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determining trial court did not abuse its discretion by compelling a party produce documents containing alleged trade secrets when the party failed to comply with an agreed protective order
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NUMBER 13-17-00486-CV
04-09-2018
IN RE BROOKFIELD INFRASTRUCTURE GROUP, LLC
On Petition for Writ of Mandamus.
MEMORANDUM OPINION
Before Justices Rodriguez, Benavides, and Longoria
Memorandum Opinion by Justice Longoria
See TEX. R. APP. P. 52.8(d) ("When granting relief, the court must hand down an opinion as in any other case," but when "denying relief, the court may hand down an opinion but is not required to do so."); TEX. R. APP. P. 47.4 (distinguishing opinions and memorandum opinions).
Relator Brookfield Infrastructure Group, LLC (Brookfield) filed a petition for writ of mandamus in the above cause seeking to compel the trial court to: (1) vacate its August 23, 2017 order granting the motion to compel the production of documents from Brookfield filed by the Matagorda County Appraisal District (MCAD); (2) deny MCAD's motion to compel the production of documents from Brookfield; and (3) grant Brookfield's May 16, 2017 motion for protection to limit the scope of a subpoena duces tecum and notice of intention to take deposition by written questions.
This lawsuit arises from two consolidated actions: (1) Tres Palacios Gas Storage, LLC, v. Matagorda County Appraisal District, cause number 14-6-0414 in the 23rd District Court of Matagorda County, Texas; and (2) Tres Palacios Holdings, LLC v. Matagorda County Appraisal District, cause number 15-H-0379 in the 23rd District Court of Matagorda County, Texas. These causes were consolidated into a single action in cause number 14-H-0414 in the 23rd District Court, from which this original proceeding was taken. The respondent in this original proceeding is the Honorable Ben Hardin. See generally TEX. R. APP. P. 52.2.
In the underlying case, real parties in interest and plaintiffs Tres Palacios Holdings, LLC and Tres Palacios Gas Storage, LLC (collectively Tres unless noted otherwise) filed appeals in district court against MCAD regarding its appraisals of the fair market value of properties owned by Tres in Matagorda County for the 2014 and 2015 tax years. Tres alleges that MCAD's appraisals for these years are "at least $300 million over fair market value." Relator is a non-party to these cases and is a 49.99% owner of Tres Palacios Gas Storage, LLC. We conditionally grant the petition for writ of mandamus in part and deny it in part.
I. BACKGROUND
According to the pleadings, Tres operates a natural gas storage facility and related pipelines in Matagorda and Wharton Counties, Texas. MCAD issued appraisals of the market value of Tres's property in Matagorda County for use by taxing units assessing ad valorem taxes. Contending that that the property was appraised in excess of the appraised value, Tres filed notices of protest with the appraisal review board and ultimately filed appeals in district court. Tres contended that due to a precipitous drop in storage volumes and rates for natural gas, Tres's market value has plummeted and its property appraisals were too high. Tres brought causes of action for violations of section 42.25 of the Texas Tax Code regarding "excessive appraisal" and section 42.26 of the Texas Tax Code regarding "unequal valuations." See, e.g., TEX. CONST. art. VIII, § 20 (stating that "[n]o property of any kind in this State shall ever be assessed for ad valorem taxes at a greater value than its fair cash market value"); id. art. VIII, § 1(a) (stating that "[t]axation shall be equal and uniform"); TEX. TAX CODE ANN. § 1.04(7) (West, Westlaw through 2017 1st C.S.) (defining "market value"); id. § 23.01(a) (providing that "all taxable property is appraised at its market value as of January 1"); id. § 42.25 (providing the remedy for "excessive appraisal"); id. § 42.26 (providing the remedy for "unequal appraisal").
MCAD served a notice of intention to take deposition by written questions and a subpoena duces tecum containing twenty-one requests for production on Brookfield, a non-party to the suit. Brookfield filed objections to these requests and a motion for protection. MCAD filed a response to Brookfield's pleadings and a motion to compel production. After a non-evidentiary hearing, the special master handling discovery matters signed an order generally granting the relief requested in MCAD's motion and response, and denying Brookfield's motion for protection. Thereafter, Brookfield filed additional objections to the special master's recommended order. On August 23, 2017, the trial court signed, without modification, the special master's order.
Brookfield notes that "While a hearing before the Special Master was held prior to the trial court's issuance of its order, no testimony was adduced at that hearing and the hearing was not transcribed." See TEX. R. APP. P. 52.7(a)(2).
In its order, the trial court overruled Brookfield's objections to the definitions and instructions in the MCAD subpoena duces tecum and overruled its objections to the document requests "except as to claims of attorney-client communication privilege or work product (as defined in TEX. R. CIV. P. 192.5(a))." The trial court ordered Brookfield to produce documents "that are in the possession, custody or control of Brookfield Infrastructure Group LLC, Brookfield Infrastructure Group, Inc., or any affiliate of Brookfield Infrastructure Group LLC (including, but not limited to, BIF II Tres Aggregator LLC)." The trial court defined "Tres Palacios Gas Storage Facility" as "Plaintiffs, its business, and its assets."
The trial court's order allowed Brookfield to designate the documents it produces as "CONFIDENTIAL" pursuant to a confidentiality agreement and agreed protective order that was signed on May 12, 2017. The trial court's order further stated that "if Brookfield withholds any documents on the basis of the attorney-client communication privilege or work product (as defined in TEX. R. CIV. P. 192.5(a)), Brookfield shall, within fourteen (14) calendar days of this Order, provide MCAD's counsel with a privilege log of the documents withheld that complies with TEX. R. CIV. P. 193.3(b)."
