Wichita Cnty. v. Envtl. Eng'g & Geotechnics, Inc.

• Decision Date: 31 May 2019
• Docket Number: NO. 03-18-00434-CV,03-18-00434-CV
• Citation: 576 S.W.3d 851
• Parties: WICHITA COUNTY, Texas, Appellant v. ENVIRONMENTAL ENGINEERING & GEOTECHNICS, INC., Appellee
• Court: Texas Court of Appeals

576 S.W.3d 851

WICHITA COUNTY, Texas, Appellant

v.ENVIRONMENTAL ENGINEERING & GEOTECHNICS, INC., Appellee

NO. 03-18-00434-CV

Court of Appeals of Texas, Austin.

Filed: May 31, 2019

OPINION

Gisela D. Triana, Justice

Wichita County, Texas filed this appeal challenging the district court's order directing the County to pay $ 11,283.89 to Environmental Engineering & Geotechnics, Inc. (EEG, a nonparty to the underlying suit) as "reasonable costs" for the production of documents in response to the County's subpoena. See Tex. R. Civ. P. 205.3(f). In two issues, the County challenges the district court's order: (1) refusing to permit the County to conduct discovery as to the reasonableness of EEG's costs, and (2) awarding EEG $ 11,283.89 "based upon the limited evidence presented" to the court at the hearing. For the reasons that follow, we will affirm the district court's order in part, reverse and render in part, and reverse and remand in part for further proceedings.

BACKGROUND

In the underlying suit, the County sought civil penalties under the Texas Water Code against Southwest Convenience Stores (SCS), alleging that SCS was responsible for three leaking underground storage tanks that polluted the groundwater in Wichita County for over nineteen years. See Tex. Water Code § 7.351. The State of Texas appeared in the suit as a "necessary and indispensable party" under the Water Code and aligned itself with the County as a party plaintiff, requesting a portion of all civil penalties awarded in the case. See id. §§ 7.353, .107. EEG was the environmental consultant for SCS between 1997 and 2016 and was involved with the "South Beverly Site" where the tanks were located. EEG was not a party to the County's suit.

The County served a subpoena on EEG requesting production of documents related to the South Beverly Site. EEG raised no objections to the County's requests. EEG responded to the subpoena by providing the County with electronic copies of documents in a DropBox folder. EEG also filed a motion for costs seeking to recoup costs associated with its document production and set the motion for hearing without conferring with the County in violation of the local rules.

At the start of the hearing, the County announced that it had not been consulted about the setting and that it was not ready to proceed if EEG intended to present witness testimony on the motion for costs. If EEG intended to present witnesses, the County requested the opportunity to depose them about the basis for the claimed costs of $ 13,916. The district court asked EEG whether it would present witness testimony, and EEG responded that it would. Having originally stated that it would grant a continuance to the County if it was not ready to proceed due to EEG's failure to consult with the County on a hearing date, the district court nevertheless proceeded to conduct an evidentiary hearing. The only witness to testify was EEG's chief operating officer, Mark Owens. The only documents offered into evidence were an invoice from EEG and two Office Depot receipts.

Owens testified that he received a call from SCS's "parent company" on April 20, 2018, asking whether he "had any information on a particular site," and that he began researching it. At the time of the call, he was not told whether the parent company had been sued, and he did not know whether to expect service of a subpoena. Owens spent "probably half an hour" researching from April 20 to April 25. He recalled being served with the County's subpoena on April 25, 2018.

Owens testified that he, EEG's executive vice president, Bruce Britten, and EEG's president/chief executive officer, Kimberly Millette, conducted the search for documents pertaining to the South Beverly site because they would know what to look for and where to look for it and because EEG had no administrative staff. Owens noted that he was the only person who had been with EEG "the entire length of time that this [site] was a project for the company." Owens said that Britten was involved with the site as the manager of this project from 2007 to 2016. Owens focused his search on "the stuff that predated [Britten]," but there was some overlapping effort, as Owens recalled "looking for some of the things that [Britten] was involved in, but [Britten] predominantly did the stuff he was in charge of from 2007 [forward]." Owens stated that Millette, who was in charge of "overall accounting functions and invoicing," would have searched for all the pertinent accounting records. Owens testified that he took the responsive documents to Office Depot/Office Max¹ for copying and scanning, and his wife retrieved the documents on May 7, 2018. An Office Depot receipt admitted into evidence shows that the May 7 transaction occurred at 11:20 a.m.

