Shops At Legacy (Inland) Ltd. v. Fine Autographs & Memorabilia Retail Stores Inc.

• Decision Date: 25 November 2013
• Docket Number: No. 05–12–00864–CV.,05–12–00864–CV.
• Court: Texas Court of Appeals
• Parties: The SHOPS AT LEGACY (INLAND) LIMITED PARTNERSHIP, Appellant v. FINE AUTOGRAPHS & MEMORABILIA RETAIL STORES INC., Appellee.

418 S.W.3d 229

The SHOPS AT LEGACY (INLAND) LIMITED PARTNERSHIP, Appellant

v.FINE AUTOGRAPHS & MEMORABILIA RETAIL STORES INC., Appellee.

No. 05–12–00864–CV.

Court of Appeals of Texas,

Dallas.

Nov. 25, 2013.

R. Spencer Shytles, Dallas, for Appellant.

Christopher S. Ayres, R. Jack Ayres Jr., Ayres Law Office, P.C., Addison, Craig David Cherry, Haley & Olson, P.C., Waco, for Appellee.

Before Justices MOSELEY, LANG, and RICHTER.¹

OPINION

Opinion by Justice LANG.

The Shops at Legacy (Inland) Limited Partnership appeals the trial court's order and final judgment, which granted Fine Autographs & Memorabilia Retails Stores, Inc.'s motion for sanctions and dismissed The Shops at Legacy's cause of action with prejudice. In five issues, The Shops at Legacy raise two arguments: (1) there was “no evidence or legally insufficient evidence” to support the trial court's conclusions that it filed multiple false pleadings, made material misrepresentations to the trial court, violated the rules governing organization of pleadings, and made incomplete discovery responses or engaged in the concealment of evidence; and (2) the trial court erred when it assessed “death penalty” sanctions because the dismissal of The Shops at Legacy's cause of action with prejudice was an excessive sanction.

We conclude the trial court erred when it dismissed The Shops and Legacy's cause of action with prejudice because the record does not show the trial court considered and analyzed the availability of lesser sanctions and whether such sanctions would fully promote compliance. The trial court's order and final judgment are reversed and this case is remanded for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

The Shops at Legacy filed suit against Fine Autographs for breach of a shopping center lease agreement. On the date of trial, The Shops at Legacy requested a continuance, which the trial court denied. Then, The Shops at Legacy orally moved for a nonsuit without prejudice. The record on appeal does not contain a written order on The Shops at Legacy's motion for nonsuit.

Fine Autographs filed a motion for sanctions, alleging discovery abuse by The Shops at Legacy. After a hearing, the trial court granted the motion and dismissed The Shops at Legacy's cause of action with prejudice.

II. “DEATH PENALTY” SANCTIONS

In issue five, The Shops at Legacy argue the trial court erred when it assessed “death penalty” sanctions because the dismissal of The Shops at Legacy's cause of action with prejudice was an excessive sanction. The Shops at Legacy argues there is no justification for the trial court's imposition of “death penalty” sanctions. Also, The Shops at Legacy contends that Fine Autographs obtained a reasonable result when The Shops at Legacy nonsuited the case. Fine Autographs responds, stating the trial court's rendition of the order and final judgment of dismissal with prejudice was the only appropriate sanction. Fine Autographs argues the pattern of misconduct by The Shops at Legacy justified a presumption that its claims lacked merit. Further, Fine Autographs maintains that counsel for The Shops at Legacy failed to propose alternative sanctions when asked to do so by Fine Autographs. In addition, Fine Autographs argues The Shops at Legacy sought a nonsuit in an attempt to escape punishment.

A. Standard of Review

An appellate court reviews a trial court's order imposing sanctions for an abuse of discretion. See Low v. Henry, 221 S.W.3d 609, 614 (Tex.2007); Tex. Integrated Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 300 S.W.3d 348, 384 (Tex.App.-Dallas 2009, pet. denied). A trial court abuses its discretion if it acted without reference to any guiding rules and principles to the extent the act was arbitrary or unreasonable. Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex.2006) (per curiam); Cire v. Cummings, 134 S.W.3d 835, 838–39 (Tex.2004); Tex. Integrated, 300 S.W.3d at 384. An appellate court reviews the entire record to determine whether the imposition of sanctions constitutes an abuse of discretion. Am. Flood Research, 192 S.W.3d at 583;Tex. Integrated, 300 S.W.3d at 384.

