Justice Sullivan's Separate Opinion in
In Re Jacobs, MD (Tex.App.- Houston [14th Dist.] Oct. 20, 2009)(Majority opinion by Brown)
(net worth discovery mandamus) (exemplary damages for gross negligence, sufficiency of pleadings)
GRANTED IN PART AND DENIED IN PART: Opinion by Justice Brown
Before Justices Brown, Boyce and Sullivan
14-09-00123-CV In Re Mark A. Jacobs, M.D., and Debra C. Gunn, M.D., and Obstetrical and Gynecologist
Associates, P.A. Appeal from Probate Court No 2 of Harris County
Trial Court Judge: Michael James Wood
Concurring and Dissenting Opinion by Justice Sullivan in In Re Jacobs, MD
Conflicting appellate court decisions on the meaning of the term "net worth" are
evidence of the confusion surrounding this fundamental issue. This confusion should
be resolved by this Court.
Here, the majority attempts to fairly bridge some of this gap by offering a solid
definition of "net worth" as assets minus liabilities. See Black's Law Dictionary 1041
(6th ed. 1990); Wal-Mart, 868 S.W.2d at 330-31 (Gonzalez, J., concurring). Yet,
even this pronouncement may still lead to disagreements about the documents that
are relevant and discoverable to calculate this figure, in light of the relative lack of
guidance on this issue.
Trial courts have the necessary management tools to control the sequence, timing,
and scope of discovery to minimize burden, maximize efficiency, and protect privacy
rights. See Tex. R. Civ. P. 166, 192. Still, we must acknowledge that there are
literally hundreds of Texas trial-court judges - spread over 254 counties - who may
preside over cases with claims for exemplary damages and, of necessity, disputes
involving net-worth discovery. They each have different backgrounds, different
approaches, and different dockets. Those dynamics are likely to produce a highly
unpredictable and idiosyncratic approach to the management of these issues across
the state - and history shows us that these are issues that regularly recur. I believe
parties to litigation in Texas are entitled to greater clarity and predictability from our
C O N C U R R I N G O P I N I O N
The Court today reaches a result consistent with the current state of Texas law. I write separately only to
note that the current Texas rule on net-worth discovery is now decades-old and, in light of the evolution of
Texas law, needs to be revisited. The instant case illustrates how it contributes to unnecessary “satellite
litigation" unrelated to the merits of the case and often produces expense and burden far exceeding any
A brief review of the history of this dispute is illustrative. It is noteworthy that the medical incident made the
basis of this lawsuit occurred in September 2004. Five years later this legal dispute remains unresolved C
even at the trial-court level.
The specific controversy over net-worth discovery is fast approaching its second anniversary and has
continued largely unabated. It began with an exhaustive request for financial records covering a multi-year
period. Those discovery requests inevitably produced C over many months C a flood of objections, hours
of court hearings, multiple court orders, and the current mandamus proceeding with multiple appellate briefs
from each side. The cost to the parties has no doubt been significant. The level of chaos in this case C a
tort case with themes common to many such disputes C has given me pause, with a belief that some
assessment is in order as to the efficacy of this process as well as the relative value of the discovery in
A. The Role of Net-Worth Discovery in Resolving Material Case Issues
Under the Rules, a trial judge should limit discovery for which the burden or expense outweighs the likely
benefit. Tex. R. Civ. P. 192.4(b). In weighing these factors, courts are to consider, among other things, the
importance of the proposed discovery in resolving the material issues of the lawsuit. See id.
As a general rule, evidence of a party's wealth is irrelevant and prejudicial. See Carter v. Exxon Corp., 842
S.W.2d 393, 399 (Tex. App.-Eastland 1992, writ denied). Consequently, it is almost always inadmissible at
trial. See Cooke v. Dykstra, 800 S.W.2d 556, 562 (Tex. App.-Houston [14th Dist.] 1990, no writ); Carter,
842 S.W.2d at 399.
In Lunsford v. Morris, however, the Texas Supreme Court carved out a narrow exception to the general rule
of inadmissibility, allowing parties to discover and introduce evidence of a defendant's net worth in cases in
which punitive or exemplary damages could be awarded. 746 S.W.2d 471, 473 (Tex. 1988) (orig.
proceeding), disapproved of on other grounds by Walker v. Packer, 827 S.W.2d 833, 842 (Tex. 1992) (orig.
proceeding). However, Lunsford properly should be considered in its historical context.