During Owens's testimony, EEG offered into evidence its $ 13,916.95 invoice:

EEG's counsel told the district court that the executives' hourly rates in the invoice were "their normal billing rate[s]." Owens acknowledged that the invoice had "all the details, cost[s] of document production that [EEG was] seeking to recover," and he asked the district court to award costs as set forth in the invoice.²

According to EEG's invoice, all three EEG executives who billed their time for "document production" listed the same block of time from April 20, 2018, to May 23, 2018. The County argued to the district court that the invoice included dates before the service of the County's subpoena (on April 25) and after the last set of documents had been retrieved from Office Depot (on May 7). Britten billed time at his professional geologist rate starting April 20, but Owens testified that he did not know whether Britten "had any actual time" between April 20 and April 24. Similarly, although the invoice shows that Millette billed time at her "president and CEO" rate starting April 20, Owens testified that Millette did not start billing her time on that day. Owens explained that "it was a block of time we used from when I started to when I stopped working. So that was kind of the block we used for everybody." EEG's counsel handled delivery of the responsive documents to the County, offering to provide them "on a CD or USB," and forwarded EEG's invoice to the County.

Owens denied having any records of the EEG executives' time aside from the totals listed on the invoice. He testified that they did not enter daily time records or time sheets. He stated, "Not for a project like this. Only—just specifically for the date." Owens was unsure how much time the three EEG executives incurred after May 7, when the last documents had been retrieved, but it was "not a lot." He said that they would "go through [the boxes] when they came back."

As for his own time, Owens acknowledged that the 22.5 hours represented "the actual hours that [he] put in searching for records requested by the subpoena." Owens testified that he billed the time spent searching for these records at a professional geologist rate that he thought was appropriate. The district court admitted the invoice into evidence over the County's objections that: (1) the invoice contained "hearsay within hearsay" and (2) Owens did not have a "proper foundation for testifying about this." In arriving at EEG's costs, the district court excluded the invoice's line item for legal fees. See BASF Fina Petrochemicals Ltd. P'ship v. H.B. Zachry Co. , 168 S.W.3d 867, 874 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (concluding that "costs of production" under Rule 205.3(f) does not include attorney's fees). The district court also deducted the cost for hard copies that EEG never provided to the County.

After the hearing, the district court ordered the County to pay EEG $ 11,283.89 (the difference between the $ 13,916.95 that EEG claimed minus $ 2,000 in legal fees and minus $ 633.06 for hard copies not provided to the County) within seven days of the order as reasonable costs of production. This calculation included the time block billed by EEG's three executives in the invoice. The County nonsuited its claims against SCS without prejudice and filed this appeal. EEG subsequently sought a show-cause order against the County and its counsel or the county judge, but the district court declined to enter those orders ex parte, concluding that it was "inappropriate" to do so and that the matter "should be noticed for hearing." EEG then filed a motion for contempt and sanctions with the district court, and the County filed an emergency motion in this Court to stay enforcement of the order on costs. We issued an order staying the enforcement of the costs order and EEG's motion for contempt and sanctions. Wichita Cty. v. Environmental Eng'g & Geotechnics, Inc. , No. 03-18-00434-CV, 2016 WL 11397710, at *1, 2016 Tex. App. LEXIS 13931, at *1 (Tex. App.—Austin July 16, 2016, order).

DISCUSSION

First issue: Refusal to permit County to conduct discovery on EEG's demand for costs

In its first issue, the County challenges the district court's order "refusing to permit" the County to conduct discovery as to the reasonableness of EEG's costs. Specifically, the County wanted to depose an EEG witness before the district court's hearing on the motion for costs. However, the County did not obtain an adverse ruling from the district court to preserve this issue for appeal. See Tex. R. App. P. 33.1(a). First, the County never noticed the deposition of an EEG witness. Second, the County did not request a continuance to depose an EEG witness before the motion for costs was heard. Third, the County did not renew its announcement of "not ready" for an evidentiary hearing when the district court stated its intent to proceed with the hearing or when Owens took the stand to testify in support of EEG's calculation of its costs for production of documents. On this record, we cannot conclude that the County has shown that the district court refused to permit discovery as to the reasonableness of EEG's costs. Accordingly, we overrule...