Opinion issued=20
February 28, 2008
In=20
The
Court of=20
Appeals
For The
First =
District of=20
Texas
NO.=20
=
01=E2=80=9305=E2=80=9300940=E2=80=93CV
SCOTT =
BADER, INC.,=20
AMY C. WRIGHT, KERN & WOOLEY, L.L.P., AND NATIONAL PIGMENTS =
&=20
CHEMICALS, INC., Appellants
V.
SANDSTONE=20
PRODUCTS, INC., Appellee
On =
Appeal from the=20
127th District Court
Harris =
County,=20
Texas
Trial =
Court Cause=20
No. 2000=E2=80=9327864A
* *=20
*
NO. =
01=E2=80=9306=E2=80=9300593=E2=80=93CV
SCOTT BADER, INC. AND NATIONAL =
PIGMENTS &=20
CHEMICALS, INC., Appellants
V.
SANDSTONE PRODUCTS, INC.,=20
Appellee
On Appeal from the 127th District=20
Court
Harris County, =
Texas
Trial Court Cause No.=20
2000=E2=80=9327864
DISSENTING =
OPINION
=
I=20
respectfully dissent. I would hold that the sanctions assessed =
against=20
Scott Bader were well within the discretion of the trial court and =
that=20
there is no requirement that the trial court explain its rejection =
of=20
lesser sanctions when, as here, the trial court=E2=80=99s order =
detailed the=20
offending party=E2=80=99s abuses and directly tailored sanctions =
specifically=20
authorized by Rule 215 of the Texas Rules of Civil Procedure to =
cure the=20
prejudice to the innocent party caused by the abuse. I would =
affirm the=20
judgment of the trial court.
The =
Test for Just=20
Sanctions
<=
/SPAN>The=20
Texas Supreme Court has set out a two-part test for determining =
whether=20
sanctions are just and therefore within the discretion of the =
trial court.=20
TransAmerican=20
Natural Gas Corp. v. Powell, 811 S.W.2d 913, =
917 (Tex.=20
1991). That test requires that there be =E2=80=9Ca direct =
relationship . . .=20
between the offensive conduct and the sanction imposed,=E2=80=9D =
i.e., that the=20
sanction be =E2=80=9Cdirected against the abuse and toward =
remedying the prejudice=20
caused by the innocent party=E2=80=9D and that the sanctions not =
be =E2=80=9Cexcessive.=E2=80=9D=20
Id. at 917. In regard to the second prong, the court is =
required to=20
consider the availability of less stringent sanctions and whether =
such=20
lesser sanctions would fully provide compliance. Id. These=20
standards set the bounds within which the trial court is to =
exercise its=20
discretion to assess sanctions under Texas Rule of Civil Procedure =
215=20
governing discovery abuse. Id. That test has been =
subsequently=20
reaffirmed in Spohn Hospital v. Mayer, 104 S.W.3d 878, 882 =
(Tex.=20
2003) (citing TransAmerican, 811 S.W.2d at 917) and=20
Cire v. Cummings, 134 S.W.3d 835, 839 (Tex.=20
2004).
