Lead Opinion
OPINION
This mandamus action calls for the resolution of two issues. First, does the “offensive use” waiver, enunciated by this court in Ginsberg v. Fifth Court of Appeals,
I.
Republic Insurance Company (“Republic”) reinsured certain policies issued by National County Mutual Fire Insurance Company (“National County”). One of those policies was issued to Culver Concrete (“Culver”). That policy provided $500,000 of primary coverage, with the first $50,000 being reinsured by Republic.
A Culver employee, Reginald Davis, was involved in an accident in 1985. The truck driven by Reginald Davis struck and killed Ezequiel Trevino. Trevino’s representatives and survivors filed two suits, which were eventually consolidated, against Cul-ver and Reginald Davis. Prior to the conclusion of the Trevino suit, National County was placed into receivership.
In 1988, National County was declared insolvent and placed into liquidation and receivership. As a part of National County's liquidation, a temporary and permanent injunction was issued prohibiting anyone with assets of National County from disposing of those assets. The reinsurance contract is an asset of National County, and Republic was enjoined from disposing of the proceeds of the contract to anyone except the receiver of National County.
The Trevino lawsuit against Culver and Reginald Davis ultimately resulted in a $19,000,000 judgment being entered against Culver and Reginald Davis. After the judgment was entered, the Trevino plaintiffs, Culver, Reginald Davis, and Canal Insurance Company all made demands on Republic for the reinsurance proceeds.
Republic filed a declaratory judgment action in Travis County. Republic acknowledged that it owed the reinsurance proceeds; however, it was faced with competing demands as it was enjoined from paying them to anyone but the Receiver. Republic offered to pay the reinsurance proceeds into the registry of the court pending resolution of the dispute. Republic sought a declaration that (1) it did not have an obligation to pay the reinsurance proceeds to the Trevino plaintiffs, Culver, Canal, and/or Reginald Davis; (2) its sole obligation was to the Receiver of National County; and (3) it did not owe any duty to the Trevino plaintiffs, Culver, Canal, and/or Reginald Davis in conjunction with or separate from the reinsurance contract. Republic also sought an injunction against the Trevino plaintiffs, Culver, Canal, and Reginald Davis preventing them from making any claim to the reinsurance proceeds.
The Trevino plaintiffs, Culver, and Reginald Davis filed counterclaims against Republic. The counterclaims allege claims under the Deceptive Trade Practices Act, the Insurance Code, and common law. The Trevino plaintiffs, Culver, and Reginald Davis contend that Republic is liable for the $19,000,000 judgment.
The counterclaims allege that, in fact, Republic took over the direct administration and settlement of certain National County policies, including the policy issued to Culver, and therefore, Republic became the primary insurer on the policy covering Culver. The Trevinos also allege that, despite knowing that the value of the claims asserted by the Trevinos against Culver and Reginald Davis exceeded the limits on Culver’s policy, and despite having an opportunity to settle those claims within policy limits, Republic wrongfully refused to settle the case.
The discovery objections were heard before Judge Joe Dibrell who referred the dispute to a special master. The special master heard evidence and issued a report to the trial court on March 9, 1992. The special master recommended that some documents be produced despite the fact that Republic established that the documents were protected by the attorney-client privilege. The special master’s report concluded that although Republic met its burden to establish the attorney-client privilege, the privilege had been waived under Ginsberg. The special master also recommended that certain documents, for which Republic asserted the party communication privilege, be produced. The special master determined that the party communication privilege was inapplicable because the communication had occurred in connection with another lawsuit.
The special master issued his report on March 9, 1992. With no advance notice of its existence, counsel for Republic received the report on March 11, 1992. The same day, March 11, 1992, Judge Dibrell signed an order that tracked the special master’s recommendations.
II.
We must first determine whether Republic preserved its complaints for our review. Republic did not object to the special master's report before the trial court adopted the report. The real parties in interest contend that Republic has waived any objection it had to the special master’s report because it failed to object to the report prior to its adoption by the trial court.
The record reflects that the trial court adopted the special master’s report before Republic received its copy of the report. Republic did not have the opportunity to object. Consequently, without reaching the question of whether an objection is required, we conclude that Republic has not waived error in this context.
III.
The attorney-client privilege as embodied in Tex.R.Civ.Evid. 503(b) secures the free flow of information between attorney and client, and it assures that the communication will not later be disclosed. West v. Solito,
A.
The real parties in interest seek information that is protected by the attorney-client
Ginsberg involved a trespass to try title suit. Ginsberg claimed that he owned a building by virtue of two deeds. One deed was from a Mr. Gaynier to Ginsberg conveying his interest in the building. After Mr. Gaynier died, Ginsberg had Mrs. Gay-nier execute a deed ratifying the deed her husband signed. Ginsberg,
Almost ten years later Mrs. Gaynier brought the trespass to try title action, claiming the first deed was forged and that she was fraudulently induced to sign the second deed. Id. At deposition she testified that she could not remember signing the second deed and that she was unaware until 1981 that the ownership of the building had changed. She also revealed that she had seen a psychiatrist in 1972 and subsequent years. Ginsberg sought access to the medical records. The records contained information which virtually established Ginsberg’s statute of limitations defense. The records revealed that Mrs. Gaynier told her psychiatrist in 1972 that the “building was sold while we were in Padre Island.” Id.
