Stephens Inc., In Re
Posted on Categories Business & Employment, Court Decisions

By Jack D. Ballard

Trial court abused its discretion in ordering production of communications between client, investment banker, and their respective attorneys, where the communications contained confidential legal advice, and the investment banker acted as the client’s representative under Tex. R. Evid. 503(a)(2)(B).

Stephens Inc., In Re, No. 04-18-00216-CV (Tex. App., 4Dist. (San Antonio), 3/27/19).

Investment banker Stephens Inc. filed a petition for writ of mandamus in response to the trial court’s order compelling it to produce 140 documents that it contended were protected from discovery under the attorney-client privilege. The Appellate Court reviews the order for abuse of discretion, because there was no fact issue, and a trial court has no discretion in determining what the law is or applying the law to the facts.

Stephens bore the burden of establishing a prima facie case for the privilege and then the burden shifted to plaintiffs to refute the privilege. Stephens was hired by client Consert Inc. to assist it in identifying investors and, later, a purchaser for the company. Consert was represented by two law firms in the transaction, Womble Carlyle Sandridge & Rice, LLP (“Womble”) and Gray Robinson, P.A. (“Gray”). Investment banker Stephens engaged it own counsel, Hayne & Boone, LLP (“Haynes”), to advise it regarding the transaction. Consert eventually entered into a Merger Agreement with Toshiba Corporation, and was acquired. Four years later, former Consert shareholders filed suit against several parties, including former officers and directors in Consert and Stephens, alleging that the merger price was a mere fraction of fair market value. Stephens objected to discovery served by plaintiffs which sought the communications between and among Stephens, its client Consert, and their respective law firms on the basis of attorney-client privilege.

Plaintiffs argued that no privilege applied, because the documents were disseminated beyond the attorney and its client, thereby waiving the privilege. Stephens produced a privilege log, and affidavits from its employee and from Consert’s legal counsel, showing that Stephens and Consert had entered into a Mutual Nondisclosure Agreement. Stephens’ employee stated that the Consert engagement required the legal involvement and advice of Stephens’ outside counsel Haynes, which pertained to the legal review and analysis of documents drafted collaboratively by Consert, Stephens and counsel for each of them. Those documents contained confidential information about Consert, and were prepared in furtherance of the proposed transaction for Consert. These documents were kept confidential and were not intended to be disclosed to a third party. Further, Consert’s attorney attested that, in the course of Stephens working to identify an investor or buyer for Consert, privileged communications including drafts of documents prepared by Consert’s or Stephens’ attorneys were exchanged among the parties with the intent that such drafts would not be disclosed to any other party, and the disclosures were made in furtherance of the rendition of legal services to Consert.

Stephens thus made a prima facie showing that the documents were protected from discovery by Texas Rule of Civil Evidence 503(a)(2)(B), because it was a “client’s representative,” a “person who, to facilitate the rendition of professional legal services to the client, makes or receives a confidential communication while acting in the scope of employment for that client.” Plaintiffs offered no evidence in rebuttal, and so mandamus was conditionally granted, requiring the trial court to vacate its order compelling production of the disputed documents.

(J. Ballard)

(SOLA Ref. No. 2019-23-03)

NOTICE: The court decision synopsis published above represents an abbreviated description of the actual decision and is re-printed here for its educational value. The author's effort is to report concisely the substance of the decision or a selected portion of the decision; commentary or analysis is generally reserved for the italicized section at the bottom of the summary. Subscribers to SAC's Online Litigation Alert (SOLA), from which this synopsis is excerpted, have immediate access to the full decision, in addition to the synopsis. 

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