IN RE: PLATINUM ENERGY SOLUTIONS

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Court of Appeals of Texas,Houston (14th Dist.).

IN RE: PLATINUM ENERGY SOLUTIONS, INC., Relator.

No. 14–13–00681–CV.

Decided: January 02, 2014

Panel consists of Chief Justice FROST and Justices BOYCE and JAMISON. Kathleen C. Pickett, for Platinum Energy Solutions, Inc. James L. Reed, John Christopher Ramsey, Robert M. Corn, for Starstream Capital, LLC, Robert E. Chamberlain, Jr., Martha Derrick, Marvel K. Mann and John Dinn Mann.

MAJORITY OPINION

Relator Platinum Energy Solutions, Inc. filed a petition for writ of mandamus in this Court. See Tex. Gov't Code Ann. § 22.221 (Vernon 2004); see also Tex.R.App. P. 52. Platinum asks this Court to compel the Honorable Wesley Ward, presiding judge of the 234th District Court of Harris County, to vacate his July 15, 2013 order denying Platinum's motion for protective order and October 21, 2013 order granting the real parties in interest's motion to compel in the underlying shareholder derivative shareholder suit. We conditionally grant the petition for writ of mandamus.

I. Background

Platinum is a Nevada corporation and an oil field services provider specializing in premium hydraulic fracturing, coiled tubing, and other pressure-pumping services. The real parties in interest are minority shareholders of Platinum.1 They filed a shareholder derivative suit against nominal defendant Platinum and its current or former officers and directors on May 25, 2012.2 The minority shareholders alleged claims based on self-dealing, conflicts of interest, excessive compensation, and waste.

Platinum's board of directors formed a Special Litigation Committee on June 5, 2012 to investigate the minority shareholders' suit and determine the appropriate response. Platinum also adopted a charter to govern the committee.

The committee presented its findings to Platinum's board of directors in December 2012. The committee found no evidence of breach of fiduciary duties or corporate waste; it recommended that Platinum refrain from pursuing the minority shareholders' claims. The committee report concluded, in part:

The low probability of success combined with Platinum's current financial challenges would provide little, if any, gain. Additionally, the SLC is concerned that pursuing any claims would expose the Company to additional claims, counterclaims, or liabilities. The significant disruptions to business activity, mounting litigation costs, the current natural gas market, and other mitigating circumstances warrant no further legal action on Platinum's behalf.

The committee also recommended that Platinum move to dismiss the derivative action.

Platinum filed a motion to dismiss the derivative action on February 15, 2013. The minority shareholders subsequently served a request asking Platinum to produce 45 categories of documents in connection with the Special Litigation Committee's investigation. Platinum objected on grounds that the requested production (1) exceeds the permissible scope of discovery; and (2) is overbroad and unduly burdensome. Platinum also filed a motion for protective order. After a hearing on July 1, 2013, the trial court signed the July 15 order denying Platinum's motion for protective order. On October 21, 2013, the trial court signed a separate order that overruled Platinum's objections to the document requests and compelled production by November 11, 2013 of documents responsive to 43 of the 45 categories.3 Platinum then filed a motion in this court to stay the October 21 order, which we granted on October 30, 2013.

Platinum argues in this mandamus proceeding that the trial court abused its discretion insofar as the permitted discovery goes beyond the following limited subjects: (1) the committee's independence and disinterestedness; (2) whether the committee's review was undertaken in good faith; and (3) the reasonableness of the committee's procedures used to investigate the minority shareholders' claims.

II. Standard of Review

Mandamus is appropriate when then relator demonstrates that (1) the trial court clearly abused its discretion; and (2) the relator has no adequate remedy by appeal. In re Reece, 341 S.W.3d 360, 364 (Tex.2011) (orig.proceeding). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law, or if it clearly fails to analyze the law correctly or apply the law correctly to the facts. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex.2005) (orig.proceeding) (per curiam).

The adequacy of an appellate remedy must be determined by balancing the benefits of mandamus review against the detriments. In re Team Rocket, L.P., 256 S.W.3d 257, 262 (Tex.2008) (orig.proceeding). Because this balance depends heavily on circumstances, it must be guided by analysis of principles rather than simple rules that treat cases as categories. In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex.2008) (orig.proceeding). In evaluating benefits and detriments, we consider whether mandamus will preserve important substantive and procedural rights from impairment or loss. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex.2004) (orig.proceeding). We also consider whether mandamus will “allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments.” Id. Finally, we consider whether mandamus will spare the litigants and the public “the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.” Id.

III. This Mandamus Proceeding is Not Premature

The minority shareholders contend that Platinum's request for mandamus relief is premature because the trial court has not yet ruled on Platinum's objections that the requests are overbroad and burdensome. We disagree. A review of Platinum's motion for protective order shows that Platinum initially objected to the 45 categories of requested documents as being overbroad and unduly burdensome; Platinum also argued that the categories exceeded the scope of permissible discovery. The order denying Platinum's motion for protective order states the motion “is hereby denied in its entirety.” After Platinum filed this petition, the trial court signed its October 21 order overruling Platinum's objections that the 43 categories still at issue are overbroad and burdensome. Therefore, we reject the minority shareholders' contention that the trial court did not rule on all of Platinum's objections.

IV. Analysis

In the trial court and in this mandamus proceeding, the parties dispute whether Texas or Delaware law governs the scope of permissible discovery in connection with a motion to dismiss a derivative action against Platinum. Resolution of this issue turns on two provisions contained in Chapter 21 of the Texas Business Organizations Code.

