Derek Phillips v. Reserve First Partners, Ltd. D/B/A First Fidelity Reserve

• Court: Court of Appeals of Texas
• Decided: April 16, 2015
• Docket: 09-13-00108-CV
• Status: Published

Opinion

In The

Court of Appeals Ninth District of Texas at Beaumont ____________________ NO. 09-13-00108-CV ____________________

DEREK PHILLIPS, Appellant

V.

RESERVE FIRST PARTNERS, LTD. D/B/A FIRST FIDELITY RESERVE, Appellee

_______________________________________________________ ______________

On Appeal from the 172nd District Court Jefferson County, Texas Trial Cause No. E-193,642 ________________________________________________________ _____________

MEMORANDUM OPINION

Reserve First Partners, Ltd., d/b/a First Fidelity Reserve (“FFR”) sued its

former employee, Derek Phillips, for violating an employment agreement. The trial

court imposed a permanent injunction enforcing a covenant not to compete,

awarded $6,000 in monetary sanctions for failing to appear for deposition, and

awarded $37,500 as attorney’s fees with an additional award of $15,000 in the

1 event of an unsuccessful appeal. Phillips presented two issues in his brief: (1)

whether the covenants in the employment agreement were unreasonable and

unenforceable as a matter of law; and (2) whether the trial court erred in granting

“death penalty” sanctions. 1 We affirm the trial court’s judgment.

Suggestion of Death

After the parties filed their appellate briefs, FFR filed a suggestion of the

death of Phillips. “Generally, an appeal is moot when the court’s action on the

merits cannot affect the rights of the parties.” VE Corp. v. Ernst & Young, 860

S.W.2d 83, 84 (Tex. 1993) (per curiam). Phillips’s first issue concerned purely

personal rights that became moot upon his death. See Olson v. Comm’n for Lawyer

Discipline, 901 S.W.2d 520, 524 (Tex. App.—El Paso 1995, no writ). The

sanctions award challenged in issue two, however, involves property rights that

were not mooted by Phillips’s death. See Kenseth v. Dallas Cnty., 126 S.W.3d 584,

593-94 (Tex. App.—Dallas 2004, pet. denied).

1 The brief contained an unbriefed statement that the trial court erred in granting attorney’s fees. Phillips’s response to the suggestion of mootness stated: “In the absence of actual damages, one cannot generally win attorney’s fees. The trial lasted less than an hour. The [a]ttorney’s fees awarded do not show a break down of attorney time. This proof does not justify the reasonableness of the fees.” We granted leave to file a supplemental brief challenging the amount of attorney’s fees awarded in the trial court’s judgment, but the appellant did not file a supplemental brief. Accordingly, we do not consider whether the trial court awarded attorney’s fees in an excessive amount. 2 Death Penalty Sanctions

“We review a trial court’s imposition of sanctions for an abuse of

discretion.” Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006).

The record must demonstrate a direct relationship between the improper conduct

and the sanction imposed and less severe sanctions must not have been sufficient to

promote compliance. Id. In situations involving discovery abuse, a trial court may

deny a litigant a decision on the merits of the case only where the sanctioned

party’s conduct justifies a presumption that its claims or defenses lack merit.

TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 918 (Tex. 1991)

(orig. proceeding). “However, if a party refuses to produce material evidence,

despite the imposition of lesser sanctions, the court may presume that an asserted

claim or defense lacks merit and dispose of it.” Id.

The trial court conducted an evidentiary hearing on FFR’s motion to compel.

