WILLIAM J. BOYCE, Justice.
Relator Platinum Energy Solutions, Inc. filed a petition for writ of mandamus in this Court. See Tex. Gov't Code Ann. § 22.221 (Vernon 2004); see also Tex. R.App. P. 52. Platinum asks this Court to compel the Honorable Wesley Ward, presiding judge of the 234th District Court of Harris County, to vacate his July 15, 2013 order denying Platinum's motion for protective order and October 21, 2013 order granting the real parties in interest's motion to compel in the underlying shareholder derivative shareholder suit. We conditionally grant the petition for writ of mandamus.
Platinum is a Nevada corporation and an oil field services provider specializing in premium hydraulic fracturing, coiled tubing, and other pressure-pumping services. The real parties in interest are minority shareholders of Platinum.
Platinum's board of directors formed a Special Litigation Committee on June 5, 2012 to investigate the minority shareholders' suit and determine the appropriate response. Platinum also adopted a charter to govern the committee.
The committee presented its findings to Platinum's board of directors in December 2012. The committee found no evidence of breach of fiduciary duties or corporate waste; it recommended that Platinum refrain from pursuing the minority shareholders' claims. The committee report concluded, in part:
The committee also recommended that Platinum move to dismiss the derivative action.
Platinum filed a motion to dismiss the derivative action on February 15, 2013. The minority shareholders subsequently served a request asking Platinum to produce 45 categories of documents in connection with the Special Litigation Committee's investigation. Platinum objected on grounds that the requested production (1) exceeds the permissible scope of discovery; and (2) is overbroad and unduly burdensome. Platinum also filed a motion for protective order. After a hearing on July 1, 2013, the trial court signed the July 15 order denying Platinum's motion for protective order. On October 21, 2013, the trial court signed a separate order that overruled Platinum's objections to the document requests and compelled production by November 11, 2013 of documents responsive to 43 of the 45 categories.
Platinum argues in this mandamus proceeding that the trial court abused its discretion insofar as the permitted discovery goes beyond the following limited subjects: (1) the committee's independence and disinterestedness; (2) whether the committee's review was undertaken in good faith; and (3) the reasonableness of the committee's procedures used to investigate the minority shareholders' claims.
Mandamus is appropriate when then relator demonstrates that (1) the trial court clearly abused its discretion; and (2) the relator has no adequate remedy by appeal. In re Reece, 341 S.W.3d 360, 364 (Tex.2011) (orig. proceeding). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law, or if it clearly fails to analyze the law correctly or apply the law correctly to the facts. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex.2005) (orig. proceeding) (per curiam).
The adequacy of an appellate remedy must be determined by balancing the benefits of mandamus review against the detriments. In re Team Rocket, L.P., 256 S.W.3d 257, 262 (Tex.2008) (orig. proceeding). Because this balance depends heavily on circumstances, it must be guided by analysis of principles rather than simple rules that treat cases as categories. In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex.2008) (orig. proceeding). In evaluating benefits and detriments, we consider whether mandamus will preserve important substantive and procedural rights from impairment or loss. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex.2004) (orig. proceeding). We also consider whether mandamus will "allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments." Id. Finally, we consider whether mandamus will spare the litigants and the public "the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings." Id.
The minority shareholders contend that Platinum's request for mandamus relief
In the trial court and in this mandamus proceeding, the parties dispute whether Texas or Delaware law governs the scope of permissible discovery in connection with a motion to dismiss a derivative action against Platinum. Resolution of this issue turns on two provisions contained in Chapter 21 of the Texas Business Organizations Code.
When construing a statute, the primary objective is to give effect to the Legislature's intent. Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex.2010). "We presume the Legislature selected language in a statute with care and that every word or phrase was used with a purpose in mind." Id. "We construe statutes by first looking to the statutory language for the Legislature's intent, and only if we cannot discern legislative intent in the language of the statute itself do we resort to canons of construction or other aids such as which statute is more specific." Id. at 639.