The specific document requests that are at issue in this original proceeding are as follows:
2. All Brookfield documents, including, but not limited to, presentations, Powerpoints, summaries, projections, charts, reports, and other documents that refer or relate to the potential investment and/or purchase of an interest in the Tres Palacios Gas Storage Facility, including, without limitation, communications concerning or relating in any way to due diligence, evaluation, appraisal or valuation of the Tres Palacios Gas Storage Facility, or concerning or relating in any way to the negotiation, drafting and closing of the transaction described in the Brookfield Agreement.
. . . .
9. All documents, communications, and/or emails referring or relating to any strategy on the execution of long term storage contracts (one year or more) for the Tres Palacios Gas Storage Facility after the execution of the Brookfield Agreement. This includes, but is not limited to, any documents discussing whether long term storage contracts should or should not be executed and at what price.
10. All documents created by you or received by you that refer or relate to the projected future storage rates of the Tres Palacios Gas Storage Facility.
11. All documents created by you or received by you that refer or relate to the projected revenue of the Tres Palacios Gas Storage Facility.
12. All documents created by you or received by you that refer or relate to the projected net income of the Tres Palacios Gas Storage Facility.
13. All documents created by you or received by you that refer or relate to the financial value of all or any part of the Tres Palacios Gas Storage Facility.
14. All valuations that you prepared, or that were prepared at your request, to assist with your determination on whether to enter into the Brookfield Agreement.
. . . .
17. All appraisals you have had prepared, or have had a third party prepare for you, for all or any part of the Tres Palacios Gas Storage Facility.
18. All market studies or projections of natural gas storage rates that anyone has prepared, or participated in preparing, at any time from January 1, 2014, through the trial of this lawsuit.
19. All documents concerning the five-year, 15 bcf storage contract Brookfield entered into in connection with the Brookfield Agreement, including, without limitation, documents concerning whether the storage price under the contract is projected by you and/or Crestwood to be above or below market rates for storage for the entire five year period.
. . . .
21. All documents concerning the possibility of converting all or any portion of the Tres Palacios Gas Storage Facility to storage of natural gas liquids, crude oil, or any substance other than dry natural gas.
With regard to category 2, the trial court ordered Brookfield to produce "all presentations, Powerpoints, reports or similar documents relating to the Brookfield Agreement that discuss or summarize the Brookfield Agreement, and all internal communications that discuss the terms of the Brookfield Agreement or whether to enter into the Brookfield Agreement." The trial court limited category 18 of MCAD's subpoena duces tecum to "market studies or projections of natural gas storage rates that are relevant to the Tres Palacios Gas Storage Facility." The trial court defined "Brookfield Agreement" as "the agreement announced on or about November 24, 2014 for Crestwood Equity Partners LP to sell Tres Palacios Gas Storage LLC to Crestwood Midstream Partners and an affiliate of Brookfield Infrastructure Group." The trial court limited production to "documents created from January 1, 2010, through the date of this Order, except for category 18 of MCAD's Subpoena Duces Tecum, which is limited to documents created from January 1, 2014, through the date of this Order."
This original proceeding ensued. By one issue, Brookfield contends that the trial court abused its discretion in issuing its August 23, 2017 order compelling Brookfield, a non-party, "to respond to requests for information that, on their face, exceed the bounds of permissible discovery under Texas law." Brookfield contends generally that Texas law limits the scope of discovery that MCAD may obtain from non-parties like Brookfield and that all of the discovery requests that are the subject of the trial court's order are objectionable on multiple independent grounds because (a) the discovery requests do not seek relevant evidence and are not reasonably calculated to lead to the discovery of admissible evidence; (b) the discovery requests are overly broad; (c) the discovery requests improperly seek privileged, trade secret, and confidential information; and (d) the discovery requests improperly impose undue burden and expense on Brookfield. Alternatively, Brookfield contends that the trial court abused its discretion in failing to award it the costs required to comply with MCAD's subpoena.
This Court requested that the real parties in interest, MCAD, Tres Palacios Holdings, LLC, and Tres Palacios Gas Storage, LLC, or any others whose interest would be directly affected by the relief sought, file a response to the petition for writ of mandamus. MCAD filed a response to the petition and Brookfield filed a reply to that response.
II. STANDARD OF REVIEW
Mandamus is an extraordinary remedy. In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig. proceeding) (per curiam). Mandamus relief is proper to correct a clear abuse of discretion when there is no adequate remedy by appeal. In re Christus Santa Rosa Health Sys., 492 S.W.3d 276, 279 (Tex. 2016) (orig. proceeding). The relator bears the burden of proving both of these requirements. In re H.E.B. Grocery Co., 492 S.W.3d at 302; Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding).
An abuse of discretion occurs when the trial court's ruling is arbitrary and unreasonable or is made without regard for guiding legal principles or supporting evidence. In re Nationwide Ins. Co. of Am., 494 S.W.3d 708, 712 (Tex. 2016) (orig. proceeding); Ford Motor Co. v. Garcia, 363 S.W.3d 573, 578 (Tex. 2012). We determine the adequacy of an appellate remedy by balancing the benefits of mandamus review against the detriments. In re Essex Ins. Co., 450 S.W.3d 524, 528 (Tex. 2014) (orig. proceeding); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding).
A discovery order that compels production beyond the rules of procedure is an abuse of discretion for which mandamus is the proper remedy. In re Nat'l Lloyds Ins. Co., 449 S.W.3d 486, 488 (Tex. 2014) (orig. proceeding); In re Deere & Co., 299 S.W.3d 819, 820 (Tex. 2009) (orig. proceeding) (per curiam); Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815 (Tex. 1995) (per curiam). A party lacks an adequate remedy by appeal with regard to an order denying discovery when: (1) the appellate court would not be able to cure the trial court's error on appeal; (2) the party's ability to present a viable claim or defense is vitiated or severely compromised; or (3) the missing discovery cannot be made a part of the appellate record. In re Ford Motor Co., 988 S.W.2d 714, 721 (Tex. 1998) (orig. proceeding).
