TierOne Converged Networks, Inc. v. Parman, Mark ( 2013 )

REVERSE and REMAND; and Opinion Filed July 9, 2013.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-12-00026-CV
TIERONE CONVERGED NETWORKS, INC., Appellant
V.
MARK PARMAN, Appellee
On Appeal from the 193rd Judicial District Court
Dallas County, Texas
Trial Court Cause No. 08-07631
MEMORANDUM OPINION
Before Justices Moseley, Bridges, and Lang-Miers
Opinion by Justice Moseley
TierOne Converged Networks, Inc. (TierOne) appeals an adverse judgment in favor of
Mark Parman, which was entered following a jury verdict. In three issues, TierOne argues (1)
the trial court erred by excluding evidence discovered after the trial began; (2) discovery of the
evidence constitutes good cause for setting aside the judgment and granting a new trial; and (3)
the trial court erred by refusing to grant a recess or mistrial on account of the newly discovered
evidence. The background and facts of the case are well-known to the parties; thus, we do not
recite them here in detail. Because all dispositive issues are settled in law, we issue this
memorandum opinion. TEX. R. APP. P. 47.2(a), 47.4. We sustain TierOne’s first issue, do not
reach its second and third issues, reverse the trial court’s judgment, and remand the case for
further proceedings.
The trial began on August 2, 2011. Parman’s evidence included testimony from two
witnesses: TierOne’s Chief Financial Officer—who was an adverse witness—and Parman.
Parman testified that he was a co-founder and Director of Marketing for TierOne. When TierOne
began business, Parman was issued 4 million shares of common stock and 500,000 shares of
preferred stock in TierOne. Parman was given two stock certificates, and he kept the certificates
in an unlocked filing cabinet in his office. Parman was out of the office for three to four weeks
due to a medical emergency and, when he returned, he discovered “that the certificates had been
voided;” someone wrote “void” on the stock certificates. He looked at the certificates “in
disbelieve [sic] for a while” and then told his co-founder that they needed to talk. After their
conversation, Parman returned the certificates to the unlocked filing cabinet. Parman testified an
unidentified person later took the stock certificates from the filing cabinet. He did not have any
copies of the stock certificates. Parman sued TierOne for conversion.
TierOne presented evidence that Parman never owned stock in TierOne and also that
Parman could have received stock in the future, but such a receipt was contingent on events that
never occurred.
On the evening of Wednesday, August 3, 2011, after the second day of trial, Jeffrey
Lowenstein, TierOne’s counsel, received an email from Scott Hillstrom, a lawyer who had not
been involved in this case. (Hillstrom had clients who were adverse to TierOne and Parman in a
different lawsuit.) The email contained an audio recording of a telephone conversation between
Hillstrom and Parman. The following day, Lowenstein provided a copy of the recording to
Parman’s lawyer. TierOne sought to use the audio recording at trial, but Parman objected on the
grounds that it was not timely disclosed. TierOne made an offer of proof.
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Hillstrom was the only witness to testify at the offer of proof. He testified he first talked
to Lowenstein on Monday, August 1, 2011. On August 3, 2011, Hillstrom was looking for a
document in his files and he found the recording, which he sent to Lowenstein at approximately
8:15 p.m. Hillstrom testified the audio file “does include statements by Parman to the effect that
he does not own any stock in TierOne, and I had heard that that issue was a central issue in this
case. So I first discovered this fact on Wednesday night, and that’s when I supplied this
recording. Even I didn’t know that information was in this recording until that night.” He also
testified: “So the same night I discovered [the audio file], I e-mailed it to [Lowenstein]. It’s the
first I knew it was there, and it’s the first that TierOne’s counsel knew it existed.” Likewise, no
one from TierOne knew the recording existed.
The recorded telephone conversation between Hillstrom and Parman, which occurred on
May 16, 2008, includes the following exchanges: 1
Hillstrom: Are you sure you’re not a shareholder [of] TierOne?
Parman: [No], man, I’ve got no stock, no nothing, buddy.
Hillstrom: Who owns most of the stock?
Parman: [Kevin. It’s in the memorandum. Six and a] half million shares.
Ron and [Kim], I think, each got 2.2 million over time. It’s all in the
memorandum.
Hillstrom: Yeah, right.
Parman: You know. I mean, you know- -
Hillstrom: Why didn’t you get any? I had heard that you were instrumental
in this whole process.
Parman: Look, man, some things are worth having; [and] some things
aren’t worth having. Okay? Look, I’ve got my own beliefs.
...
