National Tank Co. v. Brotherton

• Decision Date: 07 April 1993
• Docket Number: No. D-1576,D-1576
• Parties: NATIONAL TANK COMPANY v. The Honorable Robert P. BROTHERTON, Judge.
• Court: Texas Supreme Court

Page 193

851 S.W.2d 193

NATIONAL TANK COMPANY v. The Honorable Robert P. BROTHERTON, Judge.

No. D-1576.

Supreme Court of Texas.

April 7, 1993.

Mike Spurgers, Wichita Falls, Jeffrey Parsons, Gerald J. Brown, Roger L. McCleary, Philip A. Lionberger, Houston, for relator.

E.L. Caraway, III, Fort Worth, Roy L. Stacy, Michael G. Lee, Dallas, Richard E. Ward, Carolyn Mitchell, Fort Worth, Craig A. Eggleston, Kenneth J. Lambert, Dallas, Roy T. Sparkman, Wichita Falls, Douglas L. Baker, Plano, Charles W. Oldham, Charles M. Barnard, Robert P. Brotherton, Wichita Falls, for respondent.

OPINION

PHILLIPS, Chief Justice.

In this original proceeding we must determine whether accident reports and witness statements prepared by Relator and its insurer following a plant explosion are privileged from discovery. We modify our decision in Flores v. Fourth Court of Appeals, 777 S.W.2d 38, 40-41 (Tex.1989), to hold that investigative documents are prepared in "anticipation of litigation" for purposes of Tex.R.Civ.P. 166b(3) if a) a reasonable person would have concluded from the totality of the circumstances surrounding the investigation that there was a substantial chance that litigation would ensue; and b) the party resisting discovery believed in good faith that there was a substantial chance that litigation would ensue and conducted the investigation for the purpose of preparing for such litigation. This approach will further the public policy underlying the investigatory privileges without unduly restricting discovery, as these privileges may be overcome where the requesting party demonstrates a substantial need for the materials and undue hardship in obtaining the substantial equivalent of the materials by other means. See Tex.R.Civ.P. 166b(3). Because we today alter the controlling law, we deny mandamus relief without prejudice to allow the trial court to reconsider its ruling in light of today's opinion.

I

An explosion occurred on August 23, 1990, at a Wichita Falls manufacturing facility operated by the National Tank Company (NATCO), Relator in this proceeding. The explosion critically injured Rex Willson, a NATCO employee, and two other persons employed by independent contractors. Willson later died from his injuries. Allen Pease, NATCO's General Counsel and Secretary, learned of the explosion the day it occurred and dispatched Henry Townsend, NATCO's safety and risk control coordinator, to investigate. Although not a lawyer, Townsend was employed in NATCO's legal department under Pease's supervision. Pease also immediately notified David Sneed, a brokerage supervisor with American International Adjustment Company (AIAC), a representative of NATCO's liability insurers. Pease explained to Sneed the serious nature of the accident, and recommended that AIAC initiate its own investigation, which it did.

Willson's wife, individually and on behalf of her children and the estate, sued NATCO and several other defendants on January 15, 1991. Shortly thereafter, she requested that NATCO produce any reports prepared in connection with the accident investigation. NATCO objected, asserting the attorney-client, work-product, witness-statement, and party-communication privileges. In an order signed July 25, 1991, the trial court overruled NATCO's objections as to documents prepared prior to October 25, 1990, the date NATCO learned that it had been sued by Frank Kroupa, one of the other persons injured in the explosion. The trial court thus ordered NATCO to produce the documents prepared prior to that date. These documents are 1) the transcripts of four interviews of NATCO employees conducted by Henry Townsend shortly after the accident, 2) the transcripts of nine interviews of NATCO employees conducted by Phil Precht, an AIAC employee, shortly after the accident, and 3) three accident reports prepared by Precht and sent to Pease. The trial court, however, stayed the effect of this order to allow NATCO to seek mandamus relief.