The =
Trial Court=E2=80=99s=20
Sanctions Order
<=
/SPAN>The=20
trial court=E2=80=99s carefully articulated sanctions order in =
this case is set=20
out in the majority opinion. That court made explicit findings =
that Scott=20
Bader had =E2=80=9Cknowingly=20
and in flagrant bad faith engaged in discovery abuse,=E2=80=9D =
including=20
(1) =E2=80=9Cwithholding=20
critical responsive documents until the production of more than =
8,000=20
pages of documents on March 1, 2005, after the depositions in the =
lawsuit=20
had already taken place=E2=80=9D; (2) =E2=80=9Cproducing =
documents in a=20
manner calculated to conceal information (through removing the key =
first=20
page of a document and marking out information in other =
documents), with=20
conflicting and inadequate explanations for the same that lack =
credibility=20
=E2=80=9D; (3) =E2=80=9Cpresenting =
deposition=20
witnesses with such critical documents and information concealed =
or not=20
produced=E2=80=9D; (4) =E2=80=9Cfailing to name =
Terry=20
Strickland as a witness with knowledge of relevant facts, or to =
produce=20
responsive documents, related to Strickland=E2=80=99s role as =
director of=20
Defendant SCOTT BADER, his role as the =E2=80=9Cmain lead=E2=80=9D =
in Defendant SCOTT=20
BADER=E2=80=99s transition from using Co-Defendant =
Goodrich[=E2=80=99s] services to those=20
of Co-Defendant Para-Chem, his direct supervision over specific =
issues=20
regarding the formulation and testing of Defendant=E2=80=99s =
product, and his=20
direct involvement in specific issues related to customer reports =
of=20
problems=E2=80=9D; (5) =E2=80=9Cfailing to produce =
as a=20
corporate representative a witness with knowledge as =
requested=E2=80=9D;=20
and (6) =E2=80=9Cfiling two=20
no-evidence motions for summary judgment on December 10, 2004 and =
February=20
23, 2005, respectively, when Defendant SCOTT BADER and its counsel =
knew=20
that the production of documents and witnesses was =
deficient.=E2=80=9D=20
<=
/SPAN>The=20
trial court found that Scott =
Bader=E2=80=99s =E2=80=9Cactions were=20
calculated to conceal evidence that would indicate . . . that =
[its]=20
product did not meet its stated specifications; and . . . that the =
stated=20
specifications were modified.=E2=80=9D It further found =
that Scott Bader=E2=80=99s=20
actions =E2=80=9Cindicate a pattern or history of bad faith =
discovery abuse, demonstrate =
callous=20
disregard for the responsibilities of discovery under the rules, =
and=20
significantly interfere with the integrity and core judicial =
functions of=20
this Court and its rulings.=E2=80=9D For all of these =
reasons, the trial=20
court found Scott Bader had prejudiced =
Sandstone=E2=80=99s=20
ability to present its case, and it concluded that a =
sanctions=20
order =E2=80=9Cdirectly related to the offensive conduct . . . is =
appropriate and=20
necessary because a lesser sanction will not promote=20
compliance.=E2=80=9D
<=
/SPAN>The trial court =
sanctioned=20
this behavior by requiring that the jury be =
instructed
=E2=80=9CYou are =
to presume (1) that=20
the product that was shipped between mid-1999 and 2001 did not =
meet the=20
specifications Scott Bader provided to Sandstone, and (2) that the =
specifications that Scott Bader provided to Sandstone for the =
product=20
during mid-1999 and 2001 were =
modified.=E2=80=9D
The trial court =
ordered that=20
Scott Bader and its indemnitee, NPCI, were not permitted to rebut =
the=20
factual presumptions set forth above, and it struck affirmative =
defenses=20
addressed to the issue. The court also ruled that Scott Bader =
could not=20
use Terry Strickland as a witness at trial and that Scott Bader =
=E2=80=9Cmay not=20
use the deposition testimony of any witness from a deposition =
unless SCOTT=20
BADER first demonstrates to the Court that such deposition was =
taken after=20
full production of documents.=E2=80=9D The trial court then =
identified eight=20
witnesses who were deposed before Scott Bader=E2=80=99s =
=E2=80=9Cproduction of critical=20
documents on March 1, 2005.=E2=80=9D Finally, the trial court =
ordered that Scott=20
Bader pay $68,000 in sanctions for attorney=E2=80=99s fees and =
expenses incurred=20
by Sandstone attributable to Scott Bader=E2=80=99s discovery =
abuse. The case then=20
proceeded to a full trial in which Scott Bader was allowed to =
defend=20
itself, with the foregoing limitations, and Sandstone was required =
to=20
prove its case, including proving that its damages resulted from =
Scott=20
Bader=E2=80=99s actions.