Specifically, in 1981, the Texas Supreme Court decided to re-visit the standard of review used in reviewing
jury awards of punitive damages. See Burk Royalty Co. v. Walls, 616 S.W.2d 911, 920 (Tex. 1981). Under
the prior standard, a defendant could successfully challenge a punitive-damages award on appeal simply by
pointing to any evidence suggesting he exercised some care. See id. at 921. However, the Court chose to
depart from that standard because it was seen as creating a virtually impossible hurdle to the recovery of
punitive damages “since anything may amount to some care." Id. In its place, the Court substituted a no-
evidence standard of review that effectively Agave 'the jury greater discretion to award punitive
In addition, the Burk Court authorized plaintiffs to prove “gross negligence," the standard for imposing
punitive damages, merely by constructive notice of the defendant's subjective state of mind. See Burk, 616
S.W.2d at 922. Four years later, the Court re-affirmed that holding and also expanded the definition of
“gross negligence" to give plaintiffs additional methods to prove a defendant's culpability for exemplary
[T]he test for gross negligence is both an objective and a subjective test. A plaintiff may prove a
defendant's gross negligence by proving that the defendant had actual subjective knowledge that his
conduct created an extreme degree of risk. In addition, a plaintiff may objectively prove a defendant's gross
negligence by proving that under the surrounding circumstances a reasonable person would have realized
that his conduct created an extreme degree of risk to the safety of others.
Williams v. Steves Indus., Inc., 699 S.W.2d 570, 573 (Tex. 1985) (emphasis added), superseded by statute
as recognized by Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 20 n.11 (Tex. 1994).
In 1987, the Texas Legislature began to scale back the availability of punitive damages by enacting Chapter
41 of the Texas Civil Practice and Remedies Code. However, while the original version of Chapter 41
introduced basic limitations to the recovery of punitive damages, the protections it extended to
defendants pale in comparison with those found in the version currently in effect. Lunsford was decided
the following year but, apart from a brief mention in one of the dissenting opinions, ignores any discussion
of the 1987 reforms or their effect on the Court's expansive exemplary-damage decisions from earlier that
decade. See Lunsford, 746 S.W.2d at 476 (Gonzalez, J., dissenting).
In 1995, the Legislature passed more sweeping tort reform to the substantive and procedural law governing
punitive damages. See Act of April 11, 1995, 74th Leg., R.S., ch. 19, § 1, 1995 Tex. Gen. Laws 108, 108-
13 (amended 2003) (current version at Tex. Civ. Prac. & Rem. Code Ann. §§ 41.001-.013 (Vernon 2008 &
Supp. 2009)). Chapter 41 was significantly rewritten to provide defendants dramatic protection from
punitive-damage awards, including:
* Juries could no longer award exemplary damages intended solely to serve “as an example to others,"
but were instead limited to assessing damages with the purpose of punishing the defendant.
* The Legislature dramatically expanded Chapter 41's coverage to apply to all but a very few types of
* A plaintiff's burden of proof for punitive damages was elevated to require proof of all elements by
clear and convincing evidence.
* With few limitations, a defendant could no longer be exposed to punitive damages because of
another person's criminal act.
* The Legislature lowered the existing cap on punitive damages.
* Upon a defendant's motion, the trial court had to bifurcate the jury's determination of the amount of
punitive damages, and evidence of a defendant's net worth could not be admitted during the liability phase
of the trial.
Id. These substantive and procedural amendments changed the legal landscape on two levels. First, they
further limited the amount of punitive damages that could be assessed. See id. § 1 secs. 41.007, 41.008.
Second, and more significantly, these revisions dramatically lessened the chances of any punitive-damage
recovery by a claimant. See id. § 1 secs. 41.001(5), 41.002, 41.003(b), 41.005.
In 2003, the Legislature further eroded a plaintiff's ability to recover punitive damages as a part of
comprehensive tort-reform legislation. Now, unlike the general rule permitting a civil verdict upon the vote
of only ten jurors, an award of punitive damages requires a unanimous verdict as to liability for, and the
amount of, such damages. See Tex. Civ. Prac. & Rem. Code Ann. § 41.003(d) (Vernon 2008 & Supp.
2009); Tex. R. Civ. P. 292; DeAtley v. Rodriguez, 246 S.W.3d 848, 850 (Tex. App.-Dallas 2008, no pet.).
In their brief, the McCoys acknowledge the dramatic shift in the law on punitive damages since Lunsford, as
the Legislature has repeatedly acted "to tightly restrict the ability of litigants to seek and recover exemplary
damages." Thus, in the current legal climate, far fewer cases are likely to present fact issues for trial as
to punitive-damage liability than when Lunsford was decided more than two decades ago. Accordingly,
because net-worth discovery may serve little practical purpose in many cases, trial courts performing a
benefit-to-burden analysis should consider appropriate management of the scope of such discovery
corresponding to its utility in resolving these important issues. See Tex. R. Civ. P. 192.4(b).
