IN RE NATIONAL LLOYDS INSURANCE COMPANY, Wardlaw Claims Service, Inc., and Ideal Adjusting, Inc., Relators
No. 15-0591
Supreme Court of Texas.
June 9, 2017
Rehearing Denied December 8, 2017
Conoco was a party to multiple other executory contracts with Alma that were listed as such in Alma‘s bankruptcy disclosure statement, along with a note about whether they were to be assumed or rejected and the identities of the parties to the contracts. So, Conoco was in a position to object to Alma‘s failure to include the Exchange Agreement in its disclosures and request that the bankruptcy court require Alma to either assume and assign the Agreement or reject it. Conoco did not do so. See id. (noting that the nondebtor party to an executory contract had itself to blame for not objecting to the asset purchase agreement). Under the circumstances, Conoco would not be deprived of its contractual indemnity right if the Court were to follow applicable bankruptcy precedent and hold that the Exchange Agreement rode through the bankruptcy and remained a liability of reorganized Alma. The right simply would not attach to Noble; it would attach to the reorganized party that succeeded to the interests of the party with whom Conoco made its deal in the beginning—Alma.
I would reverse the judgment of the court of appeals. Because the Court does not, I respectfully dissent.
Jennifer Bruch Hogan, James C. Marrow, Richard P. Hogan Jr., Hogan & Hogan, Houston, Amber Lynn Anderson, John Steven Mostyn, Molly Kathleen Bowen, Mostyn Law Firm, Houston, Gilberto Hinojosa, Law Offices of Gilberto Hinojosa & Associates, P.C., Brownsville, Randal G. Cashiola, Cashiola & Bean, Beaumont, for Real Party in Interest.
R. Casey Low, Elizabeth K. Marcum, Pillsbury Winthrop Shaw Pittman LLP, Austin, Dale Wainwright, Greenberg Traurig, LLP, Austin, Greg C. Wilkins, Monica L. Wilkins, Orgain Bell & Tucker, LLP, Beaumont, Robert L. Florance IV, Pope Hardwicke Christie Schell Kelly & Taplett, L.L.P., Fort Worth, Alasdair A. Roberts, Scot Graves Doyen, Doyen Sebesta, Ltd., LLP, Houston, for Relator.
Justice Guzman delivered the opinion of the Court, in which Chief Justice Hecht, Justice Green, Justice Willett, Justice Devine, and Justice Brown joined.
The discovery dispute in this mandamus proceeding arises in the context of multidistrict litigation involving allegations of underpaid homeowner insurance claims. The issue is whether a party‘s attorney-billing information is discoverable when the party challenges an opposing party‘s attorney-fee request as unreasonable or unnecessary but neither uses its own attorney fees as a comparator nor seeks to recover any portion of its own attorney fees. We hold that, under such circumstances, (1) compelling en masse production of a party‘s billing records invades the attorney work-product privilege; (2) the privilege is not waived merely because the
To the extent factual information about hourly rates and aggregate attorney fees is not privileged, that information is generally irrelevant and nondiscoverable because it does not establish or tend to establish the reasonableness or necessity of the attorney fees an opposing party has incurred.2 A party‘s litigation expenditures reflect only the value that party has assigned to litigating the matter, which may be influenced by myriad party-specific interests. Absent a fee-shifting claim, a party‘s attorney-fee expenditures need not be reasonable or necessary for the particular case. Barring unusual circumstances, allowing discovery of such information would spawn unnecessary case-within-a-case litigation devoted to determining the reasonableness and necessity of attorney-fee expenditures that are not at issue in the litigation. This is not a proper discovery objective. We therefore conditionally grant mandamus relief and direct the trial court to vacate its discovery order.
I. Factual and Procedural Background
Following two hail storms that struck Hidalgo County in 2012, insured homeowners sued various insurers and claims adjustors, alleging underpayment of insured property-damage claims. The lawsuits were consolidated into a single multidistrict litigation (MDL) court for pretrial proceedings, including discovery.3
The discovery dispute in this mandamus proceeding involves four MDL cases in which individual homeowners sued National Lloyds Insurance Co., Wardlaw Claims Service, Inc., and Ideal Adjusting, Inc. (collectively, the insurer), asserting statutory, contractual, and extra-contractual claims.4 Among other damages, the homeowners seek attorney fees incurred in prosecuting their statutory and contractual claims. In addition to assailing the merits of the homeowners’ liability claims, the insurer asserts the homeowners’ attorney-fee claims are excessive for a case of comparable complexity in the relevant locality.
A mere two months before trial, and nearly a year after the parties served MDL master discovery requests, the homeowners requested a trial continuance and sought leave to serve additional discovery regarding the insurer‘s attorney-billing information. Though the insurer is not making a claim for attorney fees,5 the homeowners submitted (1) three interrogatories requesting hourly rates, total amount billed, and total reimbursable expenses; and (2) four requests for production seeking all billing invoices; payment logs, ledgers, and payment summaries; au-
According to the homeowners, the insurer‘s attorney fees and billing information are discoverable in the present cases because the insurer‘s counsel, Scot Doyen, testified as an attorney-fee expert in Amaro and admitted on cross-examination—albeit over objection—that an opposing party‘s fees could be considered as “a factor” in determining a reasonable fee recovery. Doyen also used his law firm‘s billing practices as an example of a proper way to allocate attorney fees to avoid an artificially inflated fee claim in MDL cases.8 Prior
Based on the record in Amaro, the homeowners contend Doyen‘s expert testimony in these cases will necessarily be based on his experience as the insurer‘s attorney in the same proceedings and, more to the point, he has admitted that an opposing party‘s fees are relevant to the disputed attorney-fee issues. Accordingly, the homeowners argue that information about the insurer‘s attorney-fee expenditures is discoverable and relevant to the attorney-fee dispute.
The insurer objects on the basis that the requested discovery is overly broad and seeks information that is both irrelevant and protected by the attorney-client and work-product privileges. With regard to relevancy, the insurer principally relies on its stipulation that it “will not use its own billing invoices received from its attorneys; payment logs, ledgers, or payment summaries showing payments to its attorneys; or the hourly fees or flat rates being paid to its attorneys; audits of the billing and invoices of its attorneys to contest the reasonableness of [the homeowners‘] attorney‘s fees.”