When construing a statute, the primary objective is to give effect to the Legislature's intent. Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex.2010). “We presume the Legislature selected language in a statute with care and that every word or phrase was used with a purpose in mind.” Id. We construe statutes by first looking to the statutory language for the Legislature's intent, and only if we cannot discern legislative intent in the language of the statute itself do we resort to canons of construction or other aids such as which statute is more specific.” Id. at 639.

Subchapter L of Chapter 21 governs derivative actions in Texas. See Tex. Bus. Orgs.Code Ann. §§ 21.551–.563 (Vernon 2012). Chapter 21 establishes a mechanism by which a corporation may move to dismiss a derivative action filed against it:

(a) A court shall dismiss a derivative proceeding on a motion by the corporation if the person or group of persons described by Section 21.554 determines in good faith, after conducting a reasonable inquiry and based on factors the person or group considers appropriate under the circumstances, that continuation of the derivative proceeding is not in the best interests of the corporation.

Tex. Bus. Orgs.Code Ann. § 21.558(a). In turn, section 21.554 provides for independent and disinterested persons, who may be directors of the corporation, to determine “how to proceed on allegations made in a demand or petition.” Tex. Bus. Orgs.Code Ann. § 21.554.

Discovery in connection with a section 21.558 motion to dismiss is governed by section 21.556, which provides as follows:

(a) If a domestic or foreign corporation proposes to dismiss a derivative proceeding under Section 21.558, discovery by a shareholder after the filing of the derivative proceeding in accordance with this subchapter shall be limited to:

(1) facts relating to whether the person or group of persons described by Section 21.558 is independent and disinterested;

(2) the good faith of the inquiry and review by person or group; and

(3) the reasonableness of the procedures followed by the person or group in conducting the review.

(b) Discovery described by Subsection (a) may not be expanded to include a fact or substantive matter regarding the act, omission, or other matter that is the subject matter of the derivative proceeding. The scope of discovery may be expanded if the court determines after notice and a hearing that a good faith review of the allegations for purposes of Section 21.558 has not been made by an independent and disinterested person or group in accordance with that section.

Tex. Bus. Orgs.Code Ann. § 21.556 (emphasis added). The purpose behind section 21.556's limitation on discovery is to (1) focus on the manner in which the committee performed its obligations; and (2) avoid delving into the merits of the shareholders' claims unless a determination first has been made that a good faith review was not conducted. See Tex. Bus. Orgs.Code Ann. § 21.556(b).

Platinum contends that section 21.556 applies to it as a Nevada corporation and limits the scope of permissible discovery in connection with its motion to dismiss the derivative action.

The minority shareholders rely instead on section 21.562, entitled “Application to Foreign Corporations,” which provides as follows:

(a) In a derivative proceeding brought in the right of a foreign corporation, the matters covered by this subchapter are governed by the laws of the jurisdiction of incorporation of the foreign corporation, except for Sections 21.555, 21.560, and 21.561, which are procedural provisions and do not relate to the internal affairs of the corporation.

(b) In the case of matters relating to a foreign corporation under Section 21.554, a reference to a person or group of persons described by that section refers to a person or group entitle under the laws of the jurisdiction of incorporation of the foreign corporation to review and dispose of a derivative proceeding. The standard of review of a decision made by the person or group to dismiss the derivative proceeding shall be governed by the laws of the jurisdiction of incorporation of the foreign corporation.

Tex. Bus. Orgs.Code Ann. § 21.562 (emphasis added). The excluded provisions referenced in subsection (a) do not pertain to discovery; section 21.55 addresses a stay of proceedings, section 21.562 addresses discontinuance or settlement, and section 21.561 addresses payment of expenses. See Tex. Bus. Orgs.Code Ann. §§ 21.555 (stay of proceeding), 21.560 (discontinuance or settlement), 21.561 (payment of expenses).

It is undisputed that Nevada, the state of Platinum's incorporation, looks to Delaware law in connection with derivative lawsuits. See Moradi v. Adelson, No. 2:11–CV–00490, 2012 WL 3687576, at *2 n. 1 (D.Nev. Aug. 27, 2012) (“Nevada courts follow Delaware law when addressing shareholder-derivative lawsuits.”). Therefore, the minority shareholders contend that section 21.562 mandates the application of Delaware law in determining the scope of permissible discovery in connection with Platinum's motion to dismiss the minority shareholders' derivative claim.

Tension exists between sections 21.566 and 21.562; the former section applies Chapter 21's discovery limits to “domestic or foreign” corporations, while the latter section omits Chapter 21's discovery limits from the list of statutory provisions applicable to foreign corporations in this context. Commentators have noted this tension. See Todd A. Murray & Lyndon F. Bittle, Emerging Issues Raised by Derivative Shareholder Actions Involving Foreign Corporations Headquartered in Texas: Making Sense of the Interaction between Texas Procedures and Substantive Law, 39 Tex. Tech. L.Rev. 1, 26–27 (2006) (“level of uncertainty” exists because section 21 .556 refers to “a domestic or foreign corporation” seeking to dismiss a derivative proceeding, while section 21.562 refers to application of laws to “foreign corporations”).

The minority shareholders argue that section 21.556 does not apply here because section 21.562(a) does not include section 21.556 in the list of provisions applicable to a foreign corporation. This argument reflects the maxim that the expression of one implies the exclusion of another, known as expressio unius est exclusio alterius. Mid–Century Ins. Co. of Tex. v. Kidd, 997 S.W.2d 265, 274 (Tex.1999). However, “[t]he doctrine of expressio unius est exclusio alterius is simply an aid to determine legislative intent, not an absolute rule. As a rule of reason and logic, it should not be mechanically applied to compel an unreasonable interpretation.” Id.