III. DISCOVERY
"Parties are 'entitled to full, fair discovery' and to have their cases decided on the merits." Ford Motor Co. v. Castillo, 279 S.W.3d 656, 663 (Tex. 2009) (quoting Able Supply Co. v. Moye, 898 S.W.2d 766, 773 (Tex. 1995) (orig. proceeding)). The scope of discovery is generally within the trial court's discretion. In re Graco Children's Prods., Inc., 210 S.W.3d 598, 600 (Tex. 2006) (orig. proceeding) (per curiam); In re CSX Corp., 124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding) (per curiam). Parties may seek discovery "regarding any matter that is not privileged and is relevant to the subject matter of the pending action . . . ." TEX. R. CIV. P. 192.3(a); see In re Nat'l Lloyds Ins. Co., 449 S.W.3d at 488. Information is relevant if it tends to make the existence of a fact that is of consequence to the determination of the action more or less probable than it would be without the information. See TEX. R. EVID. 401. The phrase "relevant to the subject matter" is to be broadly construed. Ford Motor Co., 279 S.W.3d at 664; see In re Nat'l Lloyds Ins. Co., 449 S.W.3d at 488.
It is not a ground for objection "that the information sought will be inadmissible at trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence." TEX. R. CIV. P. 192.3(a). However, a party's discovery requests must show a reasonable expectation of obtaining information that will aid in the resolution of the dispute. In re CSX Corp., 124 S.W.3d at 152. A request "is not overbroad merely because [it] may call for some information of doubtful relevance" so long as it is "reasonably tailored to include only matters relevant to the case." Texaco, Inc., 898 S.W.2d at 815; see In re Nat'l Lloyds Ins. Co., 449 S.W.3d at 488; In re Graco Children's Prods., Inc., 210 S.W.3d at 600.
IV. ANALYSIS
Brookfield argues that these discovery requests do not seek relevant evidence and are not reasonably calculated to lead to the discovery of admissible evidence; the discovery requests are overly broad; the discovery requests seek privileged, trade secret, and confidential information; and the discovery requests impose undue burden and expense. Brookfield alternatively argues that the trial court abused its discretion in refusing to award it the costs it requires to comply with the subpoena.
MCAD, in contrast, asserts that its discovery requests "sought discoverable valuation information, were not overly broad, were not unduly burdensome and are not protected by privilege." MCAD contends that "Brookfield has failed to demonstrate that the appraisals, valuations, projected storage rates, and financial information for Tres Palacios sought by MCAD are irrelevant to the appraisal value of Tres Palacios' property." It argues that the "type of information sought by MCAD is not only relevant, but essential, to the valuations that the parties' experts must prepare in the consolidated de novo district court proceedings and is clearly discoverable." MCAD asserts that Brookfield asserted form objections to each of these discovery requests and did not produce one single page of documentation in response to the discovery requests. It argues that voluminous and unfounded objections violated the Texas discovery rules.
We note that the rules of discovery required Brookfield to "comply with as much of the request to which the party has made no objection unless it is unreasonable under the circumstances to do so before obtaining a ruling on the objection." TEX. R. CIV. P. 193.2; see also id. R. 193 cmt. 2.
A. Relevance
Brookfield makes two arguments regarding why the requests for production do not seek relevant evidence and are not reasonably calculated to lead to the discovery of admissible evidence. First, Brookfield contends that the subpoena duces tecum defined "Tres Palacios Gas Storage Facility," which is a term used to define the scope of discovery in request numbers 2, 9-13, 17-18, and 21, to mean "the Matagorda Properties and Wharton Properties that were the subject of the Brookfield Agreement." MCAD's motion to compel did not seek to alter that definition. However, in its discovery order, the trial court redefined "Tres Palacios Gas Storage Facility" to mean "Plaintiffs, its business, and its assets." Brookfield contends that this revised definition "goes beyond the properties that are the subject of the underlying action" and now broadly encompasses Tres's business and all its assets, "regardless of whether those assets are subject to tax in Matagorda County and Wharton County and regardless of where they are located." Brookfield thus argues that these requests seek discovery that is not relevant to the subject matter of this action and is not reasonably calculated to lead to the discovery of admissible evidence, and that these requests are overly broad and unduly burdensome as well. In contrast, MCAD argues that the change in definition was made to clarify the scope of production and to prevent Brookfield from restricting its discovery obligations to the physical assets at issue rather than Brookfield's investment in the gas storage facility. According to MCAD, the "experts will rely on the gas storage operations within and outside of Matagorda County in determining the fair market value of the storage facility," and "the experts will evaluate the revenue and operations, etc. in determining the fair market value, not just the physical equipment."
Here, as stated previously, Tres brought causes of action for violations of section 42.25 of the Texas Tax Code regarding "excessive appraisal" and section 42.26 of the Texas Tax Code regarding "unequal valuations." See TEX. TAX CODE ANN. § 42.25; id. § 42.26. Taxable property is generally appraised at its market value. See TEX. TAX CODE ANN. § 23.01(a ); In re Valero Ref.-Tex., LP, 415 S.W.3d 567, 571 (Tex. App.—Houston [1st Dist.] 2013, orig. proceeding). There are three potential methods of determining the market value of property: cost, income, and market data comparison. See TEX. TAX CODE ANN. § 23.0101; Key Energy Servs., LLC v. Shelby Cty. Appraisal Dist., 428 S.W.3d 133, 143 (Tex. App.—Tyler 2014, pet. denied). "In determining the market value of property, the chief appraiser shall consider the cost, income, and market data comparison methods of appraisal and use the most appropriate method." TEX. TAX CODE ANN. § 23.0101.
