The Fifth District of Texas Holds Confidentiality Protections Afforded by the Texas Civil Practice and Remedies Code Apply to Mediations

The Fifth District of Texas has held that an order which compelled discovery and the testimony of the attorney for a party to a mediation settlement violated the confidentiality protections afforded by the Texas Civil Practice and Remedies Code.

In In re Empire Pipeline Corp., No. 05-10-01044-CV, (Tex.-App.—Dallas Sept. 15, 2010), the relators, Empire Pipeline Corporation, Empire Exploration, L.P. and Empire Exploration Corporation, sought relief in a mandamus proceeding from a trial court order which granted the opposing party’s motion to compel discovery and to compel testimony relating to a mediation settlement between the party and the relators.

H. Glenn Gunter sued the realtors in early 2006 alleging breach of an oil and gas exploration contract, “among other theories.” Both parties signed a settlement agreement during a December 2007 mediation. The relators’ attorney, Robert L. Harris, was present at the mediation. Shortly thereafter, Gunter moved to “’vacate’ the agreement” on the grounds that it was invalid and unenforceable due to duress and fraud, among other reasons. The relators responded to Gunter’s motion and requested a judgment which enforced the settlement agreement and dismissed Gunter’s claims. On March 25, 2008, after an evidentiary hearing, the trial judge issued an order enforcing the agreement and dismissing Gunter’s claims without prejudice.

Gunter appealed and while the appeal was pending sought a declaratory judgment against the relators. Harris, the relator’s attorney, was served a Notice of Deposition duces tecum which stated that Harris’ deposition would be taken and requested Harris to produce:

(1) all documents in the nature of notes and drafts from the mediation in this case held on or about December 12-13, 2007; (2) any form overriding royalty agreements or assignments to which he has access or which he utilizes or has utilized; and (3) all drafts or final version of overriding royalty agreements or assignments relating to Relators.

On April 20, 2010 Gunter filed a motion to compel discovery which sought Harris’ deposition and the production of the requested documents. The relators counterclaimed asserting mediation, attorney-client and attorney work-product privileges, and argued the request was beyond the proper scope of discovery. Gunter filed an answer which asserted various affirmative defenses against the agreement, including withdrawal of consent, duress and coercion, mistake and fraudulent inducement.

On July 9, 2010, the trial court signed an order following a hearing which granted in part and denied in part Gunter’s motion to compel. The order allowed for the deposition of Harris and the production of “any notes or drafts or documents given to the mediator or [Gunter . . . in connection the mediation or the preparation of documents relating to the alleged mediated settlement agreement.” The relators then sought relief in a mandamus proceeding before the Texas Fifth Court of Appeals, contending that the trial court abused its discretion in granting the order and that no adequate remedy could exist by appeal.

In conditionally granting relators request for mandamus, the Fifth District noted that the confidentiality of mediation proceedings is protected by Texas Civil Practice and Remedies Code Section 154.073. Gunter contended that the confidentiality protection is not absolute and relied on Avary v. Bank of America (72 S.W.3d 779 (Tex.App.—Dallas 2002, pet. Denied)) and “two additional cases [which] Gunter asserts ‘underscore the continuing validity of Avary.’”

In Avary, the Texas Fifth District Court of Appeals permitted discovery related to a court-ordered mediation settlement arising from a wrongful death claim. At the conclusion of the settlement, the guardian of the decedent’s estate sued the executor of the estate for breach of fiduciary duty, fraud, negligence and conspiracy. The executor moved for summary judgment, arguing that Section 154.073 rendered all communications during the mediation confidential. On appeal, the Court of Appeals reversed and remanded the lower court’s grant of the executor’s summary judgment. While making it clear that the holding was limited to the very specific facts before it, the Avary Court concluded that “only that where a claim is based upon a new and independent tort committed in the course of the mediation proceedings, and that tort encompasses a duty to disclose, section 154.073 does not bar discovery of the claim where the trial judge finds . . . disclosure is warranted.”

As Gunter’s attempts to compel testimony and discovery were not “based on a ‘new and independent tort,’ the pursuit of which would not disturb the settlement reached at the mediation proceeding,” the narrow holding of Avary was not applicable. Likewise, the Court was not persuaded by Gunter’s argument that Cadle Co. v. Castle (913 S.W.2d 627 (Tex. App.—Dallas 1995, writ denied)) “renders the confidentiality provisions of chapter 154 of the civil practice and remedies code inapplicable on these facts.”

The Court concluded that “all such discovery is barred by sections 154.073(a) and 154.073(b) of the civil practice and remedies code. . . [a]ccordingly, . . . the trial court abused its discretion by ordering the testimony and production of documents at issue.” The Court further concluded that the rights of the relators and Harris “would be materially affected by disclosure of the confidential information at issue” and that “Relators have shown that the trial court abused its discretion and that they have no adequate remedy by appeal.”

The Court granted relator’s request for a writ of mandamus, unless the lower court vacates its July 9, 2010 order and denies Gunter’s “’Motion to Compel Discovery’ to the extent that motion pertains to such deposition and documents.”

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