Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-21-00436-CV
IN RE Thomas TERAN and Ruiz and Sons, Inc.
Original Mandamus Proceeding 1
Opinion by: Beth Watkins, Justice
Sitting: Patricia O. Alvarez, Justice
Beth Watkins, Justice
Lori I. Valenzuela, Justice
Delivered and Filed: March 23, 2022
PETITION FOR WRIT OF MANDAMUS CONDITIONALLY GRANTED
Relators Thomas Teran and Ruiz and Sons, Inc. filed a petition for writ of mandamus
challenging an order granting a motion for protective order and motion to quash certain discovery
relators sought from real party in interest Foundation Surgical Hospital of San Antonio. After
reviewing relators’ petition, Foundation’s response, relators’ reply, and the mandamus record, we
conditionally grant the petition for writ of mandamus.
BACKGROUND
The underlying dispute arises out of an automobile collision between Victor Galvan, the
plaintiff below, and relator Thomas Teran. Galvan alleges that at the time of the collision, Teran
was driving a tractor-trailer owned by relator Ruiz and Sons, Inc. and was acting in the course and
1
This proceeding arises out of Cause No. 2020-CI-02455, styled Victor Galvan v. Thomas Teran and Ruiz and Sons,
Inc., pending in the 166th Judicial District Court, Bexar County, Texas, the Honorable Laura Salinas presiding.
04-21-00436-CV
scope of his employment with Ruiz and Sons. Galvan seeks more than $1,000,000 in damages,
including $500,000 in medical expenses, from defendants Teran and Ruiz and Sons.
Approximately half of Galvan’s claimed medical expenses arise from treatment he received from
Foundation. Because Galvan did not provide Foundation with information on private insurance or
government benefits that would cover his treatment, Foundation considered him a “private pay
patient.” While Foundation presented evidence that its “charges for a given procedure are the same,
irrespective of whether the patient is covered by insurance, Medicare, or private pay,” it also
presented evidence that “[t]he amount the hospital may get paid will vary based on a number of
factors,” including the terms of Foundation’s agreements with insurance providers.
Relators served Foundation—which is not a party to the underlying lawsuit—with a
deposition on written questions and a subpoena duces tecum seeking information on the negotiated
rates Foundation charges private insurers and government payors for the services it provided to
Galvan. Relators contend this information is relevant to their defenses against Galvan’s claims
because it goes to the reasonableness of the “chargemaster” 2 rates Foundation charged for
Galvan’s treatment. Foundation objected to the requested discovery, arguing relators’ requests
were vague and overbroad and the information sought was “immaterial, irrelevant, and not
reasonably calculated to lead to the discovery of admissible evidence”; “sensitive, private,
confidential, proprietary, and protected business information, including trade secrets”; and/or was
information “to which the parties have equal access or is available from other sources, including
public sources.”
On August 6, 2021, Foundation filed a motion for protective order and motion to quash.
Foundation repeated its previous objections and argued that the information relators sought was
2
“Chargemaster” rates are the full or list rates charged to uninsured patients. In re K&L Auto Crushers, LLC, 627
S.W.3d 239, 248 (Tex. 2021) (orig. proceeding).
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“outside the bounds of acceptable discovery from a nonparty.” It also argued the requested
discovery was unduly burdensome. However, in the event the court required the production of the
requested information and documents, Foundation requested “an appropriate protective order or
order of confidentiality” and “the imposition of reasonable conditions to comply with the
subpoena.” As support for its motion, Foundation attached an affidavit from its business manager.
The trial court heard Foundation’s motion on August 23, 2021. During the hearing, relators
stated their discovery requests “track what the Texas Supreme Court said was relevant in” In re
North Cypress Medical Center Operating Co., Ltd., 559 S.W.3d 128 (Tex. 2018) (orig.
proceeding). Relators also stated they were “willing to agree to a protective order” to address
Foundation’s confidentiality and trade secret concerns.
On September 14, 2021, the trial court signed an order granting Foundation’s motion for
protective order and motion to quash without explaining the basis for its ruling. This original
mandamus proceeding followed.