Neither Brookfield nor MCAD have informed us regarding the methods that were utilized for appraisal in this case. We conclude that documents reasonably related to the statute's three methods of appraising property would generally be relevant and within the scope of a properly tailored request for production. See id.; Key Energy Servs., LLC, 428 S.W.3d at 143; see also In re Premcor Ref. Grp., Inc., No. 09-09-00222-CV, 2009 WL 2253290, at *4 (Tex. App.—Beaumont July 30, 2009, orig. proceeding) (mem. op.). Nevertheless, we agree, in part, with Brookfield's contention that the change in definition constituted an abuse of discretion. The discovery ordered by the trial court was much more expansive than that sought by MCAD's original discovery requests because of the broadened definition for "Tres Palacios Gas Storage Facility." The issue here concerns the appraisal of the property that is subject to tax by MCAD. The expanded definition encompasses both plaintiffs below, their businesses, and their assets. Accordingly, the order was overbroad because it "could have been more narrowly tailored to avoid including tenuous information and still obtain the necessary, pertinent information." See, e.g., In re CSX Corp., 124 S.W.3d at 153; Fitzgerald v. Rogers, 818 S.W.2d 892, 895-96 (Tex. App.—Tyler 1991, orig. proceeding) (granting mandamus relief from a discovery order that, inter alia, exceeded the requested relief). We sustain Brookfield's argument to the extent that it contends that request numbers 2, 9-13, 17-18, and 21 encompassed irrelevant discovery due to the expanded definition of "Tres Palacios Gas Storage Facility." Our holding should not be construed, however, to prohibit discovery of documents that are relevant to the statutory methods for the appraisal of property. See TEX. TAX CODE ANN. § 23.0101; Key Energy Servs., LLC, 428 S.W.3d at 143.
Second, Brookfield further argues that the trial court's order requires the production of irrelevant documents because the requests "generally seek to go behind the Brookfield Agreement to discover the solely internal information and thought processes that Brookfield considered in determining the amount of consideration to pay for its membership interest in Tres under the Brookfield Agreement." Brookfield contends that "the only potentially relevant information that might help resolve the dispute between Tres and MCAD in this action is the amount of the consideration that Brookfield ultimately chose to pay for its interest in Tres under that agreement."
Brookfield cites no authority in support of this contention. Its argument ignores well-developed statutory and common law doctrines regarding the valuation of property, the definitions of market value and comparable properties, and various well-established factors that influence the appraised value of a property. See, e.g., TEX. TAX CODE ANN. § 23.01(b); id. § 42.26; Weingarten Realty Inv'rs v. Harris Cty. Appraisal Dist., 93 S.W.3d 280, 286 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (examining the application of former section 42.26(d) of the tax code, now found at section 42.26(a)(3)); Harris Cty. Appraisal Dist. v. United Inv'rs Realty Trust, 47 S.W.3d 648, 650 n.4 (Tex. App.—Houston [14th Dist.] 2001, pet. denied); see also Harris Cty. Appraisal Dist. v. Kempwood Plaza Ltd., 186 S.W.3d 155, 160-61 (Tex. App.—Houston [1st Dist.] 2006, no pet.); In re MHCB (USA) Leasing & Fin. Corp., No. 01-06-00075-CV, 2006 WL 1098922, at *3 (Tex. App.—Houston [1st Dist.] Apr. 27, 2006, orig. proceeding) (mem. op.). Accordingly, we overrule this argument.
B. Overbreadth
Brookfield makes several arguments in support of its contention that the discovery ordered is overbroad. First, Brookfield attacks the temporal scope of the trial court's order. Brookfield originally objected to request numbers 2, 9-14, 17-19, and 21 as overly broad and not reasonably limited in time and scope because they did not contain any date limitation and sought information about matters that occurred after the closing of the Brookfield Agreement in late 2014. The trial court's order limited these requests to documents created from January 1, 2010, through the date of its order, August 23, 2017, and limited request number 18 to documents created from January 1, 2014, through the date of its order.
Brookfield argues that these temporal limitations are overbroad and unreasonable because the issues in this lawsuit concern MCAD's appraisals in the 2014 and 2015 tax years. See, e.g., Dillard Dep't Stores v. Hall, 909 S.W.2d 491, 492 (Tex. 1995) (orig. proceeding) (per curiam) ("We hold that a twenty-state search for documents over a five-year period is overly broad as a matter of law."). Brookfield argues both that a seven-year span is overbroad and that documents created after the 2014 and 2015 valuation dates are irrelevant. Brookfield argues that information regarding the property's fair market value after the 2014 and 2015 valuation dates would be immaterial in determining the validity of MCAD's appraisal of the Property in 2014 and 2015 and "any information regarding Brookfield's considerations and thought processes after the Brookfield Agreement was executed would clearly be immaterial in analyzing Brookfield's considerations and thought processes before it was executed."
In connection with this argument, Brookfield specifically states that "limiting the request of documents to documents from dozens of affiliates around the world covering a period of more than seven years is neither narrow nor reasonably limited in time and scope where Tres merely seeks to challenge MCAD's appraisals in the 2014 and 2015 tax years." In its petition, Brookfield asserts that the subpoena expressly defined "Brookfield" to include not just "Brookfield Infrastructure Group LLC" but also "Brookfield Infrastructure Group, Inc., and any and all affiliates of Brookfield Infrastructure Group, LLC, including, but not limited to, BIF II Tres Aggregator LLC." In this original proceeding, Brookfield does not attack otherwise attack MCAD's definition of Brookfield as inclusive of its affiliates.
