In re Taylor

Citations: 401 S.W.3d 69; 2009 Tex. App. LEXIS 6573; 2009 WL 2568375Docket: No. 14-09-00548-CV

Court: Court of Appeals of Texas; August 20, 2009; Texas; State Appellate Court

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Ian Taylor filed a petition for writ of mandamus after the trial court denied his motion to quash a deposition related to a divorce proceeding between Miguel and Leticia Loya, where valuation of Miguel's stock is contested. Leticia's counsel sought to depose Taylor, the President of Vitol, Inc., to gather information about the stock's valuation. The High Court of Justice in London ordered Taylor’s deposition, limiting it to specific areas regarding stock valuation and relationships between various Vitol entities. Taylor contended that the deposition was an impermissible apex deposition, claiming his title did not grant him special status. The Texas trial court denied his motion to quash after hearings, prompting Taylor to seek mandamus relief. The court concluded that Leticia met the standard for an apex deposition, and mandamus relief is only available to correct clear abuse of discretion without an adequate legal remedy.

A trial court is bound to apply the law correctly and lacks discretion in this regard; failure to do so constitutes an abuse of discretion. Mandamus is a suitable remedy when a trial court permits an apex deposition against established discovery standards. The guidelines for apex depositions, as outlined in Crown Central Petroleum Corporation, apply when seeking to depose high-level corporate officials who assert lack of relevant knowledge. The trial court must first assess if the requesting party has demonstrated that the official possesses unique or superior knowledge. If this showing is not made, less intrusive discovery methods must be attempted first. If those methods prove inadequate, the deposition may proceed if there is a reasonable indication that it will yield admissible evidence.

In this case, Taylor claims he is not a high-level official for most entities except for Vitol Holding BV and Vitol Holding II SA, arguing his title as "President" is merely symbolic. However, his role as a director and his title qualify him as a high-level official. Regarding his knowledge, Taylor did not entirely deny relevant knowledge but indicated that others have more information about certain issues. The court agrees that total ignorance is not required under Crown Central standards, and the assertion by Miguel that Taylor has relevant knowledge does not negate the application of these standards.

The 'Vitol Group' or any individual entity did not list Taylor as a witness in litigation related to Miguel's divorce, which he is conducting independently. Miguel's references to Taylor do not imply any acknowledgment by the Vitol Group, its entities, or Taylor concerning his knowledge level. Taylor is identified as a 'high-level official' who has denied possessing 'unique or superior knowledge of discoverable information.' 

In assessing whether the apex deposition standard applies, it was determined that Leticia demonstrated Taylor's potential unique or superior knowledge regarding discoverable information. Miguel’s shares in Vitol Holding II SA were converted to Tinsel Group shares in 2006, with relevant shareholder agreements outlining termination events, including divorce. These agreements allow the respective boards to redeem shares at their discretion, with proceeds based on a defined intrinsic value formula. Consequently, Miguel and Leticia's divorce will necessitate liquidation of their Tinsel shares, a significant marital asset.

Leticia argues that the valuation of the stock is complicated by Vitol’s private status and the reclassification of shares, necessitating Taylor's deposition to uncover the true nature and value of Miguel's stock and the processes for future distributions and dividends. Despite Taylor asserting that others have more knowledge, all three individuals (including Jeff Hepper and Keith Swaby) have been deposed. The trial court exercised its discretion in permitting Taylor's deposition to proceed, consistent with established legal standards.

Miguel was not aware of any instance where an employee's divorce resulted in the non-employee spouse being awarded shares in either entity. He noted that upon termination, shares convert to preferred shares, with the board holding absolute power over redemption decisions. Jeff Hepper, a senior vice president at Vitol, indicated a lack of familiarity with Tinsel Group's legal structure and could only make educated guesses regarding Vitol's financials, acknowledging the board's discretion over dividends and redemptions.

In a termination event, redeemed shares held by a vested shareholder are valued at their full worth, while the valuation of shares held in trust for shareholders' children remains uncertain. There is no known precedent for nonemployee spouses receiving Tinsel shares in divorce settlements. The intrinsic value of Leticia's shares will be determined by the Vitol Holding II SA board during redemptions. Hepper expressed uncertainty about whether Tinsel has governing documents for dividends and redemptions in such events. Keith Swaby, a vice president of Vitol, Inc., confirmed he has not seen anyone tender Tinsel shares for redemption without leaving the company and lacks knowledge about payoffs to nonemployee spouses in divorce cases. He is also unaware of whether Leticia's shares would convert to preferred status or if she would need to sell them back to Tinsel if awarded in a divorce. The board would be involved in calculating any redemption payouts. Swaby testified that Ian Taylor is highly knowledgeable about Vitol, likely more than anyone else, although he does not have details on every operation. Intrinsic value and retained earnings are calculated annually and reported by Taylor to shareholders without any supporting documentation, relying solely on his credibility. Taylor's communications with Miguel from 2001 to 2008 include annual letters that outline the intrinsic value of Miguel's shares, detailing share classes, balance, profit allocation, dividends, and redemptions.

New shares of Vitol Holding II SA have been issued, with an invitation extended to Miguel to purchase a specific number at a designated price, while Taylor is available for inquiries. This situation contrasts with previous cases where apex depositions were denied, as seen in *In re El Paso Healthcare Sys.* and *AMR Corp. v. Enlow*, where the plaintiffs failed to demonstrate the CEO's unique knowledge. In this instance, Leticia has shown that Taylor may possess unique or superior knowledge justifying his deposition on specific issues set by the High Court of Justice, Queen’s Bench Division. Consequently, Taylor's petition for a writ of mandamus is denied, as he has not proven an abuse of discretion by the trial court.

Taylor, in his affidavit, clarifies that he is not Mr. Loya's superior and does not manage U.S. operations related to Vitol. He expresses limited knowledge about the Tinsel entities, which were established for U.S. shareholders, and indicates that others, including Mr. Loya, Mr. Hepper, and Mr. Swaby, are more qualified to provide information regarding these entities. Taylor argues that the trial judge erred in denying his motion to quash the deposition request, as he was acknowledged as a person with relevant knowledge, although the order did not specify its grounds. The discussion references the application of the Crown Central test in this context.

Termination events for a shareholder include divorce, bankruptcy, judicial payment suspension, death or disability of a natural person shareholder, dissolution of a non-natural person shareholder, attachment on shares, changes in ownership not involving transfer, loss of control over shares, and termination of employment with Vitol Group or Tinsel. In the event of a divorce, common shares awarded to Leticia will convert to preferred shares. Common shares allow participation in company appreciation and receive dividends, while preferred shares do not participate in appreciation and are subject to company redemption or repurchase at the board's discretion. When shares are redeemed, Tinsel receives payment from Vitol Holding II SA, while the Tinsel Group board decides on dividend payments for common shares. As of December 31, 2007, the intrinsic value of the Loyas’ shares and those of the Nova Trust was nearly $140,000,000, with approximately $12,700,000 in dividends paid on March 18, 2008.