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In re Methodist Primary Care Group

Court of Appeals of Texas, Fourteenth District

June 21, 2018

IN RE METHODIST PRIMARY CARE GROUP AND TMH PHYSICIANORGANIZATION, Relators

          ORIGINAL PROCEEDING WRIT OF MANDAMUS 234th District Court Harris County, Texas Trial Court Cause No. 2015-35424

          Panel consists of Justices Boyce, Donovan, and Jewell.

          OPINION

          William J. Boyce Justice

         This discovery mandamus arises from litigation surrounding two doctors who left one medical practice to join another.

         Relators and defendants below are Methodist Primary Care Group ("Methodist Primary Care") and TMH Physician Organization d/b/a Houston Methodist Specialty Physician Group ("Methodist Specialty"). The real party-in-interest and plaintiff below is Associates in Medicine, PA ("Associates").

         The underlying litigation involves allegations that relators stole trade secrets, tortiously interfered with patient relationships, and committed other actionable conduct when two doctors left Associates and moved their medical practices to Methodist Primary Care. The discovery fight focuses on the propriety of a March 8, 2018 discovery order authorizing a third-party expert, paid for by Associates, to search electronic practice management systems used by relators and other entities for certain data stored in the cloud and accessible via the internet. See Riley v. California, 134 S.Ct. 2473, 2491 (2014) ("Cloud computing is the capacity of Internet-connected devices to display data stored on remote servers rather than on the device itself."). The data at issue pertains to relators-and to more than 200 other entities affiliated with the Methodist System, which are not parties to this litigation.

         Relators filed a petition for writ of mandamus asking this court to compel the presiding judge of the 234th District Court, Harris County, to vacate the March 8 order granting Associates's motion to compel. The March 8 order appoints Pathway Forensics LLC to conduct, at Associates's expense, a data search of internet-accessible electronic practice management systems used by Methodist Primary Care, Methodist Specialty, and the other Methodist System entities. Associates contends this order is necessary to obtain evidence relevant to proving the damages it seeks.

         Resolution of this mandamus turns on the standards governing discovery of electronic data under Texas Rule of Civil Procedure 196.4 and In re Weekley Homes, L.P., 295 S.W.3d 309 (Tex. 2009) (orig. proceeding).

         We conclude that partial mandamus relief is warranted because the March 8 order (1) runs afoul of Rule 196.4 and In re Weekley Homes, and (2) encompasses certain electronic data that Associates has not requested in discovery and has not shown to be within relators' possession, custody, or control.

         I. Factual and Procedural Background

         Methodist Primary Care is an independently-managed Texas non-profit organization comprised of primary care physicians affiliated with the Methodist System. In turn, this system encompasses approximately 209 different entities. Methodist Primary Care has clinics throughout the greater Houston area. Payments for services performed by Methodist Primary Care are billed and collected by Methodist Specialty under a Billing Services Agreement.

         The dispute underlying this mandamus proceeding began in May 2015 when Drs. Shari Rubin and Joshua Septimus joined Methodist Primary Care after having practiced medicine with Associates. About a month after their move, Associates sued the two doctors; it later filed an amended petition adding Methodist Primary Care and Methodist Specialty as defendants.

         Associates alleges that Drs. Rubin and Septimus gave confidential information and trade secrets to Methodist Primary Care in connection with moving their practices. Associates asserts causes of action against Drs. Rubin and Septimus for misappropriation of trade secrets, breach of fiduciary duty, fraud, and breach of contract. Associates asserts causes of action against Methodist Primary Care for misappropriation of trade secrets, conspiracy to breach fiduciary duty and to commit fraud, tortious interference with prospective business relations, and common law unfair competition. Associates asserts an "alter ego" theory against Methodist Specialty. Associates seeks actual damages and the disgorgement of all sums obtained through the alleged theft of trade secrets.