=
Additional=20
misconduct by Sandstone=E2=80=99s counsel during trial resulted in =
the declaration=20
of a mistrial and the necessity of beginning again. The sanctions =
order at=20
issue in this appeal was issued during the second trial, after a =
hearing=20
outside the presence of the jury, to clarify what was to be taken =
as=20
established due to Scott Bader=E2=80=99s misconduct and what =
Sandstone was=20
required to prove. Scott Bader was permitted to =E2=80=9Cbring =
forward evidence=20
that does not rely on any stricken deposition to establish =
causation for=20
failures other than an affirmative defense of Plaintiff=E2=80=99s =
conduct.=E2=80=9D The=20
trial court made clear, however, that Scott Bader=E2=80=99s =
affirmative defenses=20
and its general denial were stricken to the extent of precluding=20
litigation of issues rebutting the established issues and that =
Scott Bader=20
was =E2=80=9Cnot entitled to raise quality control issues about =
Sandstone to=20
negate evidence that the product was out of specification before =
reaching=20
Sandstone.=E2=80=9D
=
When=20
the case was presented to the jury in the retrial, the jury was =
instructed=20
that (1) =E2=80=9Cthe specifications that Scott Bader provided to =
Sandstone for=20
the product during mid-1999 and 2001 were modified=E2=80=9D; (2) =
=E2=80=9C[t]he product=20
that was shipped between mid-1999 and 2001 did not meet the =
specifications=20
Scott Bader provided to Sandstone=E2=80=9D; (3) =E2=80=9C[s]uch =
modification of the=20
specifications is a breach of the sales contract between Scott =
Bader and=20
Sandstone=E2=80=9D; and (4) =E2=80=9C[s]uch modification is a =
breach of the warranty from=20
Scott Bader to Sandstone.=E2=80=9D The first jury question =
following the binding=20
instructions asked the jury, =E2=80=9CWhat sum of money, if any, =
if paid now in=20
cash, would fairly and reasonably compensate Sandstone Products, =
Inc. for=20
its damages, if any, that resulted from modification of =
specifications and=20
failure to meet specifications as instructed?=E2=80=9D The jury =
was instructed to=20
consider as elements of damages solely =E2=80=9C[t]he reasonable =
and necessary=20
cost of the repair or replacement of the failed roof =
coatings=E2=80=9D;=20
Sandstone=E2=80=99s past lost profits; litigation costs associated =
with=20
Sandstone=E2=80=99s liability to its customers; application fees =
seeking Dade=20
County, Florida approval for coating material; and costs of =
property and=20
material testing for roof coating.
Sanctions Available Under Rule=20
215
=
Among=20
the sanctions expressly made available to the trial court under =
Rule 215=20
of the Texas Rules of Civil Procedure, governing discovery abuse,=20
are
(1) an order =
disallowing any=20
further discovery of any kind or of a particular kind by the =
disobedient=20
party;
(2) an order =
charging all or=20
any portion of the expenses of discovery or taxable court costs or =
both=20
against the disobedient party or the attorney advising=20
him;
(3) an order that =
the=20
matters regarding which the order was made or any other designated =
facts=20
shall be taken to be established for the purposes of the action in =
accordance with the claim of the party obtaining the=20
order;
(4) an order =
refusing to=20
allow the disobedient party to support or oppose designated claims =
or=20
defense, or prohibiting him from introducing designated matters in =
evidence;
(5) an order =
striking out=20
pleadings or parts thereof, or . . . dismissing with or without =
prejudice=20
the action or proceedings or any part thereof, or rendering a =
judgment by=20
default against the disobedient party;
Tex. R. Civ. P. =
215.2(b). The rule=20
further provides:
(8) In lieu of any of the foregoing =
orders or in=20
addition thereto, the court shall require the party failing to =
obey the=20
order or the attorney advising him, or both, to pay, at such time =
as=20
ordered by the court, the reasonable expenses, including attorney =
fees,=20
caused by the failure, unless the court finds that the failure was =
substantially justified or that other circumstances make an award =
of=20
expenses unjust.
Id.