B. Applicable Law

Discovery sanctions are authorized by Texas Rule of Civil Procedure 215.2. SeeTex.R. Civ. P. 215.2; Tex. Integrated, 300 S.W.3d at 384. If a trial court finds a party is abusing the discovery process in seeking, making, or resisting discovery, then the trial court may, after notice and hearing, impose any appropriate sanction authorized by rule 215.2(b)(1)-(5) and (8). Tex.R. Civ. P. 215.3; Tex. Integrated, 300 S.W.3d at 384. Among the sanctions available under rule 215.2 are orders “striking out pleadings or parts thereof,” “dismissing with or without prejudice the actions or proceedings or any part thereof,” and “rendering a judgment by default against the disobedient party.” Tex.R. Civ. P. 215.2(b)(5). These sanctions, that adjudicate a claim and preclude presentation of the merits of the case, are often referred to as “death penalty” sanctions. Gunn v. Fuqua, 397 S.W.3d 358, 366 (Tex.App.-Dallas 2013, pet. filed); see generally Cire, 134 S.W.3d at 840–41;see also TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 918 (Tex.1991) (“When a trial court strikes a party's pleadings and dismisses its action or renders a default judgment against it for abuse of the discovery process, the court adjudicates the party's claims without regard to their merits but based instead upon the parties' conduct of discovery.”); Perez v. Murff, 972 S.W.2d 78, 81 (Tex.App.-Texarkana 1998, pet. denied) (any sanctions which are “case determinative” constitute “death penalty” sanctions).

Discovery sanctions serve three purposes: (1) to secure the parties' compliance with the discovery rules; (2) to deter other litigants from violating the discovery rules; and (3) to punish parties who violate the discovery rules. Tex. Integrated, 300 S.W.3d at 384;Jones v. Am. Flood Research, Inc., 218 S.W.3d 929, 932 (Tex.App.-Dallas 2007, no pet.). Although the choice of sanction is left to the sound discretion of the trial judge, the sanctions imposed must be just. SeeTex.R. Civ. P. 215.2; TransAmerican, 811 S.W.2d at 916;Tex. Integrated, 300 S.W.3d at 384;Jones, 218 S.W.3d at 932.

When determining whether a trial court's imposition of sanctions was just, an appellate court considers the following two standards: (1) whether there is a “direct relationship” between the abusive conduct and the sanction imposed; and (2) whether the sanction is excessive. See TransAmerican, 811 S.W.2d at 917;Tex. Integrated, 300 S.W.3d at 384. “A sanction imposed for discovery abuse should be no more severe than necessary to satisfy its legitimate purposes. It follows that a court must consider the availability of less stringent sanctions and whether such lessersanctions would fully promote compliance.” TransAmerican, 811 S.W.2d at 917;Tex. Integrated, 300 S.W.3d at 384;Jones, 218 S.W.3d at 932. Under this standard, the trial court need not test the effectiveness of each available lesser sanction by actually imposing the lesser sanction on the party before issuing the death penalty. Cire, 134 S.W.3d at 840. Rather, the trial court must analyze the available sanctions and offer a reasoned explanation as to the appropriateness of the sanction imposed. Cire, 134 S.W.3d at 840. “Death penalty” sanctions are harsh and may be imposed as an initial sanction only in the most egregious and exceptional cases “when they are clearly justified and it is fully apparent that no lesser sanctions would promote compliance with the rules.” GTE Commc'ns Sys. Corp. v. Tanner, 856 S.W.2d 725, 729 (Tex.1993).

Although the Texas Supreme Court recommended that trial courts make findings of fact before imposing “death penalty” sanctions, it expressly declined to require such findings. TransAmerican, 811 S.W.2d at 919 n. 9;see also Fletcher v. Blair, 874 S.W.2d 83, 85 (Tex.App.-Austin 1994, writ denied). Nevertheless, the record must include some explanation to justify the granting of “death penalty” sanctions. Fletcher, 874 S.W.2d at 86.

C. Application of the Law to the Facts

At the close of the hearing on Fine Autographs' motion for sanctions, the trial court stated the following:

Well, gentlemen, it appears that there are some issues in this lawsuit that made everyone question the ethics and the responsibilities that we all owe our clients and to the judiciary and to the court system by the other side, not by [Fine Autographs], but I think that some of this looks suspicious when actually there's probably some honest mistakes that were made by some people, a large company like The Shops at Legacy and the different people. We've heard that there are different people there that handle different things, so I can see how some of these things might have gotten a little haywire as far as the missing document from the lease, as far as the checks not being produced.

Obviously, any lawyer that takes a case wants full cooperation from their client, and without full cooperation, it's hard to defend a case or prosecute a case. As seasoned lawyers, we all know that. I think [counsel for The Shops at Legacy] was trying to work with what he had and didn't always get what he needed from his client.

The Court finds that most of the discovery abuse in this case and from the standpoint of the missing guarantee agreement was not [counsel for The Shops at Legacy's] fault. The documents that were not produced timely, those also were the obligation of the client to produce those after [counsel for The Shops at Legacy] said that he needed those documents and those weren't produced. So I believe most of the wrongdoing in this case is attributable to The Shops at Legacy, the Plaintiff in this case. The Court is going to grant the sanctions against The Shops at Legacy and order that this case be dismissed with prejudice and order that [The Shops at Legacy] reimburse [Fine...