In re VERP Inv., LLC

• Decision Date: 17 February 2015
• Docket Number: No. 05–15–00023–CV,05–15–00023–CV
• Citation: 457 S.W.3d 255
• Parties: In re VERP Investment, LLC, Relator
• Court: Texas Court of Appeals

457 S.W.3d 255

In re VERP Investment, LLC, Relator

No. 05–15–00023–CV

Court of Appeals of Texas, Dallas.

Opinion Filed February 17, 2015

Jason Friedman, Lawrence J. Friedman, James S. Bell, Dallas, TX, for appellants.

Bruce E. Turner, Dallas, TX, for appellees.

Before Justices Lang, Fillmore, and Brown

OPINION

Opinion by Justice Brown

In this mandamus proceeding relator, VERP Investment LLC, seeks relief from the trial court's order compelling VERP to turn over its computer hard drive to a third-party forensic examiner for mirror imaging of the accounting software and supporting data related to invoices prepared for certain leases to which VERP and real party in interest, Lan Hung Nguyen, are parties. We conditionally grant the petition.

Factual and Procedural Background

VERP is the landlord with respect to three commercial properties leased by Nguyen. In December 2013, VERP changed the locks on the properties because Nguyen had purportedly failed to pay rent for a period of ten months. Nguyen filed suit for wrongful lockout, breach of contract, conversion, money had and received, tortious interference with contract, breach of fiduciary duty, accounting, common law fraud, real estate fraud, and civil conspiracy and sought a temporary injunction “to restrain defendants from preventing [Nguyen] from access to [his] [personal property] and use of the [leased premises].” Nguyen contended that he had received no invoices for the majority of the time he leased the premises and no accounting of various sums he alleges VERP received from others for after-hours use of the premises that Nguyen maintains were to be applied to the balance owed under the leases. In conjunction with his suit, Nguyen sought, among other things, an accounting of these sums he believes VERP incorrectly failed to apply to the balance owed on the leases.

Nguyen served requests for production of documents. At issue in this petition for writ of mandamus is the second request for production of documents in which Nguyen requested “the electronic information related to the generation of invoices ... including the electronic information related to the accounting/software program used by the company for its accounting purposes,” “all electronic data related to the generation of such invoices,” “the accounting software/program utilized to generate the invoices,” “all electronic data files related to such invoices,” and “a forensic copy of the computer hard drive from the computer(s) used to generate the invoices.” VERP objected to each request on a variety of bases including on the grounds that the request was burdensome and that the information requested could be obtained “through more appropriate means.” VERP produced no responsive documents at the time it objected to the request for production, although by the time it filed its motion for reconsideration it asserted it had produced “more than 400” documents.

Nguyen moved to compel. Nguyen did not attempt to defend the propriety of his requests for production but rather argued only “[p]ursuant to Rule 215, defendant's refusal to comply with plaintiff's discovery requests is grounds for this Court to enter an Order compelling defendant VERP to respond as required.” The trial court held two non-evidentiary hearings,¹ one on Nguyen's motion to compel and one on VERP's motion for rehearing after the court initially granted the motion. The trial court ordered VERP to permit a forensic examiner agreed to by the parties “to make a ‘mirror image’ of the accounting software ... and its supporting data on the Defendant's computer hard drive, the computer hard drive, and all electronic data (including the accounting) on invoices prepared for [the leased properties] between June 1, 2013 and January 31, 2014....” The court's order required the parties to confer and attempt to reach agreement on search terms prior to production of the computer by VERP to the forensic examiner. It required the forensic examiner to produce a report upon the completion of his review “setting forth his/her findings and conclusions.” The order prohibited the forensic examiner from disclosing “the substance of any of the files or documents identified” by the review, but rather required the examiner to provide “a description of such files in the form of a log that should include file or documents, name, date of creation, date of last access, author and recipient.”²

Appropriateness of Mandamus Review

Mandamus is an extraordinary remedy that is available only in limited circumstances. CSR Ltd. v. Link, 925 S.W.2d 591, 596 (Tex.1996) (orig. proceeding) (citing Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992) (orig. proceeding)). Mandamus relief is available when the trial court abuses its discretion and there is no adequate remedy by appeal. In re Deere & Co. , 299 S.W.3d 819, 820 (Tex.2009) (orig. proceeding) (per curiam).