Discovery orders requiring document production from an unreasonably long period of time are impermissibly overbroad. See In re CSX Corp., 124 S.W.3d at 152; In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig. proceeding) (per curiam); Dillard Dep't Stores, Inc., 909 S.W.2d at 492; Texaco, Inc., 898 S.W.2d at 815. "Overbroad requests encompass time periods or activities beyond those at issue in the case—in other words, matters of questionable relevance." In re Jacobs, 300 S.W.3d 35, 44 (Tex. App.—Houston [14th Dist.] 2009, orig. proceeding [mand. dism'd]). A central consideration in determining overbreadth is whether the request could have been more narrowly tailored to avoid including tenuous information and still obtain the necessary, pertinent information. See In re CSX Corp., 124 S.W.3d at 153; In re Am. Optical Corp., 988 S.W.2d at 713. However, a reasonably tailored discovery request is not overbroad merely because it may include some information of doubtful relevance, and the "parties must have some latitude in fashioning proper discovery requests." In re Am. Optical Corp., 988 S.W.2d at 713; Texaco, 898 S.W.2d at 815; see also In re Waste Mgmt. of Tex., Inc., No. 13-11-00197-CV, 2011 WL 3855745, at *8 (Tex. App.—Corpus Christi Aug. 31, 2011, orig. proceeding [mand. denied]) (mem. op.).
Here, the trial court's order encompassed the production of documents for the majority of the requests to documents created from January 1, 2010, through August 23, 2017, and limited request number 18 to documents created from January 1, 2014, through the date of its order. Considering the subject of this lawsuit, we concur with Brookfield that documents created after the 2014 and 2015 appraisals would be immaterial in determining the validity of those appraisals. MCAD offers no rationale in support of the relevance of these documents. Accordingly, we conclude that the trial court abused its discretion in ordering the production of documents created after the 2014 and 2015 appraisals. To the extent that Brookfield challenges the overall temporal limitation on the requests for production; however, Brookfield cites no authority, and we have found none, suggesting that the global temporal limitation is per se overbroad. In sum, we sustain Brookfield's arguments pertaining to the discovery order's temporal limitations insofar as the order requires the production of documents created after the 2014 and 2015 valuation dates, and we overrule Brookfield's remaining arguments regarding the relevant time-span for production.
Second, Brookfield contends that the trial court abused its discretion regarding request number 14, which requests the production of "[a]ll valuations that you prepared, or that were prepared at your request, to assist with your determination on whether to enter into the Brookfield Agreement," and the directive in the trial court's order regarding request category 2—documents which discuss or summarize the Brookfield Agreement—are overbroad. As noted previously, the Brookfield Agreement was the agreement whereby Crestwood Equity Partners LP sold Tres Palacios Gas Storage LLC to Crestwood Midstream Partners and an affiliate of Brookfield Infrastructure Group. Brookfield contends that the agreement related to a membership interest in an enterprise, not the purchase of any property. "Therefore, the above discovery is overly broad because it seeks documents on the completely irrelevant issue of Brookfield's purchase of a membership interest in an enterprise—an enterprise that owned not only the property at issue but also intangible assets such as permits, contractual rights, and licenses."
Here, the purchase at issue in the Brookfield Agreement encompassed the property subject to taxation in this lawsuit, and valuations regarding that purchase would be clearly relevant to the appraisal of the property at issue. However, the purchase at issue may also encompass valuations that are not relevant to MCAD's appraisals of the property subject to taxation in the underlying lawsuit. Accordingly, the trial court's discovery order was overbroad because it "could have been more narrowly tailored to avoid including tenuous information and still obtain the necessary, pertinent information." See, e.g., In re CSX Corp., 124 S.W.3d at 153. We sustain this argument.
Third, Brookfield contends that the trial court's order as it pertains to request number 18 is overbroad. Brookfield contends that this request, as modified by the trial court, required the production of all market studies or projections of natural gas storage rates that are relevant to the Tres Palacios Gas Storage Facility at any time from January 1, 2014, through the trial of this lawsuit. Brookfield contends that the scope of this request is overbroad due to the trial court's definition of "Tres Palacios Gas Storage Facility" to broadly mean "Plaintiffs, its business, and its assets." Under the trial court's order, then, request number 18 would now appear to state: "All market studies or projections of natural gas storage rates that anyone has prepared, or participated in preparing, at any time from January 1, 2014, through the trial of this lawsuit that are relevant to Plaintiffs, its business, and its assets." We have already sustained Brookfield's complaint concerning the definition of Tres Palacios Gas Storage Facility, and accordingly, we conclude the same here.
Fourth, and finally, Brookfield contends that requests number 18 and number 19 are "improperly vague and ambiguous" because the terms "market studies," "projections of natural gas storage rates," and "market rates for storage" are undefined. We conclude that these terms are easily defined in the context of this lawsuit with reference to the relevant provisions of the tax code pertaining to definitions of similar terms. See, e.g., TEX. TAX CODE ANN. § 1.04 (West, Westlaw through 2017 1st C.S.) (including definitions of, inter alia, "market value"); id. § 23.01 (requiring the application of "generally accepted" appraisal techniques); id. § 23.012 (referencing "base projections" and "cash-flow projections"). We overrule this argument.
C. Attorney Client Privilege and Work Product
Brookfield contends that the trial court abused its discretion in compelling Brookfield to respond to the requests because they "demand the production of documents that are clearly protected from disclosure by the attorney-client and work product privileges." Brookfield argues that it presented "undisputed" evidence that MCAD's requests would require the disclosure of privileged communications. Brookfield contends that "due to the extensive regulatory issues involved with the type of operations by Tres Palacios Gas Storage, LLC and its predecessor" and "the legal considerations involved with Brookfield's purchase" of Tres, "documents were generated by or provided to both in-house and outside legal counsel to facilitate the rendition of professional legal services by such counsel to Brookfield." In support of these allegations, Brookfield offered the affidavit of Darren Soice, the former senior vice president of Brookfield Asset Management. According to the relevant parts of the Soice affidavit:
Given the extensive regulatory issues involved with the type of operations by Tres Palacios and its predecessor, and the legal considerations involved with any membership purchase transaction such as the Brookfield Agreement, I would estimate that most of the requested documents were generated by or provided to legal counsel (both internal and external) to facilitate the rendition of professional legal services by such counsel to Brookfield.
