Freeman v. Bianchi

820 S.W.2d 853, 1991 Tex. App. LEXIS 2700, 1991 WL 225947
CourtCourt of Appeals of Texas
DecidedOctober 31, 1991
Docket01-91-00754-CV
StatusPublished
Cited by36 cases

This text of 820 S.W.2d 853 (Freeman v. Bianchi) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Freeman v. Bianchi, 820 S.W.2d 853, 1991 Tex. App. LEXIS 2700, 1991 WL 225947 (Tex. Ct. App. 1991).

Opinion

OPINION

SAM BASS, Justice.

Relators, Gary Freeman, et al. (“plaintiffs”), seek an order to have the Honorable Richard P. Bianchi, Judge of the 333rd District Court of Harris County, rescind his order of August 6, 1991, denying plaintiffs’ Motion Adopting the Recommendations of Special Master and to Set Aside the Order of October 31, 1990. Real parties in interest are Granada Corporation; Granada Genetics, Inc.; Granada Biosciences, Inc.; Granada Management Corp.; Granada Financial Services, Inc.; Granada Development Corp.; Granada R & D Ventures; David G. Eller; James M. Eller, Jr.; Thomas Easley; Joe M. Massey; Christopher Zakzrewski; Darrold F. McCalla; Robert E. Wilkins; Immuno Modulators Laboratories, Inc., n/k/a Biospectrum, Inc.; and Touche Ross & Co. (“defendants” or “Granada”).

The mandamus proceeding centers on a prolonged discovery dispute about documents that defendants claim are shielded from disclosure by the attorney-client and attorney-work product privilege. Relators contend the documents prove their allegations in the underlying lawsuit; that defendants never followed procedural steps necessary to invoke privilege; that certain documents were voluntarily produced to the plaintiffs; that any privilege afforded the documents has been waived by disclosure; and that the documents that are privileged are subject to the “furtherance of crime or fraud” exception (“crime-fraud exception”) set forth in Texas Rule of Civil Evidence 503(d)(1) and subject to .discovery within the scope of Texas Rule of Civil Procedure 166b(2)(a). Relators assert that respondent abused his discretion in affording blanket protection to the documents and maintain they will have no adequate remedy at law if they cannot use the documents to prove their allegations. Defendants claim the documents were inadvertently, not voluntarily, disclosed and that the attorney-client privilege and work product privileges were not waived. Defendants assert that the crime-fraud exception does not apply to the documents.

The underlying lawsuit is for fraud; denuding a corporation; Texas Securities Act violations; tortious interference with contract; action on contract; failure of consideration; conspiracy; negligence; and violations of the Texas Free Enterprise and Antitrust Act of 1983. Plaintiffs are former shareholders of Immuno Modulation Laboratories, Inc. (“IML”), a company that manufactured and developed applications for interferon. Plaintiffs claim that Granada Corporation acquired a majority of the outstanding shares of IML by fraudulently inducing the shareholders to give up their stock.

Procedural History

This mandamus action evolved from a discovery request that commenced a three year odyssey through five separate district court judges, two courts of appeals, and the Texas Supreme Court. On June 13, 1988, plaintiffs filed their first request for production of documents from defendants. *856 In response, defendants’ counsel produced approximately 150,000 pages of documents for plaintiffs to review.

Plaintiffs began inspecting the documents on August 10, 1988. During August and September of 1988, plaintiffs marked and designated approximately 18,-000 documents for photocopying, including the following memoranda (“the four memo-randa”):

(1) Memo from John Watson (an attorney for Granada) to Don Whelley (an officer with the Granada Corporation), dated October 3, 1986, regarding advice and opinions concerning IML’s inclusion in the proposed initial public offering (“Memo One”).
(2) Memo from John Watson to Don Whelley, dated October 16, 1986, regarding IML/Gangrene sale of assets under the Texas Business Corporations Act (“Memo Two”).
(3) Memo from J. Wallace (General Counsel for Granada), dated January 8, 1986, advising of duties of IML under the Texas Business Corporations Act, with attachments (“Memo Three”).
(4) Memo from J. Wallace to David Eller (president of Granada), dated January 10, 1986, with advice concerning Texas law on corporate stock splits (“Memo Four”).

These four memoranda are among the documents that are the subject of the discovery dispute in this case.

On November 23, 1988, Granada filed a motion for protection with the trial court and attached an index of 104 documents it claimed were privileged and exempt from discovery, including Memo Three and Memo Four. Granada then tendered the 104 documents for in camera inspection on November 28, 1988. Memo One and Memo Two were not listed on the index that claimed privilege and were not produced for in camera inspection. The court took the matter under advisement.

Discovery proceeded, and during depositions taken on September 20 and 21, 1989, plaintiffs tendered Memos One, Two, and Three to Eller, Granada’s president. Granada had previously made these three memoranda available to plaintiffs for inspection and photocopying in August and September of 1988.

Plaintiffs’ counsel introduced Memo One, without objection, while questioning Eller about the contents of the memorandum. Defendants’ attorney did not object until after a break following the testimony. At that time, defendants claimed they first became aware that the four memoranda were in the possession of plaintiffs. On October 13, 1989, defendants filed an amended motion for protection, asking the court to order the four memoranda returned to them.

On November 10, 1989, the parties appeared before the judge of the trial court, the Honorable Felix Salazar, on the defendants’ motion for protection. At this hearing, plaintiffs told the court that they possessed approximately 17 other documents the defendants claimed were privileged that had been produced by defendants in August 1988.

Judge Salazar ruled that plaintiffs would be allowed to retain and use the documents during depositions to explore their allegations of fraud. On December 7, 1989, defendants filed a motion to reconsider the court’s ruling on the protective order and an alternative motion to appoint a special master.

On February 20, 1990, Judge Salazar signed an order appointing John N. Barn-hart as a special master to make findings and recommendations regarding whether the privileges, if any, that attached to the four memoranda had been waived, r and whether a total of 215 other documents were, in fact, privileged.

On June 5, 1990, the special master submitted his report. The special master found that the four memoranda were discoverable and were properly in the possession of the plaintiffs; that 73 documents were covered by the crime-fraud exception to the attorney-client privilege; and that four documents were not within the work product privilege and were discoverable.

In September of 1990, Judge Salazar invoked a local rule to transfer the case to the 165th District Court, Judge Ken Harri *857 son presiding. On October 31, 1990, Judge Harrison entered an order denying entry of the master’s report; granting protection to every document; and ordering all copies of the memoranda returned to defendants’ counsel.

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Cite This Page — Counsel Stack

Bluebook (online)
820 S.W.2d 853, 1991 Tex. App. LEXIS 2700, 1991 WL 225947, Counsel Stack Legal Research, https://law.counselstack.com/opinion/freeman-v-bianchi-texapp-1991.