in Re: Lexington Insurance Company

Relator=s Motion for Rehearing Overruled; Opinion of January 15, 2004, Withdrawn; Petition for Writ of Mandamus Denied and Cor Relator=s Motion for Rehearing Overruled; Opinion of January 15, 2004, Withdrawn; Petition for Writ of Mandamus Denied and Corrected Memorandum Opinion filed February 2, 2004. In The Fourteenth Court of Appeals ____________ NO. 14-03-01236-CV ____________ IN RE LEXINGTON INSURANCE COMPANY, RELATOR ORIGINAL PROCEEDING WRIT OF MANDAMUS C O R R E C T E D  M E M O R A N D U M   O P I N I O N We withdraw our opinion of January 15, 2004. On November 10, 2003, relator Lexington Insurance Company filed a petition for writ of mandamus in this Court. See Tex. Gov=t. Code Ann. ' 22.221 (Vernon Supp. 2000); see also Tex. R. App. P. 52. Lexington seeks to have this Court compel the Hon. Martha Hill Jamison, Judge of the 164th Judicial District Court, Harris County, to vacate her October 31, 2003 order entered in trial court cause number 01-49363, regarding several pending discovery matters and awarding sanctions for discovery abuse. By order dated November 19, 2003, this Court stayed the October 31, 2003 order until final decision by this Court on relator=s petition for writ of mandamus, or until further order of this Court. After considering the petition, all responses and replies, as well as the extensive exhibits, we deny relator's petition for writ of mandamus for the reasons discussed below. Background Facts Lexington sued a group of insured companies (among others), collectively referenced as AVarco,@ for declaratory judgment regarding insurance coverage of a settled lawsuit.[1] Varco, the real party in interest, filed a counterclaim for fraud, breach of contract, conspiracy, and Texas Insurance Code violations, and requested exemplary damages for the non-contractual claims. In the fall of 2002, Varco moved to compel the discovery of documents from Lexington. Thereafter, it filed no less than three motions to compel or enforce orders to compel discovery. Even after the appointment of a special master, who considered various discovery motions and recommended production of documents and deponents in a nine-page memorandum to the trial court, Lexington did not comply. After the trial court issued its three-page order compelling discovery and ordering sanctions, Lexington filed its petition for mandamus raising the following eight issues: A) the trial court abused its discretion by sanctioning Lexington without holding a hearing in violation of due process and Rule 215.2; B) the trial court abused its discretion and due process by adopting a special master=s recommendations without first conducting a de novo hearing; C) the trial court abused its discretion by ordering the production of a privileged joint defense agreement; D) the trial court abused its discretion by allowing discovery on the meaning of insurance policies; E) the trial court abused its discretion by ordering the production of the reservation of rights and denial letters; F) the trial court abused its discretion by denying a request for additional time in which to comply with an order of production; G) the trial court abused its discretion by ordering the production of the ABrenner Memorandum;@ and H) the trial court abused its discretion by denying a motion to sever and abate the extra-contractual from the contractual causes of action. Standard of Review Mandamus will issue to correct a discovery order if the order constitutes a clear abuse of discretion and there is no adequate remedy by appeal. In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex.1998) (orig. proceeding). In determining whether the trial court abused its discretion, we are mindful that the purpose of discovery is to seek the truth so that disputes may be decided by what the facts reveal, not by what facts are concealed. Id. The rules governing discovery do not require as a prerequisite to discovery that the information sought be admissible evidence; it is enough that the information appears reasonably calculated to lead to the discovery of admissible evidence. See Tex. R. Civ. P. 192.3(a). However, this broad grant is limited by the legitimate interests of the opposing party to avoid overly broad requests, harassment, or disclosure of privileged information. In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex.1998) (orig. proceeding). Procedural Due Process Lexington claims it was denied procedural due process because the trial judge did not hold an oral hearing before issuing monetary sanctions for discovery abuse. A trial court need not hold an oral hearing to determine the matter of sanctions for abuse of discovery. E.g., Cummings v. Cire, 74 S.W.3d 920, 925 (Tex. App.CAmarillo 2002, writ granted); Meek v. Bishop, Peterson & Sharp, P.C., 919 S.W.2d 805, 809 (Tex. App.CHouston [14th Dist.] 1996, writ denied); United Bus. Mach. v. Southwestern Bell, 817 S.W.2d 120, 123 (Tex. App.CHouston [1st Dist.] 1991, no writ). The first issue is overruled. The second issue asks whether the trial court adhered to its own order appointing the special master by failing to hold a hearing prior to adopting the master=s recommendations. No argument or authority to support this issue is set forth in the petition. Therefore, the issue is waived. Tex. R. App. P. 38.1(h). Joint Defense Agreement Lexington claims the trial court abused its discretion by ordering the production of a joint defense agreement in violation of the joint defense privilege and by ordering concomitant sanctions for prior failures to produce this document.[2] At a motion to compel hearing in September 2002, the trial court Aconditionally sustained@ the objections to documents nos. 104 and 111, Asubject to some sort of proof in whatever form that is submitted in-camera of a joint defense agreement.