In re Memorial Hermann Healthcare System

• Decision Date: 09 October 2008
• Docket Number: No. 14-08-00204-CV.,14-08-00204-CV.
• Citation: 274 S.W.3d 195
• Parties: In re MEMORIAL HERMANN HEALTHCARE SYSTEM and Memorial Hermann Hospital System, Relators.
• Court: Texas Court of Appeals

274 S.W.3d 195

In re MEMORIAL HERMANN HEALTHCARE SYSTEM and Memorial Hermann Hospital System, Relators.

No. 14-08-00204-CV.

Court of Appeals of Texas, Houston (14th Dist.).

October 9, 2008.

Rehearing Overruled December 2, 2008.

David J. Beck, David M. Gunn, Constance H. Pfeiffer, William R. Pakalka and William P. Maines, Houston, TX, for Relators.

Rusty Hardin, James G. Munisteri and Amy Catherine Dinn, Houston, TX, for Real Parties In Interest.

Panel consists of Chief Justice HEDGES, Justice FROST, and Senior Justice HUDSON.^*

MAJORITY OPINION

ADELE HEDGES, Chief Justice.

Relators Memorial Hermann Healthcare System and Memorial Hermann Hospital System (collectively, "Memorial Hermann") received a civil investigative demand ("CID") from the Texas attorney general following the demise of a rival hospital that was owned and operated by real party in interest Stealth, L.P. Suing Memorial Hermann under the Texas antitrust statute, Stealth has requested that Memorial Hermann produce copies of all materials previously disclosed to the attorney general in response to the CID. Memorial Hermann contends that those materials are privileged from discovery in private antitrust litigation and that Stealth's requests were overly broad. Because the respondent¹ ordered production, Memorial Hermann asks that we issue a writ of mandamus to vacate the trial court's discovery order. We hold that any privilege created by section 15.10(i) of the Texas Free Enterprise and Antitrust Act does not extend to CID materials held by the defendant in private antitrust litigation. We further hold that the requests are not facially overbroad. Therefore, we deny the petition for writ of mandamus.

BACKGROUND

Memorial Hermann is a non-profit corporation that owns and operates a chain of hospitals in and around the Houston area. In 2006, Memorial Hermann was sued by Stealth, L.P., for alleged antitrust violations under the Texas Free Enterprise and Antitrust Act (the "Act"). Stealth had been formed in 2002 by a collection of physicians who sought to open and operate a for-profit hospital near one of Memorial Hermann's facilities. Stealth opened Town & Country Hospital in November 2005, but the hospital floundered immediately and was closed only a few months later. In the underlying antitrust suit, Stealth has blamed Memorial Hermann for the failure of Town & Country Hospital. Specifically, Stealth has accused Memorial Hermann of violating the Act by arranging a "horizontal boycott" that precluded health insurance companies from contracting with the fledgling hospital.

The Act, which provides for public and private lawsuits² for alleged antitrust action, also empowers the Texas attorney general to investigate possible antitrust violations through the issuance of a CID. See Tex. Bus. & Comm.Code Ann. § 15.10(b) (Vernon 2002). After Stealth filed suit, the attorney general opened an antitrust investigation and issued a CID to Memorial Hermann. Memorial Hermann produced roughly 87,000 pages of responsive documents to the attorney general.

In its private action, Stealth propounded requests for production to Memorial Hermann, seeking copies of the CID documents that Memorial Hermann had disclosed to the attorney general. Memorial Hermann produced 54,000 pages of CID materials to Stealth but resisted further production under the claim that the remaining 33,000 pages are privileged from disclosure under section 15.10(i) of the Act. Memorial Hermann also objected that Stealth's requests were overly broad, but it produced no evidence in support of its objection. The trial court ordered Memorial Hermann to fully respond to the requests for production. This mandamus action followed.

Memorial Hermann advances two arguments in this proceeding. First, it contends that the Act contains a "blanket privilege" under which a defendant may decline to turn over CID materials unless its opponent can demonstrate "good cause" for such production. Second, Memorial Hermann argues that the trial court abused its discretion in overruling its objection that the requests were overly broad.

STANDARD OF REVIEW

To obtain mandamus relief, relators must demonstrate that the trial court clearly abused its discretion and that they have no adequate remedy by appeal. In re Sw. Bell Tel. Co., 226 S.W.3d 400, 403 (Tex.2007) (orig.proceeding). A trial court abuses its discretion if it reaches a decision that is arbitrary, unreasonable, or without basis or reference to guiding principles of law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992) (orig.proceeding); Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985) (orig.proceeding). A trial court has no discretion in determining what the law is or in applying the law to the facts; therefore, a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Walker, 827 S.W.2d at 840.

