in Re Natural Gas Consulting & Measurement, LLC and J.P. Davis, Relators ( 2018 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-18-00309-CV
IN RE NATURAL GAS CONSULTING & MEASUREMENT, LLC AND J. P. DAVIS,
RELATORS
OPINION ON MOTION FOR REHEARING IN AN
ORIGINAL PROCEEDING FOR WRIT OF MANDAMUS
October 10, 2018
MEMORANDUM OPINION ON MOTION FOR REHEARING
Before QUINN, C.J., and PIRTLE and PARKER, JJ.
Natural Gas Consulting & Measurement, LLC, and J.P. Davis (Natural Gas)
petitioned for a writ of mandamus. We originally denied the petition because Natural Gas
failed to comply with applicable rules of appellate procedure. The relators filed a timely
motion for rehearing wherein they represented that actions were taken to correct the
deficiencies in the petition. Their representation is correct. Consequently, we grant the
motion for rehearing, withdraw our prior opinion denying the writ, and grant the petition in
part.
Natural Gas asked us to issue a writ of mandamus directing the Honorable Ana
Estevez, 251st District Court, Randall County (trial court), "to vacate her August 3, 2018
Ruling requiring Relator NGCM to identify by August 13, 2018, and later produce one or
more witnesses to testify on its behalf, who may not assert the Fifth Amendment self-
incrimination privilege without risking sanctions." Since the relators initially filed their
petition, the trial court executed another order signed on September 14, 2018 directing 1)
the relators to designate, within ten days, "one or more corporate representative(s) for
deposition and that such representative(s) shall not have available to him/them the Fifth
Amendment privilege against compelled self-incrimination"; and 2) that "[i]n the event that
such representative(s) attempt to invoke the Fifth Amendment sanctions will be ordered
for the deposition that took place on May 18, 2018 and for the second deposition of
Defendant Natural Gas Consulting & Measurement, LLC." Natural Gas contends that 1)
"[t]here is no absolute rule" preventing "the sole member and only knowledgeable
representative of a limited liability company from invoking the Fifth Amendment right
against compelled self-incrimination; and 2) "[r]elators should not be forced to elect
between asserting their constitutional rights or facing sanctions by the trial court." We
answer "yes" and "no."
The dispute arises from a civil suit wherein Amarillo Natural Gas, Inc., Paisano
Natural Gas, Inc., Paisano Pronto, Ltd. and William Leslie Price (collectively referred to
as Amarillo Gas) sued Natural Gas for damages. The conduct underlying the suit
allegedly involves fraud, bribery, mail fraud, wire fraud, falsification of data, theft,
breached fiduciary duty, conversion, and conspiracy. Amarillo Gas sought to depose
various witnesses including Natural Gas LLC and Davis. The latter two apparently
invoked the right to refrain from incriminating themselves. Amarillo Gas’s attempt to
obtain the deposition of Natural Gas L.L.C. via a corporate representative (coupled with
2
various motions and responses thereto and hearings thereon) resulted in the trial court
entering the aforementioned September 14th order. The trial court found, during the
hearing upon those motions, that "a corporate representative cannot plead the Fifth
Amendment on an issue that has been designated when he is being deposed as a
corporate representative." The court also said: "[i]f you choose to give Mr. Davis or
someone that has these Fifth Amendment rights [in] their individual capacity, then the
Court is finding that they do not apply as a corporate rep. It is not a waiver. I am saying
there is no applications. So he will not be able to plead the Fifth."
That the rules of civil procedure permit Amarillo Gas to conduct the deposition of
a corporation is not in dispute. Nor is it disputed that a corporation noticed for deposition
is obligated to designate one or more individuals to testify on its behalf. TEX. R. CIV. P.
199.2(b)(1). To the extent that the September 14th order assures that right and mandates
compliance with that duty, we find no fault with it. Concern arises with regard to the
implications that the order has on the Fifth Amendment privilege against self-incrimination
which may be invoked by the corporate representative. See U.S. CONST. amend. V
(stating that "[n]o person . . . shall be compelled in any criminal case to be a witness
against himself). Though the Fifth Amendment itself refers to "any criminal case," its
protection included incrimination in both civil and criminal proceedings. In re Becker, No.
07-18-00230-CV, 2018 Tex. App. LEXIS 5273, at *4-5 (Tex. App—Amarillo July 11, 2018,
orig. proceeding).
A corporation and its human representatives are two distinct entities. Moreover, a
corporation, like other "artificial entities" has no right under the Fifth Amendment of the
United States Constitution to avoid incriminating itself. Braswell v. United States, 487
3
U.S. 99, 102-103, 108 S. Ct. 2284, 101 L. Ed. 98 (1988); In re Russo, 550 S.W.3d 782,
788 (Tex. App.—Houston [14th Dist.] 2018, orig. proceeding). This verity has been used
to require corporate representatives who are the custodian of corporate records to
produce those records even though doing so may tend to incriminate the representative.
