NUMBER 13-07-401-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
IN RE: RENE R. GARZA
On Petition for Writ of Mandamus and
Motion for Emergency Temporary Relief
MEMORANDUM OPINION
Before Justices Yañez, Rodriguez, and Garza
Memorandum Opinion Per Curiam
By writ of mandamus, relator, Rene R. Garza, asks this Court to compel the trial court to withdraw its order requiring Garza to provide testimony, despite his assertion of the Fifth Amendment privilege against self-incrimination, or suffer abatement of his civil lawsuit. See U.S. Const. amend. V; Tex. Const. art. I, § 10. We conditionally grant the petition for writ of mandamus.
Background
Garza worked for Palm Valley Health Care, Inc. ("Palm Valley"), a licensed home-health care service partially owned by Garza'a aunt, Idalia Canales. Canales terminated Garza, and Garza consequently brought suit against Palm Valley and Canales for breach of contract, fraud, fraudulent inducement, negligent misrepresentation, unjust enrichment, promissory estoppel, and quantum meruit. Garza alleged that Canales failed to pay him for his services and failed to provide compensation in accordance with oral and written agreements between the parties.
During his deposition, Garza asserted his Fifth Amendment privilege against self-incrimination and refused to answer certain questions about his knowledge of alleged illegal activities that occurred at Palm Valley. Specifically, counsel for real parties warned Garza that the answers to certain questions "may implicate you in criminal activity." Counsel then asked Garza several questions regarding whether he was aware of any criminal wrongdoing by Canales while he worked at Palm Valley. Garza pleaded the Fifth Amendment privilege against self-incrimination in response to these questions.
Real parties filed a motion to compel. On June 18, 2007, the trial court signed an order compelling relator to answer questions to which he asserted the privilege against self-incrimination and ordering that "failure to abide by this Order will result in an abatement of this case." The following day, the trial court entered an order staying its order on the motion to compel.
Garza filed a petition for writ of mandamus and emergency motion for expedited consideration on June 21, 2007. The Court granted relator's motion for expedited consideration and requested that real parties in interest file a response to relator's petition for writ of mandamus on or before June 29, 2007. Real parties in interest, Palm Valley and Idalia Canales, filed a motion for emergency stay on grounds that this matter was set for trial on Monday, June 25, 2007. This Court granted the motion for emergency stay and ordered all proceedings in the trial court stayed pending further order of this Court, or until the case is finally decided. See Tex. R. App. P. 52.10(b) ("Unless vacated or modified, an order granting temporary relief is effective until the case is finally decided.").
Relator contends the trial court abused its discretion in granting the motion to compel because (1) the trial court failed to properly inquire whether Garza's refusal to answer was based upon good faith and was justifiable under all of the circumstances, and (2) he did not waive his Fifth Amendment privilege through the offensive use doctrine. Relator argues that he should not have to choose between his constitutional privilege against self-incrimination and his right to access the courts. In contrast, real parties in interest contend that Garza's refusal to testify constitutes an offensive use of the Fifth Amendment privilege which justifies the trial court's abatement of the suit. According to real parties in interest, testimony regarding the nature and extent of the alleged illegal activities "go to viability and value of [Palm Valley] and to the merit of Garza's equitable claims," and the information withheld leaves real parties without the ability to present and prepare their defense to Garza's contract, tort, and equitable claims.
Mandamus
Mandamus is an extraordinary remedy, which will issue only to correct a clear abuse of discretion or a violation of a duty imposed by law when there is no adequate remedy by appeal. In re Ford Motor Co., 165 S.W.3d 315, 317 (Tex. 2005); Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992). A trial court abuses its discretion when it errs in determining what the law is or in applying the law to the facts. In re Bruce Terminix Co., 988 S.W.2d 702, 703 (Tex. 1998).
If a trial court denies a witness's assertion of the privilege against self-incrimination, the witness can challenge that ruling by a petition for writ of mandamus. That is to say, mandamus is appropriate for constitutional protections like the privilege against self-incrimination that an appeal could not adequately protect. See Tilton v. Marshall, 925 S.W.2d 672, 682 (Tex. 1996) (orig. proceeding); In re Speer, 965 S.W.2d 41, 45 (Tex. App.-Fort Worth 1998, orig. proceeding); Gebhardt v. Gallardo, 891 S.W.2d 327, 329-30 (Tex. App.-San Antonio 1995, no writ); see also In re Verbois, 10 S.W.3d 825, 827-828 (Tex. App.-Waco 2000, orig. proceeding).
