in Re Harrold E. (Gene) Wright

In The Court of Appeals Ninth District of Texas at Beaumont NO. 09-05-183 CV IN RE HARROLD E. (GENE) WRIGHT Original Proceeding MEMORANDUM OPINION We have before the Court a petition for writ of mandamus filed by Harrold E. (Gene) Wright, plaintiff in a suit against defendants J. Michael Fincher, P.C., J. Michael Fincher, Individually, J. Benjamin Johnson, John M. Martineck, Michael Harvard and Provost Umphrey Law Firm, L.L.P. Relator seeks a writ compelling the Honorable J. Gary Sanderson, Judge of the 60th Judicial District Court of Jefferson County, Texas, to vacate his order of May 4, 2005, compelling production of the following documents: I. All documents listed on attached Exhibit A are ordered produced pursuant to the offensive use exception to the attorney client/work product privilege. The Court specifically holds that the information contained in these documents cannot be obtained from any other source, including the other documents this Court has ordered produced in this order or any other Court order compelling production of documents. II. All documents listed on attached Exhibit B are ordered produced pursuant to the crime/fraud and offensive use exceptions to the attorney client/work product privilege. III. All documents listed on attached Exhibit C are ordered produced, as the Court finds that any privilege that otherwise existed has been waived by their disclosure to third parties. We first note that in his petition Wright does not contest the production of documents P-WHD 00301 or P-WHD 00361-00376 from Exhibit A. Wright also does not contest the production of documents P-WHD 00290-00300 or P-WHD 00421 from Exhibit B. Further, Wright does not contest the production of any of the documents listed on Exhibit C: P-WHD 00488-00504, P-WHD 00624-00628, P-WHD 00630-00638, P-WHD 00676, P-WHD 00677-00697, P-WHD 00701-00731, P-WHD 00732-00753, P-WHD 00755-00774, P-WHD 00788-00801, and P-WHD 00802-00806; none of which are in the record before this Court. The trial court's order was entered following our decision in In re Wright, No. 09-05-079-CV, 2005 WL 913441 (Tex. App.--Beaumont Apr. 21, 2005, orig. proceeding). In Wright, we noted that "[p]rior to the transfer of his portion of the case to Jefferson County, and over the objection of the Johnson/Martineck parties, Wright obtained work product documents on the grounds that the work product privilege never arose due to operation of the MRCA [Multi-Relator/Counsel Agreement] and the JPA [Joint Prosecution Agreement]." Id. at *1. We found the record supported a finding that Wright took the position under the MRCA and JPA that he was entitled to all of the work product of the real parties in interest from the qui tam suit, other than communications directly between the attorney and the client. Id. Because a party who successfully assumes a certain position in a legal proceeding may not then assume a contrary position, we held the trial court did not abuse its discretion in ordering production of the documents containing work product. Id. However, the direct communications between Wright and his lawyers were not subject to compelled production based on Wright's prior position. We found the trial court abused its discretion by ordering production of the direct communications between Wright and his lawyers without identifying the basis for its ruling on each document. Id. at *3. The trial court then entered the order at issue and identified its basis for ruling the documents were discoverable. Id. Our review of the documents in question reveals a number of them are not direct communications between Wright and his lawyers. Pursuant to our decision in Wright, those documents are discoverable: P-WHD 00093, P-WHD 00105-00107, P-WHD 00127-00130, P-WHD 00269-00275, P-WHD 00277-00280, P-WHD 00281-00282, P-WHD 00286-00289, P-WHD 00302-00303, P-WHD 00334-00335, P-WHD 00336-00340, P-WHD 00357-00358, P-WHD 00457-00465, P-WHD 00505-00506, P-WHD 00533-00537, P-WHD 00538-00544, P-WHD 00600-00605, P-WHD 00622-00623, P-WHD 00629, P-WHD 00859, and P-WHD 00867-00868. The remaining documents are either a direct communication between Wright and his attorneys or contain handwritten notations by Wright. Wright has grouped the documents into six categories. We address each in turn. First, however, we discuss the applicable law. Offensive Use Doctrine "Where a plaintiff invokes the jurisdiction of the courts in search of affirmative relief against a defendant, but attempts on the basis of privilege to deny the defendant the benefit of evidence that would materially weaken or defeat the plaintiff's claims against the defendant, this is an offensive rather than defensive use of the privilege, and lies outside the intended scope of the privilege." Bristol-Myers Squibb Co. v. Hancock, 921 S.W.2d 917, 921 (Tex. App.