Jerry Valdez v. Progressive County Mutual Insurance Company

• Court: Court of Appeals of Texas
• Decided: December 14, 2011
• Docket: 04-11-00254-CV
• Status: Published

Opinion

MEMORANDUM OPINION No. 04-11-00254-CV

Jerry VALDEZ, Appellant

v.

PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Appellee

From the 224th Judicial District Court, Bexar County, Texas Trial Court No. 2008-CI-16137 Honorable Solomon Casseb III, Judge Presiding

Opinion by: Marialyn Barnard, Justice

Sitting: Catherine Stone, Chief Justice Phylis J. Speedlin, Justice Marialyn Barnard, Justice

Delivered and Filed: December 14, 2011

AFFIRMED

Appellant Jerry Valdez appeals the trial court’s judgment dismissing his suit with

prejudice. Valdez brought suit against appellee Progressive County Mutual Insurance Company

(“Progressive”) concerning an unpaid insurance claim. After the trial court found Valdez had

failed to comply with multiple discovery orders compelling production of his tax returns, and

was unresponsive to lesser sanctions, the trial court imposed the “death penalty” sanction

pursuant to rule 215.2(b)(5) of the Texas Rules of Civil Procedure and dismissed Valdez’s 04-11-00254-CV

claims against Progressive. On appeal, Valdez raises five issues, contending the trial court erred

in dismissing his suit. We affirm the trial court’s judgment.

BACKGROUND

In January 2008, Valdez reported to law enforcement officials that a Harley Davidson

motorcycle and Chevrolet Silverado truck he owned were stolen from his driveway. He later

filed an insurance claim with Progressive for the loss of the two vehicles. Progressive paid

Valdez for the motorcycle loss but denied the truck claim.

Progressive informed Valdez that the denial resulted from evidence the truck was not

stolen. Progressive claimed an investigation by the National Insurance Crime Bureau revealed

the truck was photographed—prior to the date it was reported stolen—being driven into Mexico

by associates of Valdez. Progressive provided Valdez with a photograph of the truck crossing

the border and asserted the truck was being held in Mexico with Valdez’s consent as collateral

for a drug trafficking transaction.

In September 2008, Valdez filed suit against Progressive alleging violations of the Texas

Deceptive Trade Practices Act (“DTPA”) and the Texas Insurance Code, and libel. During a

pretrial deposition conducted by Progressive, Valdez claimed he was self-employed, but refused

to provide any estimate of his annual income for the years preceding the theft claim. On March

3, 2010, Progressive served Valdez with written requests for production, seeking redacted copies

of Valdez’s tax returns. Valdez neither complied with nor objected to the request. Subsequently,

Progressive filed a motion to compel production and a hearing was set for July 1, 2010.

At the hearing, Progressive asserted Valdez waived his right to object to the production

request because he failed to timely respond. Valdez, for the first time, objected to the production

request, stating the tax returns were not relevant and Progressive failed to demonstrate the tax

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returns were relevant and material to the case. After considering the parties’ arguments, the trial

court found Valdez waived his right to object and ordered him to produce his tax returns for

2006, 2007, and 2008. The deadline for production was set for July 16, 2010. Valdez did not

comply with this order.

On July 16, 2010, Valdez filed a motion to reconsider. He argued there was good cause

for the untimely objection, claiming for the first time the tax returns were protected by a right to

privacy and that Progressive failed to satisfy a condition precedent requiring it to prove the tax

returns were relevant and material. Based on this, Valdez concluded he was not obligated to

produce the tax returns. Progressive responded by again arguing Valdez waived his right to

object and further asserted he presented no good cause to the court to excuse the waiver. The

trial court denied Valdez’s motion and ordered production of the tax returns by August 13, 2010.

Again, Valdez refused the trial court’s order to produce the tax returns. Instead, he filed

a petition for writ of mandamus and a motion for an emergency stay with this court on

September 1, 2010. The petition was denied on September 15, 2010. In re Valdez, No. 04-10-

00636-CV, 2010 WL 3582399, at *1 (Tex. App.—San Antonio Sep. 15, 2010, orig. proceeding

[mand. denied]). Shortly after we denied Valdez’s petition, Progressive requested he produce the

tax returns pursuant to the trial court’s order. Valdez neither produced nor otherwise responded.

On September 17, 2010, Progressive filed a motion to enforce the trial court’s order to

compel production and sought discovery sanctions in the form of $2,500.00 in attorney’s fees.

At the motion hearing on October 4, 2010, Valdez blatantly refused to tender the tax returns,

stating he intended to file a mandamus petition to the Texas Supreme Court. He also asserted,

for the first time, a Fifth Amendment objection against producing the tax returns but offered no

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specific argument supporting its application. 1 The court granted an extension for both parties to

address whether the Fifth Amendment’s self-incrimination clause precluded the production of

Valdez’s tax returns and whether he waived his right to object on this ground by failing to timely

object.

On October 13, 2010, Valdez filed a petition with the Texas Supreme Court, challenging

this court’s denial of his petition for writ of mandamus and motion for emergency stay. The

petition raised the same issues presented to our court and made no mention of the Fifth

Amendment claim. The court denied the petition on December 3, 2010.

