Opinion
No. 11-20-00154-CV
08-06-2020
IN RE JAKIE WAYNE COMPTON; EQUIPMENT LEASING SPECIALTIES, LLC; RAITZ ENTERPRISES, INC.; AND CASEY RAITZ
Original Mandamus Proceeding
MEMORANDUM OPINION
Relators, Jakie Wayne Compton; Equipment Leasing Specialties, LLC; Raitz Enterprises, Inc.; and Casey Raitz, filed this original petition for writ of mandamus in which they request that we instruct the Honorable Jason C. Cashon, presiding judge of the 266th District Court, to vacate portions of two orders entered on June 24, 2020, in Cause No. CV36015. In those orders, Judge Cashon required Equipment Leasing, Raitz Enterprises, and Compton to produce certain financial documents and required Raitz Enterprises to respond to an interrogatory that requested that it identify businesses with which it had been associated. We conditionally grant the petition for writ of mandamus.
Background
Real Party in Interest, Francisco Oberto Rodriguez Martinez, allegedly suffered severe injuries in an automobile accident. Martinez, individually, and Real Parties in Interest, Francisco Jose Rodriguez Nunez and Christhi Jennifer Martinez deRodriguez, as next friends of Martinez, sued Relators; Lovell Lawn and Landscape, Inc; Bran Keist Dajourn Kelly; and Big State Concrete, LLC. As relevant here, Real Parties in Interest alleged in their first amended petition:
1. Compton's negligence or negligence per se was a proximate cause of the accident;Real Parties in Interest also alleged that Equipment Leasing, Raitz Enterprises, Raitz, and Big State Concrete were liable for Real Parties in Interest's damages under the doctrines of alter ego, joint enterprise, or single business enterprise.
2. Compton's negligent and/or negligent per se actions and omissions included the failure "to follow rules and regulations" of the Federal Motor Carrier Safety Act and the Texas Transportation Code and "other acts of negligence and/or negligence per se";
3. Compton was an employee or otherwise under the control of Equipment Leasing, Raitz Enterprises, Raitz, or Big State Concrete;
4. Equipment Leasing, Raitz Enterprises, Raitz, and Big State Concrete were vicariously liable for Compton's conduct under the doctrine of respondeat superior and because Compton was a "statutory employee"; and
5. Equipment Leasing, Raitz Enterprises, Raitz, and Big State Concrete had committed independent acts of negligence and negligence per se when they (a) hired and/or retained Compton when they knew or should have known that he was a reckless, inexperienced, or incompetent driver; (b) failed to properly test and qualify Compton as a driver; (c) entrusted a vehicle to Compton when they knew or should have known that he was a reckless, inexperienced, or incompetent driver; (d) failed to properly train Compton; (e) failed to properly supervise, direct, control, and dispatch Compton's driving activities; (f) failed to properly identify, implement, instruct, and/or create policies and procedures for hiring, training, supervising, and/or terminating; (g) violated "any applicable rule of the Federal Motor Carrier Safety Act/Regulations"; and/or (h) "other acts of negligence and/or negligence per se."
Equipment Leasing, Raitz Enterprises, and Compton (collectively, the Discovery Relators) filed special exceptions to Real Parties in Interest's first amended petition. The Discovery Relators complained that Real Parties in Interest had failed to plead "any facts or acts of negligence by Compton" and that Real Parties in Interest had failed to identify any statute that supported the claims for negligence per se.
Real Parties in Interest served requests for production and interrogatories on the Discovery Relators. In Requests for Production 30 through 40, Real Parties in Interest asked for a wide range of documents related to Equipment Leasing's, Raitz Enterprises', and Big State Concrete's operations, finances, transactions, and agreements with each other, with Raitz, or with Celeste Raitz. In their first interrogatory to Raitz Enterprises, Real Parties in Interest requested that Raitz Enterprises identify every business with which it had been "associated with (owner, partner, board member, receive income) within 10 years of the accident."
