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In re Namdarkhan

Court of Appeals of Texas, Fifth District, Dallas

March 21, 2017

IN RE HOSSEIN S. NAMDARKHAN AND BRAD NAMDAR, Relators

         Original Proceeding from the 193rd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-16-00853

          Before Justices Lang-Miers, Evans, and Schenck.

          MEMORANDUM OPINION

          DAVID EVANS JUSTICE.

         In this original proceeding, relators complain about a discovery order compelling production of federal tax returns and a sanction order for failure to comply with the discovery order.[1] We conditionally grant relief.

         Factual and Procedural Context

         The underlying case is a law firm's collection case and the former client's counterclaims for breach of fiduciary duty, legal malpractice, breach of contract, and DTPA violations. Real party in interest Glast, Phillips & Murray, P.C. ("GP&M") represented relator Brad Namdar ("Brad") in a grievance against DISD after Brad was placed on administrative leave from his teaching and coaching position at North Dallas High School. Brad's father, relator Hossein Shawn Namdarkhan ("Shawn"), paid some of GP&M's bills for his son. Those payments came from Shawn's business, Kid's Depot, not Shawn's personal bank account. GP&M sued to collect unpaid fees. As part of their DTPA claim, Brad and Shawn assert that the rates charged by GP&M were exorbitant and unreasonable when compared to Brad's small income as a teacher.

         In light of that income disparity argument, GP&M requested production of Brad's and Shawn's federal tax returns. Brad and Shawn objected to the discovery requests, and GP&M moved to compel production of the tax returns. Brad produced his tax returns and other income-related documents, but Shawn stood on his objections. Shawn did, however, produce a K-1 and tax documents concerning Kid's Depot, which reflected Shawn's sole source of income. GP&M moved for sanctions, which the court granted. The court's sanctions order prohibits Shawn and Brad from mentioning or discussing their income disparity argument relating to GP&M's fees as a sanction for Shawn's failure to produce his tax return. Brad and Shawn argue that the prohibition on their use of the income disparity argument is a death penalty sanction because it bars relators from raising a critical defense.

         The scope and timing of the trial court's rulings and orders are relevant here. Brad and Shawn served their objections to the requests for production on October 24, 2016, real parties filed an amended motion to compel on October 26, 2016 to address relators' discovery objections, and the court heard the amended motion to compel on October 31, 2016. During the hearing, the court expressed concerns about allowing production of complete, unredacted tax returns. The court suggested relators redact the tax returns "the way you feel it should be redacted" and then real parties could complain if the redactions were excessive or otherwise inappropriate. The trial court stated it wanted to avoid an in camera review. The trial court also stated that Shawn should not redact the numbers and financial information because the court wants "the numbers on there." But the court also said to "redact what you want. But if you redact those numbers, you're going to complain and I'm going to say, yeah, unredact them." The trial court told Shawn's counsel he had until noon the upcoming Friday, November 4, 2016, to produce the returns.

         Shawn's deposition was scheduled for November 7, 2016. At a hearing the morning of that deposition, real parties complained that relators had not produced the tax returns. They argued that the court verbally ruled that Sean must produce the returns by November 4, 2016. But relators argued that there was a dispute regarding what portions of the returns had to be produced. They also told the court that they had been trying to obtain a copy of the transcript from the October 31, 2016 hearing to determine exactly what the court ruled they should produce. They produced a K- 1 and the tax documents concerning Kid's Depot, which reflected Shawn's sole source of income. But Shawn argued that his personal tax returns were irrelevant and potentially misleading because his income was solely from the Kid's Depot business, Shawn's wife files jointly with Shawn so the individual returns would not accurately represent Shawn's income, and relators were not sure what had to be produced beyond Shawn's income information. The court told the parties that the Kid's Depot documents were not adequate and verbally ruled Shawn must produce his tax returns before the deposition "or there's a risk that he'll be excluded as a witness."

         Shawn did not produce the tax returns before his deposition. Real parties moved for sanctions for failure to comply with the verbal ruling to produce the tax returns. Then, on November 17, 2016, the court granted real parties' motion for sanctions and signed the written order at issue here prohibiting relators from discussing, mentioning, or arguing the income disparity issue.

         The court did not sign a written order setting out what Shawn was required to produce until November 21, 2016. And that order was much more specific regarding what Shawn could and could not redact from the returns than the court's statements at the October 31 hearing. In that written order, the court ordered relators to produce the tax returns with only basic, personal information redacted:

A complete 2015 tax return will be produced with redactions of only personal and identifying information redacted such as social security number, personal address or identifying identity and location of information regarding assets. No financial numbers or figures are to be redacted.

         Unlike the court's statements at the hearing, the court did not allow relators to redact how they believed the returns should be redacted and did not permit an in camera review or further hearing to address any objections to Shawn's redactions. And, although the order was not signed until November 21, 2016, it required production by noon on November 4, 2016.

         Mandamus ...


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