Subchapter L of Chapter 21 governs derivative actions in Texas. See Tex. Bus. Orgs.Code Ann. §§ 21.551-.563 (Vernon 2012). Chapter 21 establishes a mechanism by which a corporation may move to dismiss a derivative action filed against it:
Tex. Bus. Orgs.Code Ann. § 21.558(a). In turn, section 21.554 provides for independent and disinterested persons, who may be directors of the corporation, to determine "how to proceed on allegations made in a demand or petition." Tex. Bus. Orgs. Code Ann. § 21.554.
Discovery in connection with a section 21.558 motion to dismiss is governed by section 21.556, which provides as follows:
Tex. Bus. Orgs.Code Ann. § 21.556 (emphasis added). The purpose behind section 21.556's limitation on discovery is to (1) focus on the manner in which the committee performed its obligations; and (2) avoid delving into the merits of the shareholders' claims unless a determination first has been made that a good faith review was not conducted. See Tex. Bus. Orgs. Code Ann. § 21.556(b).
Platinum contends that section 21.556 applies to it as a Nevada corporation and limits the scope of permissible discovery in connection with its motion to dismiss the derivative action.
The minority shareholders rely instead on section 21.562, entitled "Application to Foreign Corporations," which provides as follows:
Tex. Bus. Orgs.Code Ann. § 21.562 (emphasis added). The excluded provisions referenced in subsection (a) do not pertain to discovery; section 21.55 addresses a stay of proceedings, section 21.562 addresses discontinuance or settlement, and section 21.561 addresses payment of expenses. See Tex. Bus. Orgs.Code Ann. §§ 21.555 (stay of proceeding), 21.560 (discontinuance or settlement), 21.561 (payment of expenses).
It is undisputed that Nevada, the state of Platinum's incorporation, looks to Delaware law in connection with derivative lawsuits. See Moradi v. Adelson, No. 2:11-CV-00490, 2012 WL 3687576, at *2 n. 1 (D.Nev. Aug. 27, 2012) ("Nevada courts follow Delaware law when addressing shareholder-derivative lawsuits."). Therefore, the minority shareholders contend that section 21.562 mandates the application of Delaware law in determining the scope of permissible discovery in connection with Platinum's motion to dismiss the minority shareholders' derivative claim.
Tension exists between sections 21.566 and 21.562; the former section applies Chapter 21's discovery limits to "domestic or foreign" corporations, while the latter section omits Chapter 21's discovery limits from the list of statutory provisions applicable to foreign corporations in this context. Commentators have noted this tension. See Todd A. Murray & Lyndon F. Bittle, Emerging Issues Raised by Derivative Shareholder Actions Involving Foreign Corporations Headquartered in Texas: Making Sense of the Interaction between Texas Procedures and Substantive Law, 39 Tex. Tech. L.Rev. 1, 26-27
The minority shareholders argue that section 21.556 does not apply here because section 21.562(a) does not include section 21.556 in the list of provisions applicable to a foreign corporation. This argument reflects the maxim that the expression of one implies the exclusion of another, known as expressio unius est exclusio alterius. Mid-Century Ins. Co. of Tex. v. Kidd, 997 S.W.2d 265, 274 (Tex. 1999). However, "[t]he doctrine of expressio unius est exclusio alterius is simply an aid to determine legislative intent, not an absolute rule. As a rule of reason and logic, it should not be mechanically applied to compel an unreasonable interpretation." Id.
Platinum asserts that section 21.556 should control over section 21.562 because section 21.556 is the more specific statute. This argument dovetails with section 311.026 of Texas Government Code, which addresses circumstances in which general and specific statutes are in conflict:
Tex. Gov't Code Ann. § 311.026 (Vernon 2013). Section 311.026(b) applies only if the general provision and special provision irreconcilably conflict with each other. TracFone Wireless, Inc. v. Comm'n on State Emergency Commc'ns, 397 S.W.3d 173, 181 (Tex.2013); Sowell v. Int'l Interests, LP, 416 S.W.3d 593, 599-600 (Tex. App.-Houston [14th Dist.] 2013, pet. filed).