Platinum asserts that section 21.556 should control over section 21.562 because section 21.556 is the more specific statute. This argument dovetails with section 311.026 of Texas Government Code, which addresses circumstances in which general and specific statutes are in conflict:

(a) If a general provision conflicts with a special or local provision, the provisions shall be construed, if possible, so that effect is given to both.

(b) If the conflict between the general provision and the special or local provision is irreconcilable, the special or local provision prevails as an exception to the general provision, unless the general provision is the later enactment and the manifest intent is that the general provision prevail.

Tex. Gov't Code Ann. § 311.026 (Vernon 2013). Section 311.026(b) applies only if the general provision and special provision irreconcilably conflict with each other. Tracfone Wireless, Inc. v. Comm'n on State Emergency Commc'ns, 397 S.W.3d 173, 181 (Tex.2013); Sowell v. Int'l Interests, LP, No. 14–12–00105–CV,–––S.W.3d––––2013 WL 4604708, at *6 (Tex.App.-Aug.29, 2013, pet.filed).

We conclude that sections 21.556 and 21.562(a) are in conflict. We further conclude that sections 21.556 and 21.562(a) cannot be read so that effect is given to both in this particular context involving the scope of permissible discovery in connection with a motion to dismiss a derivative action. See Tex. Gov't Code Ann. § 311.026(a) (conflicting provisions “shall be construed, if possible, so that effect is given to both”).

Section 21.556's discovery limitation expressly applies to domestic and foreign corporations in a proceeding to dismiss a shareholder derivative action. Section 21.562(a) states that foreign corporations are subject only to Chapter 21's provisions addressing a stay of the derivative proceeding, discontinuance or settlement of the proceeding, and payment of expenses incurred; otherwise, a derivative action brought in the name of a foreign corporation is governed by the laws of the jurisdiction of incorporation of the foreign corporation. Because these provisions irreconcilably conflict, we must determine which provision controls in this specific context involving the scope of permissible discovery in connection with a foreign corporation's motion to dismiss a derivative action.

We conclude that section 21.556 controls here because it is more specific. Section 21.556 is more specific because it addresses the narrower topic of discovery in a proceeding on a motion to dismiss the derivative action, while section 21.562(a) addresses the more general topic of selecting the law applicable to foreign corporations. See Tex. Gov't Code Ann. § 311.026(b) (special provision prevails over general provision where they irreconcilably conflict).

The minority shareholders further contend that Delaware law should control the scope of discovery in this context because Texas courts must apply the internal affairs doctrine to foreign-filing entities. The applicable statute states as follows:

If the formation of an entity occurs when a certificate of formation or similar instrument filed with a foreign governmental authority takes effect, the law of the state or other jurisdiction in which that foreign governmental authority is located governs the formation and internal affairs of the entity.

Tex. Bus. Orgs.Code Ann. § 1.102 (Vernon 2012); see also Tex. Bus. Orgs.Code Ann. § 21.562(a) (laws of jurisdiction of incorporation of foreign corporation apply to derivative action, except for specified provisions, which are procedural and do not relate to the internal affairs of the foreign corporation).

The minority shareholders also argue that, to the extent sections 21.556 and 21.562(a) are in conflict, courts resolve the statutory conflict by examining the object sought to be obtained and the consequences of a particular construction. See Tex. Gov't Code Ann. § 311.023(1), (5) (Vernon 2013). Therefore, they contend section 21.556 must yield to section 21.562(a) because the application of section 21.556 would ignore public policy goals embodied in the internal affairs doctrine.

We reject these contentions because the internal affairs doctrine has no application to this discovery dispute. The internal affairs of an entity include (1) “the rights, powers, and duties of its governing authority, governing persons, officers, owners, and members”; and (2) “matters relating to its membership interests.” Tex. Bus. Orgs.Code Ann. § 1.105 (Vernon 2012).

Because section 21.556 governs this discovery dispute, the minority shareholders are limited to discovery addressing (1) whether the Special Litigation Committee is independent and disinterested; (2) whether the committee's inquiry and review was undertaken in good faith; and (3) the reasonableness of the committee's procedures. Tex. Bus. Orgs.Code Ann. § 21.556(a).

V. Remedy

Appeal is an inadequate remedy when the appellate court would not be able to cure the trial court's discovery error. In re Dana Corp., 138 S.W.3d 298, 301 (Tex.2008) (per curiam) (orig.proceeding); In re Kuntz, 124 S.W.3d 179, 181 (Tex.2003) (orig.proceeding). This occurs when the trial court erroneously orders the disclosure of information, which will materially affect the rights of the aggrieved party. Walker v. Packer, 827 S.W.2d 833, 843 (Tex.1992) (orig.proceeding); see also In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex.2004) (orig.proceeding) (“As DuPont would lose the benefit of the privilege if the documents at issue are disclosed, even if its assertions of privilege were later upheld on appeal, we conclude that this Court may provide mandamus relief in this case.”). Here, the trial court signed an order on July 15, 2013, denying Platinum's motion for protective order without specifying its reasons. The trial court signed another order on October 21, 2013, in which it granted the minority shareholders' motion to compel and overruled Platinum's objections without specifying reasons. The record before us does not make clear whether the trial court's orders were based on a determination that (1) section 21.562(a) controls over the discovery limits set forth in section 21.556; or (2) section 21.556 applies and the 43 categories of documents at issue are discoverable under the limits established in section 21.556.