--Houston [14th Dist.] 1996, no pet.) (citing Ginsberg v. Fifth Court of Appeals, 686 S.W.2d 105, 107 (Tex. 1985)). Before a waiver of privilege based upon offensive use may be found, the party asserting the privilege must seek affirmative relief; the privileged information sought must be such that, if believed by the fact finder, in all probability it would be outcome determinative of the cause of action asserted (mere relevance is insufficient; a contradiction in position without more is insufficient; and the confidential communication must go to the very heart of the affirmative relief sought); and disclosure of the confidential communication must be the only means by which the aggrieved party may obtain the evidence. Republic Ins. Co. v. Davis, 856 S.W.2d 158, 163 (Tex. 1993). In re Houseman, 66 S.W.3d 368, 372 (Tex. App.--Beaumont 2001, orig. proceeding). The trial court must uphold the privilege if any of these requirements is lacking. Id. In determining whether attorney-client privilege has been waived by offensive use, we must consider the claims at issue. Wright's suit against defendants is for breach of the MRCA, breach of fiduciary duties, negligence and gross negligence, fraud, conversion and conspiracy. Wright further brings a cause of action for misappropriation of statutory relator's awards and for equitable forfeiture, and seeks imposition of a constructive trust. Wright also brings suit for contractual accounting pursuant to the MRCA and equitable accounting based upon the parties' relationship. In support of these causes, Wright makes the following assertions regarding defendants' conduct. Wright claims that defendants failed to perform under the MRCA or in the alternative, performed improperly and failed to secure the best and most favorable recovery for all relators, collectively. Wright asserts defendants conspired to "carve out" $450,000 from the Mobil settlement, instead of distributing the proceeds in accordance with the MRCA. According to Wright, in pursuit of settlements with Exxon and Unocal, defendants knowingly used, or caused to be used, false records or statements in order to conceal, avoid or decrease Exxon's and Unocal's obligation to the Government. Wright makes the same claim for "each other settlement with a particular defendant in the [case] other than Exxon and Unocal." Wright alleges the illegal acts were committed by defendants to obtain Government approval of settlements which were less than they could or should have been in order to obtain payments of greater statutory attorneys' fees and expenses than defendants were legally entitled to, constituting a fraud on the Government as well as on Wright himself. Wright contends defendants violated the terms of the MRCA by settling and releasing his interest in the relators' claims without his consent and approval. Wright also claims defendants violated the MRCA by not providing information and assistance on a frank and impartial basis. Wright alleges defendants failed to furnish and effectively concealed from him the damage estimates, calculations and models they prepared for use in the settlements. Moreover, Wright maintains that defendants concealed adverse interests, including excessive statutory attorneys' fees collected adverse to his interest. According to Wright, defendants have refused to disclose the amounts of statutory fees and expenses collected in the settlements. Wright alleges the statutory attorneys' fees recovered by defendants are disproportionately high, the disparity is the result of improper manipulation of the settlement process, resulting in excessive attorneys' fees and inadequate damage recoveries. It is in light of these allegations that we ascertain whether the trial court erred in finding Wright's assertion of attorney-client privilege waived via the offensive use doctrine. Crime Fraud Exception The attorney-client privilege does not apply if the lawyer's services were sought to enable or aid anyone to commit or plan to commit what the client knew or reasonably should have known to be a crime or fraud. Tex. R. Evid. 503(d)(1). "The crime/fraud exception applies only if (1) the party asserting it makes out a prima facie case of contemplated fraud and (2) there is a relationship between the document for which the privilege is challenged and the prima facie proof offered." Warrantech Corp. v. Computer Adapters Servs., Inc., 134 S.W.3d 516, 527 (Tex. App.