United States District Court, N.D. California
ORDER RE DEFENDANT'S REQUEST FOR PLAINTIFFS'
TAX RETURNS RE: DKT. NOS. 154, 155, 156
JACQUELINE SCOTT CORLEY UNITED STATES MAGISTRATE JUDGE
Julia Bernstein, Lisa Marie Smith, and Esther Garcia
(collectively, “Plaintiffs”) represent a class of
flight attendants suing Defendant Virgin America, Inc.
(“Defendant”) for allegedly denying
Plaintiffs' wages and benefits. Discovery disputes in
this class action have been referred to the undersigned
magistrate judge. (Dkt. No. 130.) On May 18, 2017, the Court
held a hearing on the parties' discovery dispute
regarding Defendant's request for Plaintiffs' tax
returns, and ordered additional briefing. (Dkt. No. 155.) Now
pending before the Court is the parties' joint letter
brief regarding Defendant's request for an order
compelling Plaintiffs to produce their tax returns. (Dkt. No.
156.) Having carefully considered the parties' arguments,
the Court DENIES Defendant's request for Plaintiffs'
diversity actions, questions of privilege are controlled by
state law.” In re Cal. Pub. Utils. Comm'n,
892 F.2d 778, 781 (9th Cir. 1989). Under California law, a
privilege protects forced disclosure of income tax returns.
Schnabel v. Super. Ct. of Orange Cnty., 5 Cal.4th
704, 719 (1993) (quoting Webb v. Standard Oil, 49
Cal.2d 509, 513 (1957)). The privilege is meant “to
facilitate tax enforcement by encouraging a taxpayer to make
full and truthful declarations in his return, without fear
that his statements will be revealed or used against him for
other purposes.” Id. California courts have
extended the privilege to cover records submitted with tax
returns, including, for example, W-2s. See Brown v.
Super. Ct. of the City & Cnty. of San Francisco, 71
Cal.App.3d 141, 143-44 (1977) (holding that W-2s are
“information contained in the returns” and thus
fall within the scope of the privilege) (citation omitted);
Bowerman v. Field Assert Servs., Inc., No.
13-cv-00057-WHO, 2013 WL 6057043, at *2-3 (N.D. Cal. Nov. 14,
2013) (concluding that the privilege protected Schedule Cs,
payroll tax records, and 1099s for any employees hired).
privilege is not absolute and is waived or inapplicable
where: “(1) there is an intentional relinquishment, (2)
the gravamen of the lawsuit is so inconsistent with the
continued assertion of the taxpayer's privilege as to
compel the conclusion that the privilege has in fact been
waived, or (3) a public policy greater than that of
confidentiality of tax returns is involved.”
Schnabel, 5 Cal.4th at 721 (internal quotation
marks, citations, and brackets omitted). None of the three
exceptions apply here.
argues Plaintiffs resigned their privilege when they placed
their residency at issue, sought certification of a residency
based subclass, and relied upon where they filed their tax
returns to establish residency. The Court disagrees. While
residency is relevant to determine subclass membership,
production of the tax returns is not necessary to decide
residency. See Bowerman v. Field Asset Servs., No.
13-cv-00057-WHO, 2013 WL 6057043, at *2 (N.D. Cal. Nov. 14,
2013) (where Plaintiff can testify to information and/or
information can be obtained from other sources, tax returns
will not be compelled). First, Plaintiffs testified under
oath to where they file tax returns. Second, Defendant
possesses Plaintiffs' W-4s, which state their home
addresses for the purposes of income tax residency. Third,
Defendant can turn to its own business records, including the
class list, which identifies the address each flight
attendant provided to Defendant or the state for which the
flight attendant had income taxes withheld. There is no need
for production of the highly privileged returns themselves.
insistence that due process requires that it be allow to
verify the veracity of Plaintiffs' deposition testimony
and whether each Plaintiff properly filed their returns in
California is unpersuasive. Defendant offers no explanation,
and the Court cannot discern any, as to why a flight
attendant would have California income taxes withheld from
her paycheck if her residency was actually somewhere else.
The cases Defendant cites are inapposite. Moss and
Marks concern citizenship, not residency, and do not
require the production of tax returns. Moss v. Infinity
Insurance Co., No. 15-CV-03456-JSC, 2016 WL 7178559,
(N.D. Cal. Dec. 9, 2016); Marks v. American Airlines,
Inc., No. 2:05-cv-08947- CAS-AJW, Dkt. 22 (CD. Cal. Feb.
27, 2016). Alakozai and Liberty Mutual do
not discuss the tax privilege. Alakozai v. Chase
Investment Services, Corp., No. 11-cv-09178, Dkt. 125,
*1 (CD. Cal. Aug. 7, 2014); Liberty Mut. Ins. Co. v.
California Auto Assigned Risk Plan, No.
3:11-cv-01419-MMC, 2012 WL 892188 (N.D. Cal. Mar. 14, 2012).
Plaintiffs did not intentionally relinquished their
the second or third exceptions apply. Defendant has not made
the argument that the gravamen of the lawsuit is so
inconsistent with the continued assertion of the taxpayer
privilege as to conclude that the privilege has been waived,
nor has Defendant identified any public policy that outweighs
the protection of tax returns under the circumstances
reasons discussed above, the Court DENIES Defendant's
request for an order compelling Plaintiffs to produce their
Order disposes ...