All panel members in this court agree that section 21.556 governs here and limits the minority shareholders to discovery addressing (1) whether the Special Litigation Committee is independent and disinterested; (2) whether the committee's inquiry and review was undertaken in good faith; and (3) the reasonableness of the committee's procedures.

Therefore, the trial court acted beyond its discretion insofar as it required production of the 43 categories of documents at issue to occur based on a determination that section 21.562(a) governs this inquiry.

Because the trial court's orders do not expressly address whether the minority shareholders are entitled to production of the 43 categories at issue in light of section 21.556's specific discovery limits, it should have the opportunity in the first instance to make this determination in light of today's opinion clarifying the reach of section 21.556. See Tex.R.App. P. 52.8(c); see also In re Nance, 143 S.W.3d 506, 514 (Tex.App.-Austin 2004, orig. proceeding) (explaining “[a]ny disclosure should be no broader than necessary and it is a trial court's obligation to oversee and safeguard the records to ensure unnecessary matters are not disclosed,” and ordering the trial court to vacate its order and review documents at issue in camera to determine whether each is subject to the physician-patient privilege); In re Sears, Roebuck & Co., 123 S.W.3d 573, 579–80 (Tex.App.Houston [14th Dist.] 2003, orig. proceeding) (holding discovery requests could have been more narrowly tailored, and ordering trial court to vacate discovery orders and conduct further proceedings); In re Shipmon, 68 S.W.3d 815, 822 (Tex.App.-Amarillo 2001, orig. proceeding [mand. denied] ) (stating, “[a]lthough we have jurisdiction to direct the trial court to proceed to make an effort to impose reasonable discovery limits, we may not tell the trial court what limits it should enter[,]” and directing the trial court to consider and determine, in the exercise of its discretion, the need for reasonable discovery limits).

We conditionally grant Platinum's petition for writ of mandamus. The trial court is directed to make an express determination as to the 43 categories of documents at issue, and to determine whether these categories pertain to one or more of the areas of inquiry allowed by section 21.556(a). The writ will issue only if the trial court does not act in conformity with this opinion. We lift our stay granted on October 30, 2013.

DISSENTING OPINION

In this mandamus proceeding, relator Platinum Energy Solutions, Inc. asserts the trial court clearly abused its discretion by issuing two orders denying Platinum's motion for protective order, overruling Platinum's discovery objections, and compelling Platinum to produce documents requested by the real parties in interest. Platinum seeks mandamus relief commanding the trial court to vacate these two orders and to issue an order granting the requested protection. Platinum does not complain that the trial court failed to address expressly whether the requested documents at issue are within the scope of the discovery allowed by section 21.556(a) of the Texas Business Organizations Code; rather, Platinum complains that the trial court abused its discretion by determining that the requested documents are within the scope of that provision and are discoverable. It is unclear what mandamus relief this court is granting. And, contrary to binding precedent, this court grants mandamus relief without identifying any abuse of discretion by the trial court.

To the extent the majority concludes that the trial court abused its discretion by failing to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a),1 the trial court was not required to make such a statement, and Platinum does not assert that the trial court abused its discretion by failing to do so. To the extent the majority concludes that the trial court abused its discretion by applying Nevada law under section 21.562(a) rather than Texas law under section 21.556(a), the majority contravenes the legal principle that the trial court is presumed to have correctly applied the law. Because the record does not reflect whether the trial court applied Nevada law under section 21.562(a) or Texas law under section 21.556(a) in making the challenged rulings, this court must presume that the trial court correctly applied Texas law under section 21.556(a). Thus, the trial court did not apply Nevada law under section 21.562(a), and there is no basis for a conclusion that the trial court abused its discretion in this regard.

This court should ascertain the extent to which the documents requested are outside the scope of the discovery allowed by section 21.556(a) and grant mandamus relief to the extent, if any, the trial court compelled production of these documents.

What relief is this court granting?

Today, the court issues a final ruling in this mandamus proceeding. In doing so, the court adjudicates all issues and lifts the stay. But, the court's opinion raises as many questions as it answers. Platinum asks this court to grant mandamus relief ordering the trial court to vacate the two challenged orders and to issue an order granting Platinum's motion for protection. The majority twice states that this court is conditionally granting Platinum's petition for writ of mandamus, which means that this court is ordering the trial court to vacate the two challenged orders and to issue an order granting Platinum's motion for protection; yet, the majority does not state specifically that this court is granting this relief. The majority does specifically direct the trial court to “make an express determination as to the 43 categories of documents at issue, and to determine whether these categories pertain to one or more of the areas of inquiry allowed by section 21.556(a),” but Platinum has not requested this relief. Moreover, this language suggests that this court may be dismissing Platinum's mandamus petition for lack of ripeness under the theory that Platinum's petition is not ready for review unless and until the trial court makes such an express determination. The parties and the trial court are entitled to an unambiguous ruling on the petition and to a clear statement of the relief this court is granting.

What was the trial court's abuse of discretion?

Before this court may conditionally grant mandamus relief, it first must determine that the trial court abused its discretion.2 Yet, the majority conditionally grants mandamus relief without making any such determination. The closest the majority comes is when it states: “Therefore, the trial court acted beyond its discretion insofar as it required production of the 43 categories of documents at issue to occur based on a determination that section 21.562(a) governs this inquiry”3 But, the majority never states whether the trial court required this production based on such a determination.4 Thus, contrary to binding precedent, the majority conditionally grants mandamus relief without determining that the trial court abused its discretion.5

Is it right to grant mandamus relief based on the trial court's failure to make an express statement in its orders as to whether the requested documents are within the statutory scope of discovery?