The Discovery Relators responded to Real Parties in Interest's discovery requests and objected that Requests for Production 30 through 40 and Interrogatory No. 1 were overly broad; were not reasonably calculated to lead to the discovery of admissible evidence; and encompassed confidential, proprietary, or private information that was not relevant. Real Parties in Interest filed motions to compel and requested that Judge Cashon overrule the objections and require the Discovery Relators to fully respond to the discovery requests. Real Parties in Interest argued that the requested discovery was relevant to their alter ego and veil-piercing allegations.
The Discovery Relators responded that Real Parties in Interest had produced no evidence of any negligent act or omission on their part that caused or contributed to the accident; that Real Parties in Interest's "unsupported allegations" as to alter ego did not allow discovery into confidential business relationships, assets, debts, and financial dealings; that the requests were not reasonably limited in scope; and that the discovery was not relevant and was not reasonably calculated to lead to the discovery of admissible evidence.
After a hearing, Judge Cashon signed two orders on June 24, 2020. In the first order, Judge Cashon overruled all of the Discovery Relators' objections to Requests for Production 30 through 40 and, subject to a protective order, ordered the Discovery Relators to respond to the requests for production within fifteen days. In the second order, Judge Cashon overruled all of Raitz Enterprises' objections to Interrogatory No. 1 but limited the relevant time period for the response to two years. Subject to a protective order, Judge Cashon ordered Raitz Enterprises to respond to Interrogatory No. 1 within fifteen days.
Relators filed in this court an unopposed motion to stay enforcement of Judge Cashon's June 24, 2020 orders. We granted the motion and stayed enforcement of the orders pending further order of this court or final disposition of this mandamus proceeding.
On June 24, 2020, Judge Cashon also granted the Discovery Relators' special exceptions. Judge Cashon specifically ordered that, by the pleading deadline, Real Parties in Interest were required to amend their pleadings (1) to "set forth the factual basis for any and all negligence claims against" Compton, (2) for the negligence per se claims, to identify the statutes that Real Parties in Interest alleged were violated, or (3) to "simply delete" the negligence and negligence per se claims from the pleadings. Real Parties in Interest's "pleading deadline" is November 13, 2020. The case is set for trial on December 7, 2020.
In this original proceeding, Relators challenge those portions of Judge Cashon's June 24, 2020 orders in which he required the Discovery Relators to respond to Requests for Production 30 through 40 and required Raitz Enterprises to respond to Interrogatory No. 1. Relators specifically assert that Judge Cashon abused his discretion when he ordered the Discovery Relators "to broadly produce complete tax, banking, financial, and business records and information" because (1) Relators have a constitutionally protected privacy interest in those records and information; (2) Real Parties in Interest failed to establish that the requested discovery is relevant to the personal injury claims, failed to make a prima facie showing that Relators are liable for the accident or that Relators' available insurance policy limits are insufficient to cover their potential liability, and failed to demonstrate that the requested information could not be obtained from less intrusive means; and (3) Real Parties in Interest's requested discovery amounted to an improper fishing expedition. Relators also contend that they do not have an adequate remedy on appeal.
Real Parties in Interest respond that they have alleged that "Relators used the corporate form to illegitimately absolve themselves from liability for any injuries" caused by their tortious actions and that Relators did not challenge those allegations by special exception. Real Parties in Interest assert that alter ego is a "viable manner" of imposing liability and that the requested discovery is relevant in an alter ego analysis.
Analysis
Mandamus is an extraordinary remedy and is warranted only when the trial court clearly abused its discretion and there is no adequate remedy by appeal. In re Murrin Bros. 1885, LTD., No. 18-0737, 2019 WL 6971663, at *2 (Tex. Dec. 20, 2019) (orig. proceeding); In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig. proceeding). The relator bears the burden to prove both of these requirements. In re H.E.B. Grocery, 492 S.W.3d at 302; Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding).
A trial court abuses its discretion when its 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). "Similarly, a trial court abuses its discretion when it fails to analyze or apply the law correctly." Id.; see also In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex. 2004) (orig. proceeding). "A trial court has no 'discretion' in determining what the law is or applying the law to the facts." In re Geomet Recycling LLC, 578 S.W.3d 82, 91 (Tex. 2019) (orig. proceeding) (quoting Walker, 827 S.W.2d at 840).
