Donal R. Schmidt, Jr. v. BPC Corp., 05-14-00653-CV

Background

BPC sued Sun River entities and Donal R. Schmidt, Jr. after Sun River I defaulted on a lease; Schmidt had signed the lease as president/CEO.
BPC amended to assert an alter ego claim against Schmidt, in part based on a post-default settlement Schmidt received from Sun River.
The trial court granted BPC’s motion to compel production of Sun River Energy I, LLC board minutes and other corporate documents, ordering production by October 30, 2012.
Schmidt repeatedly failed to produce the board minutes despite agreeing in deposition to do so and admitting awareness of the court order; some minutes were later located on a CO‑O’s computer and one set (May 11, 2012) was turned over during trial.
The court found the minutes relevant to the alter ego inquiry, excluded proffered testimony about their contents as secondary evidence, assumed minutes existed, and after closing evidence sanctioned Schmidt $42,000 in attorney’s fees for failing to disclose the minutes.
Final judgment awarded damages and fees to BPC and expressly ordered BPC recover $42,000 from Schmidt as a discovery sanction; Schmidt appealed the sanction award.

Issues

Issue	Plaintiff's Argument (Schmidt)	Defendant's Argument (BPC)	Held
Whether Schmidt had a duty to supplement discovery responses under Tex. R. Civ. P. 193.5 and thus was subject to sanctions for failing to produce board minutes	Schmidt argued he had no duty to supplement or, alternatively, that supplementation was excused because the information was made "on the record" by producing the minutes during trial	BPC argued Schmidt failed to timely supplement as required and violated a court order; sanctions were authorized under Rule 215.2 for discovery abuse	Court held Schmidt had a duty to supplement; producing minutes at trial did not satisfy the "on the record at a deposition" exception and the court did not abuse discretion in finding sanctionable conduct
Whether the $42,000 sanction was arbitrary or violated Schmidt’s due process rights for lack of notice/hearing	Schmidt argued the sanction amount was arbitrary and his due process rights were violated because no notice/hearing was given	BPC argued Schmidt waived any procedural objections by failing to object or seek reconsideration below	Court held Schmidt waived due process/amount objections for failure to preserve; no reviewable error as to amount
Whether the information in a publicly filed Form 10‑K cured the discovery violation	Schmidt claimed the 10‑K contained the same information as the board minutes	BPC and the court responded the 10‑K lacked the board’s internal calculations and deliberations sought by BPC	Court held the 10‑K did not substitute for the minutes; specific board calculations were material and missing
Whether the trial court abused its discretion in imposing sanctions	Schmidt argued arbitrariness and excessiveness	BPC argued sanctions bore a direct relationship to the misconduct and were not excessive	Court applied TransAmerican factors and Nath standard and affirmed—some evidence supported the sanction and it was not shown to be arbitrary

Key Cases Cited

Nath v. Tex. Children’s Hosp., 446 S.W.3d 355 (Tex. 2014) (appellate review of sanctions uses abuse-of-discretion standard)
TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913 (Tex. 1991) (two‑prong test for sanctions: direct relationship to conduct and no greater than necessary)
Howell v. Tex. Workers’ Comp. Comm’n, 143 S.W.3d 416 (Tex. App.—Austin 2004) (failure to object/preserve complaint about sanctions may waive appellate review)