--Fort Worth 2004, orig. proceeding) (emphasis theirs). The prima facie proof must show "a violation sufficiently serious to defeat the privilege." Freeman v. Bianchi, 820 S.W.2d 853, 861 (Tex. App.--Houston [1st Dist.] 1991, orig. proceeding). The proof is sufficient if it sets forth evidence that would establish a fraud that was ongoing or about to be committed when the document was prepared. In re Monsanto Co., 998 S.W.2d 917, 934 (Tex. App.--Waco 1999, orig. proceeding). Allegations of fraudulent conduct are insufficient. Cigna Corp. v. Spears, 838 S.W.2d 561, 569 (Tex. App. --San Antonio 1992, orig. proceeding). It is for the court to determine whether there has been a prima facie showing of fraud. Freeman, 820 S.W.2d at 861. The only theory of fraud put forth by defendants regards fraudulent overstatement of time spent working on the qui tam lawsuit in order to maximize recovery of statutory fees and costs. Although we will review the documents in light of that allegation, we cannot take it upon ourselves to review the documents for other possible theories of fraud, as defendants suggest. Documents Regarding the Negotiation of the MRCA Relying on In re Sea Mar Management, Inc., No. 14-98-01095-CV, 1999 WL 33219365 (Tex. App.--Houston [14th Dist.] Jan. 28, 1999, orig. proceeding) (not designated for publication), Wright argues he was entitled to seek advice from counsel prior to entering the MRCA without placing his attorney-client privileged communications at risk of discovery. The only requirement for the offensive use doctrine contained in Wright's argument is in a quote from Sea Mar, wherein the court found the attorney's preliminary evaluation of the legal ramifications of the client's threatened action was not outcome determinative of Sea Mar's claims. Id. at *6. Accordingly, we construe Wright's argument as only attacking that requirement. Regarding crime/fraud, Wright only asserts that he did not commit fraud when seeking advice of counsel during the negotiation of the MRCA. We find the trial court erred in ordering production of documents P-WHD 00062-63, P-WHD 00108-00109, P-WHD 00115-00123, P-WHD 00124-00126, P-WHD 00142-00146, P-WHD 00147-00151, P-WHD 00152-00161, P-WHD 00162-00167, P-WHD 00185-00253, P-WHD 00254-00257, P-WHD 00261-00265, P-WHD 00266-00268, and P-WHD 00283-00285. They are not outcome determinative of any issue in the case. Documents Related to the Mobil Carve-Out Wright claims "numerous documents have already been produced to establish the unauthorized consent to the carve-out of one of Wright's attorneys, but no documents exist which show that Wright, himself, consented." Because no such documents exist, Wright asserts there are no responsive documents that could be outcome determinative. Wright does not contend the evidence may be obtained by other means. Wright further claims the documents at issue support his position that he never consented to the carve-out. Therefore, they are not evidence of fraud. We find the documents in question, P-WHD 00417-00420, P-WHD 00545-00549, and P-WHD 00550-00554, are not outcome determinative. Consequently, the trial court erred in ordering their production. General Correspondence Regarding the Oil and Gas Cases Wright claims these documents are not directly relevant to the present dispute and therefore not outcome determinative. Wright alleges defendants were generally aware of the information contained in these letters and they are not the only means by which defendants can obtain the information. Wright fails to refer this court to evidence in the record that the defendants can obtain this information by other means. Our review of documents P-WHD 00304-00309, P-WHD 