law-net-worth-discovery | consideration of party's wealth in civil litigation |

When Is Discovery into the Net Worth of a Defendant Warranted? What is the
Proper Scope?

In Re Jacobs, MD (Tex.App.- Houston [14th Dist.] Oct. 20, 2009)(Brown)
proper scope of net worth discovery when exemplary damages are sought for gross negligence)
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       

The relators assert the trial court abused its discretion by ordering them to produce their net-worth information
to the McCoys.  A defendant's net worth is relevant in a suit involving exemplary damages.  Lunsford v. Morris,
746 S.W.2d 471, 473 (Tex. 1988) (orig. proceeding), overruled on other grounds, Walker, 827 S.W.2d at 842;
Miller v. O'Neill, 775 S.W.2d 56, 58 (Tex. App.-Houston [1st Dist.] 1989, orig. proceeding).  Therefore, in cases
where punitive or exemplary damages may be awarded, parties may discover and offer evidence of a
defendant's net worth.  Lunsford, 746 S.W.2d at 473.  Generally, in cases concerning the production of
financial records, the burden rests upon the party seeking to prevent production.  In re Brewer Leasing, Inc.,
255 S.W.3d 708, 712 (Tex. App.-Houston [1st Dist.] 2008, orig. proceeding [mand. denied]); In re Patel, 218 S.
W.3d 911, 916 (Tex. App.-Corpus Christi 2007, orig. proceeding).

The relators argue the McCoys are not entitled to discovery on net worth until they have established a prima
facie case of gross negligence.  However, the Texas Supreme Court has expressly rejected this contention.  
See Lunsford, 746 S.W.2d at 473 (rejecting requirement of prima facie showing because “[o]ur rules of civil
procedure and evidence do not require similar practices before net worth may be discovered").[2]  Therefore,
under Texas law, a party seeking discovery of net-worth information need not satisfy any evidentiary
prerequisite, such as making a prima facie showing of entitlement to punitive damages, before discovery of net
worth is permitted.  In re House of Yahweh, 266 S.W.3d 668, 673 (Tex. App.-Eastland 2008, orig. proceeding);
In re Garth, 214 S.W.3d 190, 192 (Tex. App.-Beaumont 2007, orig. proceeding [mand. dism'd); In re W. Star
Trucks US, Inc., 112 S.W.3d 756, 763 (Tex. App.-Eastland 2003, orig. proceeding); Al Parker Buick Co. v.
Touchy, 788 S.W.2d 129, 131 (Tex. App.-Houston [1st Dist.] 1990, orig. proceeding).

The relators acknowledge the Texas Supreme Court's express holding in Lunsford, but argue that we should
follow other jurisdictions that require a plaintiff to demonstrate a factual basis for punitive damages before being
allowed to do net-worth discovery.[3]  Even though Lunsford is over twenty years old, the Texas Supreme Court
has not revisited this issue.[4]  As an intermediate court of appeals, we are bound by the supreme court's ruling
in Lunsford and, therefore, we decline the relators' invitation.  See Dallas Area Rapid Transit v. Amalgamated
Transit Union Local No. 1338, 273 S.W.3d 659, 666 (Tex. 2008), cert. denied, __ U.S. __, 129 S. Ct. 2767
(2009) (“It is fundamental to the very structure of our appellate system that this Court's decisions be binding on
the lower courts."); Lubbock County, Tex. v. Trammel's Lubbock Bail Bonds, 80 S.W.3d 580, 585 (Tex. 2002)
(“It is not the function of a court of appeals to abrogate or modify established precedent. . . . That function lies
solely with this Court.").  In accordance with Lunsford, the McCoys are not required to make a prima facie case,
or any other evidentiary showing, of entitlement to punitive damages before seeking discovery of the relators'
net-worth information.

The relators also contend the trial court's order directing them to provide net-worth information for the past two
years is overly broad and unduly burdensome because it goes beyond what is necessary to demonstrate their
respective current net worths.  Discovery is limited to matters relevant to the case.  Texaco, Inc. v. Sanderson,
898 S.W.2d 813, 814 (Tex. 1995) (orig. proceeding) (per curiam); see also Tex. R. Civ. P. 192 cmt. 1 (“While
the scope of discovery is quite broad, it is nevertheless confined by the subject matter of the case and
reasonable expectations of obtaining information that will aid resolution of the dispute.").  A party's requests
must show a reasonable expectation of obtaining information that will aid in the resolution of the dispute.  In re
CSX Corp., 124 S.W.3d at 152.  Therefore, discovery requests must be reasonably tailored to include only
matters relevant to the case.  In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig. proceeding) (per
curiam).  The Texas Supreme Court has repeatedly admonished that discovery may not be used as a fishing
expedition.  K Mart Corp. v. Sanderson, 937 S.W.2d 429, 431 (Tex. 1996) (orig. proceeding) (per curiam);
Dillard Dep't Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex. 1995) (orig. proceeding) (per curiam); Texaco, Inc.,
898 S.W.2d at 815.

The scope of discovery is a matter of trial-court discretion.  In re CSX Corp., 124 S.W.3d at 152.  However, a
trial court abuses its discretion when it compels overly broad discovery.  In re Graco Children's Prods., Inc., 210
S.W.3d 598, 600 (Tex. 2006) (orig. proceeding) (per curiam); Dillard Dep't Stores, Inc., 909 S.W.2d at 492.  AA
central question in determining overbreadth is whether the request could have been more narrowly tailored to
avoid including tenuous information and still obtain the necessary information."  In re CSX Corp., 124 S.W.3d at
153.  Overbroad requests encompass time periods or activities beyond those at issue in the case - in other
words, matters of questionable relevance.  In re Alford Chevrolet-Geo, 997 S.W.2d 173, 180 n.1 (Tex. 1999)
(orig. proceeding).

The McCoys sought five years' worth of financial information from the relators.  The trial court narrowed the
scope of discovery to two years' worth.  But we do not believe the trial court sufficiently narrowed the scope of
production because only the relators' current[9] net worth is relevant.  See In re House of Yahweh, 266 S.W.3d
at 673 (holding trial court erred in failing to limit discovery to relators' current balance sheets because earlier
balance sheets would not be relevant to relators' current net worth).[10]  Therefore, we conclude the trial court
abused its discretion by ordering the relators to produce net-worth information beyond the relators' current net
worth.  See In re Allstate County Mut. Ins. Co., 227 S.W.3d 667, 669 (Tex. 2007) (orig. proceeding) (per curiam)
(holding trial court's order was abuse of discretion because it did not limit discovery requests which were
overbroad as to time and scope).  Moreover, the relators do not have an adequate remedy by appeal from the
production of their net worth from previous years.  See In re Weekley Homes, L.P., No. 08-0836, 2009 WL
2666774, at *11 (Tex. Aug. 28, 2009) (orig. proceeding) (“Instrusive discovery measures . . . require at a
minimum, that the benefits of the discovery measure outweigh the burden imposed upon the discovered
party."); In re CSX Corp., 124 S.W.3d at 153 (holding relator lacked adequate remedy by appeal where
discovery order compelled production of “patently irrelevant" documents); Tilton v. Marshall, 925 S.W.2d 672,
683 (Tex. 1996) (orig. proceeding) (op. on reh'g) (“'[w]here . . . discovery order imposes a burden on the
producing party far out of proportion to any benefit that may obtain to the requesting party,'" mandamus relief
may be justified) (quoting Walker, 827 S.W.2d at 843).