Ordinarily, the scope of discovery is within the discretion of the trial court. In re CSX Corp., 124 S.W.3d 149, 152 (Tex. 2003) (orig. proceeding) (per curiam). However, a trial court's ruling that requires the production of information beyond what the procedural rules permit is an abuse of discretion. In re Dana Corp., 138 S.W.3d 298, 301 (Tex. 2004) (orig. proceeding) (per curiam). "If an appellate court cannot remedy a trial court's discovery error, then an adequate appellate remedy does not exist." Id. Therefore, "[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., 507 S.W.3d 219, 223 (Tex. 2016) (orig. proceeding) (per curiam) (quoting In re Nat'l Lloyds Ins. Co., 449 S.W.3d 486, 488 (Tex. 2014) (orig. proceeding) (per curiam)).
The Texas Rules of Civil Procedure generally permit discovery of any unprivileged information relevant to the subject of a lawsuit, whether it relates to a claim or to a defense. TEX. R. CIV. P. 192.3(a); In re Nat'l Lloyds, 507 S.W.3d at 223. However, although the scope of discovery is broad, there must be a showing of a reasonable expectation that the requested information will aid the dispute's resolution. In re Nat'l Lloyds Ins. Co., 532 S.W.3d 794, 808 (Tex. 2017) (orig. proceeding). "[D]iscovery requests must be 'reasonably tailored' to include only relevant matters." In re CSX, 124 S.W.3d at 152.
To determine whether a discovery request seeks information that will aid the dispute's resolution, we look to the pleadings to determine the nature of the dispute. See In re Starflite Mgmt. Grp., Inc., 162 S.W.3d 409, 413 (Tex. App.—Beaumont 2005, orig. proceeding) (per curiam) ("[I]t would seem necessary to have a properly-pleaded cause of action before us in order to determine if the various documents ordered produced are 'relevant to the subject of the action.'"); see also In re Barlow, No. 07-05-0321-CV, 2005 WL 2621972, at *2 (Tex. App.—Amarillo Oct. 14, 2005, orig. proceeding) (mem. op.). Real Parties in Interest contend that the requested information is relevant to their pleaded alter ego allegations. However, veil-piercing doctrines such as alter ego are not independent or substantive causes of action. Dodd v. Savino, 426 S.W.3d 275, 291 (Tex. App.—Houston [14th Dist.] 2014, no pet.); Crooks v. M1 Real Estate Partners, Ltd., 238 S.W.3d 474, 488 (Tex. App.—Dallas 2007, pet. denied). Rather, they are a means of imposing on an individual a corporation's liability for an underlying cause of action. Crooks, 238 S.W.3d at 488. "Without an underlying cause of action creating corporate liability, evidence of an abuse of the corporate form is immaterial." Cox v. S. Garrett, L.L.C., 245 S.W.3d 574, 582 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (quoting Specialty Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 147 (Tex. App.—Houston [14th Dist.] 2000, pet. denied)); see also Martinez v. DKTA Enters. Ltd., No. 07-19-00116-CV, 2020 WL 2786942, at *6 (Tex. App.—Amarillo May 29, 2020, no pet.) (mem. op.) ("[W]ithout a viable underlying cause of action, alter ego becomes irrelevant.").
The underlying causes of action are Real Parties in Interest's claims (1) that Compton was negligent or negligent per se and that Equipment Leasing, Raitz Enterprises, and Raitz are vicariously liable for Compton's conduct and (2) that Equipment Leasing, Raitz Enterprises, and Raitz were negligent when they hired, retained, trained, or entrusted a vehicle to Compton and were negligent per se when they failed to comply with "any applicable rule of the Federal Motor Carrier Safety Act/Regulations." The Discovery Relators filed special exceptions to the negligence claim against Compton on the ground that Real Parties in Interest had failed to plead any negligent act or omission by Compton and to the negligence per se claims against Relators because Real Parties in Interest had failed to specify the violation of any specific statute.