@ Lexington never submitted proof of a joint defense agreement to the trial court. Rule 193.4 provides that at any hearing on a claim of privilege, the party asserting the privilege Amust present any evidence necessary to support the . . . privilege.@ Tex. R. Civ. P. 193.4(a). Because Lexington never satisfied its burden to support its claim of privilege to the joint defense agreement, we hold the trial court did not abuse its discretion by ordering its production. Lexington also complains that the trial court abused its discretion by ordering that Lexington pay $1,000 for its failure to produce the joint defense agreement. We have no jurisdiction to consider this issue because Lexington has an adequate remedy by appeal. Tex. R. Civ. P. 215.3; Bodnow Corp. v. City of Hondo, 721 S.W.2d 839, 840 (Tex. 1986) (holding discovery sanctions not appealable until there is a final judgment); see Braden v. Downey, 811 S.W.2d 922, 928 (Tex. 1991) (orig. proceeding) (mandamus is proper for review of a sanction only when it terminates or inhibits the presentation of the merits of a party=s claims); TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 919-20 (Tex. 1991 (orig. proceeding) (same). Depositions of Corporate Representatives In its fourth issue, Lexington claims the trial court abused its discretion by allowing discovery on the meaning of insurance policies after the trial court had determined that the policies were not ambiguous. Specifically, it objects to the production of corporate representatives for deposition on various topics. First, we find it was reasonable for the trial court to hold that the six deposition topics are discoverable. The October 2003 order compels Lexington to produce deponents to testify about the following: (1) the placing of Lexington=s policies, (2) Lexington=s defenses, and (3) the underwriting of the policies plus (4) corporate claims handling procedures, (5) its non-payment of Varco=s defense costs, and (6) its refusal to participate in the Derrick settlement. Throughout its mandamus petition, Lexington states that the trial court has previously held the entire insurance policies unambiguous; however, we find no cites to the voluminous record to support this bald statement. Its general allusions to orders granting partial summary judgments on certain contract clause defenses do not demonstrate such a legal holding by the trial court. As demonstrated by Varco=s Fifth Amended Counterclaim and Answer, this is a case over the scope and wrongful denial of insurance coverage. Varco alleges that Lexington originally denied coverage to Varco. Lexington later agreed to defend Varco under a reservation of rights. Thereafter, however, Lexington refused to pay for defense costs incurred by Varco. Varco asserts multiple claims that implicate these areas of discovery ordered by the court, including statutory bad faith claims. The special master and trial judge found these six topics for deposition to be relevant and nothing in the record suggests otherwise. Secondly, we find no abuse of discretion for the trial court to order corporate representatives for deposition on the six topics. There are two separate corporate representative deposition issues: the first involves the January 2003 scheduling order for deposition(s) ordered on the first three topics listed above, and the second involves the requests for depositions on the latter three topics, upon which Varco moved to compel production of deponents in August 2003. Apparent by its ruling, the trial court agreed with Varco that a deposition of a corporate representative taken last spring on the first three topics listed was inadequate because the deponent was prepared only to discuss one of the topics noticed.[3] Corporate representatives for the latter three areas were noticed for deposition last summer, but Lexington unilaterally never proffered witnesses on those topics. As a result, we find no abuse of discretion by the trial court in ordering the depositions of corporate representatives on the six relevant topics requested. Finally, Lexington claims the trial court=s award of the $2,000 as sanctions for Lexington=s failure to produce corporate representatives on the first three topics as previously ordered was an abuse of discretion. We have no jurisdiction to consider this issue because appeal provides an adequate remedy for review of the money sanctions award. Tex. R. Civ. P. 215.3; Bodnow, 721 S.W.2d at 840; Braden, 811 S.W.2d at 928. Reservation of Rights and Denial Letters In its fifth and sixth issues, Lexington claims the trial court abused its discretion by ordering the production of the reservation of rights and denial letters for advertising injury claims because the documents are irrelevant, and their production is burdensome, and in violation of the Gramm-Leach-Bliley Act. Alternatively, it claims the trial court abused its discretion by denying a request for additional time in which to comply with the order and Aby requiring production within fourteen days of certain documents when the record showed compliance would demand a minimum of 23,486.25 work hours by the responding party to review the 93,945 closed files, even if only fifteen minutes are allotted for a claims handler or equivalent employee to the review of each to determine whether there had been any claim made potentially relating to >advertising injury= under a CGL policy in Texas for the policy years of 1993-1999.