A party has no adequate remedy by appeal where a trial court erroneously orders the disclosure of privileged information. In re Perry, 60 S.W.3d 857, 862 (Tex.2001) (orig.proceeding). Likewise, there may be no adequate remedy by appeal from a trial court's order compelling production in response to an overly-broad discovery request. In re CSX Corp., 124 S.W.3d 149, 153 (Tex.2003) (orig.proceeding).

APPLICABILITY OF CID PRIVILEGE

The statute in question provides as follows:

Except as provided in this section or ordered by a court for good cause shown, no documentary material, answers to interrogatories, or transcripts of oral testimony, or copies or contents thereof, shall be available for examination or used by any person without the consent of the person who produced the material, answers, or testimony and, in the case of any product of discovery, of the person from whom the discovery was obtained.

Tex. Bus. & Comm.Code Ann. § 15.10(i)(1). Memorial Hermann asks that we interpret this section as privileging all CID materials, no matter who possesses them. In contrast, Stealth contends that this section creates a privilege that inures to the benefit of the attorney general only and may not be claimed by the person who produced CID materials to the attorney general.

A. Plain Statutory Language

In interpreting this statute, we begin with the plain meaning, which we derive from the entire act and not from isolated portions. See Mid-Century Ins. Co. of Tex. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007). We read the statute as a whole, interpreting it to give effect to every part. See id.; City of Houston v. Fletcher, 63 S.W.3d 920, 922 (Tex.App.-Houston [14th Dist.] 2002, no pet.). Accordingly, we consider the role of this statute in the broader statutory scheme. See 20801, Inc. v. Parker, 249 S.W.3d 392, 396 (Tex.2008). Because words in a vacuum mean nothing, we must read section (i)(1) in the context of the remainder of the statute. See Bridgestone/Firestone, Inc. v. Glyn-Jones, 878 S.W.2d 132, 133 (Tex.1994); Tex. Dep't of Mental Health & Mental Retardation, 58 S.W.3d 278, 282 (Tex.App.-Fort Worth 2001, pet. dism'd by agr.).

Section 15.10 governs the attorney general's use of a CID to probe possible antitrust violations. See generally Tex. Bus. & Comm.Code Ann. § 15.10(b). Read as a whole, section 15.10(i) contemplates the manner in which the attorney general, as opposed to a private litigant, may use and disclose CID materials:

• "The attorney general may make available for inspection or prepare copies of [CID materials] ... in the course of any investigation or a judicial proceeding in which the state is a party." Id. § 15.10(i)(2) (emphasis added).

• "The attorney general may make available for inspection or prepare copies of [CID materials] ... for official use by any officer of the State of Texas or of the United States charged with the enforcement of the laws of the State of Texas or the United States[.]" Id. § 15.10(i)(3) (emphasis added).

• "Upon request, the attorney general shall make available [CID materials] for inspection by the person who produced such material or information[.]" Id. § 15.10(i)(4) (emphasis added).

• "[T]he attorney general shall notify the person who produced the material of the attorney general's intent to make such disclosure." Id. § 15.10(i)(5) (emphasis added).

• "Upon written request, the attorney general shall return documentary material produced under this section in connection with an antitrust investigation to the person who produced it[.]" Id. § 15.10(i)(6) (emphasis added).

Read in context, section (i)(1) precludes the attorney general—but nobody else— from disclosing CID materials unless either (1) the producing person consents, or (2) the person seeking to examine the materials obtains a court order permitting access. See id. § 15.10(i)(1). Section 15.10 does not discuss or reference private antitrust lawsuits but, rather, concerns the attorney general's use of a CID prior to the institution of a public antitrust suit. See, e.g., id. § 15.10(b). Therefore, the plain statutory language does not confer a privilege upon the producing person (here, Memorial Hermann) in a subsequent lawsuit.

B. Legislative Purpose

Because section 15.10(i) is clear and unambiguous, we need not resort to rules of construction. In re Canales, 52 S.W.3d 698, 702 (Tex.2001) (orig.proceeding). We may still consider, among other things, the statute's objectives and the consequences of a particular construction. Id. We conclude that Memorial Hermann's suggested interpretation would not further the legislative objectives of section 15.10.

We need look no further than the statute itself to ascertain its statutory objectives: "The purpose of this Act is to maintain and promote economic competition in trade and commerce occurring wholly or partly within the State of Texas and to provide the benefits of that competition to consumers in the state." Tex. Bus. & Comm.Code Ann. § 15.04 (Vernon 2002). Consistent with this purpose, the Act empowers the attorney general to...