NATCO first challenged the trial court's discovery order by a mandamus action in the Court of Appeals. That court denied relief by an unpublished order on September 20, 1991. NATCO then sought mandamus relief here on September 27, 1991. While NATCO's action was pending in this Court, the discovery dispute continued below regarding the depositions of Townsend and Don Hatfield, NATCO's Operations Manager at the Wichita Falls plant. When these individuals were deposed concerning their post-accident conversations with NATCO plant personnel, NATCO objected on the basis of the same privileges previously asserted in response to plaintiff's document requests. Consistent with its earlier ruling, the trial court by order signed November 15, 1991, held that these conversations were not privileged and ordered the depositions of Townsend and Hatfield to proceed "in line with the parameters placed upon the asserted privileges as set forth in this Court's order of July 25, 1991." The trial court did not stay the effect of this second discovery order. NATCO therefore moved for emergency relief in the mandamus action already pending in this Court involving the document requests. In addition to the relief earlier requested, NATCO asked us to immediately stay the Townsend and Hatfield depositions, arguing that the sought-after testimony would moot the issues involved in the document requests. The Court granted emergency relief on November 19, 1991, staying both the depositions and the production of documents previously ordered by the trial court.

The parties opposing mandamus relief in this Court are Bonded Inspections, Inc. and Helm Inspection Services, Inc., the independent contractors that employed two of the injured individuals, and Stephen Cook, one of those injured. The members of Willson's family have settled their claims.

II

Mandamus will lie to correct a discovery error only if 1) the discovery order constitutes a clear abuse of discretion, and 2) the aggrieved party has no adequate remedy by ordinary appeal. Walker v. Packer, 827 S.W.2d 833, 839-840 (Tex.1992). To determine whether the trial court abused its discretion, it is necessary to examine the scope of the privileges asserted by NATCO.

NATCO first argues that each of the documents is protected by the attorney-client privilege. This privilege protects:

confidential communications made for the purpose of facilitating the rendition of professional legal services to the client (1) between himself or his representative and his lawyer or his lawyer's representative, (2) between his lawyer and the lawyer's representative, (3) by him or his representative or his lawyer or a representative of the lawyer to a lawyer, or a representative of a lawyer representing another party in a pending action and concerning a matter of common interest therein, (4) between representatives of the client or between the client and a representative of the client, or (5) among lawyers and their representatives representing the same client.

Tex.R.Civ.Evid. 503(b).

We first address the witness statements which Townsend took from NATCO employees and then gave to Pease. NATCO argues that these statements are privileged under category (2) above, as communications between the lawyer (Pease) and a representative of the lawyer (Townsend).

A "representative of the lawyer" for purposes of the attorney-client privilege includes "one employed by the lawyer to assist the lawyer in the rendition of professional legal services." Tex.R.Civ.Evid. 503(a)(4)(i). Assuming without deciding that Townsend was Pease's representative for purposes of this rule, ¹ the witness statements are not protected by the attorney-client privilege. These communications were in the first instance made by employees at the Wichita Falls plant to Townsend; the threshold issue is whether they were privileged at that stage. The fact that the statements were first made to Townsend as Pease's representative, and then relayed to Pease, cannot provide greater protection than if the employees had made the statements directly to Pease.

NATCO argues that the initial communications from the employees to Townsend are protected under subdivision (1) of Rule 503(b), as communications between representatives of the client and a representative of the lawyer. We conclude based on the record before us, however, that the employees who were interviewed are not "representatives" of NATCO for purposes of the attorney-client privilege. Texas Rule of Civil Evidence 503(a)(2) provides as follows:

A representative of the client is one having authority to obtain professional legal services, or to act on advice rendered pursuant thereto, on behalf of the client.

This definition adopts the "control group" test previously recognized by many federal courts. See Steven Goode & M. Michael Sharlot, Article V: Privileges, in Texas Rules of Evidence Handbook, 20 Hous.L.Rev. 273, 290 (1983). This test was first recognized in City of Philadelphia v. Westinghouse Electric Corp., 210 F.Supp. 483 (E.D.Pa.), petition for mandamus and prohibition denied sub. nom., General Electric Co. v. Kirkpatrick, 312 F.2d 742 (3d Cir.1962), cert. denied, 372 U.S. 943, 83 S.Ct. 937, 9 L.Ed.2d 969 (1963), in which the court held that a corporation could claim the attorney-client privilege only as to statements made by employees "in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney." Id. at 485. Courts applying this test generally protect only statements made by the upper echelon of corporate management. William K.C. Dippel, Comment, The Attorney-Client Privilege in the Corporate Context--Upjohn Co. v. United States, 35 Sw.L.J. 935, 939 (1981). See, e.g., Congoleum Indus., Inc. v. GAF Corp., 49 F.R.D. 82, 85 (E.D.Pa.1969) (protection limited to corporate and division vice presidents), aff'd, 478 F.2d 1398 (3d Cir.1973); Garrison v. General Motors Corp., 213 F.Supp. 515,...