         Associates served relators with 17 requests for production of documents reflecting the revenues and profits generated by Drs. Rubin's and Septimus's referrals of patients, along with documents reflecting "ancillary services" billed and collected by Methodist Specialty from May 2015 to the present.

         In its requests for production, Associates defined "ancillary services" as "all Designated Health Services as identified in 42 C.F.R. § 411.351." According to relators' petition, ancillary services are services ordered by a physician to be performed by others such as lab services and x-rays.

         These requests for production defined "documents" to include "electronic information which shall be produced in their native format."

         Methodist Primary Care responded to these requests by producing profit and loss statements for Drs. Rubin and Septimus, summaries of charges and collections for both physicians, and profit and loss information for an x-ray machine operated at a Bellaire clinic. Relators responded to the requests for documents reflecting revenues generated in connection with referrals of patients and ancillary services by stating that they had "None."

         Associates filed a motion to compel and amended motion for sanctions, arguing that relators possessed but refused to produce documents or data responsive to the requests at issue. It further asserted that a search of relators' computer systems would recover responsive documents and information. Associates asked the trial court to appoint a forensic expert to search the electronic databases of relators for several categories of information. Associates argued that it was entitled to this relief under the standard established in In re Weekley Homes for allowing direct access to another party's computer hard drives. Relators filed a response arguing that the motion should be denied because Associates had not satisfied the In re Weekley Homes standard.

         At the conclusion of a hearing on March 5, 2018, the trial court found that Methodist Primary Care and Methodist Specialty had defaulted on their obligation to search for and produce data and documents requested by Associates. The trial court signed an order granting the motion on March 8, 2018.

         The March 8 order contains the following determinations.

• Methodist Primary Care and Methodist Specialty "have defaulted on their obligation to search [their] . . . records and produce data and documents that have been requested by [Associates] . . . in discovery."
• The production of Methodist Primary Care and Methodist Specialty "has been inadequate."
• "A search of [Methodist Primary Care's] . . . and [Methodist Specialty's] . . . practice management systems, EPIC and ATHENA would likely lead to the recovery of relevant and material documents."
• "Thus, the Court GRANTS the motion in part and ORDERS the appointment of an independent expert . . . to perform an independent examination of [Methodist Primary Care's] . . . and [Methodist Specialty's] . . . practice management systems as outlined below . . . ."

         The order appoints Pathway Forensics LLC to search the electronic data of all 209 Methodist System entities using their practice management systems (EPIC, and, if necessary, their previous system, Athena). Pathway Forensics is required to search for documents or data, if any, evidencing (1) revenues generated by Drs. Rubin and Septimus arising from the Methodist System from May 15, 2015 to the present, (2) physician ancillary and professional services performed by or on behalf of Drs. Rubin and Septimus, and (3) physician ancillary and professional services performed by other physicians or on behalf of other physicians within the Methodist System for all patients referred to those physicians by Drs. Rubin and Septimus. The order directs that "[t]he [e]xpert's costs shall be borne by" Associates.

         After relators filed their petition for writ of mandamus on March 14, 2018, we asked Associates to file a response and stayed the March 8 order.

         II. Mandamus Standard

         To obtain mandamus relief, a relator generally must show both that the trial court clearly abused its discretion and that relator has no adequate remedy by appeal. In re Prudential Ins. Co., 148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to analyze the law correctly or apply the law correctly to the facts. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam). The appellate court reviews the trial court's application of the law de novo. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). The relator must establish that the trial court could reasonably have reached only one conclusion. Id. at 840.

         "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). "Mandamus relief is available when a trial court compels production of electronic data and information beyond the permissible bounds of discovery." In re Pinnacle Eng'g, Inc.,405 S.W.3d 835, 847 (Tex. App.-Houston [1st Dist.] 2013, orig. proceeding) (citing In re Weekley Homes, 295 S.W.3d at 322). The harm that a party will suffer from being required to relinquish control of its data for forensic inspection, and the harm that might result from revealing ...


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