Privilege against Self-Incrimination
The United States Constitution and the Texas Constitution guarantee a person may not be compelled to testify or give evidence against himself. See U.S. Const. amend. V; Tex. Const. art. I, § 10; see Maness v. Meyers, 419 U.S. 449, 464; In re Lowe, 151 S.W.3d 739, 745 (Tex. App.-Beaumont 2004, pet. denied); In re Speer, 965 S.W.2d at 45. The privilege may be asserted in civil cases when "the answer might tend to subject to criminal responsibility him who gives it." Texas Dep't of Pub. Safety Officers Ass'n v. Denton, 897 S.W.2d 757, 760 (Tex. 1995) (quoting McCarthy v. Arndstein, 266 U.S. 34, 40 (1924)). Blanket assertions of the privilege in civil cases are impermissible. See In re Lowe, 151 S.W.3d at 745; In re Commitment of Browning, 113 S.W.3d 851, 865 (Tex. App.-Austin 2003, pet. denied). Rather, the privilege must be asserted on a question-by-question basis. In re Lowe, 151 S.W.3d at 745; In re Commitment of Browning, 113 S.W.3d at 865; In re Verbois, 10 S.W.3d at 828.
In a civil suit, a witness's decision to invoke the privilege against self-incrimination is not absolute. In re Speer, 965 S.W.2d at 46; see Ex parte Butler, 522 S.W.2d 196, 198 (Tex. 1975). In Butler, the Supreme Court explained that:
The judge is entitled to determine whether the refusal to answer appears to be based upon the good faith of the witness and is justifiable under all of the circumstances. The inquiry by the court is necessarily limited, because the witness need only show that an answer to the question is likely to be hazardous to him; the witness cannot be required to disclose the very information which the privilege protects. Before the judge may compel the witness to answer, he must be "'perfectly clear, from a careful consideration of all the circumstances in the case, that the witness is mistaken, and that the answer(s) cannot possibly have such tendency' to incriminate." Hoffman v. United States, 341 U.S. 479, 95 L. Ed. 1118, 71 S. Ct. 814 (1951).
Id.; see In re Lowe, 151 S.W.3d at 745; In re Speer, 965 S.W.2d at 46. It is the trial court's duty to consider the witness's evidence and argument on each individual question and determine whether the privilege against self-incrimination is meritorious. In re Speer, 965 S.W.2d at 46; see In re Lowe, 151 S.W.3d at 746. More particularly, upon a party's assertion of the Fifth Amendment privilege to a discovery request, the trial court reviews the discovery request, applies the law of privilege, discovery, and protection to the request, and determines how best to protect the privilege, the right to proceed with the case, and the right to defend the suit. See generally In re R.R., 26 S.W.3d 569, 574 (Tex. App.-Dallas 2000, orig. proceeding); In re Speer, 965 S.W.2d at 45-46. In a civil suit, a fact finder may draw an adverse inference against a party who pleads the Fifth Amendment. See Tex. R. Evid. 513(c); Denton, 897 S.W.2d at 760; In re Edge Capital Group, Inc., 161 S.W.3d 764, 767 (Tex. App.-Beaumont 2005, orig. proceeding); Texas Capital Secs., Inc. v. Sandefer, 58 S.W.3d 760, 779 (Tex. App.-Houston [1st Dist.] 2001, pet. denied).
Ordinarily, a court should not penalize a party's assertion of the privilege. Spevack v. Klein, 385 U.S. 511, 515 (1967). However, a party must not assert the privilege in a way that renders the civil proceeding unfair. Denton, 897 S.W.2d at 760. When a claimant seeks to withhold pertinent information from a defendant by asserting his privilege against self-incrimination, he transforms his Fifth Amendment shield into a sword. Id. at 760-61. Three factors must be considered before we may determine whether a party has made an offensive use of his privilege: (1) whether the party asserting the privilege is seeking affirmative relief; (2) whether the party is using the privilege to protect outcome determinative information; and (3) whether the protected information is not otherwise available to the defendant. Id.; Republic Ins. v. Davis, 856 S.W.2d 158, 161 (Tex. 1993); Marshall v. Ryder Sys., 928 S.W.2d 190, 195 (Tex. App.-Houston [14th Dist.] 1996, writ denied). If any one of these requirements is not met, the trial court must uphold the privilege. Republic Ins., 856 S.W.2d at 163.
A trial court has the authority to respond to an offensive use of an evidentiary privilege by imposing the sanctions authorized by the rules of procedure. Denton, 897 S.W.2d at 759. A trial court can ultimately dismiss a party's claims for failing to comply with an order for discovery, but only after first satisfying the procedures governing sanctions. In addition, before imposing a sanction, the trial court must consider whether remedial steps short of sanctions can alleviate the problem. Id. Then, assuming they cannot, the trial court must determine whether a lesser sanction would satisfy the legitimate purpose of the sanction before imposing a death penalty sanction. Id.
Analysis
In asserting his Fifth Amendment right against self-incrimination, Garza has shown that the answers at issue in this case are likely to be hazardous to him. See Butler, 522 S.W.2d at 198. Real parties do not suggest otherwise, and, in fact, warned Garza that his responses to certain questions "may implicate you in criminal activity." However, real parties in interest contend that the trial court acted within its discretion in sanctioning Garza for asserting his Fifth Amendment right against self-incrimination because Garza was making an offensive use of the privilege.
