In addition to assailing the merits of the homeowners' liability claims, the Insurer asserted that the homeowners' attorney's fee claims were excessive for a case of comparable complexity in the relevant locality.

Two months before trial, the homeowners requested a trial continuance and sought leave to serve additional discovery regarding the Insurer's attorney billing information. Although the Insurer was not making a claim for attorneys' fees, the homeowners submitted:

(1) Three interrogatories requesting hourly rates, total amount billed, and total reimbursable expenses; and

(2) Four requests for production seeking all billing invoices; payment logs, ledgers, and payment summaries; audits; and any documents pertaining to flat-rate billing.

The specific discovery requests were:

Interrogatories:

(1) State the hourly rate of any and all attorneys who have provided legal services to this Defendant in this case;

(2) State the total amount billed by each law firm providing legal services to this Defendant in this case up to and including the time of trial; and

(3) State the total amount of reimbursable expenses incurred by any law firm providing legal services to this Defendant in this case up to and including the time of trial.

Requests for Production:

(1) Produce all billing invoices received by Defendant and/or any of the firms the named attorneys are affiliated with or employed by, in connection with this case;

(2) Produce all payment logs, ledgers, or payment summaries showing all payments paid to Defendants' attorneys and/or any of the firms that the named attorneys are affiliated with or employed by, in connection with this case;

(3) [withdrawn];

(4) Please produce all documents that show the flat rate, if any, being paid to Defense Counsel and/or any of the firms that the named attorneys are affiliated with or employed by, in connection with their services on this case; and

(5) Please produce all documents related to audits of the billing and/or invoices of Defense Counsel and/or any of the firms that the named attorneys are affiliated with or employed by, which were performed on behalf of Defendant in regards to the attorney services received by Defendant. This request is limited to the last five (5) years.

The Insurer objected.

After two non-evidentiary hearings, a discovery special master recommended that:

(1) An opponent's attorney billing information was, as a general proposition, relevant to the reasonableness of an attorneys' fee request in the same case;

(2) To the extent the discovery requests in this case sought material from an expert witness on the attorneys' fee issue, the information fell within the scope of permissible discovery under Texas Rule of Civil Procedure 192.3(e);

(3) Some of the discovery requests should be more narrowly tailored, but the Insurer's objections to the discovery requests as modified should be overruled; and

(4) “Specific records may be redacted for content protected by an appropriate privilege.”

Adopting these recommendations, the MDL pretrial court ordered the insurer to respond to the discovery requests.

The court of appeals denied the Insurer's petition for mandamus relief, and the dispute reached the Texas Supreme Court.

The Texas Supreme Court's Decision

The court granted mandamus relief and directed the trial court to vacate its discovery order.

In its decision, the court explained that the issue was whether a party's attorney-billing information (i.e., the Insurer's) was discoverable when it challenged an opposing party's attorneys' fee request as unreasonable or unnecessary but neither used its own attorneys' fees as a comparator nor sought to recover any portion of its own attorneys' fees.

It held that, under such circumstances:

(1) Compelling en masse production of a party's billing records – that is, all billing invoices, payment logs, payment ledgers, payment summaries, documents showing flat rates, and audits – invaded the attorney work-product privilege “because, cumulatively, billing records constitute[d] a mechanical compilation of information that, at least incidentally, reveal[ed] an attorney's strategy and thought processes”;

(2) The privilege was not waived merely because the party resisting discovery had challenged the opponent's attorneys' fee request where the party resisting discovery had stipulated that it would not use its own billing records to contest its opponent's attorneys' fees; and

(3) Such information was “ordinarily not discoverable.”

The court added that, to the extent factual information about hourly rates and aggregate attorneys' fees was not privileged, that information generally was “irrelevant and nondiscoverable” because it did not establish or tend to establish the reasonableness or necessity of the attorneys' fees an opposing party had incurred. In the court's opinion, a party's litigation expenditures reflected only the value that party had assigned to litigating the matter, which might be influenced by myriad party-specific interests.

Absent a fee-shifting claim, the court continued, a party's attorneys' fee expenditures “need not be reasonable or necessary for the particular case.”

Therefore, it reasoned, barring “unusual circumstances,” allowing discovery of such information would spawn unnecessary case-within-a-case litigation devoted to determining the reasonableness and necessity of attorneys' fee expenditures that were not at issue in the litigation. “This was not a proper discovery objective,” the court ruled.

It should be noted that the court said that its holding did “not prevent a more narrowly tailored request for information relevant to an issue in a pending case that [did] not invade the attorney's strategic decisions or thought processes” and did not preclude a party from seeking noncore work product “upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party's case and that the party [was] unable without undue hardship to obtain the substantial equivalent of the material by other means.”

In addition, the court said, making a claim for attorneys' fees or using attorneys' fees as a comparator in challenging an opponent's fee request put a party's attorneys' fees at issue in the litigation. It also declared that designating counsel as an expert opened the door to expert-witness discovery as provided and limited by the Texas Rules of Civil Procedure.

The court concluded:

Outside of these scenarios and absent unusual circumstances, information about an opposing party's attorney[s'] fees and expenses is, in the ordinary case, privileged or irrelevant and, thus, not discoverable.

The case is In re National Lloyds Ins. Co., No. 15-0591 (Tex. June 9, 2017).