In re Russo, 550 S.W.3d at 788. Yet, it is just as true that the same representative cannot
be made to incriminate himself via "his own oral testimony." Braswell v. United States,
487 U.S. at 114 (quoting Curcio v. United States, 354 U.S. 118, 77 S. Ct. 1145, 1 L. Ed. 2d
1225 (1957) (emphasis added). And, in Texas, no one can deny that a person acting on
behalf of a corporation may be held criminally responsible for the conduct taken on behalf
of the corporation. See TEX. PENAL CODE ANN. § 7.23(a) (West 2011) (stating that "[a]n
individual is criminally responsible for conduct that he performs in the name of or in behalf
of a corporation or association to the same extent as if the conduct were performed in his
own name or behalf."); Ex parte Canady, 140 S.W.3d 845, 850 (Tex. App.—Houston [14th
Dist.] 2004, no pet.) (stating the same). From these, we derive the answer to the question
at hand. The trial court may compel a corporate representative to appear for deposition
and testify on behalf of the corporation. So too may it order the custodian of corporate
books and records to produce same despite the chance that doing so incriminates both
the custodian and the corporation. But, the trial court may not compel the representative
designated to testify on behalf of the "artificial entity" to provide oral testimony that would
incriminate himself.
Next, we turn to the question of being sanctioned for invoking the right against self-
incrimination. To that end we note the Texas Supreme Court’s admonishment that
"[g]enerally, the exercise of the privilege [against self-incrimination] should not be
4
penalized." Texas Dept. of Public Safety Officer’s Assn. v. Denton, 897 S.W.2d 757, 760
(Tex. 1995). This admonishment was founded upon United States Supreme Court
precedent recognizing that "‘[t]he Fourteenth Amendment [to the United States
Constitution] secures against state invasion the same privilege that the Fifth Amendment
guarantees against federal infringement — the right of a person to remain silent unless
he chooses to speak in the unfettered exercise of his own will, and to suffer no penalty
. . . for such silence.’" Spevack v. Klein, 385 U.S. 511, 515, 87 S. Ct. 625, 17 L. Ed. 2d
574 (1967) (quoting Malloy v. Hogan, 378 U.S. 1, 8, 84 S. Ct. 1489, 12 L. Ed. 2d 653
(1964)) (emphasis added). Furthermore, the concept of penalty encompasses not only
fines and imprisonment but also the imposition of any sanction rendering costly the
assertion of the right to remain silent. Id. at 515 (involving the sanction of disbarment).
We do note that the general rule against penalizing the invocation of the right does
not bar a trial court from taking steps to ensure that civil proceedings remain fair. Texas
Dept. of Public Safety Officer’s Assn. v. Denton, 897 S.W.2d at 760. But the steps are
limited in both situation and extent. If plaintiff or a like party seeking affirmative relief uses
his Fifth Amendment privilege to shield from disclosure outcome determinative data
otherwise unavailable to the party against whom relief is sought, then sanctions may
issue. Id. at 760-61. Yet, even then, those sanctions must be appropriate to the
circumstances. Id. at 763.
Next, we apply the foregoing to the situation at hand. To the extent that Amarillo
Gas seeks the discovery of books and records belonging to Natural Gas, the trial court
can compel their disclosure via a deposition of its designated corporate representative
and sanction the representative for invoking the Fifth Amendment as a shield against their
5
disclosure. To the extent that oral testimony is sought from the corporate representative
which may incriminate that representative, the trial court may not prohibit him or her from
invoking the Fifth Amendment privilege. Nor may it sanction the representative if the
privilege is invoked outside the circumstances contemplated by the Denton court when
discussing the offensive use doctrine. Such distinctions are not drawn by the trial court
in its September 14th order. Instead, it imposes a blanket prohibition against invocation
of the privilege and proposes to levy sanctions for the invocation of the right in any
instance. That is a clear abuse of the discretion inherent in a trial court’s authority to
regulate discovery, and a clear abuse of discretion satisfies the first prerequisite for
issuing mandamus relief. See In re H.E.B. Grocery Co., L.P., 492 S.W.3d 300, 302 (Tex.
2016) (orig. proceeding) (per curiam) (stating that mandamus is an extraordinary remedy
granted when the relator shows that the trial court abused its discretion and that no
adequate appellate remedy exists); In re Becker, 2018 Tex. App. LEXIS 5273, at *1
(stating the same).
Furthermore, placing the representative in the dilemma of either relinquishing his
right to remain silent and suffer sanctions or of complying with the judicial edict and
incriminating himself is not a circumstance susceptible to easy remedy post-judgment.
Words spoken cannot be unspoken; words uttered by the representative that incriminate
him cannot be made to disappear via a reversal on appeal. Consequently, the second
prerequisite for issuing mandamus relief exists, as well. Indeed, our Supreme Court has
recognized that a writ of mandamus is available to address discovery orders requiring the
disclosure of information subject to a privilege. In re Nat’l Lloyds Ins. Co., 532 S.W.3d
6
794, 802-803 (Tex. 2017) (orig. proceeding). The right to avoid self-incrimination is a
privilege of constitutional magnitude.
We see from the record before us that the trial court was quite conscious of the
circumstances and took care to tread as cautiously as it could. That leads us to believe
that it also will be amenable to vacating its September 14th order and issuing another
complying with the legal parameters mentioned here (should it care to again compel
discovery). Should it not vacate the order within thirty (30) days, we will issue a writ of
mandamus mandating that it be done.
Brian Quinn
Chief Justice
7