Smith v. Smith

154 F.R.D. 661, 1994 U.S. Dist. LEXIS 6339, 1994 WL 182814
CourtDistrict Court, N.D. Texas
DecidedMay 10, 1994
DocketCiv. A. No. 3:92-CV-0170-D
StatusPublished
Cited by40 cases

This text of 154 F.R.D. 661 (Smith v. Smith) is published on Counsel Stack Legal Research, covering District Court, N.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Smith v. Smith, 154 F.R.D. 661, 1994 U.S. Dist. LEXIS 6339, 1994 WL 182814 (N.D. Tex. 1994).

Opinion

FITZWATER, District Judge:

This is an appeal from an order of the magistrate judge quashing a trial subpoena duces tecum served on a mediator appointed by a state court. The parties who issued the subpoena contend the mediator’s testimony is necessary to refute plaintiffs claims in the present suit that relate to the settlement of state court lawsuits that the witness mediated. Without approving the magistrate judge’s recognition of a mediator privilege, the court discerns no basis to disturb the order and therefore affirms.

I

Plaintiff Andrew L. Smith (“Andrew”) brings this action against defendants Clayton J. Smith (“Clayton”), Mark L. Smith (“Mark”), Smith Protective Services, Inc. (“SPS”), Smith Fire Equipment, Inc. (“SFE”), and Marcia, Inc. (“Marcia”). In the words of the Fifth Circuit, it “is but another chapter in a protracted internecine feud among [the Smiths].” Smith v. Ayres, 977 F.2d 946, 947 (5th Cir.1992), cert. denied, — U.S. -, 113 S.Ct. 2342, 124 L.Ed.2d 252 (1993). Andrew alleges that his two brothers, Clayton and Mark, with the assistance of SPS’ lawyer, R. Jack Ayres, Jr., Esq. (“Ayres”), colluded to seize control of SPS by rescinding a sale of SPS stock from Clayton to SPS. Andrew sued his brothers in state court, challenging their control rights in SPS, and contending he and his mother, Coralie C. Smith, were the controlling shareholders. Andrew filed a separate state court suit, seeking lost salary and other damages caused by the allegedly wrongful issuance of SPS stock to Clayton. Plaintiff also filed a derivative securities fraud action in federal district court against Ayres, the SPS attorney, alleging that Ayres was liable for his role in procuring the issuance of SPS stock to Mark and Clayton and for the two brothers’ subsequent mismanagement of SPS.1

With the assistance of a mediator appointed by the state district court, Andrew, his mother, and brothers settled the state court suits and executed a settlement agreement that purported to settle all claims and controversies between them. The parties also executed a release. Pursuant to the settlement agreement, plaintiff was to receive $50,000 at the time of closing the settlement agreement, $2.6 million to be paid over a period of 25 years, assignment of SPS’ claims against Ayres in the derivative suit, a 1990 Cadillac sedan, and complete affidavits by Mark and Clayton setting forth their personal knowledge of the involvement of Ayres in the alleged stock fraud scheme. SPS was to purchase all but one of Andrew’s shares and all of his mother’s shares in SPS and SFE at their par value of one cent per share. The agreement provided that in the event of default of any covenant in the agreement, SPS would have 120 days to cure, and if it did not cure within that time, Andrew and his mother could exercise an option to purchase 65% of the authorized shares of SPS for $65,000.2

Andrew brings the instant action, contending defendants misrepresented that they would make a full and complete disclosure of the involvement of Ayres in the alleged SPS stock fraud scheme, as provided in the settlement agreement, and that defendants failed to disclose the pending sale of SFE’s assets to a competitor of SFE, in order to induce Andrew and his mother to sell their SFE stock to defendants for a grossly inadequate [664]*664price. Andrew alleges claims for securities fraud, in violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder; breach of and conspiracy to breach fiduciary duties; violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962(b), (c), and (d) (“civil RICO”); and common law fraud. Andrew also seeks specific performance of the settlement agreement, allowing him to exercise his option to purchase 65% of SPS, and attorney’s fees.

In connection with the trial setting for this case, defendants issued a subpoena duces tecum to Tom James, Esq. (the “Mediator”), the individual who mediated settlement of the state court lawsuits. The subpoena commanded that he appear as a witness at trial and produce and permit inspection and copying of all documents in his possession “relate ing to mediation of Cause No. 86-5798-K, Coralie Smith, et al. v. Clayton J. Smith, et al., in the 192nd Judicial District Court, Dallas County, Texas and Cause No. 84-3652-K in the 192nd Judicial District Court, Dallas County, Texas, Smith Protective Services, Inc. v. Andrew L. Smith.” Defendants seek to introduce the testimony of the Mediator because Andrew contends that Mark and Clayton defrauded him into signing the settlement agreement that resulted from the mediation process. Defendants maintain that the Mediator “is the only impartial witness to the concerns and attitudes expressed by [Andrew] during the private caucus sessions concerning both the affidavits and any disclosure of the future asset sale,” and that the Mediator “is the only impartial witness to defendants’ conduct and their statements concerning the affidavits during their private caucus sessions.” Defendants urge that “[b]ecause [Andrew] alleges fraud, his conduct, state of mind, words and actions during the mediation immediately before the time he alleges he was defrauded are highly probative of any reliance he placed upon the alleged representations.” They contend their own statements and conduct during their private sessions with the Mediator are likewise “extremely important for the jury to be able to consider.”

The Mediator moved to quash the subpoena or, in the alternative, for a protective order. He argued that the requested testimony was prohibited by Tex.Civ.Prac. & Rem.Code Ann. § 154.073 (West Supp.1994), and Rule 12 of the Rules for Mediation promulgated by the state District Courts of Dallas County, Texas (the “Dallas District Court Mediation Rules”), and that any evidence would be inadmissible pursuant to Fed.R.Evid. 408. Amicus curiae The Association of Attorney-Mediators, Inc. (“AAM”) supported the Mediator’s motion.

The court referred the motion to the magistrate judge, who decided in favor of the Mediator and quashed the subpoena. The magistrate judge began his written order by assuming that the Mediator’s testimony would not be rendered inadmissible by Rule 408. He found it unnecessary to decide whether Texas law and the Dallas District Court Mediation Rules were binding on this court because comity and the expectations of the Mediator and the parties at the time the mediation was conducted required this court to give due deference to the Texas law and rules. The magistrate judge then held that a nediator privilege applied, he assumed the privilege was a qualified one, and on the basis of the facts presented, he decided for public policy reasons that the privilege outweighed defendants’ interest in obtaining the Mediator’s records and testimony.

Defendants seek to overturn the magistrate judge’s order on four grounds.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
154 F.R.D. 661, 1994 U.S. Dist. LEXIS 6339, 1994 WL 182814, Counsel Stack Legal Research, https://law.counselstack.com/opinion/smith-v-smith-txnd-1994.