In re Deruiter Ranch, LLC

IN RE DERUITER RANCH, LLC

No. 13-21-00001-CV

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

September 28, 2021

On Petition for Writ of Mandamus.

Before Chief Justice Contreras and Justices Hinojosa and Silva

MEMORANDUM OPINION

DORI CONTRERAS CHIEF JUSTICE ^[1]

In this original proceeding, relator DeRuiter Ranch, LLC (DeRuiter) asserts that the trial court abused its discretion in preventing DeRuiter from obtaining discovery regarding whether its property is being properly condemned for "public use" in a statutory condemnation proceeding.^[2] See Tex. Util. Code Ann. § 181.004. We conditionally grant DeRuiter's petition for writ of mandamus.

I. Background

Permian Highway Pipeline LLC (Permian), a gas utility, filed a petition for condemnation against DeRuiter in Lavaca County Texas. According to its petition, Permian is in the process of constructing a gas utility pipeline which will be approximately 425 miles long and will traverse seventeen Texas counties. Permian's original statement and petition for condemnation provided that:

[T]he [p]ipeline . . . will transport, convey, distribute, or deliver natural gas and its associated substances for public use or service for compensation; for sale to persons engaged in distributing or selling natural gas to the public; for sale or delivery to the public for domestic or other use whether for public hire or not; and for which the right-of-way has been or is hereafter acquired by exercising the right of eminent domain.

Permian asserted that its board of directors "found that it is a public use and is necessary, and required by the public convenience and necessity, and in the public interest" for Permian to acquire land for the pipeline's construction.

In connection with the construction of the pipeline, Permian negotiated with DeRuiter to obtain permanent and temporary easements and rights of way on DeRuiter's property, which comprises approximately three hundred fifty-six acres in Lavaca County. After negotiations failed, Permian instituted the underlying condemnation proceeding. After an administrative hearing resulted in an award to DeRuiter Permian objected to the award, thereby converting the case into a judicial proceeding. In the underlying proceedings, DeRuiter filed a plea to the jurisdiction in which it asserted that the pipeline does not serve a public use, there is no necessity for the pipeline, and Permian's board of directors abused its discretion and acted arbitrarily and capriciously in determining that there was a public necessity for the pipeline.

During the litigation, DeRuiter propounded discovery requests to Permian. Permian responded to some of the requests, but the parties were unable to agree on all issues regarding discovery. Ultimately, DeRuiter requested the trial court to rule on Permian's objections to six of DeRuiter's requests for production that relate to the alleged "public use" of the pipeline. DeRuiter argued that the requested information is "clearly relevant to whether [Permian's] proposed taking in this case satisfies Texas law's public use requirement." The six requests for production at issue are as follows:

20. All documents showing the ownership structure of the Subject Pipeline.

21. All contracts, prospective contracts, bids, quotes, letters of intent, and commitments for the transportation of any product(s) through the Subject Pipeline.

22. If you or an Affiliate owns the products to be transported by the Subject Pipeline, produce all documents evidencing what you or the Affiliate will do with the products after the products are transported by the Subject Pipeline and/or to whom they will be sold.

23. All contracts between you and any of your Affiliates related to the transportation, processing[, ] and sale of any products to be transported through the Subject Pipeline.

24. All contracts between you or any of your Affiliates and any third party related to the transportation, processing, and sale of any products to be transported through the Subject Pipeline.

25. All communications with any customer(s) and/or prospective customer(s) for the transportation of any product(s) through the Subject Pipeline.

Permian objected to each of these requests for production. Its objections to the requests were not identical, but its response to each of the requests included this objection regarding relevance:

Plaintiff objects to this Request to the extent it seeks information that is not relevant to the subject matter of this lawsuit nor is it likely to lead to the discovery of relevant, admissible evidence and is an impermissible fishing expedition specifically prohibited by the Texas Rules of Civil Procedure.

Permian also objected to some of the discovery requests as overly broad, unduly burdensome, or duplicative of other requests. Permian did not file affidavits or other evidence in support of its objections.