The transactions represented by the Brookfield Agreement and all other agreements executed contemporaneously therewith involved approximately twenty-five (25) employees of Brookfield, two (2) of which were inside counsel at Brookfield rendering professional legal services to Brookfield, and approximately fourteen (14) outside counsel attorneys rendering professional legal services to Brookfield.
Soice's supplemental affidavit states that the documents described were "generated by or furnished to both internal and external legal counsel" to Brookfield "in order to seek legal advice" on numerous issues which included, but were not limited to "compliance with health, safety, and environmental regulations" and "compliance with Texas Railroad Commission regulatory requirements." Brookfield argues that the "undisputed evidence above conclusively establishes that the requests that are the subject of the trial court's order implicate documents protected from disclosure by the attorney-client and work product privileges." More specifically, Brookfield asserts that the trial court abused its discretion in overruling its objection to the definition in Section F of the subpoena, which effectively defines Brookfield as including its attorneys, and by compelling Brookfield "to catalog every single document in its attorneys' working files and every single written document . . . that Brookfield has exchanged with its attorneys (including but not limited to e-mails and other written communications between Brookfield and its counsel) in a privilege log."
The "Definitions" section of MCAD's subpoena provides: "Whenever any company or other business entity is referred to, the following requests encompass the officers, directors, employees, members, managers, attorneys, agents and representatives of that company or other business entity." The trial court's discovery order provides that if Brookfield "withholds any documents on the basis of the attorney-client communication privilege or work product (as defined in TEX. R. CIV. P. 192.5(a)), Brookfield shall, within fourteen (14) calendar days of this Order, provide MCAD's counsel with a privilege log of the documents withheld that complies with TEX. R. CIV. P. 193.3(b)." In its order, the trial court overruled Brookfield's objections to the definitions and instructions in the MCAD subpoena duces tecum and overruled Brookfield's objections to the document requests "except as to claims of attorney-client communication privilege or work product (as defined in TEX. R. CIV. P. 192.5(a))."
If a party believes information is privileged, the party has a right to assert that privilege in accordance with Rule 193.3 of the Texas Rules of Procedure. See TEX. R. CIV. P. 193.3. Rule 193.3 sets out the procedure to be followed where a party claiming privilege may withhold the privileged material or information from its response. See id. R. 193.3(a). If a party chooses to withhold, then that party must disclose that responsive material has been withheld, identify the requests to which the material is responsive, and identify the privilege or privileges asserted. Id. The party seeking discovery may then serve a written request asking the withholding party to identify the withheld information and material. Id. R. 193.3(b). Within fifteen days, "the withholding party must serve a response" describing the withheld material or information, "without divulging the privileged information itself or waiving the privilege," but in a manner that "enables other parties to assess the applicability of the privilege." Id. The response must also assert "a specific privilege for each item or group of items withheld." Id. This response identifying withheld items is commonly called a privilege log. In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 221 n.1 (Tex. 2004) (orig. proceeding) (per curiam).
The mere listing of a specific privilege in a response or a privilege log does not prove that privilege. In re Park Cities Bank, 409 S.W.3d 859, 868 (Tex. App.—Tyler 2013, orig. proceeding); In re Monsanto Co., 998 S.W.2d 917, 928 (Tex. App.—Waco 1999, orig. proceeding). Therefore, in addition to the privilege log, the party resisting discovery must establish a prima facie case for the privilege by testimony or affidavit. In re Living Ctrs. of Tex., Inc., 175 S.W.3d 253, 261 (Tex. 2005) (orig. proceeding); In re Park Cities Bank, 409 S.W.3d at 868. When a party asserting that documents are protected by privilege, makes a prima facie showing of privilege, and tenders documents to the trial court, the trial court must conduct an in camera inspection of those documents before deciding to compel production. In re E.I. DuPont de Nemours & Co., 136 S.W.3d at 223; see TEX. R. CIV. P. 193.4.
With one significant exception that is directly relevant to this case, preparation and service of a privilege log is mandatory when a log has been timely requested. TEX. R. CIV. P. 193.3(b). However, a party is not required to file a privilege log for communications or documents to or from its attorney or for privileged documents of a lawyer or lawyer's representative. Id. R. 193.3(c); In re Lumbermen's Underwriting All., 421 S.W.3d 289, 292 (Tex. App.—Texarkana 2014, orig. proceeding). Specifically, a party need not create a log and "may withhold a privileged communication to or from a lawyer or lawyer's representative or a privileged document of a lawyer or lawyer's representative" that is:
(1) created or made from the point at which a party consults a lawyer with a view to obtaining professional legal services from the lawyer in the prosecution or defense of a specific claim in the litigation in which discovery is requested, andTEX. R. CIV. P. 193.3(c). A comment to Texas Rule of Civil Procedure 193.3 states that "[a] party need not state that material created by or for lawyers for the litigation has been withheld as it can be assumed that such material will be withheld from virtually any request on the grounds of attorney-client privilege or work product." Id. R. 193.3 cmt. 3. The comment further states that "the rule does not prohibit a party from specifically requesting the material or information if the party has a good faith basis for asserting that it is discoverable." Id.
(2) concerning the litigation in which the discovery is requested.
