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In re Sam Houston Electric Cooperative, Inc.

Court of Appeals of Texas, Ninth District, Beaumont

October 3, 2019

IN RE SAM HOUSTON ELECTRIC COOPERATIVE, INC.

          Submitted on September 9, 2019

          Original Proceeding 253rd District Court of Liberty County, Texas Trial Cause No. CV1510279

          Before McKeithen, C.J., Kreger and Johnson, JJ.

          MEMORANDUM OPINION

          PER CURIAM.

         Relator Sam Houston Electric Cooperative, Inc. ("SHEC") filed a petition for writ of mandamus, in which it asks this Court to compel the trial court to vacate its order compelling the depositions of its Board of Directors and to grant its motion for protection from the depositions. We conditionally grant the writ of mandamus.

         BACKGROUND

         Joe D. Berry ("Berry"), individually, on behalf of the surviving heirs and children of Lester B. Berry ("Lester"), as next friend of Kevin M. Berry, and as administrator of the Estate of Lester B. Berry, filed this suit against SHEC, alleging that SHEC shut off power to the home of Lester B. Berry without proper notice, "causing horrendous suffering to and ultimately the awful death of Lester Berry." According to Berry, Lester was disabled and required an oxygen concentrator around the clock, and to work properly the oxygen concentrator needed a constant supply of electricity. Berry asserted causes of action for negligence, gross negligence, survival, and wrongful death.

         In his second amended petition, Berry purported to assert a class action "as representative of all others similarly situated," and he added individual defendants, who he alleged were current officers, directors, advisory directors, or advisory directors-at-large of SHEC. Berry pleaded, among other things, that SHEC had breached its fiduciary duties by failing to return margins periodically to its members as required by statute, and that rather than operating as a nonprofit entity, SHEC was confiscating each member's equity. Additionally, Berry asserted that SHEC had failed to retire capital credits.

         SHEC and the individual defendants moved to compel arbitration and to stay the class action claims pending arbitration. The trial court signed an order denying the motion, and the defendants appealed. On appeal, this Court reversed the trial court's order and remanded the cause for entry of an order compelling arbitration and staying further proceedings as to the class action claims pending arbitration. Sam Houston Elec. Coop. v. Berry, No. 09-16-00346-CV, ___ S.W.3d ___, 2017 WL 4319849, at *7 (Tex. App.-Beaumont Sept. 28, 2017, no pet.) (not yet released for publication). The trial judge signed an order severing the class action from the wrongful death and survival claims.

         Berry then filed a motion in the wrongful death and survival portion of the lawsuit to compel the depositions of the members of SHEC's Board of Directors. In the motion, Berry asserted that he had a right to take the depositions because the Board grants an applicant membership into SHEC and the Board would have knowledge of Lester's membership. Attached to the motion to compel was, among other things, a letter from defense counsel stating that no deposition dates would be offered because members of the Board "have no personal knowledge relevant to this lawsuit."

         SHEC responded to the motion to compel and argued that the plaintiffs were "effectively ignoring the court ordered severance of the class action claims from the current survival and wrongful death actions." SHEC alleged that the depositions were unrelated to the pending lawsuit and constituted an abuse of process. Additionally, SHEC asserted that the plaintiffs had not explained the relevance of the Board members' depositions and that the depositions were impermissible under the apex doctrine. According to SHEC, the deposition notices constituted "an attempt to obtain discovery related to the severed putative class action - not the wrongful death allegations currently pending before the Court." SHEC asserted that depositions of SHEC's corporate representatives had been scheduled. The mandamus record reflects that Berry's counsel passed on the depositions of two corporate representatives, whose depositions had been scheduled for June 13, 2019.

         Attached to SHEC's response were the affidavits of the Board members, in which they claimed that they lacked personal involvement with the acceptance of Lester's membership and in which they explained that they were generally involved with strategic decision making at a high level, but they were not involved with or personally aware of SHEC's day to day operations and had no knowledge about the circumstances surrounding Lester's death or his relationship with SHEC. SHEC also filed a motion to quash the depositions.

         Berry responded and asserted that he has a right to take the depositions of the Board members "because it is permitted by the rules, despite the Board of Directors['] status as a nonparty in this case." In addition, Berry asserted that the requested depositions were reasonably calculated to lead to the discovery of admissible evidence. According to Berry, each individual member of SHEC's Board "has unique and superior personal knowledge of the information sought, for example[, ] determining whether an applicant . . . is approved for a membership and disbursements of capital credits." Berry argued that (1) SHEC's documents produced in response to written discovery requests clearly associated SHEC's Board of Directors to membership approval and control of capital credits, and (2) and each individual board member has greater knowledge about the approval of applications than the corporate representatives because applications must be approved by the Board before membership is extended.

         Berry asserted that the individual Board members possessed greater knowledge about the quality and quantity of capital credits because the Board determines whether to pay capital credits. According to Berry, the apex doctrine does not protect high-level corporate officials who have firsthand or personal knowledge of particular facts. Berry contended that the Board members' affidavits did not sufficiently deny knowledge of relevant facts, but instead "simply states each individual is not involved with the day to day operations of SHEC and was not personally involved [in] the acceptance of Plaintiff's membership." Finally, Berry asserted that less intrusive means of discovery were not required because the Board members ...


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