Republic Ins. Co. v. Davis
| Decision Date | 03 June 1993 |
| Docket Number | No. D-2369,D-2369 |
| Citation | 856 S.W.2d 158 |
| Parties | REPUBLIC INSURANCE COMPANY, Relator, v. The Honorable Paul R. DAVIS, Jr., Judge, Respondent. |
| Court | Texas Supreme Court |
This mandamus action calls for the resolution of two issues. First, does the "offensive use" waiver, enunciated by this court in Ginsberg v. Fifth Court of Appeals, 686 S.W.2d 105 (Tex.1985), apply to the attorney-client privilege? Second, does the privilege for party communications extend to subsequent litigation? We conclude that the Ginsberg "offensive use" waiver, while potentially applicable to the attorney-client privilege, does not apply in this case. We also conclude that the party communication privilege does not extend to any lawsuit which does not involve claims that precipitated the communication. Because the trial court abused its discretion in ordering the production of documents protected by the attorney-client privilege, we conditionally grant the writ of mandamus. 1
Republic Insurance Company ("Republic") reinsured certain policies issued by National County Mutual Fire Insurance Company ("National County"). One of those policies was issued to Culver Concrete ("Culver"). That policy provided $500,000 of primary coverage, with the first $50,000 being reinsured by Republic.
A Culver employee, Reginald Davis, was involved in an accident in 1985. The truck driven by Reginald Davis struck and killed Ezequiel Trevino. Trevino's representatives and survivors filed two suits, which were eventually consolidated, against Culver and Reginald Davis. Prior to the conclusion of the Trevino suit, National County was placed into receivership.
In 1988, National County was declared insolvent and placed into liquidation and receivership. As a part of National County's liquidation, a temporary and permanent injunction was issued prohibiting anyone with assets of National County from disposing of those assets. The reinsurance contract is an asset of National County, and Republic was enjoined from disposing of the proceeds of the contract to anyone except the receiver of National County.
The Trevino lawsuit against Culver and Reginald Davis ultimately resulted in a $19,000,000 judgment being entered against Culver and Reginald Davis. After the judgment was entered, the Trevino plaintiffs, Culver, Reginald Davis, and Canal Insurance Company all made demands on Republic for the reinsurance proceeds.
Republic filed a declaratory judgment action in Travis County. Republic acknowledged that it owed the reinsurance proceeds; however, it was faced with competing demands as it was enjoined from paying them to anyone but the Receiver. Republic offered to pay the reinsurance proceeds into the registry of the court pending resolution of the dispute. Republic sought a declaration that (1) it did not have an obligation to pay the reinsurance proceeds to the Trevino plaintiffs, Culver, Canal, and/or Reginald Davis; (2) its sole obligation was to the Receiver of National County; and (3) it did not owe any duty to the Trevino plaintiffs, Culver, Canal, and/or Reginald Davis in conjunction with or separate from the reinsurance contract. Republic also sought an injunction against the Trevino plaintiffs, Culver, Canal, and Reginald Davis preventing them from making any claim to the reinsurance proceeds.
The Trevino plaintiffs, Culver, and Reginald Davis filed counterclaims against Republic. The counterclaims allege claims under the Deceptive Trade Practices Act, the Insurance Code, and common law. The Trevino plaintiffs, Culver, and Reginald Davis contend that Republic is liable for the $19,000,000 judgment.
The counterclaims allege that, in fact, Republic took over the direct administration and settlement of certain National County policies, including the policy issued to Culver, and therefore, Republic became the primary insurer on the policy covering Culver. The Trevinos also allege that, despite knowing that the value of the claims asserted by the Trevinos against Culver and Reginald Davis exceeded the limits on Culver's policy, and despite having an opportunity to settle those claims within policy limits, Republic wrongfully refused to settle the case. 2 After the initiation of the counterclaims, the Trevino plaintiffs served Republic with a request for production of documents. Republic asserted objections to the request.