Mrs. Gaynier resisted disclosure of the records on the basis of the psychotherapist-patient privilege. This Court rejected her claim of privilege.
B.
Five courts of appeals have considered the issue of waiver by offensive use in the attorney-client context. Of those five, four hold that the offensive waiver applied to the attorney-client privilege; the fifth held that the offensive waiver was limited to the facts of Ginsberg and was not applicable to the attorney-client privilege.
The first case to apply the Ginsberg offensive use waiver to the attorney-client privilege was DeWitt and Rearick, Inc. v. Ferguson,
The sisters sued DeWitt and Rearick, Inc. and two of its employees for $400,000 in actual damages. DeWitt and Rearick, Inc. attempted to determine the basis upon which the sisters had settled their suit. Id. The sisters testified that they settled upon the advice of counsel; however, they refused to divulge the basis and theories upon which the settlement was made, asserting the attorney-client privilege. Id. DeWitt and Rearick, Inc. responded to the sisters’ claims of privilege by arguing that
The court of appeals concluded that the offensive use waiver applied. Id. at 694. The reasons behind the sisters’ settlement, which were protected by the attorney-client privilege, materially affected DeWitt and Rearick’s ability to mount a defense. The court held that the sisters were not entitled to pursue their claim and maintain the attorney-client privilege. Id.
The court in Parten v. Brigham,
The court of appeals concluded that by filing the bill of review, which required the wife to prove that the judgment in the divorce action was entered without any negligence on her part, the wife waived her attorney-client privilege. Id. at 168. The court of appeals noted that this presented an offensive use of the attorney-client privilege. By filing the bill of review, the wife placed her knowledge and the knowledge of her agent — her attorney — directly in issue. Id.
The court in Public Util. Comm’n v. Houston Lighting & Power Co.,
The only court of appeals to consider the issue and reject the offensive use waiver is Cantrell v. Johnson,
The court of appeals disagreed. First, the court of appeals noted that this case was not one in which proof of a defense might be precluded if the discovery was not permitted. Id. Although the documents might reveal Cantrell’s knowledge and state of mind, relevant factors in the litigation, those factors can be litigated without undermining the attorney-client privilege. Id. The court went on to determine that the Ginsberg holding must be limited to the
We conclude the better position applies the Ginsberg offensive use waiver to the attorney-client privilege.
First, before a waiver may be found the party asserting the privilege must seek affirmative relief.
We next examine the facts of this case to determine whether the offensive use waiver guidelines were met. We conclude that in this case there has been no waiver of the attorney-client privilege.
Republic is not seeking affirmative relief. Republic did file a declaratory judgment action, but a declaratory judgment action is not necessarily an action for affirmative relief.
Republic seeks a declaration of its obligations with respect to the reinsurance proceeds. It also requests a declaration that it owed no duties to the Trevino plaintiffs, Culver, Canal, or Reginald Davis. Finally, it seeks an injunction that would prohibit the same parties from filing a lawsuit to recover the reinsurance proceeds. The unifying factor to the relief Republic seeks is that all of it is, in reality, defensive in nature. We reject the contentions of the real parties in interest that Republic’s declaratory judgment is seeking the type of affirmative relief that would result in an offensive use waiver. Because we reach the conclusion that Republic is not seeking affirmative relief, we need not consider the other offensive use factors.
The trial court abused its discretion in ordering Republic to produce documents protected by the attorney-client privilege. See Walker v. Packer,
IV.
Republic also argues that the trial court abused its discretion by ordering the production of documents protected by the party communication privilege. Republic concedes that the party communications at issue were not generated in contemplation of or in the course of this suit. They were generated in what Republic refers to as “pending, parallel” litigation involving the same nucleus of facts and some of the same parties. Republic urges that these party communications should be privileged in this suit.
The party communication privilege is found in rule 166b(3)(d). That rule reads in part:
Communications between agents or representatives or the employees of a party to the action or communications between a party and that party’s agents, representatives or employees, when made subsequent to the occurrence or transaction upon which the suit is based and in connection with the prosecution, investigation or defense of the particular suit, or in anticipation of the prosecution or the defense of the claims made a part of the pending litigation [are exempt from discovery].
Tex.R.Civ.P. 166b(3)(d) (emphasis added).
The language of this rule requires that the party communication, to be privileged, occur during or in anticipation of the
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We are confident that the trial court will vacate the order dated September 3, 1992 and that it will proceed in accordance with this opinion. A writ of mandamus will issue only if it does not.