Parman: [I’m no longer, um, uh, an employee] of TierOne. I don’t own
any stock. I’m not a director [nor was I ever a director] or an officer of the
company. . . .
...
1
At the offer of proof, the court reporter transcribed the portions of the recorded conversation that were played to the trial court. We also
listened to the audio file and determined the court reporter’s transcription is reasonably accurate. Therefore, we quote the court reporter’s
transcription here, unless otherwise noted.
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Parman: I have taken a long, hard look at it. I could be part of TierOne
right now and I could have stock. [Okay? I’m telling you that right - -]
Hillstrom: Well, yeah, I’m sure you could. [I thought you did.]
Parman: Yeah. But the fact of the matter is that after looking at it long
and hard, okay, and watching the way things went down there in the beginning, in
the interim, in the immediate area, and now, you know, present day, it’s just not
something I want to be part of. Nothing good comes of that stuff. . . .
These excerpts were played at the offer of proof, and TierOne supplied the trial court with the
full recording.
The court denied TierOne’s motion to admit the audio file. TierOne also requested that
the Court recess or grant a mistrial so that discovery could be conducted on the newly discovered
evidence; the trial court denied this request as well. The trial judge stated: “I’m unable to grant a
recess without granting a mistrial, based on the Court’s schedule, and I’m not going to do that.” 2
The jury found TierOne converted 4 million shares of common stock and 500,000 shares
of preferred stock that belonged to Parman. 3 It further found $600,000 would reasonably
compensate Parman for his damages resulting from the conversion. The trial court denied
TierOne’s motion for judgment notwithstanding the verdict and rendered judgment for Parman.
The trial court also denied TierOne’s motion for new trial. This appeal followed.
A party who learns that its discovery response is no longer complete and correct must
amend or supplement the response. See TEX. R. CIV. P. 193.5(a). “An amended or supplemental
response must be made reasonably promptly after the party discovers the necessity for such a
response. . . . it is presumed that an amended or supplemental response made less than 30 days
before trial was not made reasonably promptly.” TEX. R. CIV. P. 193.5(b).
2
The trial judge also stated: “And from the Court’s scheduling, continuing this trial would result in a mistrial. We’ve already mistried this
case once before.”
3
The jury was instructed that conversion “is the unauthorized and wrongful exercise of dominion or control over the personal property
owned and/or legally possessed by another in denial of or inconsistent with the rights of the owner of the property.”
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Rule 193.6 generally requires evidence that is not timely disclosed to be excluded, unless
an exception applies:
A party who fails to make, amend, or supplement a discovery response in a timely
manner may not introduce in evidence the material or information that was not
timely disclosed, or offer the testimony of a witness (other than a named party)
who was not timely identified, unless the court finds that:
(1) there was good cause for the failure to timely make, amend, or
supplement the discovery response; or
(2) the failure to timely make, amend, or supplement the discovery
response will not unfairly surprise or unfairly prejudice the other parties.
TEX. R. CIV. P. 193.6(a). The burden to establish good cause is on the party seeking to
introduce the evidence, and a finding of good cause must be supported by the record. TEX. R.
CIV. P. 193.6(b).
The purpose of rule 193.6 is to “require complete responses to discovery so as to promote
responsible assessment of settlement and prevent trial by ambush.” Alvarado v. Farah Mfg. Co.,
Inc., 830 S.W.2d 911, 913-14 (Tex. 1992) (applying former rule 215.5); Lopez v. La Madeleine
of Texas, Inc., 200 S.W.3d 854, 860 (Tex. App.—Dallas 2006, no pet.). Although the exclusion
of the evidence is a harsh consequence, the good cause exception “allows a trial judge to excuse
a party’s failure to comply with discovery obligations in difficult or impossible circumstances.”
PopCap Games, Inc. v. MumboJumbo, LLC, 350 S.W.3d 699, 718 (Tex. App.—Dallas 2011, pet.
denied).
We review the trial court’s exclusion of evidence based on a party’s failure to disclose for
an abuse of discretion. See id. (citing Fort Brown Villas III Condo. Ass’n, Inc. v. Gillenwater,
285 S.W.3d 879, 881 (Tex. 2009) (per curium)). A trial court abuses its discretion when it acts
in an arbitrary or unreasonable manner without reference to any guiding principles or rules. Id.