The majority correctly concludes that section 21.556, entitled “Discovery,” governs today's discovery dispute and that the minority shareholders are limited to discovery addressing (1) whether the Special Litigation Committee is independent and disinterested; (2) whether the committee's inquiry and review was undertaken in good faith; and (3) the reasonableness of the procedures followed by the committee in conducting the review.6 The majority then proceeds to grant mandamus relief without specifying how the trial court abused its discretion. The majority notes that, in the challenged orders, the trial court did not “expressly address whether the minority shareholders are entitled to production of the 43 categories at issue in light of section 21.556's specific discovery limits.”7 The majority then directs the trial court to issue an order expressly stating whether the trial court has concluded that these 43 categories of documents are within the scope of discovery permitted by section 21.556(a).8 Thus, the majority appears to base this court's decision to grant mandamus relief on a conclusion that the trial court abused its discretion by failing to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a). If this is the basis for today's mandamus relief, it is not supported by the law or the record.

The trial court did not abuse its discretion by failing to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a).

In its motion for protective order, Platinum asserted that (1) the trial court should issue an order protecting Platinum from producing any documents beyond the documents Platinum produced before filing the motion; (2) the trial court should limit the required production to five categories of documents; (3) section 21.556(a) applies to the discovery process in the underlying suit, and the 45 document requests are overbroad and encompass documents outside the scope of the discovery allowed by this statute; and (4) the trial court should issue an order disallowing the requested discovery. In their response, real parties in interest Starstream Capital, LLC, Robert E. Chamberlain, Jr., Martha Derrick, Marvel K. Mann, and John Dinn Mann (hereinafter the “Shareholders”) asserted that under section 21.562(a), Nevada law, rather than Texas law, applies to the discoverability of the requested documents.9 Though Platinum's primary argument always has been that Texas law and section 21.556(a) apply to this discovery dispute, Platinum also has argued in the alternative that it would be entitled to a protective order even if Nevada law applies.

As Platinum points out in its mandamus petition, at a hearing on its motion for protective order, (1) Platinum argued that section 21 .556(a) applies to the underlying case; (2) the trial court and counsel discussed section 21.556(a)'s limits on discovery, and (3) without ruling on the motion at that time, the trial court indicated it was inclined to conclude that all 45 document requests are within the scope of the discovery allowed by section 21.556(a). After taking the motion under advisement, the trial judge acted on his stated inclination and signed an order denying Platinum's motion for protective order “in its entirety.” Using this language is the same as saying the motion is “in all things” denied, and in the context of the denial of a motion, it means every individual part of the motion is refused. Under the unambiguous language of the trial court's order, the trial court denied every single request in Platinum's motion.10 Thus, in its July 15, 2013 order, the trial court ruled that (1) Platinum is not entitled to protection from producing any documents beyond the documents Platinum already produced; (2) the required production of documents should not be limited to five categories of documents; and (3) the Shareholders' 45 document requests are not overbroad and do not encompass documents outside the scope of the discovery allowed by section 21.556(a).11

In its October 21, 2013 order, the trial court addressed a second time the issue of whether the requested documents are within the scope of the discovery allowed by section 21.556(a). The Shareholders moved to compel production of the 45 categories of requested documents. In response, Platinum asserted that (1) Texas law and section 21.556(a) apply to this discovery dispute; (2) the requested discovery is overbroad and exceeds the scope of permissible discovery under section 21.556(a); and (3) Platinum has produced all documents within the scope of discovery permitted under section 21.556(a) and therefore no further production should be ordered. Though, from the beginning, Platinum's chief argument has been that Texas law and section 21.556(a) apply to this discovery dispute, Platinum also has asserted the alternative argument that the motion to compel should be denied even if Nevada law applies. The trial court granted the Shareholders' motion to compel production of the requested documents, despite Platinum's argument that section 21.556(a) barred this discovery, and the trial court expressly overruled Platinum's objections to 43 discovery requests,12 including objections that the requests are overbroad and exceed the scope of permissible discovery under applicable law.

The majority is simply incorrect to the extent it concludes the trial court abused its discretion by failing to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a).13 The majority cites no authority requiring the trial court to make such an express statement, and such a requirement is contrary to precedent from the Supreme Court of Texas, this court, and sister courts of appeals.14 There is no requirement that the trial court recite its rationale or detail its reasoning. All that is required is a ruling. And, usually that is all that is given.

For example, in In re Sears, Roebuck & Co., this court granted mandamus relief as to two orders compelling discovery because the discovery requests were overbroad.15 This court concluded that the trial court sufficiently addressed the overbreadth issues and that the two orders were ready for mandamus review even though in the orders the trial court did not expressly provide an overbreadth analysis, or address the issue at all.16 The trial court simply compelled discovery without explaining its reasoning.17 Not only did the trial court fail to make an explicit statement of the basis for its ruling on the defendant's objections to the 142 discovery requests, the trial court expressly stated it was not ruling on these objections.18 This court held that, by granting the plaintiffs' motion to compel discovery, the trial court necessarily overruled the defendant's objections.19 While explanations are often helpful, usually appreciated, and sometimes included, they are not required in an order compelling discovery or granting protection from it. A trial court need not expressly state the reasoning behind its rulings nor identify which of the losing party's arguments the trial court is rejecting.20 By making its discovery ruling, a trial court impliedly considers and rejects all of the losing party's arguments.21 That is precisely what happened in today's case. The trial court did not abuse its discretion when it failed to make an express statement in its orders that the requested documents are within the scope of the discovery allowed by section 21.556(a).22

Even if it were an abuse of discretion for the trial court to fail to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a), mandamus relief still would not be appropriate because the trial court has not refused a request that it make such an express statement.