B. Burden and Expense of Net-Worth Discovery
The benefits of net-worth discovery are likely limited in most cases, but the direct and indirect costs may not
be. Of course, a case against a publicly traded corporation may present little problem in this respect, as its
net worth should be discernible simply from the contents of a widely available annual report. Under that
scenario, the burden and expense of the proposed discovery would be minimal. See id.
A private individual, however, presents a far different profile with, at minimum, potentially serious issues as
to privacy rights and availability of responsive information. Net-worth discovery as to an individual will
almost inevitably require C and deserve C much more management and oversight by the trial court. See
In re Weekley Homes, L.P., ___ S.W.3d ___, 52 Tex. Sup. Ct. J. 1231, 2009 WL 2666774, at *4 (Tex. Aug.
28, 2009) (orig. proceeding) ("To the extent possible, courts should be mindful of protecting sensitive
information and should choose the least intrusive means of retrieval.").
In this case, the McCoys sought audited financial statements that, while invasive, may at least represent one
of the most accurate and efficient ways for indicating an individual's net worth, if available. However,
they also sought countless other categories of documents that have been repeatedly held undiscoverable,
such as income-tax returns, or which possess only the most indirect and tenuous connection to net
worth. Among this latter category of documents are the McCoys' requests for (1) HUD statements reflecting
the sale or purchase of real estate; (2) "any and all contracts that you are a party to with any health
insurance company, HMO, including Medicare and/or Medicaid, managed care entity, or hospital"; (3) any
documents reflecting accounts receivable, from any time period, for the provision of medical care; (4)
accounts receivable due to the defendant's "participation in any clinical drug trials, medical device trials, or
other medical product trials" for the purpose of obtaining FDA approval; and (5) all medical bills issued for
an entire calendar year, presumably as to all of the physicians' patients, "touching, concerning, or dealing
with" the provision of medical care.
This sort of invasive discovery generally raises very serious privacy concerns, but that is not its only cost. It
also imposes additional burden and expense on the parties and their attorneys, as well as occupying the
limited resources of the trial court and, now, this appellate court. See Wal-Mart Stores, Inc. v. Alexander,
868 S.W.2d 322, 331-32 (Tex. 1993) (Gonzalez, J., concurring) (commenting on the privacy concerns and
potential for abuse inherent in the "unlimited discovery . . . of sensitive, private, and confidential financial
However, this sort of discovery should not be unexpected given the Texas Supreme Court's lengthy silence
as to both the precise definition of Anet worth" in this context and the proper boundaries for the discovery
and ultimate presentation of information as to a defendant's net worth:
This Court in Lunsford failed to define net worth and failed to suggest a procedure for placing such
evidence before the jury. I predicted then that in the absence of guidance from this Court, "confusion will
prevail as practitioners and judges attempt to ascertain the components of 'net worth.'" Lunsford, 746 S.W.
2d at 475.
Conflicting appellate court decisions on the meaning of the term "net worth" are evidence of the confusion
surrounding this fundamental issue. This confusion should be resolved by this Court.
Wal-Mart, 868 S.W.2d at 330 (Gonzalez, J., concurring) (citations omitted); see also Lunsford, 746 S.W.2d
at 476 (Gonzalez, J., dissenting) (calling for clear definition of term "net worth" and clarity on types of
documents relevant to calculate it).
Here, the majority attempts to fairly bridge some of this gap by offering a solid definition of "net worth" as
assets minus liabilities. See Black's Law Dictionary 1041 (6th ed. 1990); Wal-Mart, 868 S.W.2d at 330-31
(Gonzalez, J., concurring). Yet, even this pronouncement may still lead to disagreements about the
documents that are relevant and discoverable to calculate this figure, in light of the relative lack of guidance
on this issue.
Trial courts have the necessary management tools to control the sequence, timing, and scope of discovery
to minimize burden, maximize efficiency, and protect privacy rights. See Tex. R. Civ. P. 166, 192. Still,
we must acknowledge that there are literally hundreds of Texas trial-court judges - spread over 254
counties - who may preside over cases with claims for exemplary damages and, of necessity, disputes
involving net-worth discovery. They each have different backgrounds, different approaches, and different
dockets. Those dynamics are likely to produce a highly unpredictable and idiosyncratic approach to the
management of these issues across the state - and history shows us that these are issues that regularly
recur. I believe parties to litigation in Texas are entitled to greater clarity and predictability from our courts.
Accordingly, I would urge that Lunsford be revisited and updated.
/s/ Kent C. Sullivan
Panel consists of Justices Brown, Boyce, and Sullivan. (Brown, J., majority) (Sullivan, J., concurring).