Application of the=20
Test of Abuse of Discretion in Assessing Sanctions=20
<=
/SPAN>Here,=20
the trial court carefully articulated in its oral and written =
sanctions=20
orders=E2=80=94issued after notice and hearing=E2=80=94the =
justification of each of=20
its narrowly tailored sanctions. Each sanction was chosen from one =
expressly permitted by Rule 215.2 to address exactly the behavior =
the=20
trial court found to have been committed by Scott Bader. There is =
no=20
evidence in the record that Scott Bader did not do exactly =
what the=20
trial court found it did do, and the majority acknowledges as =
much. There=20
is no question that Scott Bader=E2=80=99s actions constituted =
severe discovery=20
abuse designed to keep Sandstone from presenting its case. The =
trial court=20
first entered sanctions directed specifically at prohibiting Scott =
Bader=20
from profiting from its concealment of documents and of a key =
witness in=20
the first trial. Nevertheless, Scott Bader continued its =
misconduct during=20
trial, and a mistrial was declared, so that everyone had to start =
over.=20
During the second trial, after a hearing outside the presence of =
the jury,=20
the court issued the written sanctions order at issue on appeal,=20
clarifying its specifically targeted sanctions against Scott =
Bader, and it=20
instructed the jury accordingly. At no point did the trial court =
enter=20
=E2=80=9Cdeath penalty=E2=80=9D sanctions that would have =
prevented Scott Bader from=20
presenting any defense at all. Sandstone was still obliged to =
prove its=20
case and its damages.
<=
/SPAN>I=20
would hold that the trial court fully satisfied the first prong of =
the=20
test for the just impositions of sanctions articulated by the =
supreme=20
court in TransAmerican, namely, the requirement that there be =
=E2=80=9Ca direct=20
nexus among the conduct, the offender, and the sanction =
imposed.=E2=80=9D See=20
Spohn Hosp., 104 S.W.3d at 882.
=
The=20
majority, however, does not even discuss the trial court=E2=80=99s =
satisfaction of=20
the first prong of the TransAmerican test. Instead, it =
turns=20
directly to the second prong, which =E2=80=9Cmandates that the =
trial court=20
consider less stringent measures before settling on severe =
sanctions.=E2=80=9D=20
Id. at 883. Ignoring the trial court=E2=80=99s targeting of =
sanctions to=20
address ongoing misconduct and its explanation in the sanctions =
order for=20
each of the sanctions imposed, the majority finds =
=E2=80=9Cconclusory=E2=80=9D the trial=20
court=E2=80=99s conclusion that it had =E2=80=9Cconsidered the =
possibility of all lesser=20
available options=E2=80=9D but =E2=80=9C[u]nder these =
circumstances, . . . no lesser=20
sanctions are available to address and deter Defendant SCOTT =
BADER=E2=80=99s=20
conduct while preserving SANDSTONE=E2=80=99s rights.=E2=80=9D =
Bader, Wright, Kern &=20
Wooley, L.LP. and National Pigments & Chemicals, Inc. v. =
Sandstone=20
Products, Inc., No. 01-05-00940-CV, slip op. at 22 (Tex. =
App.=E2=80=94Houston=20
[1st Dist.] Feb. 28, 2008, no pet. h.). The majority holds that =
the trial=20
court abused its discretion because this conclusion was =
=E2=80=9Cunsupported,=E2=80=9D=20
and, in a footnote, it offers its own suggestions for sanctions =
the trial=20
court might have considered. Bader, slip op. at=20
22.
=
In=20
my view, the majority misconstrues the controlling language it =
quotes from=20
Cire, 134 S.W.3d at 842, and it directly contravenes the =
holding in=20
Cire, which is controlling authority. I would find =
Cire to=20
be on all fours with this case with the sole exception that the =
trial=20
court in Cire levied death penalty sanctions for flagrant =
discovery=20
abuse, while the trial court in this case did not. =
=
In=20
Cire, the plaintiff refused to produce audiotapes critical =
to the=20
proof of her case against the defendant and then deliberately =
destroyed=20
them after being thrice ordered to produce them. See id. at =
841.=20
The supreme court observed,
Because the audiotapes sought by Cire =
would have=20
either proved or disproved Cummings=E2=80=99s claims, her =
destruction of them=20
justifies a presumption they would have done the latter. On this =
record,=20
it was within the trial court=E2=80=99s discretion to determine =
that Cummings=20
deliberately destroyed dispositive evidence; thus, death penalty =
sanctions=20
are warranted in this exceptional case. As we explained in=20
TransAmerican, discovery sanctions can be used to =
adjudicate the=20
merits of a party=E2=80=99s claims when a party=E2=80=99s =
hindrance of the discovery=20
process justifies a presumption that its claims lack merit. =
Id. at 841 (citing =
TransAmerican,=20
811 S.W.2d at 918). In sum, the supreme court in Cire =
approved=20
death penalty sanctions for behavior virtually identical to that =
of Scott=20
Bader in this case. Yet in this case, unlike Cire, no death =
penalty=20
sanctions were imposed.