As stated previously, an offensive use of the privilege occurs when: (1) the party asserting the privilege is seeking affirmative relief; (2) the party is using the privilege to protect outcome determinative information; and (3) the protected information is not otherwise available to the defendant. Denton, 897 S.W.2d at 760; Republic Ins., 856 S.W.2d at 161.
In the instant case, relator was seeking to hold real parties in interest liable for, inter alia, fraud and breach of contract. Relator was unquestionably seeking affirmative relief for his claims. Accordingly, relator meets the first of the three requirements for an offensive use of the privilege. Denton, 897 S.W.2d at 760.
The second prong of the test for an offensive use requires that "the privileged information sought must be such that, if believed by the factfinder, in all probability it would have been outcome determinative of the cause of action asserted . . . . The confidential communication must go to the very heart of the affirmative relief sought." Id. at 761 (quoting Republic Ins., 856 S.W.2d at 161).
Real parties argue that the requested discovery is relevant to the valuation of Palm Valley for purposes of measuring potential damages under any of relator's legal or equitable claims for relief, but also determines the outcome of the causes of action. Real parties contend that if Garza was aware of, or participated in, alleged illegal activities at Palm Valley, Garza's claims in law and equity would be defeated by his participation or acquiescence to such conduct.
We reject real parties' argument that the requested discovery is outcome-determinative because it could affect the amount of potential damages. Under the test articulated by the Texas Supreme Court, this criterion for an offensive use of the privilege against self-incrimination concerns the liability of the parties and not the calculation or amount of damages. See id.
Garza's causes of action are based on alleged misrepresentations regarding ownership interests in Palm Valley and breach of an oral agreement, also pertaining to ownership of the company. Garza's causes of action are also based on a written employment agreement which promised a base salary, an annual incentive bonus tied to net profits, and compensation equal to half of the value of the company upon a "triggering event."
Information regarding Garza's knowledge of alleged illegal activities at Palm Valley is not outcome determinative regarding whether or not Canales made misrepresentations to Garza or whether Canales breached an oral or written contract with Garza. Moreover, based on the record before us, any such information would not affect Garza's alleged ownership interests in Palm Valley. However, while this information is not relevant to the breach of contract and similar issues, it could directly affect Garza's equitable causes of action. Knowledge of alleged illegal activities would, in all probability, be outcome-determinative of Garza's causes of action for unjust enrichment, promissory estoppel, and quantum meruit. Accordingly, the second requirement to establish an offensive use of the privilege has been met. See id.
Under the third requirement to establish an offensive use, the protected information must not be otherwise available to the defendant. Denton, 897 S.W.2d at 761. That is, disclosure of the confidential communication must be the only means by which the aggrieved party can obtain the evidence. Id.
Relator refused to answer questions about alleged illegal activity on the part of Canales. Canales is clearly another source for this information. While real parties argue that they are entitled to discovery of Garza's knowledge of Canales's alleged illegal activities, requiring each witness to testify regarding his or her own personal knowledge of alleged illegal activities would eviscerate the utility of this prong of the offensive use test. Accordingly, the third requirement for an offensive use has not been satisfied.
Conclusion
Real parties in interest have failed to meet the requirements delineated by the Texas Supreme Court to establish that Garza was making an offensive use of the privilege against self-incrimination. See id. Accordingly, the trial court abused its discretion in sanctioning Garza by granting the motion to compel Garza to answer the specified questions and abating the suit until Garza testified.
We lift the stay previously imposed by this Court. See Tex. R. App. P. 52.10(b). We direct the trial court to vacate its order compelling Garza to testify and abating the lawsuit until Garza has testified. In further conducting proceedings in this matter, the trial court is entitled to determine whether Garza's refusal to answer questions based on his asserted Fifth Amendment right against self-incrimination appears to be based upon good faith and is justifiable under all of the circumstances. See Butler, 522 S.W.2d at 198. Upon Garza's assertion of the Fifth Amendment privilege to a discovery request, the trial court should review the discovery request, apply the law of privilege, discovery, and protection to the request, and determine how best to protect the privilege, the right to proceed with the case, and the right to defend the suit. See In re Edge Capital Group., Inc., 161 S.W.3d at 768. While the trial court should not penalize Garza for asserting the privilege, as with an abatement, it can take acts to ensure that the civil proceeding remains "fair." See Denton, 897 S.W.3d at 760. For instance, when a plaintiff invokes the privilege against self-incrimination, the trial court can subsequently prohibit the plaintiff from introducing evidence on the subject, and such an act of judicial discretion does not constitute penalizing the plaintiff's use of the privilege. Id. The trial court can also allow an adverse inference to be drawn against Garza. See Tex. R. Evid. 513(c); Denton, 897 S.W.2d at 760.
We conditionally grant the petition for writ of mandamus for the reasons stated herein. The writ will issue only if the trial court fails to act in accordance with this opinion.
PER CURIAM
Memorandum Opinion delivered and
filed this the 6th day of August, 2007.