00310-00312, P-WHD 00314, P-WHD 00325-00328, P-WHD 00329-00333, P-WHD 00813-00836, and P-WHD 00852-00853 reveals they are not outcome determinative of an issue in this case. We therefore find the trial court erred in ordering those documents produced. Documents Regarding the Johnson/Martineck Group's Breach of the MRCA Wright claims these documents are not outcome determinative and are not the only means by which defendants can obtain the information because the complaints raised in the documents are not inconsistent with the claims asserted in the lawsuit. Further, Wright asserts, his counsel directly addressed these issues with defendants at the time. As a result, the documents are not evidence of fraud. Having reviewed documents P-WHD 00421, P-WHD 00424-00426, P-WHD 00570-00577, P-WHD 00578-00583, P-WHD 00611-00614, P-WHD 00645-00653, and P-WHD 00654-00660, we find the privileged information is not such that it would, in all probability, be outcome determinative. Accordingly, we find the trial court erred in ordering production of those documents. Likewise, documents P-WHD 00481-00483, P-WHD 00484-00487, P-WHD 00555-00561, P-WHD 00562-00569, P-WHD 00584-00588, and P-WHD 00606-00610, are not outcome determinative. Furthermore, we do not find those documents show a prima facie case of fraud based on the only theory suggested by defendants - the fraudulent overstatement of time spent working on the qui tam lawsuit. For those reasons, we find the trial court erred in ordering disclosure of these documents. We find portions of documents P-WHD 00466-00480 and P-WHD 00854-00858 are outcome determinative. Particularly, we are concerned with page 13 of Document P-WHD 00466-00480 and those portions of both documents that do not involve legal advice by Wright's attorney. Therefore, the trial court did not err in ordering their production. We do not, however, order their disclosure in full but remand this cause to the trial court for consideration of appropriate redaction. Documents Regarding a Fee Dispute with Wright's Former Counsel Wright asserts these documents concern a fee dispute with his former counsel and only show how funds were distributed among Wright and his lawyers. Wright claims the information has previously been provided to the defendants, in exhibit R-7 of the mandamus record. Our comparison of exhibit R-7 and the documents in question reveal the information has not been previously provided. Wright makes no other argument, therefore we do not address whether these documents are outcome determinative. Accordingly, Wright's argument fails and we find the trial court did not err in ordering discovery of P-WHD 00661-00664, P-WHD 00665-00668, P-WHD 00669-00675, and P-WHD 00812. Documents Regarding the Distribution of Fees Among the Wright Group Wright argues these documents shows the distribution of fees among himself, his counsel, and former counsel. Additionally, some of the letters contain handwritten notes approving the fee calculation. Wright claims the entire distribution of all funds received by Wright has previously been provided to the defendants. Wright makes no other argument, therefore we do not address whether these documents are outcome determinative. Our comparison of exhibit R-7 and the documents in question reveal that while most of the information has been previously provided, they are not identical. Accordingly, we find the trial court did not err in ordering discovery of P-WHD 00837-00838, P-WHD 00840-00841, P-WHD 00844-00849, P-WHD 00850-00851, P-WHD 00860-00864, P-WHD 00869, P-WHD 00870-00872, and P-WHD 00873-00875. Further, we find documents P-WHD 00842-00843 are discoverable under the offensive use doctrine pursuant to Wright's claims regarding the settlements. As to document P-WHD 00839, the information is contained in R-7 and the trial court erred in ordering its discovery. For the foregoing reasons, we conditionally grant the petition for writ of mandamus and order the trial court to vacate its order of May 4, 2005, and enter an order consistent with this opinion. We are confident the trial court will follow this opinion. The writ will issue only if the court fails to comply. WRIT CONDITIONALLY GRANTED. PER CURIAM Submitted on May 23, 2005 Opinion Delivered August 31, 2005 Before McKeithen, C.J., Gaultney and Kreger, JJ.