 Patricia F. Miller, Comment, 2003 Texas House Bill 4: Unanimous Exemplary Damage Awards and Texas Civil Jury
Instructions, 37 St. Mary's L.J. 515, 529 (2006) (citations omitted); see Burk, 616 S.W.2d at 922.
 See Act of June 3, 1987, 70th Leg., 1st C.S., ch. 2, § 2.12, 1987 Tex. Gen. Laws 37, 44 (amended 1995 & 2003) (current
version at Tex. Civ. Prac. & Rem. Code Ann. §§ 41.001-.013 (Vernon 2008 & Supp. 2009)).
 For example, the tort-reform legislation included a basic cap on exemplary damages. See Act of June 3, 1987, 70th Leg.,
1st C.S., ch. 2, § 2.12 sec. 41.007, 1987 Tex. Gen. Laws 37, 46 (amended 1995 & 2003). In addition, the legislature
effectively abrogated the purely objective method of proving gross negligence. See Transp. Ins. Co. v. Moriel, 879 S.W.2d 10,
20 n.11 (Tex. 1994). However, because this narrower definition of "gross negligence" applied only to products-liability cases
and certain negligence actions, courts continued to apply Burk Royalty and Steves Industries to all other gross-negligence
suits. See J. Stephen Barrick, Comment, Moriel and the Exemplary Damages Act: Texas Tag-Team Overhauls Punitive
Damages, 32 Hous. L. Rev. 1059, 1066 (1995).
 See infra pp. 4-5.
 See Act of June 2, 2003, 78th Leg., R.S., ch. 204, §§ 13.01-.08, 2003 Tex. Gen. Laws 847, 886-89 (current version at Tex.
Civ. Prac. & Rem. Code Ann. §§ 41.001-.013 (Vernon 2008 & Supp. 2009)).
 See Miller, supra note 1, at 520 ("[T]he unanimity requirements make it more difficult for a plaintiff to receive a punitive
damage award from a Texas jury.").
 In fact, some might argue Chapter 41, as currently constituted, imposes punitive-damage liability only for intentional torts.
See Tex. Civ. Prac. & Rem. Code Ann. §§ 41.001(7), (11), 41.003(a) (authorizing exemplary damages only for fraud, malice,
and gross negligence, where malice requires proof of "a specific intent . . . to cause substantial injury or harm" and gross
negligence similarly mandates a showing of the defendant's (1) actual, subjective awareness of an extreme degree of risk
and (2) consciously indifferent decision to proceed nonetheless).
 Indeed, discovery into a defendant's net worth may consume a disproportionate amount of attention inasmuch as net
worth is only one among several factors a jury should consider, and not even the most important factor in reviewing an
amount of punitive damages. See Tex. Civ. Prac. & Rem. Code Ann. § 41.011(a) (Vernon 2008); Owens-Corning Fiberglas
Corp. v. Malone, 972 S.W.2d 35, 45-46 (Tex. 1998) ("[T]he degree of reprehensibility of the defendant's conduct is '[p]erhaps
the most important indicium' of the reasonableness of a punitive damage award.") (quoting BMW of N. Am., Inc. v. Gore, 517
U.S. 559, 575 (1996)). In fact, until Lunsford, a defendant's net worth was not even listed as a factor for the jury to consider in
awarding punitive damages. See Lunsford, 746 S.W.2d at 472-73; Alamo Nat'l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.
1981). Even so, a post-Lunsford jury may still decide on the amount of punitive damages without considering evidence of the
defendant's net worth. See Durban v. Guajardo, 79 S.W.3d 198, 210-11 (Tex. App.-Dallas 2002, no pet.).
 Closed corporations and closely-held corporations may present similar, albeit somewhat less serious, issues.
 See Sears, Roebuck & Co. v. Ramirez, 824 S.W.2d 558, 559 (Tex. 1992) (orig. proceeding). Of course, the average
private individual is highly unlikely to have audited financial statements readily available.
 See id.; see also Wal-Mart Stores, Inc. v. Alexander, 868 S.W.2d 322, 331 (Tex. 1993) (Gonzalez, J., concurring)
(surveying numerous cases precluding discovery into federal income-tax returns).
 For example, in appropriate cases, some trial courts use a docket-control order to schedule and hear summary-
judgment motions on predicate exemplary-damage issues in advance of allowing pre-trial discovery on net worth. This
approach could limit discovery disputes and the potential cost of compliance to only what is necessarily justified by the facts
and claims of the case. Similarly, trial courts may wish in certain cases to allow only the threshold discovery of net-worth
amounts by way of limited disclosure at one stage of pre-trial, and delay discovery as to underlying facts or methods of
calculation of those amounts C potentially much more invasive and complicated C until a later point when necessary.