After two non-evidentiary hearings, a discovery special master recommended that (1) an opponent‘s attorney-billing information is, as a general proposition, relevant to the reasonableness of an attorney-fee request in the same case; (2) to the extent the discovery requests in this case seek material from an expert witness on the attorney-fee issue, the information falls within the scope of permissible discovery under
The court of appeals denied the insurer‘s petition for mandamus relief.9 While the court acknowledged that an opposing party‘s attorney-billing information may be irrelevant in a given case,10 the court concluded the discovery order was not an abuse of discretion in the underlying cases because (1) an opposing party‘s attorney fees are germane to at least two factors that inform the “reasonable and necessary” attorney-fee inquiry, as set forth in Arthur Andersen & Co. v. Perry Equipment Corp.;11 (2) the Arthur Andersen factors are explicitly nonexclusive;12 (3) the insurer‘s designated expert witness
In this original proceeding, the insurer primarily relies on several lower-court cases declaring information about a party‘s attorney-fee expenditures is “patently irrelevant” to an opposing party‘s attorney-fee claim.16 The insurer maintains that the Arthur Andersen factors do not contemplate discovery of an opposing party‘s attorney-billing information, arguing those factors are textually directed only to evidence about the claimant‘s attorney fees. The insurer also reasserts its privilege objections and disputes that its attorney fees are at issue in this litigation by virtue of the Amaro litigation.
Relying on authority from other jurisdictions, the homeowners argue trial courts have discretion to order disclosure of an opposing party‘s attorney-fee information and could permissibly compel production in this case. In addition to citing counsel‘s role as a testifying expert in this case and Amaro as supporting the trial court‘s discovery order, the homeowners rely on the concurring opinion in El Apple I, Ltd. v. Olivas,17 which describes an opposing party‘s attorney fees as a “surer indicator[ ]” of the reasonableness of a fee request. With regard to privilege, the homeowners point to a dearth of evidence that redaction would be ineffective to protect any applicable privileges and argue, in the alternative, that attorney-billing information is not privileged as a matter of law or on the record before the Court.
Germania Farm Mutual Insurance Association filed an amicus brief supporting the insurer. Germania is a defendant in other cases pending before the MDL pretrial court and asserts the plaintiffs in those cases are seeking nearly identical discovery from Germania even though “Germania‘s counsel has not testified about attorney‘s fees in any MDL case or otherwise done anything to put Germania‘s attorney‘s fees at issue.”
II. Discussion
A. Standard of Review
A trial court generally has discretion to determine the scope of discovery.18 However, “[a] discovery order that compels production beyond the rules of procedure is an abuse of discretion for which mandamus is the proper remedy.”19 Under our procedural rules, the scope of discovery extends to “any matter that is not privileged and is relevant to the sub-
B. Privilege
The insurer asserted two privileges in response to the discovery requests: the attorney-client privilege and attorney work-product privilege. Analogizing to our analysis in National Union Fire Insurance Co. v. Valdez,22 we hold that a request to produce all billing records invades a party‘s work-product privilege because, cumulatively, billing records constitute a mechanical compilation of information that, at least incidentally, reveals an attorney‘s strategy and thought processes.
1. Legal-Representation Privileges
The attorney-client privilege protects communications between attorney and client that are (1) not intended to be disclosed to third parties and (2) made for the purpose of facilitating the rendition of professional legal services.23 The privilege promotes free discourse between attorney and client, thereby advancing the effective administration of justice.24
“The work product privilege is broader than the attorney-client privilege.”25 The discovery rules define “work product” as:
(1) material prepared or mental impressions developed in anticipation of litigation or for trial by or for a party or a party‘s representatives...; or
(2) a communication made in anticipation of litigation or for trial between a party and the party‘s representatives or among a party‘s representatives, including the party‘s attorneys [and] consultants.26
Certain matters are expressly excluded from the definition of “work product,” however, and are not protected from discovery even if made or prepared in anticipation of litigation or for trial.27 The carve-outs include “information discoverable under Rule 192.3 concerning experts, trial witnesses, witness statements, and contentions.”28
“The primary purpose of the work product rule is to shelter the mental processes, conclusions, and legal theories of the attorney, providing a privileged area within which the lawyer can analyze and prepare his or her case.”29 Core work
The party asserting a privilege in opposition to a discovery request “must establish by testimony or affidavit a prima facie case for the privilege,” although “[t]he party need produce ‘only the minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.‘”33 In limited circumstances, “the documents themselves may, standing alone, constitute sufficient proof” to establish a claimed privilege.34 Additionally, we have held that “evidence may not always be necessary to support a claim of protection from discovery.”35
2. The Requested Documents, Collectively, Are Work Product
We have described the work-product privilege as encompassing “two related but different concepts“:
First, the privilege protects the attorney‘s thought process, which includes strategy decisions and issue formulation.... Second, the privilege protects the mechanical compilation of information to the extent such compilation reveals the attorney‘s thought processes.36
Billing records constitute “communication[s] made in anticipation of litigation or for trial between a party and the party‘s representatives or among a party‘s representatives.”37 Moreover, as a whole, billing records represent the mechanical compilation of information that reveals counsel‘s legal strategy and thought processes, at least incidentally.
Conceptually, the matter is similar to the issue we considered in National Union Fire Insurance Co. v. Valdez, which involved a discovery request for an attorney‘s entire litigation file.38 We observed that “[t]he organization of the file, as well as the decision as to what to include in it, necessarily reveals the attorney‘s thought processes concerning the prosecution or defense of the case” and that, if such information were discoverable, an attorney
A request for all billing invoices, payment logs, payment ledgers, payment summaries, documents showing flat rates, and audits is analogous to the request in Valdez for an attorney‘s entire litigation file. These billing records—which are generated in anticipation of litigation and trial—are “almost certain to encompass numerous irrelevant and immaterial documents.”41 When a party neither seeks to recover its own attorney fees nor attempts to use its attorney-billing records to challenge the opposing party‘s attorney fees, the party‘s attorney should not be restricted in the preparation or presentment of his or her billing records by the prospect that they might have to be revealed in their entirety. Further, these billing records, which are useful to the requesting party only if they describe what the attorney has done in the case, reveal the attorney‘s thought processes concerning the prosecution or defense of the case.