ANALYSIS
Standard of Review and Applicable Law
Mandamus is an extraordinary remedy that is only appropriate to correct a clear abuse of
discretion for which the complaining party lacks an adequate remedy on appeal. K & L Auto, 627
S.W.3d at 247. While a trial court has “broad discretion to decide whether to permit or deny
discovery,” a court’s ruling on a discovery matter may constitute an abuse of discretion if the
decision “is ‘so arbitrary and unreasonable as to amount to a clear and prejudicial error of law.’”
Id. (quoting In re State Farm Lloyds, 520 S.W.3d 595, 604 (Tex. 2017) (orig. proceeding)). A
party seeking mandamus relief may establish that a trial court abused its discretion by showing
“that the trial court could have reached only one conclusion and that a contrary finding is thus
arbitrary and unreasonable” or by demonstrating “that the court erred in determining what the law
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is or applying the law to the facts, even when the law is unsettled.” Id. (internal quotation marks
omitted).
Generally, a party may conduct discovery on “any matter that is not privileged and is
relevant to the subject matter of the pending action.” TEX. R. CIV. P. 192.3(a). Because discovery
is intended to allow courts to decide disputes “based on what the facts reveal, not by what facts
are concealed,” we are required to liberally construe discovery rules “to allow the litigants to obtain
the fullest knowledge of the facts and issues prior to trial[.]” K & L Auto, 627 S.W.3d at 248
(internal quotation marks omitted).
“Evidence of a medical provider’s negotiated rates for private insurers and public payers
is relevant, though not dispositive, when considering the reasonableness of its chargemaster rates.”
In re ExxonMobil Corp., 635 S.W.3d 631, 633 (Tex. 2021) (orig. proceeding) (per curiam); see
also K & L Auto, 627 S.W.3d at 248–49; N. Cypress, 559 S.W.3d at 135. In North Cypress, a case
in which a patient challenged a medical lien based on the reasonableness of her medical provider’s
chargemaster rates, the Texas Supreme Court held the trial court did not abuse its discretion by
requiring the provider to produce:
• “all contracts regarding negotiated or reduced rates for the hospital services provided to
Plaintiff in which [the medical provider at issue] is a party, including those with Aetna,
First Care, United Healthcare, Blue Cross Blue Shield, Medicare, and Medicaid”;
• “the annual cost report [the medical provider at issue is] required to provide to a Medicare
Administrative Contractor . . . as a Medicare certified institutional provider for” specified
years; and
• Medicare and Medicaid reimbursement rates for services performed for the plaintiff.
N. Cypress, 559 S.W.3d at 130. In K & L Auto, the Texas Supreme Court extended its North
Cypress holding to personal injury suits in which a tortfeasor challenges the reasonableness of
chargemaster rates a plaintiff seeks to recover. K & L Auto, 627 S.W.3d at 250–51. The K & L
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Auto court also held that a discovery request that tracks the requests at issue in North Cypress is
“not overbroad as a matter of law.” Id. at 253.
When a party resists discovery on the basis that the requests are unduly burdensome, it
must bring forward evidence to support that complaint. Id. “‘[C]onclusory allegations that the
requested discovery is unduly burdensome’” will not suffice. Id. (quoting In re Alford Chevrolet-
Geo, 997 S.W.2d 173, 181 (Tex. 1999) (orig. proceeding)).
Finally, when a medical provider resists discovery of information regarding its negotiated
rates on the basis that the information is confidential, proprietary, or a trade secret, it must show
“that an appropriate protective order will not address [its] concerns.” K & L Auto, 627 S.W.3d at
256. Before denying discovery of this information “on the ground that the requested documents
contain confidential information or trade secrets,” the trial court must consider “whether it could
permit this discovery while protecting the information.” Id.
Application
Clear Abuse of Discretion
A. Relevance, Overbreadth and Undue Burden
In the challenged discovery requests, relators sought the production of:
• A copy of all contracts in which Foundation is a party with Aetna, Blue Cross Blue Shield,
Humana, United Healthcare, Cigna, Medicare, and Medicaid;
• An annual cost report that Foundation is required to provide to a Medicare Administration
Contractor as a Medicare certified institutional provider for 2020;
• The Medicare and Medicaid reimbursement rates for each of the services Foundation
provided to Galvan; and
• The reimbursement rates Foundation would have been paid for the services it provided to
Galvan pursuant to Foundation’s contracts with Aetna, Blue Cross Blue Shield, Humana,
United Healthcare, and Cigna.
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These discovery requests track those the supreme court approved in K & L Auto and North Cypress.