=
The=20
appellate court=E2=80=99s error in reversing the trial =
court=E2=80=99s sanctions order in=20
Cire, as described by the supreme court, was exactly the =
same as=20
the error made by the majority in this case. The supreme court observed in =
Cire that the=20
court of appeals had held that =E2=80=9Cthe trial court abused its =
discretion when=20
it failed to consider alternative, lesser sanctions and when it =
did not=20
explain why lesser sanctions would not suffice.=E2=80=9D =
Id. The supreme=20
court continued, =E2=80=9CThe court of appeals also said that the =
trial court=20
could have and should have considered other, lesser sanctions =
before it=20
imposed death penalty sanctions,=E2=80=9D but =E2=80=9C[the court =
of appeals] suggested a=20
less stringent sanction: a spoliation instruction to the jury =
directing it=20
to assume the missing audiotapes would have been unfavorable to =
Cummings=E2=80=9D=20
and it concluded that the trial court erred by refusing to =
consider lesser=20
sanctions. Id. The supreme court granted the petition for =
review in=20
Cire specifically =E2=80=9Cto consider the issue of death =
penalty sanctions=20
and to examine whether a trial court=E2=80=99s sanctions order =
must recite why=20
every conceivable sanction would be ineffective in securing =
compliance and=20
curing prejudice before striking pleadings.=E2=80=9D Id. at =
838.
=
In=20
reversing the court of appeals, the supreme court held that, in an =
exceptional case, like that in Cire, even death penalty =
sanctions=20
may be issued without imposing lesser sanctions so long as the =
trial court=20
=E2=80=9Cconsiders=E2=80=9D lesser sanctions. Id. The court =
explained:=20
Under this =
standard, the=20
trial court need not test the effectiveness of each available =
lesser=20
sanction by actually imposing the lesser sanction on the party =
before=20
issuing the death penalty; rather, the trial court must analyze =
the=20
available sanctions and offer a reasoned explanation as to the=20
appropriateness of the sanction imposed.
Id. at 840. =
=
The=20
trial court in this case did exactly what Cire and=20
TransAmerican require. It tailored sanctions directly to =
the abuses=20
perpetuated by Scott Bader and it explained why these sanctions =
were=20
necessary to cure the specific prejudice to Sandstone caused by =
each of=20
Scott Bader=E2=80=99s abuse. Nevertheless, like the court of =
appeals in=20
Cire, the majority in this case would require the trial =
court=E2=80=99s=20
sanctions order to =E2=80=9Crecite why every conceivable sanction =
would be=20
ineffective in securing compliance and curing prejudice=E2=80=9D =
before it would=20
allow the court to the issue targeted sanctions that would impede =
Scott=20
Bader=E2=80=99s presentation of its case on the issues on which it =
abused=20
discovery. See id. at 838. Because I believe the majority =
opinion=20
directly contravenes controlling authority, interferes with the=20
jurisdiction of the trial court, and has the effect of rewarding =
severe=20
discovery abuse with a retrial without the hindrance of sanctions =
that=20
were fully within the discretion of the trial court to impose, I =
must=20
dissent.
=
I=20
would affirm the judgment of the trial court.
=
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Evelyn=20
V. Keyes
=
&=
nbsp; &n=
bsp; &nb=
sp; &nbs=
p; =
; Justice
Panel=20
consists of Justices Nuchia, Keyes, and Higley.
Justice=20
Keyes, =
dissenting. |