What constitutes an adequate remedy by appeal has no comprehensive definition. See In re Ford Motor Co., 165 S.W.3d 315, 317 (Tex.2005) (orig. proceeding) (per curiam) (citing In re Prudential, 148 S.W.3d 124, 136 (Tex.2004) (orig. proceeding)). Determining whether a party has an adequate remedy by appeal requires a “careful balance of jurisprudential considerations” that “implicate both public and private interests.” See id. (quoting In re Prudential, 148 S.W.3d at 136 ). “When the benefits [of mandamus review] outweigh the detriments, appellate courts must consider whether the appellate remedy is adequate.” Id. (quoting In re Prudential, 148 S.W.3d at 136 ). An appeal is inadequate when the parties are in danger of permanently losing substantial rights. In re Van Waters & Rogers, Inc., 145 S.W.3d 203, 211 (Tex.2004) (orig. proceeding) (per curiam). “Such a danger arises when the appellate court would not be able to cure the error, when the party's ability to present a viable claim or defense is vitiated, or when the error cannot be made part of the appellate record.” Id. “If an appellate court cannot remedy a trial court's discovery error, then an adequate appellate remedy does not exist.” In re Dana Corp., 138 S.W.3d 298, 301 (Tex.2004) (orig. proceeding). For this reason an order compelling discovery that is “well outside the proper bounds” is reviewable by mandamus. See In re Weekley Homes, L.P., 295 S.W.3d 309, 322 (Tex.2009) (orig. proceeding); In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex.1998) (orig. proceeding). Failure of the trial court to observe the electronic discovery procedures explicated in the supreme court's seminal In re Weekley Homes decision is an abuse of discretion. In re Jordan, 364 S.W.3d 425, 426 (Tex.App.—Dallas 2012, orig. proceeding). Thus, an appellate court may grant mandamus when a trial court improperly allows direct access to an opponent's electronic storage devices and thereby permits excessively broad discovery.

Standard of Review

“[T]he ultimate purpose of discovery is to seek the truth, so that disputes may be decided by what the facts reveal, not by what facts are concealed.”In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex.1998) (orig. proceeding) (per curiam) (quoting Jampole v. Touchy, 673 S.W.2d 569, 573 (Tex.1984) (orig. proceeding)). The scope of discovery largely rests within the discretion of the trial court. Ginsberg v. Fifth Court of Appeals, 686 S.W.2d 105, 108 (Tex.1985) (orig. proceeding). For that reason, in considering whether a trial court has clearly abused its discretion with regard to a discovery order, the reviewing court may not substitute its judgment for the judgment of the trial court. See Walker, 827 S.W.2d at 839–40. “Even if the reviewing court would have decided the issue differently, it cannot disturb the trial court's decision unless it is shown to be arbitrary and unreasonable.” Id. at 840. When a trial judge exercising an otherwise discretionary authority has only one course to follow and one way to decide, however, the discretion vested in the court is for all practical purposes destroyed. In re Goodyear Tire & Rubber Co., 437 S.W.3d 923, 927–28 (Tex.App.—Dallas 2014, orig. proceeding) (citing Jones v. Strayhorn, 159 Tex. 421, 321 S.W.2d 290, 295 (1959) ). Thus, when challenging matters ordinarily committed to the broad discretion of the trial court, a relator in a mandamus proceeding must establish that the trial court could reasonably have reached only one decision. Walker, 827 S.W.2d at 839–40.

Procedures for Obtaining Discovery in Electronic Format

Rule 196.4 of the Texas Rules of Civil Procedure addresses the procedures that must be followed in seeking the discovery of data or information in electronic or magnetic format. The Texas Supreme Court provided a comprehensive analysis of those procedures in its opinion in In re Weekley Homes, L.P., so we do not review all the procedures in detail here. Instead, we turn directly to the question of whether Nguyen is entitled to forensic imaging of relator's computer.

Nguyen first argues that VERP is not entitled to the procedural protections afforded by the rules of civil procedure and the supreme court's decision in In re Weekley Homes because VERP waived these protections by failing to articulate appropriately specific objections to the request for production of electronic data and failing to support its objections at the hearing on Nguyen's motion to compel. We disagree.

In its objections to the requests for production, VERP objected to each request on the ground that the request was burdensome and that the information requested could be obtained “through more appropriate means.” In its response to Nguyen's motion to compel, VERP elaborated that Nguyen had failed to demonstrate that VERP was “withholding, concealing, or destroying discoverable electronic information,” had failed to show that VERP had not adequately produced the requested data and a search of VERP's computer hard drive might recover such material, had failed to show that retrieval of the data sought was feasible, had failed to show a...