In re Burkett
| Decision Date | 06 October 2022 |
| Docket Number | 08-21-00209-CV |
| Citation | 657 S.W.3d 728 |
| Parties | IN RE: Mark BURKETT, Relator. |
| Court | Texas Court of Appeals |
John L. Pool, Pro Se.
Randy Lee, Attorney at Law, Midland, for Relator.
Alex Reynolds, Atkins, Hollmann, Jones, Peacock, Lewis & Lyon, Odessa, for Real party in interest.
Before Rodriguez, C.J., Palafox, and Alley, JJ.
In this mandamus action we are principally asked whether the assertion of a piercing the corporate veil theory opens an individual defendant up to discovery of financial dealings they may have with any other person or entity, whether those dealings are connected to the litigation or not. We conclude the discovery served here goes beyond the outer bounds of relevance. Because an amended petition with different allegations was filed in the trial court after the case reached this Court, we decline to parse the discovery requests to delineate the offensive from the non-offensive. It is enough to say the discovery should have been more narrowly tailored to what could be reasonably expected to aide in the disposition of the claim. We trust the trial court can do that on remand if the issue arises under the newly filed petition.1
At the time of the discovery ruling made the basis of this mandamus, the live petition alleged that plaintiff and real-party-interest Chock's Inc., an oil field service company, had invoiced Crosstex Services, LLC for $20,069.03 worth of goods and services rendered in June 2018. When Crosstex failed to pay the invoices, Chock's sued and pleaded three theories of recovery against Crosstex: a suit on a sworn account, breach of contract, and quantum meruit. The same petition also names Mark Burkett as a defendant, asking the court to pierce Crosstex's corporate veil to hold Burkett individually liable under each of its three pleaded theories.
In support of that piercing claim, the petition alleges that Crosstex "was and is undercapitalized, has no assets, no money in any bank account, no equipment, no buildings, and no property." To pierce the corporate veil, the petition alleges that Burkett:
1) used Crosstex as a sham to perpetrate a fraud; 2) organized and operated Crosstex as a mere tool or business conduit for himself; 3) used Crosstex to evade an existing legal obligation and to justify a wrong and protect against the discovery of a crime; 4) operated Crosstex in a manner where is [sic] was inadequately capitalized with the effect of creating an injustice; and 5) used Crosstex to perpetrate a fraud on Chock's for Crosstex ‘s direct personal benefit.
This section of the petition concludes that Burkett formed Crosstex to commit acts of malfeasance.
The petition also contains a separate fraud count against Burkett alleging that he made material and false representations to Chock's ("Burkett made promises to pay and indicated that Chock's would be reimbursed for the work it performed and for the goods it provided."). In discovery responses, however, Chock's clarified that this was in fact a non-disclosure claim: Burkett had failed to tell Chock's that it should have switched to invoicing another Burkett related entity, Copper Ridge Resources, LLC, that took over the servicing of the well. Copper
Ridge has apparently now gone into bankruptcy.2
Chock's served requests for production to Burkett that are the subject of this mandamus. The requests for production, among other things, ask Burkett to produce:
Crosstex also served interrogatories that mirrored many of the same subjects.
In response to these discovery requests, Burkett agreed to provide information germane to himself and Crosstex, but objected to the remaining requests, complaining that the discovery's purpose "is not to discover relevant facts but is rather an improper attempt to locate assets" to satisfy a judgment. Burkett also objected that the discovery "imposes an undue burden, unnecessary expense, harassment, annoyance and invasion of Burkett's personal and property rights[.]" Finally, he objected "because it seeks information not relevant to the subject matter of the pending action and not reasonably calculated to lead to the discovery of admissible evidence."