Notes
. The original respondents in this mandamus action were Judge Joe Dibrell and Judge Peter M. Lowry. Judge Dibrell initially ordered the production of the documents which are the subject of this dispute. The case, however, was docketed in Judge Lowry’s court. The case was eventually transferred to the 200th District Court, Judge Paul R. Davis presiding. On September 3, 1992, Judge Davis signed an order requiring Republic Insurance to produce all documents subject to Judge Dibrell’s orders. By signing this order, Judge Davis has, in effect, adopted the orders signed by Judge Dibrell. Judge Davis has been substituted as the respondent.
. All causes of action that Culver or Reginald Davis could assert against Republic have been assigned to the Trevinos by order of the trial court.
. Some decisions by courts of appeals suggest that a party must object to the special master’s report before the trial court adopts it. See Martin v. Martin,
. This issued confronted the court in West,
. The psychotherapist-patient privilege contains specific exceptions, none of which were applicable to the Ginsberg scenario. See Tex.R.Civ.Evid. 510(d)(1) — (7). The Ginsberg decision relies for its support on Fifth Amendment cases. See Ginsberg, 686 S.W.2d at 107. The cases cited stand for the proposition that a plaintiff may not come into court and use his Fifth Amendment privilege as an offensive weapon. See, e.g., Henson v. Citizens Bank of Irving,
. Most recently, the court of appeals in Westheimer v. Tennant,
. In Owens-Corning Fiberglas v. Caldwell,
Other jurisdictions find offensive use waivers of the attorney-client privilege. E.g., Chicago Title Ins. Co. v. Superior Court,
. One of the principles behind privileges is that the harm to the relationship protected by the privilege is greater than the benefit gained through complete disclosure. 8 J. Wigmore, Wigmore on Evidence § 2285 at 527 (McNaughton rev. 1961).
. Cf. Maryland Gen. Ins. Co. v. Blackmon,
. If the communication is but one form of indirect evidence of a matter, the trial court should not find a waiver. See Hearn v. Rhay,
. The court in Hearn set forth offensive use factors similar, though somewhat less rigorous, than those we adopt. Hearn involved defendants attempting to assert the affirmative defense of good faith in a 42 U.S.C. § 1983 claim. The plaintiff sought to depose the defendants’ attorneys and sought production of documents. All of this information was both protected by the attorney-client privilege and highly relevant to the defendants’ affirmative defense. Id. at 580-81. The court concluded that the defendants had impliedly waived the attorney-client privilege by asserting their affirmative defense. The Hearn court found three factors common to cases finding a waiver of the attorney-client privilege by offensive use:
(1) the assertion of the privilege was the result of an affirmative act, such as filing suit, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defense.
Id. at 581. The court went on to conclude that the harm to the adversary was sufficient to justify the piercing of the privilege. Id. at 582.
. We do not hold, as the concurring and dissenting opinion implies, that an action under the Declaratory Judgment Act may never constitute affirmative relief. There may be occasions when a party couches affirmative relief in the form of a declaratory judgment action. In such a case, the offensive use waiver may apply. This is not such an occasion.
Concurrence Opinion
concurring and dissenting.
I agree with parts I and II of the majority opinion. Republic must be given an opportunity to object to the special master’s report before Republic can be held to have waived objection to it. .1 agree with part III-A and most of part III-B of the majority opinion. This court’s Ginsberg opinion sets forth an “offensive use” exception to certain privileges, and the logical conclusion from our own opinions — as well as the better-reasoned opinions of our courts of appeals — is that the attorney-client privilege is subject to the Ginsberg doctrine. I also agree with part IV of the majority opinion. The party communications privilege is limited to the particular suit or suits in anticipation of which the communications are made.
I disagree with the last paragraph of Part III-B where the majority states, for the first time, three “factors” which are more “rigorous” than the corresponding elements for offensive-use waiver in federal courts. The statement in Hearn v. Rhay,
(1) the assertion of the privilege was the result of an affirmative act, such as filing suit, by the asserting party; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would have denied the opposing party access to information vital to his defense.
See, e.g., Conkling v. Turner,
I strongly disagree with the majority’s perspective of the Declaratory Judgment Act counterclaim as not “seeking affirmative relief.” That the statute states it is “remedial” means nothing, since a number of statutes which are “remedial” have been held to authorize affirmative relief.
The Declaratory Judgment Act requires an actual controversy which will be resolved between the two parties before it can apply. United Servs. Life Ins. Co. v.
In Abor v. Black,
Disagreeing with the conclusion there is no “offensive use,” I also disagree that the few documents the majority would protect should be protected. The special master and several district judges who have reviewed this matter properly concluded that the Ginsberg offensive use waived the attorney client privilege as to these documents. Accordingly, I would deny the petition for writ of mandamus in its entirety.
DOGGETT, J., joins in this concurring and dissenting opinion.
. See, e.g., Nuclear Corp. of Am. v. Hale,
. The actual holding was that a subsequent injunction was appropriate. The opinion by Justice Guittard sets forth decisions from other jurisdictions having enacted the Uniform Declaratory Judgments Act to demonstrate the contempt enforcement sanction.
. Contrary to what the majority claims, I do not imply and do not intend to imply that the majority concludes a declaratory judgment action is never an "offensive use” within the meaning of Ginsberg.