DeRuiter filed a request for the trial court to rule on Permian's objections. As stated previously, DeRuiter alleged that the requested documents were relevant and discoverable, yet Permian had "failed to produce a single responsive document to these specific requests." Permian filed a response in opposition to DeRuiter's request, citing the Texas Utilities Code for the assertion that the legislature has determined that gas utilities serve a public purpose and the "common carrier" pipeline standard^[3] applied under other statutory schemes requiring an unaffiliated third-party shipper for a public purpose does not apply to gas utilities. See Tex. Util. Code Ann. §§ 121.001(a)(2)(A), 121.051(a), 181.004. Permian further asserted that it had "adequately" produced documentation to show its compliance with the public use requirement, including the affidavit of John J. Towles with exhibits, Permian's "Application for Permit to Operate a Pipeline in Texas" (Form T-4), its permit from the Railroad Commission of Texas, Permian's board's consent declaring public necessity and use, Permian's New Construction Report (PS-48), and Annual Gas Utility Transmission Reports.^[4]

The trial court held a non-evidentiary hearing on DeRuiter's request for a ruling in which the parties' arguments focused exclusively on the relevance of DeRuiter's requests for production.^[5] Although Permian had a witness available to testify regarding various issues, including the alleged confidentiality of some of the requested data, it ultimately did not produce that witness at the hearing given the parties' exclusive focus on the relevance of DeRuiter's requests. After the hearing, the trial court issued an order on October 19, 2020, sustaining Permian's objections to these requests for production.

This original proceeding ensued. By one issue, DeRuiter contends that the trial court abused its discretion in preventing DeRuiter from obtaining discovery regarding whether Permian's "for profit pipeline project actually serves a public use" and that DeRuiter lacks an adequate remedy by appeal. This Court requested and received a response to the petition from Permian and received a reply thereto from DeRuiter.

II. Standard of Review

Mandamus is an extraordinary and discretionary remedy. See In re Allstate Indem. Co., 622 S.W.3d 870, 883 (Tex. 2021) (orig. proceeding); In re Garza, 544 S.W.3d 836, 840 (Tex. 2018) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). The relator must show that "(1) the trial court abused its discretion, and (2) the relator lacks an adequate remedy on appeal." In re USAA Gen. Indem. Co., 624 S.W.3d 782, 787 (Tex. 2021) (orig. proceeding); In re Prudential Ins. Co. of Am., 148 S.W.3d at 135-36; Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding). A trial court abuses its discretion when it acts with disregard for guiding rules or principles or when it acts in an arbitrary or unreasonable manner. In re Garza, 544 S.W.3d at 840. We determine the adequacy of an appellate remedy by balancing the benefits of mandamus review against the detriments. In re Acad., Ltd., 625 S.W.3d 19, 25 (Tex. 2021) (orig. proceeding); In re Essex Ins. Co., 450 S.W.3d 524, 528 (Tex. 2014) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148 S.W.3d at 136. An appellate remedy may be inadequate to address an erroneous discovery ruling when

(1) an appellate court cannot cure the discovery error, such as when confidential information is erroneously made public, (2) the party's ability to present a viable claim or defense-or reasonable opportunity to develop the merits of the case-is "severely compromised" so that the trial would be a waste of resources, or (3) discovery is disallowed and cannot be made part of the appellate record such that a reviewing court is unable to evaluate the effect of the trial court's error based on the record.

In re K & L Auto Crushers, LLC, 627 S.W.3d 239, 256 (Tex. 2021) (orig. proceeding) (quoting Walker, 827 S.W.2d at 843-44); see In re Allied Chem. Corp., 227 S.W.3d 652, 658 (Tex. 2007) (orig. proceeding). "A party's ability to present and develop its case may be severely compromised when the denied discovery goes 'to the very heart' of a party's case and prevents it from 'developing essential elements' of its claim or defense." In re K & L Auto Crushers, LLC, 627 S.W.3d at 256 (quoting Able Supply Co. v. Moye, 898 S.W.2d 766, 772 (Tex. 1995) (orig. proceeding)).

III. Discovery

"Trial courts have broad discretion to decide whether to permit or deny discovery." In re K & L Auto Crushers LLC, 627 S.W.3d at 247; see In re Nat'l Lloyds Ins., 532 S.W.3d 794, 802 (Tex. 2017) (orig. proceeding). "Parties are 'entitled to full, fair discovery' and to have their cases decided on the merits." Ford Motor Co....