For example, billing records reveal when and where attorneys strategically deploy a client‘s resources; which issues were addressed by experienced lawyers as compared to less experienced counsel; the subject-matter expertise of an attorney working on a particular aspect of the case; and who was hired as consultants—including consulting experts and jury consultants—and when. This information provides detailed information regarding a party‘s litigation decisions and also illuminates the relative significance of or concern about particular matters. Especially when a party is a repeat litigant, as the insurer is here, decisions revealed through billing records represent strategic choices and are pieces of “an overall legal strategy for all the cases in which it is involved,” which a party must be allowed to develop without intrusion.42 Discovery of billing records in their entirety would provide a roadmap of how the insurer plans to litigate not only this particular case but also other MDL cases.
The homeowners argue that redaction of privileged material, which the trial court allowed in this case, should be sufficient to protect any privileged information. However, in Valdez, we held the attorney‘s entire litigation file is privileged per se, regardless of whether unprivileged information is included in the file.43 We conclude that Valdez‘s core analysis applies here as well and logically applies even if privileged in-
We also conclude that redacting privileged information—such as the specific topics researched or the descriptions of the subject of phone calls—would be insufficient as a matter of law to mask the attorney‘s thought processes and strategies. The chronological nature of billing records reveals when, how, and what resources were deployed. With this knowledge, a party in the same proceeding could deduce litigation strategy as to specific or global matters.
Aggregate fee summaries also reveal strategic choices. When litigation is pending, the discovery rules impose a duty to amend or supplement discovery throughout litigation.44 A dramatic increase in mid-litigation spending could imply an upcoming filing or significant research expenditures related to elevated concerns over recent litigation events.45 For these reasons, redaction would be inadequate to protect the work-product nature of the total billing information.
Further, objections and disputes regarding what should be redacted based on privilege would lead to collateral litigation over attorney-fee claims, with the issues likely to recur throughout the litigation as discovery is amended or supplemented. As the United States Supreme Court admonished in Hensley v. Eckerhart, “[a] request for attorney‘s fees should not result in a second major litigation.”46
We therefore hold that requests for production of all billing invoices, payment logs, payment ledgers, payment summaries, documents showing flat rates, and audits invade the zone of work-product protection. Our holding does not prevent a more narrowly tailored request for information relevant to an issue in a pending case that does not invade the attorney‘s strategic decisions or thought processes.47 Nor does our holding preclude a party from seeking noncore work product “upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party‘s case and that the party is unable without undue hardship to obtain the substantial equivalent of the material by other means.”48 But, here, the record bears no evidence of either.
In describing billing records as work product when requested en masse, we do not foreclose the possibility that some or all of the information may also be protected from compelled disclosure by the attorney-client privilege.52 But to be protected by the attorney-client privilege, the insurer must establish that the communications were confidential and made to facilitate the rendition of professional legal services to the client. The insurer failed, however, to “establish [a prima facie case for the privilege] by testimony or affidavit” or even by “only the minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true.”53
C. Relevance
Although we conclude the requested documents are protected by the work-product privilege, factual information is not exempt from discovery by mere inclusion within protected documents.54 Accordingly, we must also consider whether interrogatories that request hourly rates, total amount billed, and total reimbursable expenses seek discoverable information. Though the parties disagree about wheth-
We hold the requested information is generally not relevant because (1) the opposing party may freely choose to spend more or less time or money than would be “reasonable” in comparison to the requesting party; (2) comparisons between the hourly rates and fee expenditures of opposing parties are inapt, as differing motivations of plaintiffs and defendants impact the time and labor spent, hourly rate charged, and skill required; (3) “the tasks and roles of counsel on opposite sides of a case vary fundamentally,” so even in the same case, the legal services rendered to opposing parties are not fairly characterized as “similar“;55 and (4) a single law firm‘s fees and hourly rates do not determine the “customary” range of fees in a given locality for similar services. However, when a party uses its “own hours and rates as yardsticks by which to assess the reasonableness of those sought by [the requesting party]” or seeks to shift responsibility for those expenditures, the party places its own attorney-billing information at issue, making the information discoverable.56
1. Scope of Discovery
The scope of discovery extends to any unprivileged information that is “relevant to the subject matter” of the pending action, even if inadmissible at tri-
The discovery guideposts can be summarized as follows: only relevant evidence is discoverable; relevant evidence that is privileged is not discoverable; relevant evidence that is not privileged is discoverable when (i) it is admissible or (ii) it is inadmissible but reasonably calculated to lead to the discovery of admissible evidence; and failing either of those admissibility criteria, the request for discovery may be denied even if the requested information is relevant and unprivileged.
We turn now to the pertinent inquiry: whether information about opposing counsel‘s hourly rates, total fees, and total reimbursable expenses is relevant and reasonably calculated to lead to the discovery of admissible evidence even when those expenditures are not independently at issue in the litigation, as is the case here.
2. Establishing Reasonable and Necessary Attorney Fees
We begin by considering the issue to which the requested information is purportedly relevant—the homeowners’ claim for reimbursement of reasonable and necessary attorney fees.
