Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Ariel Freaner v. Enrique Marin Lutteroth Valle

September 28, 2012

ARIEL FREANER
PLAINTIFF,
v.
ENRIQUE MARIN LUTTEROTH VALLE, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Mitchell D. Dembin U.S. Magistrate Judge

ORDER ON JOINT MOTION FOR DETERMINATION OF DISCOVERY DISPUTE RE: TAX AND RELATED DOCUMENT PRODUCTION

[ECF NO. 56]

Background

Before the Court is the joint motion of the parties, filed on September 7, 2012, for a determination of a discovery dispute. (ECF No. 56). The dispute involves Plaintiff's refusal to produce federal and state tax records pursuant to discovery demands made by Defendants. Plaintiff objects to production on the basis of the California privilege against disclosure of tax returns, privacy and relevance. (ECF No. 56-3). Defendants assert that this case is governed by federal privilege law which does not contain a privilege protecting tax returns and that the returns are relevant. The dispute essentially is a motion to compel production by Defendants.

Plaintiff has sued Defendants alleging, among other things, that he was not paid for certain services rendered beyond the scope of a contractual agreement between the parties. Defendants have counterclaimed alleging that Plaintiff failed to perform certain contractual duties. (ECF Nos. 1, 7). As provided below, Defendants' motion to compel, as presented in this joint motion, is DENIED.

Discussion

Courts in California have created an implied privilege against disclosure of returns. Webb v. Standard Oil Co., 49 Cal.2d 509, 513 (1957). The privilege is not absolute; it must be balanced against other public policy considerations. Schnabel v. Superior Ct., 5 Cal.4th 704, 718-21 (1993). "The privilege will not be upheld when (1) the circumstances indicate an intentional waiver of the privilege; (2) the gravamen of the lawsuit is inconsistent with the privilege; or (3) a public policy greater than that of the confidentiality of tax returns is involved." Weingarten v. Superior Ct., 102 Cal.App.4th 268, 274 (Cal.Ct.App. 2002).

Discovery of tax returns is not privileged under federal law. Deployment Medicine Consulants, Inc., v. Pipes, 2010 WL 4853814 *2 (S.D.Cal. Nov. 23, 2010). In the Ninth Circuit, "discovery of tax returns is allowed when 'they are relevant and there is a compelling need for the returns because their information is not otherwise readily attainable from an alternative source.'" Id. (citations omitted).

The initial inquiry in the instant case is whether to apply California or federal law to the question of whether the requested tax returns are privileged. The answer will turn on the application of Fed.R.Evid. 501 which provides, in pertinent

[I]n civil actions and proceedings with respect to an element of a claim or defense as to which State law supplies the rule of decision, the privilege of a witness . . . shall be determined in accordance with State law.

Defendants assert that the instant case presents a federal question with pendant state law claims and that federal privilege law should apply. (ECF No. 56-2 at 5). Plaintiff does not address the choice of law question; he assumes that state law applies and that none of the exceptions to assertion of the privilege is extant in this case. (ECF No. 56-3). It is rarely so simple.

In Young v. United States, 149 F.R.D. 199 (S.D.Cal. 1993), the court addressed whether state or federal privilege law applied to a lawsuit brought under the Federal Tort Claims Act. In that case, the plaintiff asserted that because the Federal Tort Claims Act requires the court to look to the law of the state where the injury occurred in determining liability, that state privilege law applied. Defendant argued that in federal question cases, federal privilege law applies. The court found that in Federal Tort Claims Act cases, federal law absorbs or incorporates state law so that federal privilege law applies. The court stated:

The law governing suits in federal court may be state law operative of its own force, state law incorporated or adopted as the federal law, or specific federal law uniform throughout the United States. . . . Where state law operates of its own force, it is clear that state law provides the rule of decision. However, where the state law becomes, in effect, the federal law by incorporation, then federal law supplies the rule of decision. at 201-202.

Most cases applying federal privilege law are cases based primarily on federal law with pendant state law claims. See Eagle Precision Technologies, Inc., v. Eaton Leonard Robolix, Inc., 2005 WL 6453567 *3-4 (S.D.Cal. May 12, 2005) and cases cited therein. This does not necessarily mean that state privilege law ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.