Mandamus relief generally requires a predicate request for an action and a refusal of that request.23 But, the requirement that there be a predicate request and an adverse ruling is excused when such a request would have been futile and the trial court's refusal is little more than a formality.24 To determine whether a request would have been futile, the reviewing court examines whether the request would have added anything for the trial court's consideration.25 Platinum moved for a protective order, and the trial court ruled on that motion. The Shareholders moved to compel production of the requested documents, and the trial court ruled on that motion and overruled Platinum's discovery objections. Even if, contrary to the above analysis, there were a requirement that the trial court expressly state in its order that all of the requested documents are within the scope of the discovery allowed by section 21.556(a), a failure to satisfy that requirement would not be a basis for granting mandamus relief in this proceeding because no party requested that the trial court make such a statement in its orders, and thus the trial court did not refuse any such request. And, because such a request would have added something for the trial court's consideration and would not have been futile, even if an express-statement requirement existed, the failure to meet it would not provide a basis for granting today's mandamus relief.26

Is mandamus relief appropriate based upon the trial court's purported application of Nevada law?

The majority conditionally grants mandamus relief and states that the trial court abused its discretion to the extent it required production of the 43 categories of documents at issue based upon Nevada law under section 21.562(a). Though the majority does not state whether the trial court required this production based upon Nevada law under section 21.562(a),27 the majority appears to base its decision to grant mandamus relief on a conclusion that the trial court abused its discretion by applying Nevada law under this provision. This possible basis for mandamus relief is not supported by the law or the record.

Under binding precedent, this court must presume that the trial court based its discovery rulings upon section 21.556(a) and Texas law rather than Nevada law under section 21.562(a).

Under Texas law, in both original proceedings and appeals, the trial judge is entitled to a presumption that he correctly applied the law.28 If nothing in the record rebuts this presumption, then the trial court is deemed to have applied the law correctly in making its ruling.29 Specifically in the context of conflict-of-laws issues, appellate courts have held that, if the parties dispute which jurisdiction's law should be applied and the record does not reflect which jurisdiction's law the trial court applied, appellate courts should presume that the trial court applied the law of the jurisdiction that should have been applied under a correct legal analysis.30

Platinum and the Shareholders dispute whether Texas law and section 21.556(a) apply or whether under section 21.562(a), Nevada law applies. Under a correct legal analysis, the trial court should have applied Texas law and section 21.556(a) rather than Nevada law under section 21.562(a). Nothing in the record shows that the trial court did the latter. Therefore, under binding precedent, the trial court is deemed to have done the former and to have held that all requested documents fall within the scope of the discovery allowed under section 21.556(a).31 By not basing this court's analysis on the presumption that the trial court applied Texas law and section 21.556(a), today's decision conflicts with precedents from this court and from the other Houston-based court of appeals.32 Instead of creating confusion in the law and uncertainty in the region's jurisprudence, this court should presume that the trial court applied Texas law and determined that all requested documents fall within the scope of the discovery allowed under section 21.556(a).

This court must uphold the trial court's orders under any legal theory supported by the record.

In both appeals and original proceedings, if the trial court does not specify the basis of its order, this court must uphold the trial court's order under any legal theory supported by the record.33 The majority determines that Texas law and section 21.556(a) apply rather than Nevada law. Thus, to the extent the record reflects that the requested documents fall within the scope of the discovery allowed under section 21.556(a), the trial court did not abuse its discretion in compelling their production. But, rather than deciding whether the trial court abused its discretion by impliedly determining that all requested documents fall within the scope of section 21.556(a), the majority conditionally grants mandamus relief and orders the trial court to make an express determination regarding the extent to which the discovery of the documents requested is permitted by section 21.556(a).34 This decision conflicts with precedents requiring that this court uphold the trial court's order under any legal theory supported by the record.35

Is today's new rule a good idea?

Texas trial courts have limited time and limited resources. This combination makes it challenging for them to issue written orders that detail their legal reasoning and conclusions, especially when the ruling resolves a discovery dispute that involves dozens of document requests and multiple objections to these requests. Though in some areas of the law, trial courts are required to express their reasoning and legal conclusions, there is no such requirement for rulings on quotidian discovery disputes.36 The majority's new rule, if followed in the future, will impose an unwarranted burden on trial courts, unnecessarily increase the cost of litigation, and delay the resolution of disputes, all without any apparent benefit. Worse yet, the new rule will inflict collateral damage in the form of a split of authority in the ten-county jurisdiction this court shares with the First Court of Appeals. Discovery disputes should be resolved quickly and efficiently. Today's ruling obliges a trial judge to express reasoning and conclusions as to each possible ground underlying every discovery ruling or risk being ordered to do so by writ of mandamus. Trial judges that undertake the task will have a substantial new burden on their time and resources and those that do not will be forced into an unwelcome ping-pong match, in which they serve the ruling and the appellate court returns it for an express statement of the trial court's reasons. Because trial courts often do not express their reasoning and legal conclusions in discovery orders, the majority's new rule will result in this court granting “extraordinary” relief in very ordinary circumstances. If mandamus relief is granted on this purely procedural basis, what could have been resolved in a single mandamus proceeding will require repeat visits to the appellate court.

