In re K & L Auto Crushers, LLC

• Decision Date: 28 May 2021
• Docket Number: No. 19-1022,19-1022
• Citation: 627 S.W.3d 239
• Parties: IN RE K & L AUTO CRUSHERS, LLC and Thomas Gothard, Jr., Relators
• Court: Texas Supreme Court

627 S.W.3d 239

IN RE K & L AUTO CRUSHERS, LLC and Thomas Gothard, Jr., Relators

No. 19-1022

Supreme Court of Texas.

Argued January 5, 2021

Opinion delivered: May 28, 2021

J. Martin Futrell, Amy Witherite, Dallas, Rosalyn Renee Tippett, for Real Party in Interest Kevin Walker and Latunija Johnson.

Adriaan Tieleman Jansse, San Antonio, for Amicus Curiae Tri-City Pain Associates, P.A.

Matthew B. Baumgartner, Austin, P. M. Schenkkan, for Amicus Curiae Research and Planning Consultants, L.P.

Elizabeth Lee Thompson, Houston, William H. Chamblee, Dallas, Wade C. Crosnoe, Austin, Weston Hall, for Relators.

Amanda Garrett Taylor, Scott K. Field, Austin, for Amici Curiae Texans for Lawsuit Reform, American Tort Reform Association, Chamber of Commerce of the United States of America.

Christopher M. McDowell, Morgan A. McPheeters, Dallas, for Real Party in Interest Saint Camillus Medical Center, Dr. Andrew Indresano, and Pine Creek Medical Center.

Donald P. Wilcox, Kelly M. Walla, Austin, Laura Thetford, for Amicus Curiae Texas Medical Association.

George Scott Christian, for Amicus Curiae Texas Civil Justice League.

Ellen Peeples, Jillian Schumacher, Houston, for Amicus Curiae Advanced Diagnostics Health System, LLC.

Melissa A. Lorber, Austin, Sara B. Churchin, for Amici Curiae State Farm Mutual Automobile Insurance Company, American Property Casualty Insurance Association.

Kelly Cook, Plano, Matthew J. Kita, Dallas, Jim M. Perdue Jr., Houston, for Amicus Curiae Texas Trial Lawyers Association.

Andrea Schwab, Austin, for Amicus Curiae Texas Orthopaedic Association.

Cesar J. Lopez, Austin, Stephen Gregory Wohleb, for Amicus Curiae Texas Hospital Association.

Henry John Paoli, El Paso, for Amicus Curiae Texas Association of Defense Counsel.

Justice Boyd delivered the opinion of the Court, in which Chief Justice Hecht, Justice Guzman, Justice Lehrmann, Justice Devine, Justice Blacklock, and Justice Busby joined.

We held three terms ago that the negotiated rates a medical provider charged to patients’ private insurers and public-entity payors were relevant and discoverable on the issue of the reasonableness of the "full" rates the provider charged to an uninsured patient for the same services. In re N. Cypress Med. Ctr. Operating Co. , 559 S.W.3d 128, 129 (Tex. 2018) (orig. proceeding). Based on that holding, we concluded that the trial court did not abuse its discretion by allowing discovery of the provider's negotiated rates in the uninsured patient's suit challenging the reasonableness of the full rates the provider charged and secured with a medical lien. Id.

This case presents the same issue, but in a different context. Here, the defendants in a personal-injury suit argue that the trial court abused its discretion by quashing their discovery requests, including those for information regarding the plaintiff's medical providers’ negotiated rates and costs. We hold that the information we found relevant to the reasonableness of the provider's rates in North Cypress is equally relevant here. For the reasons explained below, we conclude that the trial court abused its discretion by denying outright the defendants’ narrowed requests—which they expressly limited to the discovery we approved in North Cypress —because at least some of the discovery requested is relevant, the narrowed requests were sufficiently tailored, the providers and the plaintiff failed to submit evidence establishing that the narrowed requests were unduly burdensome, and the trial court failed to consider whether a protective order would reasonably protect against the disclosure of any confidential information or trade secrets. Because we also conclude that the defendant has no adequate appellate remedy, we conditionally grant mandamus relief, without prejudice to the providers’ and plaintiff's right to adequately support their objections on rehearing in the trial court.

I.Background

Kevin Walker alleges he was injured in a motor-vehicle collision with a tractor-trailer rig driven by Thomas Gothard, Jr. According to Walker, the accident occurred at an intersection where both vehicles had stopped side-by-side in adjacent lanes that both permitted right turns. As Gothard made the turn from the left lane, his trailer's passenger-side wheels caught the rear driver-side door of Walker's car, which was still stopped in the right lane. The trailer dragged the car a short distance before Gothard stopped, scraping and tearing the sheet metal along the driver's side of Walker's car. After the accident, the parties took photos, exchanged information, and drove away without reporting any injuries.