@ A trial court has broad discretion to schedule and define the scope of discovery. See In re Colonial Pipeline Co., 968 S.W.2d at 941. The Texas Rules of Civil Procedure authorize discovery into any relevant matter that is not privileged and is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other party. Tex. R. Civ. P. 192.3 (a). The trial court has ruled on this particular discovery three times. It repeatedly ordered Lexington to produce the documents, but Lexington has not complied. Because of Varco=s claims outlined above, we find that the trial court did not abuse its discretion in holding these documents are relevant. Also, their production is not overly broad and burdensome, particularly because the trial court limited the scope of production to letters issued for Texas for commercial general liability policies within a period of six years only as to advertising injury claims. Further, the documents will not violate the Gramm-Leach-Bliley Act because the reservation of rights and denial letters are to be produced in redacted form to delete private, personal and nonpublic information of insureds. In late October 2003, after several motions to compel filed by Varco, after the court-ordered deadline to produce these documents had passed, and after the special master recommended that the documents be produced, Lexington for the first time submitted detailed proof to the trial court suggesting that the discovery ordered would be exceedingly expensive and overly burdensome. Throughout the discovery process, Lexington=s objections to the production of the reservation of rights and denial letters were disclosed piecemeal. Not until September 19, 2003, after the court-ordered deadline to produce these documents, did it file for an extension of time to produce the documents. The special master found that A[t]his has gone far enough.@ Lexington has been on notice that this discovery was requested for some time; the denial and reservation of rights letters were first ordered to be produced in July 2003, and re-ordered produced in September 2003. Accordingly, we also hold it was not an abuse of discretion for the trial court to deny the motion for an extension of time. The fifth and sixth issues are overruled. The Brenner Memorandum In its seventh issue, Lexington claims the trial court abused its discretion by ordering the production of the ABrenner Memorandum.@ After the special master issued her recommendations, Lexington submitted to the trial court two affidavits of witnesses who testified they have never used the Brenner Memorandum nor are they aware it is in Lexington=s possession. These affidavits are not evidence of a privilege or exemption from discovery to support withholding the production of this document. See Tex. R. Civ. P. 193.3. We find the trial court did not abuse its discretion in ordering the production of the Brenner Memorandum and this issue is overruled. Denial of Lexington=s Motion to Sever and Abate Varco=s Extra-Contractual Claims Lexington claims the trial court abused its discretion by denying a motion to sever and abate the extra-contractual from the contractual causes of action. However, its petition for writ of mandamus does not pray that the order denying severance and abatement be vacated; it only requests vacation of the October 31, 2003 order on discovery matters. Regardless, the order denying severance and abatement is dated August 22, 2002, more than fourteen months before the petition for mandamus was filed on November 10, 2003. A writ of mandamus is an extraordinary remedy issued not as a matter of right, but at the discretion of the court. Rivercenter Assocs. v. Rivera, 858 S.W.2d 366, 367 (Tex. 1993) (orig. proceeding). Mandamus is largely governed by equitable principles; equity is intended to aid the diligent and not those who slumber on their rights. Id. Relator offers no explanation for the fourteen‑month delay from the time the trial court entered its order denying the severance and abatement until the time it filed its petition for writ of mandamus. Consequently, we find that Lexington=s delay in filing a mandamus petition on this issue constitutes waiver. See In re Xeller, 6 S.W.3d 618, 624 (Tex. App.CHouston [14th Dist.] 1999, orig. proceeding). Having ruled on all of Lexington=s issues, we deny the petition for writ of mandamus. This Court=s stay order of November 10, 2003 is lifted. The discovery that is the subject of the trial court=s October 31, 2003 order is ordered to be produced in accordance with the order of the court below. PER CURIAM Petition Denied and Corrected Memorandum Opinion filed February 2, 2004. Panel consists of Justices Yates, Hudson and Fowler. [1] After seven years of litigation, the Derrick Manufacturing v. Varco case, involving patent infringement and related claims, was settled by Varco for $15 million after running up defense costs of $17.5 million. Varco and its related companies seek coverage for this case against a host of insurers. [2] The joint defense privilege, found in Rule of Evidence 503(b)(1)(C), sometimes called the common interest or community of interest rule, is not an independent privilege, but an exception to the general rule that no attorney‑client privilege attaches to communications that are made in the presence of or disclosed to a third party. In re Skiles, 102 S.W.3d 323, 326 n.2 (Tex. App.CBeaumont 2003, orig. proceeding). Thus, in addition to establishing the applicability of the attorney‑client privilege, the elements necessary to invoke the joint defense privilege are: 1) a common legal interest between all persons with whom the communication is shared; and 2) a communication exchanged among those persons Ain confidence, >not . . . for the purpose of allowing unlimited publication and use, but rather, ... for the limited purpose of assisting in their common cause.=@ In re LTV Sec. Litig., 89 F.R.D. 595, 604 (N.D. Tex. 1981)(quoting Wilson P. Abraham Const. v. Armco Steel Corp., 559 F.2d 250, 253 (5th Cir. 1977)). [3] Lexington claims there was a Rule 11 agreement between counsel setting the deposition (such that a motion to quash was withdrawn) that acknowledged the witness was being offered on only one area. However, we find no such document in the record.