If the trial judge in this proceeding does not change his mind, then he will sign an order expressly stating that each category of requested documents falls within the scope of the discovery allowed under section 21.556(a) and the disputed documents are discoverable. If the trial judge does change his mind, then he will issue a different order specifying the extent to which he concludes that the requested discovery falls within the scope of the discovery allowed under section 21.556(a) and is discoverable. In either event, unless Platinum and the Shareholders both are satisfied with the trial court's order, this court is likely to see yet another mandamus petition, and the next time this court will have to answer the same question presented today—To what extent, if any, do the requested documents fall within the scope of the discovery allowed by section 21.556(a)? It would be more efficient-and in keeping with binding precedent—to apply the existing rule.

For all of these reasons, this court should determine today the extent, if any, the documents requested fall outside the scope of the discovery permitted by section 21.556(a) and grant mandamus relief to the extent the trial court compelled discovery or denied protection as to these documents. Because this court chooses not to do so, I respectfully dissent.

FOOTNOTES

1.  Real parties in interest are Starstream Capital, LLC, Robert E. Chamberlain, Jr., Martha Derrick, Marvel K. Mann, and John Dinn Mann.

2.  The officer/director defendants are L. Charles Moncla, Jr., J. Clarke Legler, II, Jose E. Feliciano, Colin Leonard, Richard L. Crandall, William Restrepo, Mervin Dunn, Daniel T. Layton, Layton Corporation, Clearlake Capital Partners, LLC, and Clearlake Capital Partners II (Master), L.P.

3.  The minority shareholders voluntarily withdrew requests Nos. 5 and 6.

1.  Unless otherwise specified, all statutory references in this opinion are to the Texas Business Organizations Code.

2.  See In re Bass, 113 S.W.3d 735, 738 (Tex.2003) (holding appellate court cannot grant mandamus relief absent determination that trial court abused its discretion); In re Labidi, 287 S.W.3d 922, 926 (Tex.App.-Houston [14th Dist.] 2009, orig. proceeding) (holding appellate court cannot grant mandamus relief absent showing by relator that trial court abused its discretion).

3.  Ante at p. 13 (emphasis added).

4.  As discussed below, under binding precedent, the trial court did not require production of any documents based on a determination that section 21.562(a) governs this inquiry. This court must presume that the trial court correctly applied Texas law and section 21.556(a), and nothing in the record rebuts this presumption. See Nexen, Inc. v. Gulf Interstate Engineering Co., 224 S.W.3d 412, 416–17 (Tex.App.-Houston [1st Dist.] 2006, no pet.); Vickery v. Comm'n for Lawyer Discipline, 5 S.W.3d 241, 251 (Tex.App.-Houston [14th Dist.] 1999, pet. denied); Ex parte Jackson, 911 S.W.2d 230, 234 (Tex.App.-Houston [14th Dist.] 1995, orig. proceeding [hab. denied] ); State Nat'l Bank v. Academia, Inc., 802 S.W.2d 282, 290 (Tex.App.-Corpus Christi 1990, writ denied).

5.  See In re Bass, 113 S.W.3d at 738; In re Labidi, 287 S.W.3d at 926.

6.  See Tex. Bus. Orgs.Code Ann. § 21.556(a).

7.  Ante at p. 13.

8.  See ante at p. 14.

9.  The Shareholders asserted that, to the extent Nevada law applies, Nevada courts would follow Delaware law on such issues, and the Shareholders briefed these issues under Delaware law. Nonetheless, even presuming that Nevada courts would follow Delaware precedent on these issues, under the Shareholders' argument, this court still would be applying Nevada law rather than Delaware law. Therefore, in this opinion, this alternative is described as applying Nevada law rather than as applying Delaware law.

10.  See Deep Water Slender Wells, Ltd. v. Shell Int'l Exploration & Production, Inc., 234 S.W.3d 679, 693 & n. 9 (Tex.App.-Houston [14th Dist.] 2007, pet. denied) (concluding that, although trial court expressly referred to only one ground for granting the motion to dismiss in its dismissal order, the trial court dismissed on both grounds asserted because the trial court stated that it granted the motion “in all things,” which means that the court dismissed based on all the grounds in the motion).

11.  See id.

12.  The trial court did not rule on the objections to requests 5 and 6 because the Shareholders withdrew these two requests at the hearing on their motion to compel. Therefore, only 43 of the original 45 requests are currently at issue.

13.  See ante at p. 12–14.

14.  See Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 555–56 (Tex .1990) (stating that, before a discovery issue may be reviewed in an original mandamus proceeding, the trial court must have denied a motion raising that issue, without imposing any requirement that the trial court explicitly detail its reasoning or explicitly state the various issues it determined in ruling on the motion); Douglas v. Redmond, No. 14–12–00259–CV, 2012 WL 5921200, at *7 (Tex. App–Houston [14th Dist.] Nov. 27, 2012, pet. denied) (holding that, when trial court does not specify the basis for its ruling in its order, appellate courts must uphold the order on any legal theory supported by the record) (mem.op.); In re Kenefick, No. 14–08–00203–CV, 2008 WL 3833842, at *5–6 (Tex.App.-Houston [14th Dist.] Aug. 19, 2008, orig. proceeding) (holding that by granting a motion to compel discovery, the trial court implicitly overruled all of the resisting party's discovery objections, even though the trial court did not explicitly state in its order that it was overruling these objections); Nexen, Inc. v. Gulf Interstate Engineering Co., 224 S.W.3d 412, 416–17 (Tex.App.-Houston [1st Dist.] 2006, no pet.) (finding no error and proceeding to adjudicate merits of case in which trial court did not specify whether its ruling was based upon Texas law or Alberta law, in case in which there was a conflict-of-laws issue); In re Sears, Roebuck & Co., 123 S.W.3d 573, 575 (Tex.App.-Houston [14th Dist.] 2003, orig. proceeding) (holding that trial court necessarily overruled defendant's objections to plaintiffs' 142 discovery requests by granting plaintiffs' motion to compel discovery, even though, in its order, the trial court expressly stated that it was not ruling on the defendant's discovery objections); In re Texas Prop. & Cas. Ins. Guar. Ass'n, 989 S.W.2d 880, 882 (Tex.App.-Austin 1999, orig. proceeding) (holding, in a mandamus proceeding, that trial court's order must be upheld on any theory supported by the record, even though the trial court did not state any basis for its ruling in the order); State Nat'l Bank v. Academia, Inc., 802 S.W.2d 282, 290 (Tex.App.-Corpus Christi 1990, writ denied) (finding no error in trial court's failure to specify whether its ruling was based upon Texas law or Illinois law, in case in which there was a conflict-of-laws issue, and proceeding to adjudicate merits of the case).