To obtain reversal of the trial court’s exclusion of evidence, TierOne must show the trial court’s
ruling probably (although not necessarily) caused the rendition of an improper judgment. See
Lopez, 200 S.W.3d at 864; TEX. R. APP. P. 44.1(a)(1). “It is not necessary for the complaining
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party to prove that “but for” the exclusion of evidence, a different judgment would necessarily
have resulted.” Lopez, 200 S.W.3d at 864. “Typically, a successful challenge to a trial court’s
evidentiary rulings requires the complaining party to demonstrate that the judgment turns on the
particular evidence excluded or admitted.” Interstate Northborough P’ship v. State, 66 S.W.3d
213, 220 (Tex. 2001). Whether the erroneous exclusion of evidence probably caused the trial
court to render an improper judgment is “a judgment call entrusted to the sound discretion and
good sense of the reviewing court from an evaluation of the whole case.” Lopez, 200 S.W.3d at
864 (quoting First Emps. Ins. Co. v. Skinner, 646 S.W.2d 170, 172 (Tex. 1983)).
TierOne argues it had good cause for disclosing the audio file during trial, and the trial
court erred by not admitting the audio file. Parma argues the trial court properly excluded the
evidence because the recording should have been disclosed as a supplement to TierOne’s
response to Parma’s requests for disclosure, and TierOne did not supplement its discovery
response reasonably promptly after TierOne discovered the recording.
Because the audio file was produced on the third day of trial, TierOne’s supplemental
discovery response raised the presumption that the audio file was not produced reasonably
promptly. See TEX. R. CIV. P. 193.5(b). The first question we consider, then, is whether
TierOne showed that it had good cause for its failure to timely supplement its discovery
response. See TEX. R. CIV. P. 193.6(a)(1). We conclude that it did.
The evidence presented to the trial court at the offer of proof shows TierOne did not
know that the audio file existed or that Hillstrom might have had discoverable information until
Hillstrom emailed the recording to Lowenstein the night of August 3. Even Hillstrom, the
person in possession of the file, did not remember that he had the recording until that evening. It
would have been difficult or impossible for TierOne to request information from someone it did
not know had relevant information about the case, or to supplement its discovery response with a
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recording TierOne did not know existed and Hillstrom did not recall possessing. See PopCap
Games, Inc., 350 S.W.3d at 718. The discovery rules did not require TierOne to do the
impossible. See Frazin v. Hanley, 130 S.W.3d 373, 378 (Tex. App.—Dallas 2004, no pet.).
Until Hillstrom sent the audio file to Lowenstein, TierOne had nothing to disclose. Thus,
TierOne had good cause for failing to produce the audio file before becoming aware that
Hillstrom had relevant information and becoming aware of the existence of the audio file on
August 3, 2011.
Parman also argues TierOne’s disclosure of the file was not timely because TierOne did
not produce it before completing its cross-examination of Parman the morning of August 4,
2011. Although Lowenstein did not provide Parman’s counsel with a copy of the recording until
after Lowenstein cross-examined Parman the following morning, Lowenstein did cross-examine
Parman about Parman’s conversation with Hillstrom. On appeal, Parman argues that
“reasonably promptly” “must mean prior to use of the evidence at trial to cross-examine a
witness on that very subject.” Parman does not cite any legal authority to support this argument
and we have not found any.
The fact that Lowenstein cross-examined Parman before producing the audio file does
not alone mean the disclosure was not reasonably prompt. Determining whether a discovery
response was supplemented reasonably promptly is a question based on, among other things, the
length of time that has passed between the discovery of the information to be produced and the
production; we do not determine promptness solely based on which events occurred during the
intervening time period. See generally Hooper v. Chittaluru, 222 S.W.3d 103, 109-110 (Tex.
App.—Houston [14th Dist.] 2009, pet. denied); Frazin, 130 S.W.3d at 378 (supplementing
discovery within eight days of determining discovery response no longer complete was
reasonably prompt); Tri-Flow International v. Jackson, No. 13-01-472-CV, 2002 WL 31412532
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(Tex. App.—Corpus Christi, Oct. 24, 2002, no pet.) (not designated for publication)
(supplementing within two weeks of receiving new evidence was reasonably prompt).
Based on the record, we conclude TierOne supplemented its discovery responses
reasonably promptly. TierOne received the audio file at approximately 8:15 p.m. after the
second day of trial. TierOne produced the file to Parman the following day. The time between
when TierOne discovered the evidence and produced it to Parman was reasonable.