Counsel for FFR claimed that he issued notice of deposition but neither Phillips

nor his counsel appeared for the deposition. According to counsel for FFR, Phillips

also failed to respond to the discovery requests that were attached to the original

petition that had been served on the defendant. FFR’s counsel stated that he spent

ten hours on matters related to the deposition, that his hourly rate is $300, that he is

familiar with the reasonable and customary fees charged by attorneys with his

3 qualifications, and that $3,000 would be a reasonable fee. Counsel for Phillips

argued that the deposition should be quashed because less than thirty days

remained before trial. See Tex. R. Civ. P. 190.3(b)(1)(B)(i) (discovery period ends

30 days before the date set for trial). He argued that Phillips was not required to

respond to the discovery requests because the fiftieth day following service of the

suit fell within thirty days of trial. 2 Compare Tex. R. Civ. P. 190.3(b)(1)(B)(i) with

Tex. R. Civ. P. 194.3(a) (a party served with requests for disclosure before his

answer is due need not respond until 50 days after service of the request). The trial

court granted FFR’s motion to compel Phillips’s deposition, ordered Phillips to

appear for a deposition and to deliver responses to requests for disclosure and

requests for production, and ordered Phillips to pay $3,000 within five days as a

sanction for his failure to appear for the deposition. See Tex. R. Civ. P.

215.2(b)(2), (8). On appeal, Phillips does not argue that the trial court abused its

discretion in making this order.

The following week, the trial court conducted a hearing on a new motion for

sanctions after Phillips failed to respond to FFR’s requests for disclosure and failed 2 The trial court gave the case an expedited trial setting when it granted a temporary injunction that prohibited Phillips from soliciting FFR’s customers or engaging in a business similar to FFR’s within 250 miles of FFR’s office. Counsel for Phillips explained to the trial court that Phillips was not available for deposition because he had left the area so he could conduct business and comply with the terms of the temporary injunction. 4 to appear for the deposition ordered by the trial court. The trial court signed an

order striking Phillips’s pleadings and awarded $3,000 as a sanction for legal fees

and expenses incurred by reason of counsel’s preparation for the deposition the

trial court ordered. Phillips was present in person for the permanent injunction

hearing. Phillips argued that exclusion of the witness was the appropriate sanction

for failing to appear for deposition. FFR argued Phillips’s repeated failure to

participate in any discovery justified imposing severe consequences for his

discovery abuse.

In his brief on appeal, Phillips argues that on the day of trial, the trial court

should have ordered Phillips to be deposed in front of the court reporter, imposed

the cost of that deposition on Phillips, and conducted the bench trial on the

following day without striking Phillips’s pleadings. See Tex. R. Civ. P. 215.2(b)(2)

(permitting a trial court to charge expenses of discovery to the disobedient party).

Phillips argues the record does not explain why lesser sanctions would not have

served their purpose, but the record shows that Phillips failed to comply when the

trial court ordered a lesser sanction. Generally, the trial court must use a less

stringent sanction first to determine “whether lesser sanctions will fully promote

compliance, deterrence, and discourage further abuse.” Chrysler Corp. v.

Blackmon, 841 S.W.2d 844, 849 (Tex. 1992). In this case, the trial court tried

5 lesser sanctions first when it ordered Phillips to pay $3,000 and appear for

deposition. See Tex. R. Civ. P. 215.2(b)(8). Phillips neither complied with the

order nor explained his non-compliance when he presented himself for the first

time at the trial without having responded to the requests for disclosure and

without paying the $3,000 previously ordered by the trial court. The trial court

could reasonably conclude that Phillips did not have a valid defense to FFR’s

claims. See TransAmerican, 811 S.W.2d at 918; Hernandez v. Sovereign Cherokee

Nation Tejas, 343 S.W.3d 162, 171-72 (Tex. App.—Dallas 2011, pet. denied) (a

party’s failure to comply with previous orders compelling discovery justifies

conclusion that the party’s conduct prevented the opposing party from obtaining

evidence essential to the presentation of its case and lesser measures would not

achieve his compliance). We overrule issue two and affirm the trial court’s

judgment.

AFFIRMED.

________________________________ CHARLES KREGER Justice

Submitted on October 15, 2014 Opinion Delivered April 16, 2015 Before Kreger, Horton, and Johnson, JJ.