“Texas follows the American rule on attorney‘s fees, which provides that, generally, ‘a party may not recover attorney‘s fees unless authorized by statute or contract.‘”61 When fee-shifting is authorized, the party seeking to recover those fees bears the burden of establishing the fees are reasonable and necessary.62 This inquiry requires consideration of eight nonexclusive factors articulated in Arthur Andersen & Co. v. Perry Equipment Corp.:
- the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
- the likelihood ... acceptance of the particular employment will preclude other employment by the lawyer;
- the fee customarily charged in the locality for similar legal services;
- the amount involved and the results obtained;
- the time limitations imposed by the client or by the circumstances;
- the nature and length of the professional relationship with the client;
- the experience, reputation, and ability of the lawyer or lawyers performing the services; and
- whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.63
The homeowners cite the first and third Arthur Andersen factors as establishing the trial court‘s discretion to authorize discovery concerning the insurer‘s attorney-fee expenditures. The homeowners neither address the other enumerated factors nor identify any nonenumerated factor affecting the analysis in this case. But relying on the concurring opinion in El Apple I, Ltd. v. Olivas, the homeowners assert that a comparison of their own fees to the insurer‘s fees is relevant to discharging their burden of proof and is, in fact, a “surer indicator[ ]” of a reasonable fee.64
The insurer argues no Arthur Andersen factor is textually or practically directed to an opposing party‘s attorney fees because the fee-recovery analysis focuses solely on the reasonableness and necessity of the claimant‘s attorney fees. The insurer characterizes the El Apple concurrence as involving a party‘s election to use its own fees as a comparator and not as insinuating an opposing party‘s attorney-billing information is inherently relevant.
3. The Requested Information Is Not Relevant
Considering where the evidentiary burden lies with respect to a fee-shifting
Despite superficial appeal, such “an apples-to-oranges comparison” is analytically faulty:
The most obvious flaw ... is that making such a comparison—where the benchmark for the award of plaintiff‘s attorney fees is “reasonableness“—would require the trial court to first determine whether the defendant‘s counsel billed a reasonable amount. Such a scheme does not make sense.67
In order for an opposing party‘s fees to serve as a relevant measure to any legitimate degree, the claimant would first have to establish those fees are themselves reasonable and necessary. Doing so necessitates consideration of other data points beyond the instant parties’ expenditures. Because other evidence would be required to make an opposing party‘s fees relevant in the first instance, discovery concerning an opposing party‘s attorney-fee expenditures serves no purpose besides unnecessarily complicating the litigation in pursuit of a collateral matter. Evidence of an opposing party‘s fees lacks genuine probative value as a comparator for a requesting party‘s fees and, at best, would be merely cumulative or duplicative of other evidence directed to that inquiry.68 Concisely stated, two wrongs don‘t make a right, and proving two rights is unnecessary when the only fact of consequence is whether one is right.
This conclusion accords with both a literal and practical reading of the first and third Arthur Andersen factors, which the homeowners cite as supporting the trial court‘s discovery order. With regard to the first factor—which considers the time, labor, and skill required and the novelty and difficulty of the questions involved—there can be little dispute that different motivations and different demands drive the time and labor spent, hourly rate charged, and skill required to defend litigation as compared to prosecuting a suit.69 As to the third Arthur Andersen factor—the fee customarily charged in the locality for similar legal services—opposing parties are not providing “similar legal services” even in the same case, and the term “customarily” connotes a composite of fee information for the area rather than a single data point. Fundamentally, the tasks and roles of counsel on opposite sides of a case and the interests of opposing parties are so distinct that no “logical comparability” ex-
For example, a party subject to repeat litigation, such as an insurer or corporate defendant, may view the precedential value of a case more significantly than an opposing party who might not anticipate ever being involved in similar litigation again. Likewise, one side may have more at risk in a case.71 Such considerations could reasonably justify greater expenditures in time, labor, and money than might be considered “reasonable” from the other party‘s perspective.72 As the expression goes, one side of the litigation may have more skin in the game than the other.
Similarly, the nature of the attorney-client relationship may differ in ways that affect the rates charged and the demands on counsel‘s time. In that vein, ongoing attorney-client relationships often exist between corporate and governmental parties and their counsel and frequently involve negotiated rates that take into consideration future litigation work.73 And “[l]arger organizations, often armed with more resources to expend on litigation than individuals, are frequently more demanding on their counsel in requesting constant updates on the litigation and detailed summaries on recent rulings, thereby requiring more time by their attorneys.”74 These considerations are especially pertinent in multi-party litigation, like the MDL proceedings here.
Even when working on the same tasks, attorneys litigating the same case do not approach those tasks in a sufficiently comparable manner to be genuinely probative of the degree of effort or skill required by one another. Indeed, while counsel for both sides may attend the same deposition, the attorney taking the deposition would reasonably be expected to expend more time and expense in preparing for the deposition than the attorney defending the deponent. In like manner, the contrast between responding to discovery requests and reviewing and analyzing information produced creates significant variations in time and money spent. Suffice it to say that counsel in the same case are not actually or even effectively performing “similar legal services” for the litigation.
[W]hat a single law firm charges for a particular set of services and its choice of tactics in representing a given client are issues decidedly distinct from deciding what constitutes a customary fee. The [customary-fee] factor is plainly aimed at a composite of legal fees charged for a given service. Thus, focusing on one law firm‘s billing practices is unhelpful in determining what is “customary.” The thrust of this lawsuit is whether [plaintiff‘s] fees, not those generated by [defendant], fall within the range of reason.75
Explaining the distinction, one court observed: “The particular rates charged by defendants’ attorneys in this action reflect only the rates charged in one specific case by one specific law firm but do not have a bearing on the general hourly rates normally charged for similar legal work in the area.”76
The fact that the insurer challenges the homeowners’ attorney fees as excessive does not, in and of itself, alter the analysis.77 A party can challenge another party‘s fee request as not “customary” even though that party also paid a fee that was not “customary,” as long as the challenger does not rely on its own fees to prove the point.78
The homeowners cite several state and federal decisions for the proposition that an opposing party‘s attorney-billing information is at least minimally relevant and therefore the trial court has complete discretion to order discovery of such information or not.79 While there is authority that may be construed as supporting the homeowners’ discovery efforts, the jurisprudence reflects a wide variety of approaches to this issue among state and federal courts.80 For the reasons explained above, we agree with those cases concluding such information is generally not discoverable and, in the ordinary case, “patently irrele-
Even if a party‘s attorney-billing information were marginally relevant to an opposing party‘s fee claim, discovery of such information should ordinarily be denied because the “probative value is substantially outweighed by the danger of ... unfair prejudice, confusion of the issues, misleading the jury, undue delay, or needlessly presenting cumulative evidence.”82 When requested information would manifestly foment these concerns and the probative value of the requested information is minimal, the discovery request is not “reasonably calculated to lead to the discovery of admissible evidence.”83
What‘s more, barring unusual circumstances, evidence about an opposing party‘s attorney fees is not necessary for the requesting party to meet its burden of proof, but there is a genuine threat that allowing such discovery would give rise to abusive discovery practices. “Discovery is often the most significant cost of litigation” and a potential “weapon capable of imposing large and unjustifiable costs on one‘s adversary.”84 Especially in the context of multi-party litigation, costs are magnified by expanding the scope of discovery, and “the costs of multi-party litigation can drive defendants to settle regardless of the merits.”85 While litigants should have the opportunity “to obtain the fullest knowledge of the facts and issues prior to trial,”86 our rules also protect against unnecessary burgeoning of litigation costs.