Parman also argues the trial court properly excluded the audio file because Hillstrom, by
talking with Parman and recording their conversation, violated Minnesota’s and Texas’s rules of
professional responsibility. (Hillstrom is a Minnesota attorney; at the time the recording was
made, he represented clients who were adverse to Parman in a different lawsuit.) We conclude
that, even if Hillstrom violated an attorney disciplinary rule, his actions would not render the
audio recording inadmissible. “[T]he Court of Criminal Appeals has held that violation of
attorney disciplinary rules in obtaining evidence for a criminal proceeding does not bar
introduction of that evidence at trial.” Harris Cnty. Appraisal Dist. v. Houston Laureate Assocs.,
Ltd., 329 S.W.3d 52, 55 (Tex. App.—Houston [14th] Dist. 2010, pet. denied) (citing Gentry v.
State, 770 S.W.2d 780, 790-91 (Tex. Crim. App. 1988); cf. TEX. DISCIPLINARY R. PROF’L
CONDUCT Preamble ¶¶ 14-15, reprinted in TEX. GOV’T CODE ANN., tit. 2, subtit. G app. A (West
2005) (“[T]hese rules are not designed to be standards for procedural decisions. Furthermore,
the purpose of these rules can be abused when they are invoked by opposing parties as
procedural weapons.”)). Moreover, the Texas Rules of Evidence do not compel the exclusion of
the audio recording even if it was obtained in violation of attorney disciplinary rules. See TEX.
R. EVID. 101(b) (rules of evidence govern civil and criminal proceedings in all courts of Texas,
except small claims).
Therefore, the trial court abused its discretion by refusing to admit the recording.
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We next consider whether the trial court’s error “probably caused the rendition of an
improper judgment.” TEX. R. APP. P. 44.1(a)(1).
The jury was asked to decide whether TierOne converted stock owned by Parman, which
necessarily required the jury to determine that Parman, at some time, owned the stock. Parman’s
statements to Hillstrom are relevant to the issue of whether Parman owned stock in TierOne. See
Lopez, 200 S.W.3d at 864. It is difficult to imagine how a recorded conversation in which
Parman makes statements such as “No, man, I’ve got no stock, no nothing, buddy;” “I don’t own
any stock;” and “some things aren’t worth having” would not influence the jury’s consideration
of the conversion issue in a manner adverse to the jury’s verdict in this case.
Although we cannot definitively state the contents of the audio recording are
irreconcilable with Parman’s allegations in this case and testimony at trial, a jury likely would
consider the apparent variance in his statements when deciding whether Parman was a credible
witness. See id. During cross-examination in the jury’s presence, Parman testified:
Q. And do you remember telling Mr. Hillstrom on two occasions
during that phone call that you did not have stock in TierOne?
A. No, I don’t.
Q. Do you remember telling Mr. Hillstrom during that conversation
that the only people that had common stock in TierOne was Kevin Weaver - - had
6-and-a-half million shares[?] Do you remember saying that?
A. No, I don’t.
Q. And do you remember saying that the other people that had shares
were Ron Celmer and Kim Marshall, who were each going to get 2.2 million
shares over time. Do you remember saying that?
A. No, I don’t.
Q. Do you deny saying that?
A. I - - there would be - - that would be untruthful for me to say it, so
I wouldn’t have said it.
Based on the jury’s verdict, we can conclude the jurors determined Parman was a credible
witness and they credited his testimony that he was awarded stock in TierOne and that TierOne
subsequently and improperly voided that stock. The audio recording likely would have impacted
the weight the jury accorded Parman’s testimony. See id.
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We conclude the trial court’s error of excluding the audio recording probably (although
not necessarily) caused the rendition of an improper judgment. See TEX. R. APP. P. 44.1(a)(1);
Lopez, 200 S.W.3d at 864. We sustain TierOne’s first issue.
Our resolution of TierOne’s first issue obviates the need for us to consider TierOne’s
second or third issues. See TEX. R. APP. P. 47.1. We reverse the trial court’s judgment and
remand the case for further proceedings.
/Jim Moseley/
JIM MOSELEY
JUSTICE
120026F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
TIERONE CONVERGED NETWORKS, On Appeal from the 193rd Judicial District
INC., Appellant Court, Dallas County, Texas
Trial Court Cause No. 08-07631.
No. 05-12-00026-CV V. Opinion delivered by Justice Moseley.
Justices Bridges and Lang-Miers
MARK PARMAN, Appellee participating.
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and this cause is REMANDED to the trial court for further proceedings consistent
with this opinion.
It is ORDERED that appellant TIERONE CONVERGED NETWORKS, INC. recover
its costs of this appeal from appellee MARK PARMAN.
Judgment entered this 9th day of July, 2013.
/Jim Moseley/
JIM MOSELEY
JUSTICE
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