15.  See 123 S.W.3d at 575–80.

16.  See id. at 575–76.

17.  See id.

18.  See id. at 575.

19.  See id.

20.  See Axelson, Inc., 798 S.W.2d at 555–56; In re Kenefick, 2008 WL 3833842, at *5–6; Nexen, Inc., 224 S.W.3d at 416–17; In re Sears, Roebuck & Co., 123 S.W.3d at 575; In re Texas Prop. & Cas. Ins. Guar. Ass'n, 989 S.W.2d at 882; State Nat'l Bank, 802 S.W.2d at 290.

21.  See In re Kenefick, 2008 WL 3833842, at *5–6; In re Sears, Roebuck & Co., 123 S.W.3d at 575.

22.  See Axelson, Inc., 798 S.W.2d at 555–56; In re Kenefick, 2008 WL 3833842, at *5–6; Nexen, Inc., 224 S.W.3d at 416–17; In re Sears, Roebuck & Co., 123 S.W.3d at 575; In re Texas Prop. & Cas. Ins. Guar. Ass'n, 989 S.W.2d at 882; State Nat'l Bank, 802 S.W.2d at 290.

23.  Axelson, Inc., 798 S.W.2d at 556.

24.  See In re Le, 335 S.W.3d 808, 814–15 (Tex.App.-Houston [14th Dist.] 2011, orig. proceeding).

25.  See id.

26.  See Axelson, Inc., 798 S.W.2d at 556; In re Le, 335 S.W.3d at 814–15.

27.  See ante at p. 12–14.

28.  Vickery, 5 S.W.3d at 251; Ex parte Jackson, 911 S.W.2d at 234.

29.  Vickery, 5 S.W.3d at 251; Ex parte Jackson, 911 S.W.2d at 234; Nexen, Inc., 224 S.W.3d at 416–17; State Nat'l Bank, 802 S.W.2d at 290.

30.  See Nexen, Inc., 224 S.W.3d at 416–17 (holding that court of appeals would presume that the trial court correctly applied Alberta law rather than Texas law because appellate courts presume the trial court correctly analyzed the conflict-of-laws issues and applied the correct law and because the record was silent as to which jurisdiction's law the trial court applied in making the challenged ruling); State Nat'l Bank, 802 S.W.2d at 290–91 (holding that court of appeals would presume that the trial court correctly applied Illinois law rather than Texas law because appellate courts presume the trial court correctly analyzed the conflict-of-laws issues and applied the correct law and because the record was silent as to which jurisdiction's law the trial court applied in making the challenged ruling).

31.  Vickery, 5 S.W.3d at 251; Ex parte Jackson, 911 S.W.2d at 234; Nexen, Inc., 224 S.W.3d at 416–17; State Nat'l Bank, 802 S.W.2d at 290.

32.  See Vickery, 5 S.W.3d at 251; Ex parte Jackson, 911 S.W.2d at 234; Nexen, Inc., 224 S.W.3d at 416–17. The First Court of Appeals District and the Fourteenth Court of Appeals District both are composed of the counties of Austin, Brazoria, Chambers, Colorado, Fort Bend, Galveston, Grimes, Harris, Waller, and Washington. See Tex. Gov't Code Ann. 22.201 (West 2013).

33.  See Douglas, 2012 WL 5921200, at *7 (holding that, when trial court does not specify the basis for its ruling in its order, appellate courts must uphold the order on any legal theory supported by the record); In re Texas Prop. & Cas. Ins. Guar. Ass'n, 989 S .W.2d at 882 (holding, in a mandamus proceeding, that trial court's order must be upheld on any theory supported by the record, even though the trial court did not state any basis for its ruling in the order).

34.  See ante at pp. 12–14.

35.  See Douglas, 2012 WL 5921200, at *7; In re Texas Prop. & Cas. Ins. Guar. Ass'n, 989 S.W.2d at 882.

36.  See Axelson, Inc., 798 S.W.2d at 555–56; Douglas, 2012 WL 5921200, at *7; In re Kenefick, 2008 WL 3833842, at *5–6; Nexen, Inc., 224 S.W.3d at 416–17; In re Sears, Roebuck & Co., 123 S.W.3d at 575; In re Texas Prop. & Cas. Ins. Guar. Ass'n, 989 S.W.2d at 882; State Nat'l Bank, 802 S.W.2d at 290.

WILLIAM J. BOYCE, Justice.

FROST, C.J., dissents.

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