The discovery objections were heard before Judge Joe Dibrell who referred the dispute to a special master. The special master heard evidence and issued a report to the trial court on March 9, 1992. The special master recommended that some documents be produced despite the fact that Republic established that the documents were protected by the attorney-client privilege. The special master's report concluded that although Republic met its burden to establish the attorney-client privilege, the privilege had been waived under Ginsberg. The special master also recommended that certain documents, for which Republic asserted the party communication privilege, be produced. The special master determined that the party communication privilege was inapplicable because the communication had occurred in connection with another lawsuit.
The special master issued his report on March 9, 1992. With no advance notice of its existence, counsel for Republic received the report on March 11, 1992. The same day, March 11, 1992, Judge Dibrell signed an order that tracked the special master's recommendations.
We must first determine whether Republic preserved its complaints for our review. Republic did not object to the special master's report before the trial court adopted the report. The real parties in interest contend that Republic has waived any objection it had to the special master's report because it failed to object to the report prior to its adoption by the trial court. 3
The record reflects that the trial court adopted the special master's report before Republic received its copy of the report. Republic did not have the opportunity to object. Consequently, without reaching the question of whether an objection is required, we conclude that Republic has not waived error in this context.
The attorney-client privilege as embodied in TEX.R.CIV.EVID. 503(b) secures the free flow of information between attorney and client, and it assures that the communication will not later be disclosed. West v. Solito, 563 S.W.2d 240, 245 (Tex.1978). Although the aim of the modern discovery process is to yield full and complete information regarding the issues in dispute, courts also recognize the importance of the attorney-client privilege. Confidential communications promote effective legal services. This in turn promotes the broader societal interest of the effective administration of justice. Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584 (1981). Confidential communications, however, often result in the suppression of otherwise relevant evidence. Courts balance this conflict between the desire for openness and the need for confidentiality in attorney-client relations by restricting the scope of the attorney-client privilege. See Duval County Ranch Co. v. Alamo Lumber Co., 663 S.W.2d 627, 634 (Tex.App.--Amarillo 1983, writ ref'd n.r.e.); In re LTV Securities Litigation, 89 F.R.D. 595, 600 (N.D.Tex.1981) (). This case calls for us to determine whether a party's need for information can ever outweigh the benefits associated with the attorney-client privilege.
The real parties in interest seek information that is protected by the attorney-client privilege. They contend that our decision in Ginsberg establishes a waiver by "offensive use" of the attorney-client privilege. 4 We must determine whether there is a waiver by offensive use of the attorney-client privilege, and if there is, whether Relator waived its attorney-client privilege.
Ginsberg involved a trespass to try title suit. Ginsberg claimed that he owned a building by virtue of two deeds. One deed was from a Mr. Gaynier to Ginsberg conveying his interest in the building. After Mr. Gaynier died, Ginsberg had Mrs. Gaynier execute a deed ratifying the deed her husband signed. Ginsberg, 686 S.W.2d at 106.
Almost ten years later Mrs. Gaynier brought the trespass to try title action, claiming the first deed was forged and that she was fraudulently induced to sign the second deed. Id. At deposition she testified that she could not remember signing the second deed and that she was unaware until 1981 that the ownership of the building had changed. She also revealed that she had seen a psychiatrist in 1972 and subsequent years. Ginsberg sought access to the medical records. The records contained information which virtually established Ginsberg's statute of limitations defense. The records revealed that Mrs. Gaynier told her psychiatrist in 1972 that the "building was sold while we were in Padre Island." Id.
Mrs. Gaynier resisted disclosure of the records on the basis of the psychotherapist-patient privilege. This Court rejected her claim of privilege. 5 In doing so, this court relied on the notion that "[a] plaintiff cannot use one hand to seek affirmative relief in court and with the other lower an iron curtain of silence against otherwise pertinent and proper questions which may have a bearing upon his right to maintain his action." Id. at 108 (quoting Pavlinko v. Yale-New Haven Hosp., 192 Conn. 138, 470 A.2d 246,...
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