In sum, barring unusual circumstances, an opposing party‘s attorney-fee information is not relevant because there is no reasonable expectation that the information will aid the dispute‘s resolution. Moreover, whatever marginal relevance might theoretically exist would not come close to surpassing competing concerns about undue prejudice, confusion of the issues, and abusive discovery practices, among others. Aside from lacking genuine probative value, discovery of an opposing party‘s attorney-billing information should generally not be permitted for these additional reasons.
D. Expert Discovery
Attorney-billing information may be discoverable by virtue of the opposing party designating its counsel as a testifying expert. Per Rule 192.3, a party is entitled to expert discovery of facts known by the testifying expert relating to the expert‘s mental impressions and opinions formed, any bias of the expert witness, and documents provided to or reviewed by the
expert in anticipation of testimony.87 Additionally, the work-product privilege does not apply to “information discoverable under Rule 192.3 concerning experts, trial witnesses, witness statements, and contentions.”88 Thus, the tactical decision to designate counsel as a testifying witness provides the opposing party with the means to access information and attorney work product not otherwise available under the general scope of discovery.89
In those circumstances, however, the requesting party must follow the discovery rules applicable to testifying experts. Importantly, a party is limited in the tools available to discover information concerning expert witnesses, even though the information may otherwise be within the scope of testifying-expert discovery. “Rule 192.3(e) sets forth the scope of information that parties may discover about a testifying expert.... Rule 195 addresses the methods for obtaining such information, limiting testifying-expert discovery to that acquired through disclosures, expert reports, and oral depositions of expert witnesses.”90 To minimize undue expense and curb discovery abuse,91 Rule 195 does not provide for interrogatories or requests for production like the discovery requests at issue here.92 Further, because the disputed discovery requests are not permissible methods of obtaining information discoverable under Rule 192.3(e), the exception to the work-product privilege in Rule 192.5(c)(1) does not apply.93
While the distinctions may seem like a technicality, the limitations on expert discovery ensure discovery is narrowly tailored to permissible purposes. In this case,
Because the homeowners chose not to use Rule 195‘s permissible discovery methods to request insurer‘s expert information, the trial court erred insofar as it relied on Rule 192.3(e) in determining the scope of discovery. Additionally, the Rule 192.5(c)(1) work-product exception does not apply to requested information under these particular discovery methods and thus the trial court‘s discovery order improperly compels discovery of work-product privileged information.
E. Response to Dissent
“The line between who is a Rule 702 expert witness and who is a Rule 701 [fact] witness is not always bright.”96 But when a witness is properly disclosed and designated as an expert and the main substance of the witness‘s testimony is based on specialized knowledge, skill, experience, training, and education, “the testimony will generally be expert testimony within the scope of Rule 702.”97 Here, the insurer (1) challenged the reasonableness and necessity of the homeowners’ attorney fees, but has not requested its own fees; (2) stipulated that it will not use its own billing information to contest the homeowners’ attorney fees; (3) designated one of its attorneys as an expert based upon his experience, education, and skill; and (4) stated that counsel “is expected to testify as to reasonable and necessary attorney fees for a case of such complexity as this case, pending in Hidalgo County, Texas.”
The dissent‘s analysis conflates the role of an expert with the role of a fact witness and ignores the distinction between the discovery rules associated with those respective roles. We do not disagree with the dissent that the insurer‘s counsel can be cross-examined at trial in his role as an expert witness; consequently, discovery as to his credibility, biases, and facts relating to or forming the basis of his mental impressions and opinions is permitted under the expert-discovery rules.98 But the homeowners did not use permissible methods for obtaining expert discovery.99 The discovery methods matter; we require—as our rules of civil procedure require—that parties utilize permissible tools for requesting expert discovery.
Finally, the dissent‘s preservation argument misses the mark.102 The insurer‘s opposition to discovery is two-pronged: (1) the requested information is privileged and irrelevant under the general scope of discovery, and (2) the insurer‘s designation of its attorney as an expert witness does not change this fact. Whether designation of counsel as an expert alters the discovery analysis—as the homeowners and dissent maintain—is well within the issue presented.
III. Conclusion
Making a claim for attorney fees or using attorney fees as a comparator in challenging an opponent‘s fee request puts a party‘s attorney fees at issue in the litigation. In addition, designating counsel as an expert opens the door to expert-witness discovery as provided and limited by the Texas Rules of Civil Procedure. Outside of these scenarios and absent unusual circumstances, information about an opposing party‘s attorney fees and expenses is, in the ordinary case, privileged or irrelevant and, thus, not discoverable. Given the circumstances in this case and the nature of the discovery requests at issue, we conditionally grant mandamus relief and direct the trial court to vacate its order compelling National Lloyds Insurance Company, Wardlaw Claims Service, and Ideal Adjusting to answer requests for production 1, 2, 4, and 5, and interrogatories 1, 2, and 3. The writ will issue only if the trial court fails to do so.
Justice Johnson filed a dissenting opinion, in which Justice Lehrmann and Justice Boyd joined.
