in Re Mountain Valley Indemnity Co. and Shane Waddell ( 2022 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
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NO. 09-22-00207-CV
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IN RE MOUNTAIN VALLEY INDEMNITY COMPANY
AND SHANE WADDELL
__________________________________________________________________
Original Proceeding
60th District Court of Jefferson County, Texas
Trial Cause No. B-204,896
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MEMORANDUM OPINION
In a first-party property damage suit, the insured (James Warren Stutts or Real
Party in Interest) alleged his homeowner’s insurance company (Mountain Valley
Indemnity Company or Relator) and the outside claims adjuster utilized by the
insurance company to adjust the claim (Shane Waddell) improperly handled his
claim for water damage caused by a malfunctioning plumbing line that was
connected to a second-floor water heater in the insured’s home. After invoking the
appraisal provision for the dwelling and contents loss part of the claim and after
receiving a partial summary judgment from the trial court, Stutts’ remaining causes
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of action include alleged improper claims handling and bad faith claims. Stutts
served Mountain Valley Indemnity Company with written discovery requesting
production of certain documents that it alleges are relevant to the alleged improper
claims handling. Mountain Valley objected to the production of twenty-six pages of
documents that include what Mountain Valley describes as claim notes and
communications between Mountain Valley’s in-house counsel and Waddell, and
Waddell’s supervisor. Mountain Valley alleged the documents are protected by the
attorney-client privilege and work-product doctrine and Stutts filed a Motion to
Compel. The trial court, after inspecting documents in camera, ordered Relators
Mountain Valley Indemnity Company and Shane Waddell to produce claim notes
and communications between Mountain Valley’s in-house counsel, Waddell, and
Waddell’s supervisor.
In their mandamus petition, Relators contend they lack an adequate remedy
by appeal for the trial court’s clear abuse of discretion when it ordered Relators to
produce documents protected from discovery by the attorney-client privilege and the
work-product privilege. We temporarily stayed the trial court’s order compelling
discovery and requested a response from Real Party in Interest James Warren Stutts.
See Tex. R. App. P. 52.10(b). After considering the parties’ arguments and
authorities and after reviewing the record, including the in camera documents, we
conditionally grant mandamus relief.
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To be entitled to mandamus relief, a relator must show that the trial court
clearly abused its discretion and the relator lacks an adequate remedy by appeal. In
re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig.
proceeding). A trial court abuses its discretion when it acts without regard to guiding
rules or principles or when it acts in an arbitrary or unreasonable manner. In re
Garza, 544 S.W.3d 836, 840 (Tex. 2018) (orig. proceeding). Mandamus relief is
available when the trial court erroneously orders the disclosure of privileged
information because appeal does not provide an adequate remedy. See In re Christus
Santa Rosa Health Sys., 492 S.W.3d 276, 279 (Tex. 2016); In re E.I. DuPont de
Nemours & Co., 136 S.W.3d 218, 223 (Tex. 2004); Walker v. Packer, 827 S.W.2d
833, 843 (Tex. 1992) (orig. proceeding).
1. Work-Product Privilege
Work product comprises:
(1) material prepared or mental impressions developed in
anticipation of litigation or for trial by or for a party or a party’s
representatives, including the party’s attorneys, consultants, sureties,
indemnitors, insurers, employees, or agents; or
(2) a communication made in anticipation of litigation or for trial
between a party and the party’s representatives or among a party’s
representatives, including the party’s attorneys, consultants, sureties,
indemnitors, insurers, employees, or agents.
Tex. R. Civ. P. 192.5(a). Litigation is anticipated (1) whenever the circumstances
surrounding the investigation would indicate to a reasonable person that there is a
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substantial chance of litigation, and (2) the party resisting discovery had a good faith
belief that there was a substantial chance that litigation would ensue and conducted
the investigation for the purpose of preparing for such litigation. National Tank Co.
v. Brotherton, 851 S.W.2d 193, 204 (Tex. 1993) (orig. proceeding). Core work
product containing the “mental impressions, opinions, conclusions, or legal
theories” of an attorney or an attorney’s representative is not discoverable. Tex. R.