Burkett also filed a Motion for Protective Order directed at this same discovery. In his motion, Burkett outlined the claims against him, and complained that Chock's discovery "seeks to obtain information about Burkett's other business interests and activities, personal financial affairs, asset ownership, banking information and other information having nothing to do with whether or not Burkett made fraudulent representations with respect to Crosstex's dealings with Chock's." He sought a protective order because "[a]ny dealings Burkett may have had with any other entity at any time for any other reason are simply not within the scope of discovery permitted by TEX.R.CIV.P. 192.3(a)." He then cited the trial court to Rule 192.6(b) that permits a court to protect litigants from discovery based on "undue burden, unnecessary expense, harassment, annoyance, or invasion of personal, constitutional, or property rights." TEX.R.CIV.P. 192.6(b).
Following what the parties conceded was a non-evidentiary hearing, the trial court denied the motion from which Burkett seeks mandamus relief. The trial court's order limits the time-period for responsive financial records to those from May 2018 to the present.
Mandamus is an extraordinary remedy. In re Prudential Ins. Co. of America , 148 S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). To obtain mandamus relief, a relator must show that (1) a trial court has clearly abused its discretion, and (2) the relator has no adequate remedy by appeal. Walker v. Packer , 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding).
A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law, or if it clearly fails to analyze or apply the law correctly. Id. at 840 ; In re CSX Corp. , 124 S.W.3d 149, 151 (Tex. 2003) (orig. proceeding) (per curiam) ; In re ReadyOne Industries, Inc. , 394 S.W.3d 697, 700 (Tex.App.--El Paso 2012, orig. proceeding). "The mere fact that a trial judge may decide a matter within his discretionary authority in a different manner than an appellate judge in a similar circumstance does not demonstrate that an abuse of discretion has occurred." Downer v. Aquamarine Operators, Inc. , 701 S.W.2d 238, 242 (Tex. 1985). We also explain the standard this way: The question is whether the trial court acted without reference to any guiding rules and principles. Id. at 241-42.
Germane here, those guiding rules and principles are found in our discovery rules, and a trial court abuses its discretion by ordering discovery that exceeds that permitted by the rules of procedure.
Texaco, Inc. v. Sanderson , 898 S.W.2d 813, 815 (Tex. 1995) (orig. proceeding) (per curiam) ; see also In re Contract Freighters, Inc. , 646 S.W.3d 810, 814 (Tex. 2022) (orig. proceeding) (per curiam) ("A discovery order that compels production well outside the bounds of proper discovery is an abuse of discretion for which mandamus is the proper remedy."); In re UPS Ground Freight, Inc. , 646 S.W.3d 828, 831-32 (Tex. 2022) (orig. proceeding) (per curiam) (same).
"In general, a party may obtain discovery regarding any matter that is not privileged and is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other party." TEX.R.CIV.P. 192.3(a). Evidence is "relevant" if "it has any tendency to make a fact [of consequence to the action] more or less probable than it would be without the evidence[.]" TEX.R.EVID. 401 ; In re N. Cypress Med. Ctr. Operating Co., Ltd. , 559 S.W.3d 128, 131 (Tex. 2018) (orig. proceeding). Moreover, relevance for purposes of discovery is broader than relevance under the Texas Rules of Evidence. In re N. Cypress , 559 S.W.3d at 131 (). The phrase "relevant to the subject matter" is "liberally construed to allow the litigants to obtain the fullest knowledge of the facts and issues prior to trial." Ford Motor Co. v. Castillo , 279 S.W.3d 656, 664 (Tex. 2009).
While the scope of discovery is generally within the trial court's discretion, In re CSX Corp. , 124 S.W.3d at 152, the trial court must try to impose reasonable limits on discovery. In re American Optical Corp. , 988 S.W.2d 711, 713 (Tex. 1998) (orig. proceeding) (per curiam). For instance, a discovery order that requires document production over an unreasonably long time-period or from distant and unrelated locales is impermissibly overbroad and subject to mandamus correction. In re CSX Corp. , 124 S.W.3d at 152. "A central consideration in determining overbreadth is whether the request could have been more narrowly tailored to avoid including tenuous information and still obtain the necessary, pertinent information." Id. at 153 ; see Texaco, Inc. , 898 S.W.2d at 815 (). Stated otherwise, ...
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