Phil Johnson Justice, Dissenting
Relators (collectively, National Lloyds or the company) designated Scot Doyen, an attorney representing them in these lawsuits, to testify regarding attorney‘s fees the homeowner-plaintiffs seek to recover. The question posed by the parties and ruled on by the trial court is whether information about his fees, expenses, and billing information, as well as that of other attorneys representing National Lloyds in the suits is discoverable. National Lloyds maintained in the trial court and now
This Court, addressing an issue not raised by the parties, says the homeowners used improper discovery methods by using interrogatories and requests for production of documents. It follows that up by saying that the methods would not have mattered anyway because the information is not relevant. The first reason the information is irrelevant, says the Court, is because National Lloyds has disavowed any intent to use its attorney‘s fees as a measure for challenging the plaintiffs’ claims. The second reason is because whatever relevance the information might have is slight when compared to competing concerns such as undue prejudice, confusion of the issues, and abusive discovery practices. Thus, the Court agrees with National Lloyds and determines that the trial court abused its discretion by directing even the limited discovery it ordered.
I disagree and would deny relief.
I. Standard of Review
Generally, parties may obtain discovery “regarding any matter that is not privileged and is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other party.”
II. Discussion
A. Methods of Discovery
National Lloyds designated Doyen, whose firm is one of those representing it in the pending cases, as an expert witness on attorney‘s fees. After Doyen testified in a similar-type case and gave opinion testimony as to the plaintiff‘s attorney‘s fee request, based in part on his personal knowledge from representing a defendant in the case, the homeowners sought permission to serve interrogatories and requests for production regarding, as to each case, the time Doyen and his firm spent on the case and the firm‘s fees and expenses billed to and paid by National Lloyds. They sought the same information regarding all the lawyers representing National Lloyds in the cases. National Lloyds objected that the requested discovery was “overly broad and seeks information that is both irrelevant and protected by the attorney-client and work-product privileges.” Ante at 801. A special master heard the dispute. National Lloyds neither offered testimony nor produced any documents for examination by the special master or trial court. The special master recommended, and the trial court ordered,
National Lloyds did not assert in the trial court that the homeowners improperly requested discovery by using interrogatories and requests for production. It did not assert in the court of appeals that the trial court abused its discretion by authorizing discovery by means of interrogatories and requests for production instead of requests for disclosure, depositions, and reports as permitted by Rule 195. See
In my view, the trial court did not abuse its discretion by addressing only the issues presented by the parties and not granting relief on grounds National Lloyds did not urge. See McKinney v. Nat‘l Union Fire Ins. Co., 772 S.W.2d 72, 75 (Tex. 1989) (“[T]he objecting party must assume the burden of establishing its privilege, immunity or other objection to the discovery request.” (emphasis added)). Moreover, interrogatories and requests for production of documents are appropriate for discovering information related to Doyen as a person with knowledge of relevant facts regarding attorney‘s fees in cases in which he has participated in trial preparation, as is discussed more fully below. National Lloyds should not get to convert a witness from one with knowledge of relevant facts into solely an expert witness simply by designating the witness as an expert. And the trial court would not have abused its discretion by considering Doyen as a fact witness as well as an expert for discovery purposes—even if National Lloyds had argued he was not a fact witness, which it has not.
In light of the foregoing, I disagree with the Court‘s conclusion that “[b]ecause the homeowners chose not to use Rule 195‘s permissible discovery methods to request insurer‘s expert information, the trial court erred insofar as it relied on Rule 192.3(e) in determining the scope of discovery.” See ante at 815.
B. Relevance
Going beyond the issue of methods of discovery, the Court concludes that the trial court abused its discretion by ordering National Lloyds to respond to the following discovery requests because they did not seek relevant information:
Interrogatories:
- State the hourly rate of any and all attorneys who have provided legal services to this Defendant in this case;
- State the total amount billed by each law firm providing legal services to this Defendant in this case up to and including the time of trial; and
- State the total amount of reimbursable expenses incurred by any law firm providing legal services to this Defendant in this case up to and including the time of trial.
Requests for Production:
Produce all billing invoices received by Defendant and/or any of the firms the named attorneys are affiliated with or employed by, in connection with this case; - Produce all payment logs, ledgers, or payment summaries showing all payments paid to Defendants’ attorneys and/or any of the firms that the named attorneys are affiliated with or employed by, in connection with this case;
...
- Please produce all documents that show the flat rate, if any, being paid to Defense Counsel and/or any of the firms that the named attorneys are affiliated with or employed by, in connection with their services on this case; and
- Please produce all documents related to audits of the billing and/or invoices of Defense Counsel and/or any of the firms that the named attorneys are affiliated with or employed by, which were performed on behalf of Defendant in regards to the attorney services received by Defendant.
(emphasis added). The record clarifies that Request for Production number five is limited to documents in the particular case in which discovery is sought.
The amount of reasonable and necessary attorneys’ fees to which the plaintiffs are entitled, if any, will be answered by the factfinder—in these cases, presumably a jury, as jury demands have been made. Transcontinental Ins. Co. v. Crump, 330 S.W.3d 211, 230 (Tex. 2010) (“In general, the reasonableness of statutory attorney‘s fees is a jury question.” (quoting City of Garland v. Dall. Morning News, 22 S.W.3d 351, 367 (Tex. 2000))). The discovery was sought only after Doyen had both been designated to testify in these cases and had testified in another case in opposition to a plaintiff‘s attorney‘s fee request. And there can be no doubt that if Doyen testifies, his testimony will be in opposition to the fees requested by the homeowners: trial lawyers do not call witnesses to testify in support of the opposing party‘s position.
During the discovery hearing the homeowners’ attorneys explained that Doyen‘s testimony in the prior, similar-type case prompted the discovery requests here. In that case he gave opinion testimony based in part on personal knowledge from his own participation in the case. The homeowners’ desire for information is understandable, given that when Doyen was cross-examined in the earlier case about the amount of time and fees he and his firm billed for handling the case, he could not recall details of those matters. Given that previous experience, the homeowners’ lawyers reacted rationally: they sought specific information and records with which to arm themselves to test Doyen‘s testimony and opinions should his recollection again falter, or his memory as to the firm billings be incomplete. Moreover, just in case there were other firms involved in representing National Lloyds in any of these matters, the plaintiffs’ discovery requests inquired about those firms, also. For if litigation tasks in a case are split among several firms, a true picture of the amount of time spent and fees billed by attorneys representing National Lloyds can only be presented by disclosure of the time and billings on the case from all the firms performing services.