See K & L Auto, 627 S.W.3d at 246; N. Cypress, 559 S.W.3d at 130. And, as in K & L Auto, the
record shows relators “agreed to narrow [their] requests to the information North Cypress
permitted.” K & L Auto, 627 S.W.3d at 252. Accordingly, as the Texas Supreme Court has held,
the discovery relators seek here is relevant and is not overbroad as a matter of law. Id. at 252–53.
Additionally, while Foundation argued below that relators’ discovery requests are unduly
burdensome, the only support it offered for that argument was its business manager’s conclusory
assertion to that effect. Such evidence is not sufficient to show relators’ requested discovery is
unduly burdensome. K & L Auto, 627 S.W.3d at 253.
For these reasons, to the extent the trial court concluded the requested discovery was
irrelevant, overbroad, or unduly burdensome, it abused its discretion. Id. at 251, 253.
B. Alternative Methods to Challenge Reasonableness
Foundation argues the trial court did not abuse its discretion by quashing the requested
discovery because section 18.001 of the Texas Civil Practice & Remedies Code allows the
reasonableness of medical charges to be challenged by affidavit. See TEX. CIV. PRAC. & REM. CODE
ANN. § 18.001. This argument implies relators do not need the requested discovery because they
can instead “hire experts to opine that [Foundation’s] chargemaster rates are unreasonable.” See K
& L Auto, 627 S.W.3d at 254. However, because an opinion on reasonableness “must be based on
relevant facts and data,” the K & L Auto court rejected a similar assertion, noting that “denial of
discovery here limits [the requesting party] to offering speculative evidence rather than the
providers’ actual agreed rates with insurers and other payors[.]” Id. at 254, 257.
Foundation further notes that some of the information relators seek is publicly available.
“The trial court could certainly limit discovery by excluding information [relators] could obtain
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elsewhere, but it could not simply deny all access to the relevant facts and information because
some of it might be available elsewhere[.]” Id. at 254.
For these reasons, to the extent the trial court quashed the requested discovery based on
section 18.001 or because some of the requested information is publicly available, it abused its
discretion. See id.
C. Confidentiality, Trade Secret, and Protective Order
Finally, Foundation argues that North Cypress, K & L Auto, and ExxonMobil are not
dispositive of its trade secret objections because those opinions “did not overrule the cases setting
forth the standards governing trade secrets.” It cites authority holding that “when a party resisting
discovery establishes that the requested information is a trade secret under Rule 507, the burden
shifts to the requesting party to establish that the information is necessary for a fair adjudication
of its claim or defense.” In re Cont’l Gen. Tire, 979 S.W.2d 609, 610 (Tex. 1998); see also TEX.
R. EVID. 507. Because relators did not file a response to Foundation’s motion for a protective order
and motion to quash, Foundation argues relators did not present “evidence demonstrating the
information was necessary for a fair adjudication of their challenge to the reasonableness of the
charges for Foundation’s treatment of Galvan.” Foundation reasons that relators therefore have not
overcome a presumption that the information they seek is privileged and is not discoverable.
We will assume, without deciding, that Foundation successfully established the requested
discovery contains protected trade secrets or other confidential or proprietary information.
Nevertheless, we disagree with its assertion that North Cypress, K & L Auto, and ExxonMobil are
not dispositive here. In North Cypress, the supreme court noted that the party resisting discovery
did not explain why a protective order “would be insufficient to address its [confidentiality]
concerns.” N. Cypress, 559 S.W.3d at 137. In K & L Auto, the supreme court explained:
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Even if the requested documents contain confidential information or trade secrets,
the providers have not shown that an appropriate protective order will not address
their concerns. . . . [The trial] court should have considered whether it could permit
this discovery while protecting the information, yet the record contains no
suggestion that the court ever did so. To the extent the court denied the discovery
on this ground, we conclude the court abused its discretion.
K & L Auto, 627 S.W.3d at 256 (emphasis added). And in ExxonMobil, the supreme court held:
[T]he providers’ objection that the requests seek confidential information or
protected trade-secret information also fails. A protective order could easily shield
the information from unnecessary disclosure, and the providers failed to establish
why such an order would be insufficient to protect their interests. The trial court
did not state its reasons for denying ExxonMobil’s motion, but to the extent it relied
on concerns about confidentiality or trade secrets, it abused its discretion by failing
to consider whether it could have permitted discovery while issuing a protective
order.
