At least since the Texas Supreme Court’s 1994 opinion in Transportation Insurance Company v. Moriel, questions of the right to discovery of a defendant’s net worth information, the definition of "net worth", and the scope of information relating to net worth have been simmering in the district courts and in the courts of appeals. The latest opinion on the subject has been issued by the Fourteenth District Court of Appeals and the concurring opinion makes case for why it’s time for the Texas Supreme Court to address these thorny issues. The majority’s opinion in In re Jacobs may be found here. The concurring opinion may be found here.
In re Jacobs is a case in which the plaintiffs brought suit for negligence and gross negligence in connection with medical care provided to Shannon McCoy. Plaintiffs initially sought discovery of net worth information from the defendant medical providers. The trial court first ordered Plaintiffs to replead to provide more specific allegations of gross negligence, and subject to a sufficient pleading, the trial court ordered the defendant physicians to produce financial statements they provided to a lender within the past 2 years or alternatively to provide an affidavit stating what the net worth would have been if such a financial statement had been provided to a lender. The trial court later clarified that the plaintiffs also would be allowed to depose the two physicians about their net worth. The physicians sought relief from the court of appeals by writ of mandamus.
The majority notes that the physicians requested application of standards different from what appears to be the prevailing standard in Texas, but the majority concludes that it is "bound by the supreme court’s ruling in Lunsford [v. Morris]." The majority goes on to conclude that the Plaintiffs’ live pleadings sufficiently alleged specific facts to support their allegations of gross negligence. However, the majority concludes that the trial court did not sufficiently narrow the scope of the discoverable information. First, the court holds that "only the relators’ current net worth is relevant." Accordingly, the court held that there was an abuse of discretion insofar as allowing discovery of past net worth. The majority also concludes that that the trial court abused its discretion in allowing deposition questions to exceed the narrow inquiries into current net worth (defined as total assets less current total liabilities) and the facts and methods used to calculate the current net worth. Finally, the majority holds that the trial court abused its discretion by requiring the physicians to create and produce affidavits in the form of what a lender would have required since a party cannot be forced to create documents that do not otherwise exist solely to comply with a request for production.
Just as important as the majority’s opinion is the concurring opinion by Justice Sullivan. Justice Sullivan gives a brief history of the development of the law relating to gross negligence and discovery of net worth over the last 25-30 years, and advocates for resolution of conflicting standards of the meaning of "net worth" and of the law surrounding right to discovery of net worth information. Interestingly–whether Justice Sullivan is aware of it or not–there have been a few attempts to pique the Texas Supreme Court’s interest on this subject. In fact, I am aware of two cases in which the petition for writ of mandamus was granted, but the parties later settled before an opinion issued, and there is a third petition for writ of mandamus on which Justice Raul Gonzales wrote a dissent from the court’s decision to deny review of that petition for writ of mandamus. Now some 12 years later, it may be that Justice Sullivan has a point; the issue may have simmered long enough in the courts of appeals and it may be time to reexamine it.