When a witness testifies based on personal knowledge, even in part, matters within that witness‘s personal knowledge, subject to other exclusionary rules of evidence, become relevant and fall within the scope of cross examination.
The Court says that
Ante at 798-99 (citing[U]nder [these] circumstances, (1) compelling en masse production of a party‘s billing records invades the attorney work-product privilege; (2) the privilege is not waived merely because the party resisting discovery has challenged the opponent‘s attorney-fee request; and (3) such information is ordinarily not discoverable.
Following its determination that some of the requested information is protected by the work-product privilege, a determination with which I do not disagree, the Court turns to whether the requests for hourly rates, total amounts billed, and total reimbursable expenses seek discoverable information. The Court notes that this question relates to the scope of discovery and that the proper scope “extends to any unprivileged information that is ‘relevant to the subject matter’ of the pending action, even if inadmissible at trial, so long as the information sought ‘appears reasonably calculated to lead to the discovery of admissible evidence.‘” Ante at 808 (quot-
Ante at 799 (citingTo the extent factual information about hourly rates and aggregate attorney fees is not privileged, that information is generally irrelevant and nondiscoverable because it does not establish or tend to establish the reasonableness or necessity of the attorney fees an opposing party has incurred.
While there are certainly times when counsel‘s experience, the roles undertaken by counsel, and varying motivations make a direct comparison of time spent on a case and fees charged for it inapt, there are just as certainly times when circumstances in particular cases might make a comparison highly appropriate. See El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 766 (Tex. 2012) (Hecht, J., concurring). When a party designates the attorney representing it in a case to testify and dispute another party‘s fee request, the designation implies that the attorney will rely on his own experience in trying and billing cases comparable to the one in which he is designated to testify. If the attorney testifies and mitigating factors make a fee comparison between the parties inapplicable, then objections can be lodged based on the status of the evidence at the time the attorney testifies. See
Further, the trial court could have, in its discretion, considered the information sought as being relevant for cross examination of lawyer Doyen regarding the credibility of his opinions and testimony. Witness credibility is important regarding contested issues, and attorney‘s fees are no different. See Howsley & Jacobs v. Kendall, 376 S.W.2d 562, 565 (Tex. 1964). The Texas Rules of Evidence expressly recognize that witnesses may be cross examined on their credibility.
We believe that we‘re entitled to know how much the Defendants spend on attorneys’ fees and the number of hours that they billed for, in order to counter the arguments and testimony that we heard [from Doyen in the previous trial].
The Court gives several reasons for concluding that the requested information is not relevant. First, it says that an opposing party may freely choose to spend more or less than would be “reasonable” in comparison to the requesting party. Ante at 808. But deciding what is a reasonable fee
Second, the Court says that comparisons between attorney‘s fees of plaintiffs and defendants are inapt because differing motivations of the parties impact the time spent, rate charged, and skill required. Ante at 808. That may be true to some extent, but the fact remains that all the lawyers are representing clients in the same lawsuit and doing much of the same work, such as filing pleadings, attending the same depositions and hearings, doing pretrial orders and briefing, preparing to examine and cross examine the same pool of witnesses, working on the same jury charge, and preparing to argue the same case to the same jury. There is necessarily symmetry in a great deal of the activity undertaken by attorneys representing clients in the same lawsuit, even though they represent opposing parties. That symmetry is relevant for cross-examination purposes if Doyen testifies regarding such activities and is critical of the homeowners’ attorney‘s fees request as to those activities.
Third, the Court says that the tasks and roles of counsel on opposite sides of a case vary fundamentally, so even in the same case, the legal services rendered to opposing parties are not “fairly characterized” as similar. Ante at 808. I disagree. There are some differences in the typical activities undertaken by counsel for opposing parties in a lawsuit, but most of the activities are of the same general nature. And if they are not, the testifying witness will have an opportunity to explain the differences. In any particular case the issues generally become apparent early on. From that point, preparation for the parties generally entails similar types of activities—even though likely not exactly the same activities—as set out above, and others such as researching points of law that might arise, conferring with and corresponding with the client regularly, interviewing witnesses, attending mediation, and preparing witnesses for trial. Any differences go to the weight of the evidence, not to whether there is some relevancy between the level and types of activities and time spent by the attorneys for each side. At the least, there is enough similarity and relevance for the trial court to have determined that the limited discovery it ordered was warranted.
Finally, the Court says that a single law firm‘s fees and rates do not determine the “customary” range of fees in a general locality for similar services. See Arthur Andersen & Co., 945 S.W.2d at 818 (noting that the fee customarily charged in the locality is a factor to be considered in determining the reasonableness and necessity of attorney‘s fees). True. But saying that a single firm‘s fees and rates do not determine a customary or reasonable fee is not the same as saying that firm‘s fees and rates are not relevant to the question. To the extent that “customary” fees are in issue, an opposing party‘s fees and rates are certainly some evidence of the customary fees and rates in that locality. As such,
In sum, it is one thing to say that evidence of National Lloyds’ attorneys’ time and fees in a particular case is inadmissible in that case when an opposing party is seeking attorney‘s fees in the case. Admissibility will depend on the evidence and what has transpired at trial before such evidence is offered, and the purpose for which it is offered. Cf. In re E.N.C., 384 S.W.3d 796, 805 (Tex. 2012); see also
C. And Further ...
The Court asserts that production of any part of an attorney‘s file, even redacted billing information, would conflict with our holding in National Union Fire Insurance Co. v. Valdez, in which we decided that requests for en masse production of an attorney‘s entire litigation file was improper because it called for disclosure of privileged, work-product materials. Ante at 816 (citing Nat‘l Union Fire Ins. Co. v. Valdez, 863 S.W.2d 458, 460 (Tex. 1993)). Not so. The requests for discovery in this case are not even close to the requests we considered in Valdez. An attorney‘s entire file includes notes about attorney-client conferences, reports to clients, trial strategies and preparation, and case evaluation; just to mention a few areas and matters that are undisputedly privileged. No one doubts that those materials “necessarily [reveal] the attorney‘s thought processes concerning the prosecution or defense of the case.” See Valdez, 863 S.W.2d at 460.