We conclude that sections 21.556 and 21.562(a) are in conflict. We further conclude that sections 21.556 and 21.562(a) cannot be read so that effect is given to both in this particular context involving the scope of permissible discovery in connection with a motion to dismiss a derivative action. See Tex. Gov't Code Ann. § 311.026(a) (conflicting provisions "shall be construed, if possible, so that effect is given to both").
Section 21.556's discovery limitation expressly applies to domestic and foreign corporations in a proceeding to dismiss a shareholder derivative action. Section 21.562(a) states that foreign corporations are subject only to Chapter 21's provisions addressing a stay of the derivative proceeding, discontinuance or settlement of the proceeding, and payment of expenses incurred; otherwise, a derivative action brought in the name of a foreign corporation is governed by the laws of the jurisdiction of incorporation of the foreign corporation. Because these provisions irreconcilably conflict, we must determine which provision controls in this specific context involving the scope of permissible discovery in connection with a foreign corporation's motion to dismiss a derivative action.
We conclude that section 21.556 controls here because it is more specific. Section 21.556 is more specific because it addresses the narrower topic of discovery in a proceeding on a motion to dismiss the derivative action, while section 21.562(a) addresses the more general topic of selecting the law applicable to foreign corporations.
The minority shareholders further contend that Delaware law should control the scope of discovery in this context because Texas courts must apply the internal affairs doctrine to foreign-filing entities. The applicable statute states as follows:
Tex. Bus. Orgs.Code Ann. § 1.102 (Vernon 2012); see also Tex. Bus. Orgs.Code Ann. § 21.562(a) (laws of jurisdiction of incorporation of foreign corporation apply to derivative action, except for specified provisions, which are procedural and do not relate to the internal affairs of the foreign corporation).
The minority shareholders also argue that, to the extent sections 21.556 and 21.562(a) are in conflict, courts resolve the statutory conflict by examining the object sought to be obtained and the consequences of a particular construction. See Tex. Gov't Code Ann. § 311.023(1), (5) (Vernon 2013). Therefore, they contend section 21.556 must yield to section 21.562(a) because the application of section 21.556 would ignore public policy goals embodied in the internal affairs doctrine.
We reject these contentions because the internal affairs doctrine has no application to this discovery dispute. The internal affairs of an entity include (1) "the rights, powers, and duties of its governing authority, governing persons, officers, owners, and members"; and (2) "matters relating to its membership interests." Tex. Bus. Orgs.Code Ann. § 1.105 (Vernon 2012).
Because section 21.556 governs this discovery dispute, the minority shareholders are limited to discovery addressing (1) whether the Special Litigation Committee is independent and disinterested; (2) whether the committee's inquiry and review was undertaken in good faith; and (3) the reasonableness of the committee's procedures. Tex. Bus. Orgs.Code Ann. § 21.556(a).
Appeal is an inadequate remedy when the appellate court would not be able to cure the trial court's discovery error. In re Dana Corp., 138 S.W.3d 298, 301 (Tex.2004) (per curiam) (orig. proceeding); In re Kuntz, 124 S.W.3d 179, 181 (Tex.2003) (orig. proceeding). This occurs when the trial court erroneously orders the disclosure of information, which will materially affect the rights of the aggrieved party. Walker v. Packer, 827 S.W.2d 833, 843 (Tex.1992) (orig. proceeding); see also In re E.I. DuPont de Nemours & Co., 136 S.W.3d 218, 223 (Tex.2004) (orig. proceeding) ("As DuPont would lose the benefit of the privilege if the documents at issue are disclosed, even if its assertions of privilege were later upheld on appeal, we conclude that this Court may provide mandamus relief in this case."). Here, the trial court signed an order on July 15, 2013, denying Platinum's motion for protective order without specifying its reasons. The trial court signed another order on October 21, 2013, in which it granted the minority shareholders' motion to compel and overruled Platinum's objections without specifying reasons. The record before us does not make clear whether the trial court's orders were based on a determination that (1) section 21.562(a) controls over the discovery limits set forth
All panel members in this court agree that section 21.556 governs here and limits the minority shareholders to discovery addressing (1) whether the Special Litigation Committee is independent and disinterested; (2) whether the committee's inquiry and review was undertaken in good faith; and (3) the reasonableness of the committee's procedures.