Civ. P. 192.5(b)(1); In re Nat’l Lloyds Ins. Co., 532 S.W.3d 794, 804 (Tex. 2017)
(orig. proceeding). A trial court may order disclosure of noncore work product only
if the requesting party shows substantial need and undue hardship. Tex. R. Civ. P.
192.5(b)(2); Nat’l Lloyds, 532 S.W.3d at 804.
Relators argue they anticipated litigation on the date Mountain Valley issued
its May 31, 2018 coverage letter reserving rights under the policy and advising Stutts
that he was unjustifiably causing an increase in the Loss of Use expense of his claim.
They argue Stutts failed to produce any evidence establishing his substantial need
for the material to prepare his case and he failed to show that he is unable without
undue hardship to obtain the substantial equivalent of the material by other means.
They further argue that the in-house counsel’s emails include some core work
product.
Stutts argues Relators failed to produce evidence that the communications at
issue were made in anticipation of litigation as opposed to normal claims-handling;
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therefore, he argues, the burden never shifted to him to produce evidence of a
substantial need.
When the claim for protection is based on a specific privilege, such as
attorney-client or attorney work product, the documents themselves may constitute
the only evidence substantiating the claim of privilege. Weisel Enters, Inc. v. Curry,
718 S.W.2d 56, 58 (Tex. 1986) (orig. proceeding). We have reviewed the in camera
documents and find that Mountain Valley met its burden of making a prima facie
showing that the documents are protected from discovery as under the work-product
doctrine. To the extent some of the documents may only be non-core work product,
Stutts has not shown a substantial need for the documents. So, we conclude the trial
court abused its discretion by ordering production of documents protected as
attorney work-product.
2. Attorney-Client Privilege
The attorney-client privilege protects communications between attorney and
client that are (1) not intended to be disclosed to third parties, and (2) made for the
purpose of facilitating the rendition of professional legal services. Nat’l Lloyds, 532
S.W.3d at 803. “The privilege promotes free discourse between attorney and client,
thereby advancing the effective administration of justice.” Id. A client has a privilege
to refuse to disclose and to prevent any other person from disclosing confidential
communications made to facilitate the rendition of professional legal services to the
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client. Tex. R. Evid. 503(b)(1). The attorney-client privilege protects confidential
communications between a client or the client’s representative and the lawyer or the
lawyer’s representative and between the client’s representatives who, to facilitate
the rendition of professional legal services to the client, make or receive a
confidential communication while acting in the scope of employment for the client.
Id; see also Tex. R. Evid. 503(a)(2)(B).
Relators identify certain e-mail correspondence among Waddell, his
supervisor Mike Reyna, and Mountain Valley’s in-house counsel Ellen Greer. They
argue these e-mail communications clearly fall within the attorney-client privilege
because they “make clear that Ms. Greer’s involvement was for legal advice because
of significant concerns about Stutts’s claim and because Stutts had retained an
attorney to represent him in his claim.” Stutts contends Relators failed to
demonstrate that the trial court could have reached only one decision in making a
factual determination that none of the documents were made to facilitate the
rendition of legal services. Stutts argues the attorney-client privilege does not apply
to the extent any attorney’s communications related solely to the investigation and
evaluation of Stutts’s claim.
We reviewed the documents that Relators identified as being subject to the
attorney-client privilege and that the trial court reviewed in camera. These
documents show by the discussion and content thereof that they concern Mountain
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Valley’s adjusters’ consultation with Mountain Valley’s staff attorney and pertain to
legal advice regarding Stutts’s claims. We conclude the trial court abused its
discretion by ordering production of the e-mail communication documents because
the documents are protected by the attorney-client privilege.
3. Appropriate Relief
“Mandamus is proper when the trial court erroneously orders the disclosure
of privileged information because the trial court’s error cannot be corrected on
appeal.” DuPont, 136 S.W.3d at 223. We lift our stay order and conditionally grant
mandamus relief. We are confident that the trial court will vacate its order of June
23, 2022. A writ of mandamus will issue only in the event the trial court fails to
comply.
PETITION CONDITIONALLY GRANTED.
PER CURIAM
Submitted on September 21, 2022
Opinion Delivered November 10, 2022
Before Golemon, C.J., Kreger and Johnson, JJ.
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