Brookfield is correct in arguing that it has no obligation to produce a privilege log regarding privileged communications with its attorneys "created or made from the point at which a party consults a lawyer with a view to obtaining professional legal services from the lawyer in the prosecution or defense of a specific claim in the litigation in which discovery is requested," and "concerning the litigation in which the discovery is requested." See id. R. 193.3(c); In re Lumbermen's Underwriting All., 421 S.W.3d at 292. MCAD has neither specifically requested the material or information nor has it asserted that it has a good faith basis for asserting that it is discoverable. See TEX. R. CIV. P. 193.3 cmt. 3.
Our ruling should not, however, be construed as to exempt communications with attorneys which do not fall within the parameters of Rule 193. In other words, Brookfield is not exempted from the privilege log requirement for privileged communications with its attorneys that were not obtained for obtaining professional legal services "in the prosecution or defense of a specific claim in the litigation in which discovery is requested," and "concerning the litigation in which the discovery is requested." See id. R. 193.3(c); In re Lumbermen's Underwriting All., 421 S.W.3d at 292. To the extent that such communications exist, Brookfield should comply with Rule 193 and include those documents within a privilege log. We leave it to the trial court to determine whether any such documents are protected from disclosure after review of the privilege log, any evidence provided by Brookfield or MCAD regarding the discoverability of the documents, and if necessary, an in camera review. See, e.g., TEX. R. CIV. P. 192.5(b)(2); In re Living Ctrs. of Tex., Inc., 175 S.W.3d at 261; In re Lumbermen's Underwriting All., 421 S.W.3d at 294-95; In re USA Waste Mgmt. Res., LLC, 387 S.W.3d 92, 96 (Tex. App.—Houston [14th Dist.] 2012, orig. proceeding); In re Yorkshire Ins. Co., 337 S.W.3d 361, 364 (Tex. App.—Amarillo 2011, orig. proceeding). This argument is sustained, in part, as stated here.
D. Trade Secret and Confidential Information
Brookfield contends that the trial court also abused its discretion by compelling it to produce documents containing trade secrets and other confidential information that, if disclosed, would create "a competitive disadvantage for Brookfield in a competitive industry." Brookfield argues that it presented "undisputed" evidence that most of the documents sought by MCAD are "confidential, proprietary, and commercially sensitive." Brookfield argues that it presented evidence establishing that the requested documents include: (1) documents containing "information generated during Brookfield's internal processes followed in the evaluation of investments in natural gas storage facilities in general, not just the Brookfield Agreement transactions"; and (2) the "results of Brookfield's due diligence, transaction execution, and valuation of investment opportunities specific to energy and energy-related infrastructure." Brookfield argues that if "this information were to become public, Brookfield would suffer a competitive disadvantage when investing in other natural gas-related facilities." Brookfield also contends that MCAD failed to meet its burden to present particularized evidence that it needed trade secret evidence.
In support of these allegations, Brookfield again offered the affidavit of Darren Soice. Soice testified in relevant part:
6. I note that the Subpoena seeks documents containing several types of information that are competitively sensitive. This information is confidential and proprietary and, importantly, it is competitively sensitive information that should not be disclosed to anyone. The twenty-one (21) document requests included in the Subpoena seek, in whole or in part, confidential and proprietary information that would be damaging to Brookfield if disclosed. The requested documents contain information generated during Brookfield's internal processes followed in the evaluation of investments in natural gas storage facilities, which would include the results of Brookfield's due diligence, transaction execution and valuation of investment opportunities specific to energy and energy related infrastructure. If this information were to become public, Brookfield would suffer a competitive disadvantage when investing in other natural gas related facilities.
7. The Subpoena also requests, as request no. 18, "all market studies or projections of natural gas storage rates that anyone has prepared, or participated in preparing, at any time from January 1, 2014, through the trial of this lawsuit" (emphasis added). Depending upon the meaning of the term "market studies", which is undefined, and whether the request is with respect to all affiliates of Brookfield, this request could describe almost all of the documents ever created, received or worked on by the Brookfield family of business entities, which focus on investments which of course rely upon the study of the markets involved. If this information were disclosed, Brookfield would suffer a competitive disadvantage not only when investing in other natural gas related facilities, but also when investing in the other markets in which Brookfield and its affiliates invest.
We disagree with Brookfield's assertion that the trial court abused its discretion in ordering the production of this data. Whether or not Brookfield has established that any documents are confidential or protected by trade secret privilege, a concept which we view with some skepticism, see, e.g., In re Bass, 113 S.W.3d 735, 737 (Tex. 2003) (orig. proceeding); In re Cont'l Gen. Tire, Inc., 979 S.W.2d 609, 610 (Tex. 1998) (orig. proceeding); see also In re M-I LLC, 505 S.W.3d 569, 578 (Tex. 2016) (orig. proceeding), Brookfield's argument fails to consider that there is an agreed protective order in place which contains procedures applicable to its claims. See TEX. R. CIV. P. 192.6; TEX. R. EVID. 507; TEX. CIV. PRAC. & REM. CODE ANN. § 134A.006 (West, Westlaw through 2017 1st C.S.). Specifically, Brookfield has not taken advantage of the provisions of the protective order to argue that certain materials should not be produced. The protective order provides:
This Order shall be without prejudice to the right of Brookfield or the Parties
(a) to bring before the Court at any time the question of whether any particular document or information is confidential or whether its use should be restricted or
(b) to present a motion to the Court for a separate protective order as to any particular document or information, including restrictions differing from those as specified herein.