On December 13, 2010, the trial court granted Progressive’s third motion to compel,

ordering Valdez to produce the tax returns and pay $2,500.00 to Progressive by December 17,

2010. Once more, Valdez elected to disobey the trial court’s order, choosing instead to file a

motion to set it aside. This time Valdez dropped any reference to a right to privacy and argued

only that the Fifth Amendment precluded production of the tax returns, the returns were not

relevant to the case, and the $2,500.00 sanction was vague and penal in nature.

Finally, on December 27, 2010, Progressive filed a motion to enforce the December 13,

2010 order and sought discovery sanctions in the form of a dismissal of Valdez’s claims, a death

penalty sanction under rule 215.2(b)(5) of the Texas Rules of Civil Procedure. See TEX. R. CIV.

P. 215.2(b)(5) (authorizing trial court to dismiss with prejudice lawsuit of non-compliant party).

A hearing was set for January 11, 2011.

At the hearing, Progressive justified its request for death penalty sanctions by

highlighting Valdez’s continued refusals to obey numerous court orders even after being

sanctioned for discovery abuse. In his reply, Valdez insisted he would continue withholding the

1 There is no evidence in the record indicating that criminal proceedings against Valdez for insurance fraud had commenced as of the date he raised the Fifth Amendment objection. However, on November 29, 2010, a Bexar County grand jury indicted Valdez for insurance fraud arising from the truck claim at issue in this appeal.

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tax returns based solely upon Fifth Amendment grounds. Valdez did not inform the court that he

had been indicted by a Bexar County grand jury on November 29, 2010, for insurance fraud

arising from his theft claim, but alluded only to potential criminal liability arising from an

alleged failure to file tax returns. Valdez’s counsel suggested the tax returns at issue may not

have been filed, thereby justifying the self-incrimination objection based on the possibility of

prosecution for failure to file tax returns. See 26 U.S.C.A. § 7203. Counsel later clarified that

Valdez, who was present but did not testify at the hearing, reminded him of his previous

admission at deposition that he did in fact file the requested tax returns. Neither Valdez nor his

counsel expressed concern that the tax returns might be used in a criminal proceeding based on

insurance fraud.

After considering the arguments presented by both parties, the trial court granted

Progressive’s motion and rendered a judgment dismissing Valdez’s suit with prejudice on

January 14, 2011. The trial court denied Valdez’s motion for new trial. Valdez perfected this

appeal.

ANALYSIS

Although Valdez divides his appellate complaints into five separate issues, a review of

the issues establishes Valdez has but one complaint: the trial court erred in imposing the death

penalty sanction of dismissal because the basis of the sanction, his repeated refusals to produce

his income tax returns, was invalid. More specifically, Valdez argues sanctions were

inappropriate because he was not required to produce the requested returns as they were

protected by his rights under the Fifth Amendment and his constitutional privacy rights.

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Standard of Review

A trial court’s imposition of discovery sanctions is reviewed on appeal for abuse of

discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004); Paradigm Oil, Inc. v. Retamco

Operating, Inc., 161 S.W.3d 531, 536 (Tex. App.—San Antonio 2004, pet. denied). Death

penalty sanctions should be limited to situations where a “party has so abused the rules of

procedure, despite imposition of lesser sanctions, that the party’s position can be presumed to

lack merit.” Finley Oilwell Service, Inc. v. Retamco Operating, Inc., 248 S.W.3d 314, 320 (Tex.

App.—San Antonio 2007, pet. denied). “The test for an abuse of discretion is not whether, in the

opinion of the reviewing court, the facts present an appropriate case for the trial court’s action,

but ‘whether the court acted without reference to any guiding rules and principles.’” Vela v.

Wagner & Brown, Ltd., 203 S.W.3d 37, 56 (Tex. App.—San Antonio 2006, no pet.). “The trial

court’s ruling should be reversed only if it was arbitrary or unreasonable.” Cire, 134 S.W.3d at

839.

Applicable Law

The primary purpose of discovery is “to ensure that lawsuits are ‘decided by what the

facts reveal, not by what facts are concealed.’” In re Alford Chevrolet-Geo, 997 S.W.2d 173,

180 (Tex. 1999) (quoting Jampole v. Touchy, 673 S.W.2d 569, 573 (Tex. 1984)). Parties may

generally obtain discovery of relevant non-privileged information, documents, and tangible

things related to an action pending in court “reasonably calculated to lead to . . . admissible

evidence.” Axelson, Inc. v. McIlhany, 798 S.W.2d 550, 553 (Tex. 1990); TEX. R. CIV. P. 192.3.

Requests for discovery should be “reasonably tailored to include only matters relevant to the case

. . .” and not be employed simply to harass or generate expense for an opponent. Alford

Chevrolet-Geo, 997 S.W.2d at 180–81. A trial court has broad discretion to limit discovery to

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prevent undue burden and expense depending on the needs of the case. Id. at 181; TEX. R. CIV.