Special exceptions are a means to question the legal sufficiency of a plaintiff's petition. TEX. R. CIV. P. 91; Ross v. Goldstein, 203 S.W.3d 508, 512 (Tex. App.—Houston [14th Dist.] 2006, no pet.). A party may use special exceptions "to compel clarification of pleadings when the pleadings are not clear or sufficiently specific or fail to plead a cause of action." Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007) (per curiam); see also Alpert v. Crain, Caton & James, P.C., 178 S.W.3d 398, 405 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) ("A special exception is a proper method to determine whether a plaintiff has pleaded a cause of action."). If a trial court grants special exceptions, the pleader may either amend his petition to cure the defect or "stand on the pleadings and test the trial court's decision on appeal." Ford v. Performance Aircraft Servs., Inc., 178 S.W.3d 330, 336 (Tex. App.—Fort Worth 2005, pet. denied). "If the pleader fails or refuses to amend the pleading, the trial court may dismiss the case." Id.
Judge Cashon granted the Discovery Relators' special exceptions and, therefore, determined that Real Parties in Interest had not adequately pleaded a negligence cause of action against Compton or a negligence per se claim against any of the Relators. Without an adequately pleaded factual basis for liability against Compton, Real Parties in Interest also failed to adequately plead a claim that either Equipment Leasing, Raitz Enterprises, or Raitz were vicariously liable for Compton's negligence or were negligent when they hired, retained, trained, or entrusted a vehicle to Compton. See Endeavor Energy Res., L.P. v. Cuevas, 593 S.W.3d 307, 311 (Tex. 2019) (noting that negligent-hiring and negligent-entrustment claims require negligence by the employer in hiring the employee or entrusting property to the employee and the employee's subsequent negligent act or omission); Ineos USA, LLC v. Elmgren, 505 S.W.3d 555, 565 (Tex. 2016) ("Thus, when an employee acts negligently within the course and scope of employment, respondeat superior permits a person injured by that action to sue the employee's employer directly to recover all damages caused by the employee's negligence."); Serafine v. Blunt, No. 03-16-00131-CV, 2017 WL 2224528, at *5 (Tex. App.—Austin May 19, 2017, pet. denied) (mem. op.) ("Failure to prove the underlying, actionable tort means that the negligent-hiring, negligent-training, and negligent-supervision claims fail for lack of proximate causation."). Therefore, based on Judge Cashon's ruling on the Discovery Relators' special exceptions, Real Parties in Interest have not adequately pleaded any underlying cause of action against Relators.
Judge Cashon required the Discovery Relators to respond to Real Parties in Interest's discovery requests by July 9, 2020. However, he did not require Real Parties in Interest to adequately plead a claim against Relators until November 13, 2020. Until Real Parties in Interest adequately plead an underlying cause of action against Relators, the alter ego allegations against Equipment Leasing, Raitz Enterprises, and Raitz are irrelevant. See Cox, 245 S.W.3d at 582; see also Martinez, 2020 WL 2786942, at *6. "When a trial court orders discovery that is not relevant, it abuses its discretion and the resisting party has no adequate remedy by appeal." In re Islamorada Fish Co. Tex., L.L.C., 319 S.W.3d 908, 913 (Tex. App.—Dallas 2010, orig. proceeding); see also In re CSX, 124 S.W.3d at 153 (holding that there is no adequate remedy by appeal from an order in which the trial court compels production of "patently irrelevant" documents).
We hold that, because Real Parties in Interest have not adequately pleaded an underlying cause of action, Judge Cashon abused his discretion when he ordered the production of information related to Real Parties in Interest's alter ego allegations and that Relators do not have an adequate remedy by appeal. Therefore, we conditionally grant Realtor's petition for writ of mandamus. We direct the Honorable Jason Cashon to vacate those portions of the two orders that he signed on June 24, 2020, in which he required Equipment Leasing, Raitz Enterprises, and Compton to respond to Requests for Production 30 through 40 and required Raitz Enterprises to respond to Interrogatory No. 1. A writ of mandamus will issue only if Judge Cashon fails to act by August 17, 2020.
JOHN M. BAILEY
CHIEF JUSTICE August 6, 2020 Panel consists of: Bailey, C.J.,
Stretcher, J., and Wright, S.C.J. Willson, J., not participating.
Jim R. Wright, Senior Chief Justice (Retired), Court of Appeals, 11th District of Texas at Eastland, sitting by assignment.