Walker first sought medical treatment four days after the collision. Five months later, Walker underwent surgeries on his cervical spine and shoulder to repair injuries he claims he sustained in the accident. Walker's medical providers charged him a total of about $1.2 million for the surgeries and related treatment. Walker did not pay for the medical care or provide information on private insurance or public benefits. Instead, his attorneys sent the medical providers "letters of protection,"¹ promising they would "attempt to protect [the providers’] interest in [Walker's] account" when they settled Walker's claims, but "only for any reasonable and necessary medical charges."

Walker sued Gothard and his employer, K & L Auto Crushers (collectively, K & L Auto).² After Walker served medical-expense affidavits under section 18.001 of the Civil Practice and Remedies Code, K & L Auto served counter-affidavits challenging the amounts billed as unreasonable. See TEX. CIV. PRAC. & REM. CODE § 18.001. K & L Auto then served subpoenas on Walker's healthcare providers, requesting production of information related to their billing practices and rates over a period of several years. The subpoenas included multiple requests, some with multiple sub-requests, and sought a wide array of information. Three of the providers—Saint Camillus Medical Center, Pine Creek Medical Center, and Dr. Andrew Indresano—filed motions to quash the subpoenas, asserting they were overbroad, unduly burdensome and harassing, and not reasonably calculated to lead to the discovery of admissible evidence, and that they sought information that was irrelevant, inadmissible, confidential, proprietary, and protected as trade secrets. Walker also moved for a protective order and to quash the subpoenas, essentially on the same grounds.³ K & L Auto then moved to compel the discovery. After a hearing, the trial court sustained the providers’ objections and quashed the subpoenas without explaining the basis for its ruling.

A few weeks later, Walker moved to strike some of K & L Auto's experts’ counter-affidavits, arguing that the experts’ assertions that Walker's medical expenses were unreasonably high were conclusory, unreliable, and unsupported by facts and data. K & L Auto then moved for partial reconsideration of the order quashing the subpoenas, arguing its experts needed information about the medical providers’ negotiated rates and costs to adequately contest the reasonableness of the full rates the providers charged to Walker. K & L Auto's motion abandoned many of the requests and sub-requests the initial subpoenas contained and narrowed its requests to seek production only of documents related to (1) the amounts the providers charged insurance companies, federal insurance programs, and in-network healthcare providers for the services, materials, devices, and equipment billed to Walker as of the date of Walker's treatment, (2) the amounts the providers paid for the devices and equipment billed to Walker, and (3) the providers’ chargemaster (full) rates for the devices and equipment billed to Walker and how the providers determined those rates.⁴ But K & L Auto still broadly sought, among other things, all communications between the providers and any manufacturer, seller, and distributor of any device used by the providers to treat Walker, and in many cases, all documents related to the services and devices provided.

K & L Auto reiterated in its motion for reconsideration that it was "willing to enter into any reasonable and necessary protective orders with the medical providers to address concerns about confidentiality of their contractual agreements with third-party payers and insurers." Based on its willingness to enter into a protective order and the narrowing of its requests, K & L Auto asserted that its requests were now "targeted to the specific medical devices/services at issue, d[id] not implicate any concerns about confidentiality of other patient records, and f[ell] squarely within the discovery authorized by" our decision in North Cypress .

The providers responded by arguing the narrowed requests suffered the same problems as the original requests contained in the subpoenas. Relying on the affidavits they had submitted in support of their objections to the initial requests, they continued to complain of the general volume, breadth, and burden of the narrowed requests. They did not provide any additional evidence, however, to support their objections that the narrowed requests imposed an undue burden or implicated confidential information.

At a hearing on the reconsideration motion, K & L Auto explained, "What we are trying to do is come in with a targeted motion for partial reconsideration" and "focus the Court on the specific discovery requests [it] made that [it thought were] expressly authorized" by North Cypress . It then noted that North Cypress permitted discovery of medical providers’ reimbursement rates with private insurers, Medicare, and Medicaid, and discovery of the costs to medical providers for the equipment and devices reflected in the patient's bills. K & L Auto specifically pointed the trial court to the fact that it had made requests "in [its] subpoena that are along those lines and are targeted to the specific medical services and devices at issue in the time frame at issue," and requests "seeking discovery...