Therefore, the trial court acted beyond its discretion insofar as it required production of the 43 categories of documents at issue to occur based on a determination that section 21.562(a) governs this inquiry.
Because the trial court's orders do not expressly address whether the minority shareholders are entitled to production of the 43 categories at issue in light of section 21.556's specific discovery limits, it should have the opportunity in the first instance to make this determination in light of today's opinion clarifying the reach of section 21.556. See Tex.R.App. P. 52.8(c); see also In re Nance, 143 S.W.3d 506, 514 (Tex.App.-Austin 2004, orig. proceeding) (explaining "[a]ny disclosure should be no broader than necessary and it is a trial court's obligation to oversee and safeguard the records to ensure unnecessary matters are not disclosed," and ordering the trial court to vacate its order and review documents at issue in camera to determine whether each is subject to the physician-patient privilege); In re Sears, Roebuck & Co., 123 S.W.3d 573, 579-80 (Tex.App.Houston [14th Dist.] 2003, orig. proceeding) (holding discovery requests could have been more narrowly tailored, and ordering trial court to vacate discovery orders and conduct further proceedings); In re Shipmon, 68 S.W.3d 815, 822 (Tex.App.-Amarillo 2001, orig. proceeding [mand. denied]) (stating, "[a]lthough we have jurisdiction to direct the trial court to proceed to make an effort to impose reasonable discovery limits, we may not tell the trial court what limits it should enter[,]" and directing the trial court to consider and determine, in the exercise of its discretion, the need for reasonable discovery limits).
We conditionally grant Platinum's petition for writ of mandamus. The trial court is directed to make an express determination as to the 43 categories of documents at issue, and to determine whether these categories pertain to one or more of the areas of inquiry allowed by section 21.556(a). The writ will issue only if the trial court does not act in conformity with this opinion. We lift our stay granted on October 30, 2013.
FROST, C.J., dissenting.
KEM THOMPSON FROST, Chief Justice, dissenting.
In this mandamus proceeding, relator Platinum Energy Solutions, Inc. asserts the trial court clearly abused its discretion by issuing two orders denying Platinum's motion for protective order, overruling Platinum's discovery objections, and compelling Platinum to produce documents requested by the real parties in interest. Platinum seeks mandamus relief commanding the trial court to vacate these two orders and to issue an order granting the requested protection. Platinum does not complain that the trial court failed to address expressly whether the requested documents at issue are within the scope of the discovery allowed by section 21.556(a) of the Texas Business Organizations Code; rather, Platinum complains that the trial court abused its discretion by determining that the requested documents are within the scope of that provision and are discoverable.
To the extent the majority concludes that the trial court abused its discretion by failing to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a),
This court should ascertain the extent to which the documents requested are outside the scope of the discovery allowed by section 21.556(a) and grant mandamus relief to the extent, if any, the trial court compelled production of these documents.
Today, the court issues a final ruling in this mandamus proceeding. In doing so, the court adjudicates all issues and lifts the stay. But, the court's opinion raises as many questions as it answers. Platinum asks this court to grant mandamus relief ordering the trial court to vacate the two challenged orders and to issue an order granting Platinum's motion for protection. The majority twice states that this court is conditionally granting Platinum's petition for writ of mandamus, which means that this court is ordering the trial court to vacate the two challenged orders and to issue an order granting Platinum's motion for protection; yet, the majority does not state specifically that this court is granting this relief. The majority does specifically direct the trial court to "make an express determination as to the 43 categories of documents at issue, and to determine whether these categories pertain to one or more of the areas of inquiry allowed by section 21.556(a)," but Platinum has not requested this relief. Moreover, this language suggests that this court may be dismissing Platinum's mandamus petition for lack of ripeness under the theory that Platinum's petition is not ready for review unless and until the trial court makes such an express determination. The parties and the trial court are entitled to an unambiguous ruling on the petition and to a clear statement of the relief this court is granting.