Any issues regarding the production of documents should be subject to the agreed-upon provisions in the protective order. Under the protective order, issues pertaining to confidentiality or trade secrets for specific documents should be submitted to the trial court for determination. Brookfield does not argue that this protective order is insufficient. The record before us does not indicate that Brookfield has filed a motion to modify the protective order in any respect. Accordingly, we conclude that Brookfield has not met its burden to establish that the requested documents are precluded from discovery based on their alleged confidentiality. See McKinney v. Nat'l Union Fire Ins. Co. of Pittsburgh, Penn., 772 S.W.2d 72, 75 (Tex. 1989) (stating that if a discovery hearing is held, the objecting party must assume the burden of establishing its privilege, immunity, or other objection to the discovery request); In re Navistar, Inc., 501 S.W.3d 136, 142-43 (Tex. App.—Corpus Christi 2016, orig. proceeding). Because the question regarding whether the documents encompass confidential or trade secret privileges has not been presented to the respondent, those objections remain subject to presentation. Accordingly, Brookfield should produce all documents listed in the request for production that do not contain private data and should, if necessary, request an in camera hearing regarding those documents containing allegedly confidential or privileged matter in order for the trial court to give due consideration to the matter. We deny Brookfield's argument pertaining to trade secret and confidential documents.
E. Undue Expense and Burden
Brookfield contends that the trial court also abused its discretion in compelling Brookfield to respond to the requests because they impose an undue burden and expense on Brookfield. In connection with this issue, Brookfield reiterates its previous objections to the requests which we have already addressed. Brookfield argues that:
[It] presented evidence estimating that complying with the subpoena's requests would involve a "minimum of hundreds of hours of labor and substantial expense based on: (1) the need to reach out to dozens of employees to determine if the requested documents are still available, determine the completeness of such documents, and assemble the documents both in paper and electronic format; (2) the sheer amount of work (about 6,500 hours) performed in connection with the transactions that were the subject of the Brookfield Agreement; (3) the need to engage a third-party service provider to collect, review, and prepare such documents for production; (4) the need to retain legal counsel to conduct a review of the documents to identify legally privileged communications and take steps to recognize and preserve any applicable privileges; and (5) the sheer scope of the universe of documents implicated by the requests.
Discovery may be limited if (1) it is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; or (2) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. TEX. R. CIV. P. 192.4; In re Weekley Homes, LP, 295 S.W.3d 309, 317 (Tex. 2009) (orig. proceeding); In re Stern, 321 S.W.3d 828 (Tex. App.—Houston [1st Dist.] 2010, orig. proceeding). The fact that a discovery request is burdensome is not enough to justify protection; "it is only undue burden that warrants nonproduction." ISK Biotech Corp. v. Lindsay, 933 S.W.2d 565, 568 (Tex. App.—Houston [1st Dist.] 1996, no pet.); see In re Alford Chevrolet-Geo, 997 S.W.2d 173, 181 (Tex. 1999) (orig. proceeding) (requiring demonstration of undue burden or harassment); In re Energas Co., 63 S.W.3d 50, 55 (Tex. App.—Amarillo 2001, orig. proceeding). A discovery request will not result in an undue burden when the burdensomeness of responding to it is the result of the responding party's own "conscious, discretionary decisions." ISK Biotech Corp., 933 S.W.2d at 569; see In re Whiteley, 79 S.W.3d 729, 734-35 (Tex. App.—Corpus Christi 2002, orig. proceeding). A party resisting discovery cannot make conclusory allegations that the requested discovery is unduly burdensome but must instead produce some evidence supporting its request for a protective order. In re Alford Chevrolet-Geo, 997 S.W.2d at 181; In re Energas Co., 63 S.W.3d at 55.
We have sustained Brookfield's complaint that some of the discovery requests at issue are overbroad for the reasons stated. Because the discovery ordered in this case will be constrained in scope, we need not address Brookfield's additional complaint that the discovery order is unduly burdensome. See In re Whiteley, 79 S.W.3d at 734-35.
A court may determine requests are unduly burdensome where the discovery sought may be more easily or cheaply obtained from another source. See TEX. R. CIV. P. 192.4. MCAD asserts that it has cooperated in addressing Brookfield's concerns about cumulative production and documents unrelated to Tres Palacios. MCAD agreed that Brookfield did not have to produce documents that Tres produced or could produce, and agreed to limit Brookfield's production to documents to relevant to Tres, as opposed to gas storage operations in other parts of the country. These agreements significantly reduced the amount of documents Brookfield would have to produce in response to the subpoena, essentially reducing the document requests to Brookfield's internal documents regarding the Brookfield Sale including appraisals, valuations, revenue, storage rates, and income projections.
V. CONCLUSION
The Court, having examined and fully considered the petition for writ of mandamus, the response, the reply, and the applicable law, concludes that Brookfield has partially obtained its right to mandamus relief as stated herein. Accordingly, we lift the stay previously imposed. See TEX. R. APP. P. 52.10(b) ("Unless vacated or modified, an order granting temporary relief is effective until the case is finally decided.").
We conditionally grant mandamus relief as stated here and deny it as to all other relief requested. We grant relief regarding (1) request numbers 2, 9-13, 17-18, and 21 as overbroad due to the expanded definition of "Tres Palacios Gas Storage Facility;" (2) request numbers 2, 9-14, 17-19, and 21 insofar as documents created after the 2014 and 2015 appraisals would be irrelevant; (3) the definition of "Brookfield" as including its attorneys with regard to the provision of a privilege log; and (4) request number 14 as overbroad because it is not limited to the appraised property. We direct the trial court to vacate its August 23, 2017 discovery order to the extent that it compels the production of such documents and issue a written ruling correcting these matters. We emphasize that our ruling is based solely on the record before us, and we express no opinion about whether any of these documents could be shown to be subject to discovery after additional proceedings. See In re Sullivan, 214 S.W.3d 622, 625 (Tex. App.—Austin 2006, orig. proceeding). All other relief is denied. Our writ will issue only if the trial court fails to comply.
NORA L. LONGORIA
Justice Delivered and filed the 9th day of April, 2018.