In re ExxonMobil, 635 S.W.3d at 635. The supreme court has previously considered, and rejected,
the suggestion that trade secret information is per se exempt from the rules announced in North
Cypress, K & L Auto, and ExxonMobil. See id.; K & L Auto, 627 S.W.3d at 256; N. Cypress, 559
S.W.3d at 137.
While Foundation correctly notes that North Cypress and its progeny did not cite Texas
Rule of Evidence 507 or overrule any prior supreme court case law, we conclude their outcomes—
and our application of those outcomes to these facts—are consistent with existing trade secret
jurisprudence. Both K & L Auto and ExxonMobil concluded that the discovery at issue went “to
the heart of [the requesting party]’s case—that the providers’ rates were unreasonable” and
therefore unrecoverable. In re ExxonMobil, 635 S.W.3d at 635; K & L Auto, 627 S.W.3d at 256–
57. K & L Auto and ExxonMobil effectively hold that when a tortfeasor challenges the
reasonableness of a medical provider’s chargemaster rates for the plaintiff’s treatment, certain
discovery on the provider’s negotiated rates for the same treatment is necessary for a fair
adjudication of that challenge. Compare In re Cont’l Gen. Tire, 979 S.W.2d at 610, with
ExxonMobil, 635 S.W.3d at 635, and K & L Auto, 627 S.W.3d at 256–57. Additionally, while
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Foundation argues that Texas Rule of Evidence 507 establishes a higher standard than that applied
in North Cypress and its progeny, we note that rule explicitly provides that a responding party may
refuse to disclose trade secret information “unless the court finds that nondisclosure will tend to
conceal fraud or otherwise work injustice.” TEX. R. EVID. 507(a) (emphasis added). Taken
together, Texas Rule of Evidence 507, North Cypress, K & L Auto, and ExxonMobil establish that
under facts like these, the question of whether a trial court should limit discovery of a provider’s
negotiated rates is more appropriately addressed through protective orders and other targeted
rulings, rather than a wholesale denial of discovery. See TEX. R. EVID. 507(c); ExxonMobil, 635
S.W.3d at 635; K & L Auto, 627 S.W.3d at 258; N. Cypress, 559 S.W.3d at 137.
Here, there is no indication that the trial court “considered whether it could permit this
discovery while protecting the information[.]” K & L Auto, 627 S.W.3d at 256. Accordingly, “[t]o
the extent the court denied the discovery on this ground, we conclude the court abused its
discretion.” See id.
No Adequate Remedy by Appeal
Relators argue they lack an adequate remedy on appeal because: (1) the trial court’s denial
of their requested discovery severely compromises their ability to challenge the reasonableness of
Foundation’s chargemaster rates; and (2) because Foundation is a third party, “the missing
discovery . . . cannot be made part of the appellate record or challenged on appeal.” Again, K & L
Auto and ExxonMobil are directly on point and require us to agree with relators. The requested
discovery “is likely relevant and critical to the reasonableness of the medical charges, and it would
be difficult, at best, to determine on appeal whether the lack of discovery erroneously affected the
outcome of the trial.” K & L Auto, 627 S.W.3d at 257; see also In re ExxonMobil, 635 S.W.3d at
635–36. Accordingly, relators lack an adequate remedy by appeal. In re ExxonMobil, 635 S.W.3d
at 635–36; K & L Auto, 627 S.W.3d at 256–57.
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CONCLUSION
As was the case in ExxonMobil, “[t]he facts of this case closely parallel those of K & L
Auto, and that opinion is dispositive of the issues presented here.” ExxonMobil, 635 S.W.3d at 633.
We therefore conditionally grant relators’ petition for writ of mandamus and direct the trial court
to vacate its September 14, 2021 Order on Nonparty Foundation Surgical Hospital of San
Antonio’s Motion for Protective Order and Motion to Quash. As was the case in K&L Auto, our
order is without prejudice to the trial court’s authority to craft an order that adequately protects the
interests at stake and imposes reasonable conditions to comply with the subpoena. See K & L Auto,
627 S.W.3d at 245, 258. The writ will issue only if the trial court fails to comply within fifteen
days of the date of our opinion and order.
Beth Watkins, Justice
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