Before this court may conditionally grant mandamus relief, it first must determine that the trial court abused its discretion.
The majority correctly concludes that section 21.556, entitled "Discovery," governs today's discovery dispute and that the minority shareholders are limited to discovery addressing (1) whether the Special Litigation Committee is independent and disinterested; (2) whether the committee's inquiry and review was undertaken in good faith; and (3) the reasonableness of the procedures followed by the committee in conducting the review.
In its motion for protective order, Platinum asserted that (1) the trial court should
As Platinum points out in its mandamus petition, at a hearing on its motion for protective order, (1) Platinum argued that section 21.556(a) applies to the underlying case; (2) the trial court and counsel discussed section 21.556(a)'s limits on discovery, and (3) without ruling on the motion at that time, the trial court indicated it was inclined to conclude that all 45 document requests are within the scope of the discovery allowed by section 21.556(a). After taking the motion under advisement, the trial judge acted on his stated inclination and signed an order denying Platinum's motion for protective order "in its entirety." Using this language is the same as saying the motion is "in all things" denied, and in the context of the denial of a motion, it means every individual part of the motion is refused. Under the unambiguous language of the trial court's order, the trial court denied every single request in Platinum's motion.
In its October 21, 2013 order, the trial court addressed a second time the issue of whether the requested documents are within the scope of the discovery allowed by section 21.556(a). The Shareholders moved to compel production of the 45 categories of requested documents. In response, Platinum asserted that (1) Texas law and section 21.556(a) apply to this discovery dispute; (2) the requested discovery
The majority is simply incorrect to the extent it concludes the trial court abused its discretion by failing to state expressly in its orders whether the requested documents are within the scope of the discovery allowed by section 21.556(a).
For example, in In re Sears, Roebuck & Co., this court granted mandamus relief as
Mandamus relief generally requires a predicate request for an action and a refusal of that request.
The majority conditionally grants mandamus relief and states that the trial court abused its discretion to the extent it required production of the 43 categories of documents at issue based upon Nevada law under section 21.562(a). Though the majority does not state whether the trial court required this production based upon Nevada law under section 21.562(a),
Under Texas law, in both original proceedings and appeals, the trial judge is entitled to a presumption that he correctly applied the law.
Platinum and the Shareholders dispute whether Texas law and section 21.556(a) apply or whether under section 21.562(a), Nevada law applies. Under a correct legal
In both appeals and original proceedings, if the trial court does not specify the basis of its order, this court must uphold the trial court's order under any legal theory supported by the record.
Texas trial courts have limited time and limited resources. This combination makes it challenging for them to issue written orders that detail their legal reasoning and conclusions, especially when the ruling resolves a discovery dispute that involves dozens of document requests and multiple objections to these requests. Though in some areas of the law, trial courts are required to express their reasoning and legal conclusions, there is no
If the trial judge in this proceeding does not change his mind, then he will sign an order expressly stating that each category of requested documents falls within the scope of the discovery allowed under section 21.556(a) and the disputed documents are discoverable. If the trial judge does change his mind, then he will issue a different order specifying the extent to which he concludes that the requested discovery falls within the scope of the discovery allowed under section 21.556(a) and is discoverable. In either event, unless Platinum and the Shareholders both are satisfied with the trial court's order, this court is likely to see yet another mandamus petition, and the next time this court will have to answer the same question presented today — To what extent, if any, do the requested documents fall within the scope of the discovery allowed by section 21.556(a)? It would be more efficient — and in keeping with binding precedent — to apply the existing rule.
For all of these reasons, this court should determine today the extent, if any, the documents requested fall outside the scope of the discovery permitted by section 21.556(a) and grant mandamus relief to the extent the trial court compelled discovery or denied protection as to these documents. Because this court chooses not to do so, I respectfully dissent.