The requested billing information in this case is a narrow sliver of the entire file, and in Valdez we were careful to note that the decision “does not prevent a party from requesting specific documents ... relevant to issues in a pending case, even though some or all of the documents may be contained in an attorney‘s file.” Id. The information and documents sought here are limited, specific, and unquestionably relevant to an issue in this case. The trial court‘s authorizing National Lloyds—by a very general and nonspecific order—to redact privileged information before producing documents, was fully adequate to protect privileged information absent National Lloyds demonstrating otherwise.
To the extent the Court implies that the homeowners seek to use the requested discovery to independently support their claim for attorney‘s fees, National Lloyds does not claim that they do. As the homeowners argued to the special master, the discovery was sought only after Doyen‘s designation as a witness regarding the homeowners’ attorney‘s fees claim, and after he testified in opposition to the fee request of a homeowner in a different trial. As discussed, the homeowners say they only seek the information to prepare for cross examining Doyen. So, any discussion about using the fees National Lloyds’ lawyers charged as proof of the homeowners’ attorney‘s fees is misplaced.
Moreover, the discovery requests can hardly be excessively burdensome or a great expansion of the trial that will take place. First, National Lloyds did not claim that they are. Second, it is common knowledge among civil trial lawyers that insurance companies require regular, detailed billing invoices from their attorneys. Invoices generally set out, at the very least, the date, amount of time taken, and description of activity for which the company is being billed. That information is most
As the Court explains, this situation has been brought about by National Lloyds’ own litigation choice to designate its trial attorney to testify as an expert. Ante at 807 n.54 (noting that parties concerned about disclosing fees and expenses paid to trial counsel can designate another expert witness or withdraw the designation of trial counsel as a witness). What National Lloyds should not be able to do is have it both ways by using one of its trial attorneys to critique the time, fees, and other details of the homeowners’ attorney‘s fees request, while screening from view its own attorneys’ time and fees in the same case for the same or similar activities. The materials the trial court ordered discovered, at the very least, may lead to admissible evidence that many, if not most, jurors would consider relevant in weighing the testimony of a witness such as Doyen—how much time did the insurance company‘s lawyers spend on the case in regard to the items those lawyers criticize as to the homeowners’ attorneys, and what did they and their insurance clients consider a reasonable fee for those efforts?
III. Conclusion
The trial court‘s reasonably cautious approach as to what interrogatories must be answered and what discovery must be produced does not demonstrate an abuse of discretion. There is, at a minimum, possible relevance of the discovery sought to an element of the pending case. See Ford Motor Co., 279 S.W.3d at 664. There simply has been no showing that National Lloyds’ complying with the trial court‘s discovery order would result in undue prejudice or abusive discovery practices. It most certainly would not result in confusion of the issues—it is a discovery order, not a ruling on the admissibility of the information or documents sought.
I would deny mandamus relief. Because the Court does otherwise, I respectfully dissent.
Notes
Interrogatories:
(1) State the hourly rate of any and all attorneys who have provided legal services to this Defendant in this case;
(2) State the total amount billed by each law firm providing legal services to this Defendant in this case up to and including the time of trial; and
(3) State the total amount of reimbursable expenses incurred by any law firm providing legal services to this Defendant in this case up to and including the time of trial.
Requests for Production:
(1) Produce all billing invoices received by Defendant and/or any of the firm‘s the named attorneys are affiliated with or employed by, in connection with this case;
(2) Produce all payment logs, ledgers, or payment summaries showing all payments paid to Defendants’ attorneys and/or any of the firms that the named attorneys are affiliated with or employed by, in connection with this case;
(3) [withdrawn discovery request not at issue in this appeal];
(4) Please produce all documents that show the flat rate, if any, being paid to Defense Counsel and/or any of the firms that the named attorneys are affiliated with or employed by, in connection with their services on this case; and
(5) Please produce all documents related to audits of the billing and/or invoices of Defense Counsel and/or any of the firms that the named attorneys are affiliated with or employed by, which were performed on behalf of Defendant in regards to the attorney services received by Defendant. This request is limited to the last five (5) years. [The trial court further limited this request to “documents regarding the specific case in which the request is propounded“].
... Well, I think that we have to look at the time components that are in some of these different entries. And I will tell you that... I don‘t [necessarily] take exception with the amount of time that is in a given entry as much as I do a couple of them that I think the time spent should have been allocated across more than just the Amaro file.
....
The Motion to Remand was filed in the Amaro case. It was also filed in about a hundred other cases. When the lawyer shows up to attend that hearing, and what have to do in our fee bills [sic], for instance, the four hours for attending the hearing, I don‘t have a problem with. That‘s ... a reasonable expenditure of time. But, for instance, [on] my side, the lawyer that I have there has to take that and then prorate that out over a number of files. Because you can‘t bill that four hours to every file, it would be as though you worked four hundred hours for that hearing and ... that would never be reasonable. So you have to take that time and prorate it out. We do it on our side....
As a point of clarification, Doyen later added:
On the motion to remand, I think it was a four-hour hearing that I was talking about earlier, what struck me about this when I reviewed it was we prorated our time across every case on the appendix to which that—those motions apply. And I cannot say that the [plaintiffs’ attorneys] did that the same way. If, in fact, they did not and only billed it to the file that was for that hearing, then the four hours would be appropriate because they did have somebody there for that period of time. And I don‘t know how it was billed inside their system, if—and they‘ve put it on here with regard to it being this file and this file alone. If it was billed there, then I think that‘s completely appropriate to do. And ... I don‘t have any indication [that] they did overbill it. And if I created that impression, then I apologize for that. But what struck me was the way we did it. We prorated it out across every one, but it has occurred to me that they may not have done it that way. They may have gone and billed it to just that one. If that‘s the case, then it‘s certainly appropriate to do so.
The official comments to Rule 195 articulate a goal of minimizing “undue expense” in conducting expert discovery. This goal comports with efforts by this Court and others to curb discovery abuse through the implementation of carefully crafted principles and procedures. We have expressed concerns about allowing overly expansive discovery about testifying experts that can permit witnesses to be subjected to harassment and might well discourage reputable experts from participating in the litigation process.