P. 192.4. A party seeking the court’s protection against burdensome or harassing discovery must

present some evidence as to why the court should intervene. Alford Chevrolet-Geo, 997 S.W.2d

at 181.

Rule 215.3 of the Texas Rules of Civil Procedure provides that “[i]f the court finds a

party is abusing the discovery process in . . . resisting discovery . . . then the court in which the

act is pending may, after notice and hearing, impose any appropriate sanction authorized by . . .

Rule 215.2(b).” TEX. R. CIV. P. 215.3; see also Paradigm Oil, 161 S.W.3d at 537. One of the

authorized sanctions under rule 215.2(b) permits a court to strike a party’s pleadings or dismiss

with prejudice an action pending before it, i.e., the death penalty sanction. Id. at R. 215.2(b)(5).

As with any discovery abuse sanction, dismissal with prejudice must be justly imposed.

Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849 (Tex. 1992); TEX. R. CIV. P. 215(b). To be

just, “a direct relationship between the offensive conduct and the sanction imposed must exist . . .

and . . . the sanction . . . must not be excessive.” Chrysler Corp., 841 S.W.2d at 849. Dismissal

with prejudice should not be employed by a court “absent a party’s flagrant bad faith or

counsel’s callous disregard for the responsibilities of discovery under the rules.” Cire, 134

S.W.3d at 839 (quoting TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 918 (Tex.

1991)). Generally, a court should test the effectiveness of less stringent discovery sanctions prior

to imposing the death penalty sanction against a party. Id at 840. In certain exceptional

circumstances, however, a court need only consider lesser sanctions prior to dismissing the case

with prejudice. Id.; Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex. 2003).

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Application

Valdez argues the death penalty sanction for discovery abuse was inappropriate because

his tax returns were constitutionally barred from discovery. Concluding unilaterally that his

constitutional right to privacy and right against self-incrimination barred the compelled

production of his tax returns, Valdez deliberately ignored four trial court discovery orders,

including three orders compelling production of the tax returns and one order sanctioning him

$2,500.00 for discovery abuse.

We hold that even if Valdez had a valid Fifth Amendment or other constitutional

privilege to refuse production of his tax returns, he waived these rights by failing to timely object

in writing to the discovery request on this basis. See TEX. R. CIV. P. 193.2(e); In re Gore, 251

S.W.3d 696, 700–01 (Tex. App.—San Antonio 2007, no pet.) (stating that failure to timely plead

and prove privilege from discovery can operate as waiver); TEX. R. APP. P. 33.1(a) (requiring

timely objection to trial court in order to preserve the right to appeal). A specific objection to

each discovery request must be brought to the trial court’s attention so the court can make a

proper decision. See Gebhardt v. Gallardo, 891 S.W.2d 327, 330–31 (Tex. App.—San Antonio

1995, no pet.); In re Speer, 965 S.W.2d 41, 45–46 (Tex. App.—Fort Worth 1998, no pet.). Rule

193.2 of the Texas Rules of Civil Procedure specifically requires objections to written discovery

to be in writing and to provide the specific legal or factual basis for the objection. TEX. R. CIV.

P. 193.2(a). Rule 193.2(e) provides that untimely objections are waived unless the trial court

excuses the waiver for “good cause shown.” Id. R. 193.2(e). Responses to production are due

within thirty days after the date of service. Id. R. 196.2(a). A party seeking to exclude any

matter from discovery must likewise assert any objection or privilege to a request for production

in writing within that response. Id. R. 196.2(b); Bielamowicz v. Cedar Hill Indep. Sch. Dist., 136

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S.W.3d 718, 723 (Tex. App.—Dallas 2004, pet. denied). A failure to timely assert a proper

objection or privilege waives the objection or claim of privilege. TEX. R. CIV. P. 193.2(e);

Bielamowicz, 136 S.W.3d at 723.

Progressive first sought production of Valdez’ tax returns in March 2010. Valdez offered

no objection and asserted no privilege to this request for production. Only when Progressive

sought to compel production and set the matter for hearing on July 1, 2010, did Valdez assert any

objection. At that time, he raised only an oral objection based on relevance. Valdez did not

propose a constitutional privacy argument until he filed a motion to reconsider on July 16, and

failed to raise the Fifth Amendment issue until October 2010. The record indicates Valdez was

not deprived of an opportunity to raise either objection. Accordingly, having filed no timely

written objections to Progressive’s request for production of the tax returns, we hold Valdez

waived his right to contest production. Id.

CONCLUSION

Based on the foregoing, we hold Valdez waived his right to object to the discovery of his

tax returns on constitutional right to privacy and self-incrimination grounds. Having waived this

right, Valdez was thus obligated to comply with the trial court’s orders compelling production of

the returns. His subsequent disobedience of numerous court orders constituted blatant disrespect

for the trial court and the rules of discovery. Valdez’s continued obstruction led the trial court to

dismiss his lawsuit with prejudice. Accordingly, we hold the trial court’s imposition of a death

penalty sanction was not abuse of discretion. We overrule Valdez’s issues and affirm the trial

court’s judgment.

Marialyn Barnard, Justice

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