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In re Howeth

Court of Appeals of Texas, Third District, Austin

June 22, 2017

In re Heath Howeth

         ORIGINAL PROCEEDING FROM HAYS COUNTY

          Before Chief Justice Rose, Justices Field and Bourland

          MEMORANDUM OPINION

          Cindy Olson Bourland, Justice

         Relator Heath Howeth filed a petition for writ of mandamus asking this Court to direct the trial court to vacate its order granting a motion to compel and directing Howeth to produce his tax returns and supporting material. See Tex. Gov't Code § 22.221; see also Tex. R. App. P. 52.1. We will conditionally grant the writ in part.

         BACKGROUND

         This original proceeding arises from a dispute over an alleged partnership related to the development of a piece of commercial real property (the "Property") and an alleged oral loan. The underlying suit was filed by the real parties in interest, Knight's Crossing LLC and Paul Albini, seeking a declaratory judgment that Howeth has no interest in the Property and that Knight's Crossing is the owner of the Property in fee simple. Howeth counterclaimed for a partnership accounting, for breaches of the duties of loyalty and care, for breach of fiduciary duty, for common-law fraud and fraud in the inducement, and for the winding up of the partnership. He also asserted a claim against Albini for usury based on a loan made by Albini to Howeth (the "50K Note").

         After Howeth served his objections and responses to Knight's Crossing and Albini's requests for production, Knight's Crossing and Albini filed a motion to compel the following categories of documents: (1) Howeth's federal tax returns and schedules for tax years 2009-2016;[1](2) "all materials and correspondence delivered to/from Mr. Howeth's accountant (the 'Accountant Documents') relating to the preparation of the Returns to the extent they relate, refer to or evidence the items/properties/categories set forth in [request for production] 4";[2] and (3) property-tax bills, canceled checks for those taxes, and tax receipts for tax payments made by Howeth on the Property and the Crossroads Parcel that was conveyed to a lender entity owned or controlled by Albini on the 50K Note.

         After a hearing, the trial court found that certain documents sought by Knight's Crossing and Albini "are responsive to [their] Requests for Production, are relevant to the issues in dispute in this lawsuit, are material and discoverable, and the information contained therein is not available from other sources." The court further found that "the pursuit of justice outweighs the privacy interests in the Documents, except that the Court is issuing a protective order . . . to further safeguard such privacy interests."

         Accordingly, the trial court ordered Howeth to produce: (1) his complete tax returns and all schedules for the tax years 2011 through the present; and (2) "all documents, correspondence, notes, worksheets, receipts, checks, and other items delivered to Mr. Howeth's accountant, exchanged between the Howeths and their accountant or contained in the Howeth accountant's file pertaining to the Relevant Tax Years" (the "accountant documents"). Although Knight's Crossing and Albini had agreed that information unrelated to the issues in the lawsuit (e.g., Social Security numbers, dependent information, information related to charitable or other personal deductions or income derived solely from Mrs. Howeth, etc.) should be redacted from Howeth's tax returns and the accounting documents, the trial court denied Howeth's request to redact irrelevant information from the documents. Instead, the trial court granted a protective order that ordered all parties and their counsel to refrain from disclosing any of the documents "to any third parties other than the parties' representatives, the attorneys and firm personnel working on this lawsuit, any court reporters or videographers in any depositions, any persons properly in attendance at any depositions, any experts retained in this case, and the Court's own personnel as may be necessary." The trial court also ordered the parties not to file of record any of the documents without leave of court or Howeth's agreement to ensure that they do not inadvertently become public record. This mandamus proceeding followed.

         STANDARD OF REVIEW

         Mandamus is an extraordinary remedy granted only when the relator shows that the trial court abused its discretion and that no adequate appellate remedy exists. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding). The relator bears the burden of proving these two requirements. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). "A trial court abuses its discretion when it acts in an unreasonable or arbitrary manner or, stated differently, when it acts without reference to guiding rules and principles." In re Colonial Pipeline Co., 968 S.W.2d 938, 941 (Tex. 1998) (orig. proceeding) (per curiam). While we may not substitute our judgment for that of the trial court with respect to factual issues or matters committed to the trial court's discretion, "a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion." Walker, 827 S.W.2d at 839-40. The scope of discovery is largely within the trial court's discretion. In re Colonial Pipeline, 968 S.W.2d at 941. However, a trial court's order that requires production of documents beyond what the procedural rules permit is an abuse of discretion. In re Dana Corp., 138 S.W.3d 298, 301 (Tex. 2004) (per curiam) (orig. proceeding).

         A party will not have an adequate remedy by appeal when the appellate court would not be able to cure the trial court's discovery error. Walker, 827 S.W.2d at 843. For example, when privileged information would be revealed, appeal is not an adequate remedy; likewise, an appeal may not be an adequate remedy when "a discovery order compels the production of patently irrelevant or duplicative documents, such that it clearly constitutes harassment or imposes a burden on the producing party far out of proportion to any benefit that may obtain to the requesting party." Id.; see also In re House of Yahweh, 266 S.W.3d 668, 673 (Tex. App.-Eastland 2008, orig. proceeding) (applying standard to production of tax returns). Consequently, we will consider whether the trial court abused its discretion when it compelled (1) the production of the tax returns and accountant documents and (2) their production without redaction.

         ANALYSIS

         In this mandamus proceeding, Howeth asserts in two issues that the trial court abused its discretion by compelling production of his tax returns and the accountant documents and by compelling production of those documents without requiring redaction of irrelevant information. Howeth argues that the trial court did not require Knight's Crossing and Albini to make the required showing that the information was relevant, material, and could not be obtained from other sources. In response, Knight's Crossing and Albini contend that the tax returns and the ...


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