Texas Snap-Back Provision Protects Inadvertent Disclosure of Privileged Material

Inadvertent production of privileged material is something all trial counsel worries about in today’s world of e-discovery. Complicated “claw back” provisions are drafted and inserted in protective orders to provide an extra layer of protection.  In Texas, lawyers and in-house counsel have an additional layer of protection in the language of Texas Rule of Civil Procedure 193.3(d), commonly known as the “snap-back” provision. The snap-back provision provides that:

“A party who produces material or information without intending to waive a claim of privilege does not waive that claim under these Rules of Evidence if-within ten days or shorter time ordered by the court, after the producing party actually discovers that such production was made-the producing party amends the response, identifying the material or information produced and stating the privilege asserted.”

The Rule has two key points. First, the rule is focused on intent to waive the privilege not the intent to produce the material or information. See Tex. R. Civ. Proc. 193 cmt 4; see also In re Christus Spohn Hosp. Kleberg, 222 S.W.3d 434 (Tex. 2007). Secondly, the triggering date is not the date of production of the material or information, but the date of actual discovery that an inadvertent production was made.

Texas Courts have applied and considered the snap-back provision in a wide variety of cases. See In re AEP Tex. Cent. Co., 128 S.W.3d 687 (Tex. App. – San Antonio 2003, no writ) (holding that legal memorandum prepared in anticipation of litigation and inadvertently produced was covered by snap-back provision); Warrantech Corp. v. Computer Adapters Servs., 134 S.W.3d 516 (Tex. App. – Fort Worth 2003, no writ) (holding privilege was not waived by inadvertent disclosure and trial court did not abuse discretion in excluding letter at trial). In the Christus Spohn Hosp. Kleberg case, the Supreme Court of Texas denied the request for mandamus based on the snap-back provision because the privilege holder was going to have the expert to whom the privileged material was disclosed testify despite the disclosure. However, the Supreme Court held that the snap-back provision would preserve the privilege and take precedence over the rule mandating that all documents provided to a testifying expert are discoverable if the expert did not testify and his designation was withdrawn. See In re Christus Spohn Hosp. Kleberg, 222 S.W.3d 434 (Tex. 2007).

The snap-back provision is a useful tool that can be supplemented by the traditional claw back language used in agreed protective orders. Relying on both the snap-back provision and the claw back provision in an agreed protective order along with reasonable discovery review procedures with multiple layers of review (i.e. first review for responsiveness followed by second and third reviews for privilege, etc.) can help eliminate the damage and expense that an inadvertent production of a privileged document can cause.

The opinions in this blog are solely the author’s and any suggestions or comments can be sent to me at john@jrjoneslaw.com.

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Regulation Z Changes Set To Take Effect June 1, 2013

As many of the regular readers of this blog know because they are involved in mortgage lending, the principal purpose of the Truth-in-Lending-Act (“TILA”) is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. TILA also includes substantive protections. For example, the act and regulation give consumers the right to cancel certain credit transactions that involve a lien on a consumer’s principal dwelling. Regulation Z also prohibits specific acts and practices in connection with an extension of credit secured by a consumer’s dwelling.

Beginning June 1, 2013, the Truth-in-Lending-Act and Regulation Z will prohibit mandatory arbitration terms in both closed-end loans and open end loans secured by a consumer’s principal dwelling. See 12 C.F.R. 1026.36(h), as amended by 78 Fed. Reg. 11279 at 11413 (Feb., 15, 2013); see also 15 U.S.C. §1639c(e)(1).  The regulation also states that no mortgage loan agreement shall be applied or interpreted to “bar a consumer from bringing an action” in court based upon a federal claim. See 15 U.S.C. §1639c(e)(3).  The issue that has not been decided is whether the ban on arbitration is going to be applied retroactively.  See NCLC eReports, May 2013, No. 2 article by Jon Sheldon for a discussion of retroactive application.

The opinions of this blog are the author’s and any suggestions or comments should be sent to me at John@jrjoneslaw.com.  Have a great Memorial Day Weekend and I would like to extend a heart-felt thank you to all the men and women who made the ultimate sacrifice for our country!

Statute of Frauds Applies to “Material” Modifications

The United States District Court for the Northern District of Texas has published a case that should be a roadmap for assignees of an original mortgage lender faced with claims that foreclosure was improper.  First, the opinion in Rhodes v. Wells Fargo Bank, N.A., 2012 U.S.Dist. LEXIS 156500 (N.D.Tex. October 31, 2012), provides an excellent primer on summary judgment practice in federal courts. More importantly, the District Court granted summary judgment and the 31 page opinion addresses the nine different causes of action raised by the plaintiffs. The opinion is also noteworthy because Wells Fargo went out of its way and attempted to assist the borrower with modifications, forbearance agreements, etc. on a home loan in the original value of $151,650 that ultimately led to claims that an oral modification had been agreed to by the borrower and Wells Fargo so that foreclosure was improper.  It is the borrower’s claim of oral modification and the statute of frauds defense that are the point of today’s blog.

The statute of frauds, Texas Business & Commerce Code Section 26.01, requires that certain specified classes of contracts be in writing to be enforceable. A loan agreement in which the amount of the loan agreement exceeds $50,000 in value is not enforceable unless the agreement is in writing and signed by the party to be bound or by that party’s authorized representative. See Tex. Bus. & Comm. Code Ann. Section 26.02(b). In Texas, oral modifications of a written contract subject to the statute of frauds are also subject to the statute of frauds if they materially alter the obligations imposed by the original contract. See Rhodes v. Wells Fargo Bank, N.A., 2012 U.S.Dist. LEXIS 156500 (N.D.Tex. October 31, 2012), citingHorner v. Bourland, 724 F.2d 1142, 1148 (5th Cir. 1984). Oral agreements to modify the percentage of interest to be paid, the amount of the installments, security rights, the terms of the remaining balance of the loan, the amount of the monthly payments, the date of the first payment and the amount to be paid monthly for taxes and insurance have been held to be material and therefore, they cannot be orally modified. Id., citing, Foster v. Mutual Savings Ass’n., 602 S.W.2d 98 (Tex. Civ. App.-Fort Worth 1980, no writ).  The Court also described how an agreement to “delay payment of money” or “delay foreclosure” are subject to the statute of frauds.  Even if a borrower alleges that they have applied for a specific program altering their loan obligations and have reached an oral agreement regarding the program, it is still subject to the statute of frauds. Rhodes v. Wells Fargo Bank, N.A., 2012 U.S.Dist. LEXIS 156500 (N.D.Tex. October 31, 2012)(citing various authorities). Rhodes went further and argued that the loan was not modified but a new oral agreement had been created. In rejecting this, the District Court held the statute of frauds would still apply to a claim by Plaintiff based on an oral unilateral contract unless an equitable exception applied. The Court rejected the borrower’s claims of partial performance and promissory estoppel to overcome the statute of frauds defense and upheld the summary judgment in favor of Wells Fargo.

I highly recommend the opinion because the District Court did an exceptional job in outlining the claims, defenses and why summary judgment was granted.The section on partial performance, virtual fraud and promissory estoppel as a defense to the statute of frauds is noteworthy and those areas will be the topic of future blogs.  The opinions contained in this blog are the author’s and any comments, suggestions and replies should be directed to me at John@jrjoneslaw.com.