Judge Martha K. Gooding, Case 21-01237839 2023-05-15 Tentative Ruling

Judge: Martha K. Gooding, Case: 21-01237839, Date: 2023-05-15 Tentative Ruling

1) Motion to Quash Discovery Subpoena

2) Motion to Quash Discovery Subpoena

Before the Court are two motions by Plaintiff Ahmed Ibrahim (“Plaintiff”) to quash two separate subpoenas issued by Defendant Target Corporation (“Defendant”).

Motion #1 – re Subpoena to GLI

As explained further below, Plaintiff’s motion for order quashing, modifying, or limiting the subpoena defendant Target Corporation served on GLI is granted in part and denied in part. The subpoena is hereby limited to documents reflecting or relating to work done by Plaintiff and money paid to Plaintiff for that work, for the period of 1/1/19 through 1/31/22. If Plaintiff contends that any such documents are protected by his tax return privilege, counsel should be prepared to specifically identify such documents at the hearing.

No sanctions are awarded.

Motion #2 – re Subpoena to BLS Limousine

As explained further below, Plaintiff’s motion for order quashing, modifying, or limiting the subpoena Defendant served on BLS Limousine is granted in part and denied in part. The subpoena is hereby limited to documents reflecting or relating to work done by Plaintiff and money paid to Plaintiff for that work, for the period of 1/1/19 through 1/31/22. If Plaintiff contends that any such documents are protected by his tax return privilege, counsel should be prepared to identify such documents at the hearing.

No sanctions are awarded.

Motion #1 –– to quash subpoena to GLI

[ROA #89]

Defendant subpoenaed the following documents from Plaintiff’s client, GLI:

Documents and records, income documents, and writings, including, but not limited to, employment, payroll and applications for employment, work absence and incident reports, personnel records, pre-employment exam records and progress records, pertaining to the employment of Ahmed Ibrahim, DOB: 09/01/1963, SSN: UNKNOWN, from 01/01/2017 to the present.

[Jurczak Decl. (ROA #90), Ex. A.]

Plaintiff objects that he is not and has never been an employee of GLI. Nonetheless, he objects this subpoena is overbroad, seeking documents not relevant to this action, and violates his right to privacy. He also objects that this tax return documents are privileged.

Plaintiff does not explain what sort or documents GLI, as his client, would be likely to have. But in light of Plaintiff’s deposition testimony that he is a self-employed driver and gets his work through two clients, GLI and BLS Limousine, it does seem likely that GLI will have documents relating to its transactions with Plaintiff, including payment, that are relevant to the issue of his income and his claim for lost income. [Mandalia Decl. (ROA #131), Ex. 2 (Plaintiff Depo.).]

While acknowledging that his asserted loss of income is in issue in this case, Plaintiff takes the position that Defendant has been able to conduct discovery on the issue through written discovery to him and taking his deposition. The Court finds this argument unpersuasive. Defendant is not required to accept Plaintiff’s testimony on this point without seeking other evidence to disprove or corroborate that testimony.

For its part, Defendant contends that the subpoena seeks documents relevant to Plaintiff’s claim for loss of income and that it has attempted to discover the information from Plaintiff but his written discovery responses and deposition answer have been vague and uninformative. The problem with Defendant’s position – and its subpoena – is that it is too broad and sweeps far beyond any documents relevant to the purported reason for the subpoena, i.e., discovering evidence relevant to Plaintiff’s lost income claim.

Motion to Quash Subpoena

Any party to the action or the witness may bring a motion to quash a subpoena and may request the Court to quash it entirely, modify it, or direct compliance with it upon those terms and conditions as the court shall declare including protective orders. In addition, the court may make any other order as may be appropriate to protect the moving party from unreasonable or oppressive demands including unreasonable violations of the moving party’s right of privacy. Code Civ. Proc. §1987.1.

Further, in connection with a subpoena for consumer records: “Any consumer whose personal records are sought by a subpoena duces tecum and who is a party to the civil action in which this subpoena duces tecum is served may, prior to the date for production, bring a motion under Section 1987.1 to quash or modify the subpoena duces tecum.” Code Civ. Proc., § 1985.3(g).

A notice to consumer was served in connection with the subpoena to GLI [Jurczak Decl. (ROA #90), Ex. A.], but if GLI is not Plaintiff’s employer it is not clear that documents it has concerning Plaintiff would be consumer records.

Grounds for a motion to quash include that the records sought are not within the permissible scope of discovery, are protected by privacy rights, are not relevant to the subject matter, or are unjustly burdensome or oppressive demands. Civ. Proc. Before Trial ¶ 8:598.

Plaintiff has a right to privacy in his financial and/or employment records to the extent GLI has such records. As the Court has previously addressed, however, Plaintiff has claimed lost earnings.

A right of privacy exists as to a party's confidential financial affairs, even when the information sought is admittedly relevant to the litigation. Rutter, CPBT, §8:303 et seq, citing Cobb v. Sup.Ct. (1979) 99 Cal. App. 3d 543, 550 (privacy as limit on discovery of defendant's net worth where punitive damages sought) and Fortunato v. Sup.Ct. (Ingrassia) (2003) 114 Cal. App. 4th 475, 480 (confidential financial information given to a bank by a customer is protected by the right to privacy: the right to privacy in confidential customer information remains whatever form it takes, whether tax returns, checks, statements, or other account information). Also, tax records, both state and federal, are privileged to facilitate disclosure and payment of taxes. Webb v. Standard Oil Co. (1957) 49 Cal. 2d 509, 513-14, and Sav-on Drugs, Inc. v. Superior Court (1975) 15 Cal. 3d 1, 6.

Privacy protections are qualified, not absolute: courts must carefully balance the right of privacy against the need for discovery. Rutter, CPBT, §8:294. Disclosure may be ordered if a “compelling public interest” would be served thereby. Id., citing Britt v. Sup.Ct., supra, 20 Cal. 3d at 855–56; John B. v. Sup.Ct. (Bridget B.) (2006) 38 Cal. 4th 1177, 1199.

The party seeking discovery after a valid privacy objection has been made must show a particularized need for the information sought. The court must be convinced that the information is directly relevant to a cause of action or defense ... i.e., that it is essential to determining the truth of the matters in dispute. Britt, supra, 20 Cal.3d at 859–862; Harris v. Superior Court (1992) 3 Cal.4th 661, 665; Rutter, Cal. Prac. Guide Civ. Pro. Before Trial Ch. 8C-5 at 8:320. The court must carefully balance the requesting party’s need for the information with opposing party’s right of privacy when determining whether the discovery should be permitted. John B. v. Superior Court (2006) 38 Cal.4th 1177, 1199; Harris, supra, 3 Cal.App.4th at 665.

Although a party need not always show a “compelling need” for the discovery, “when a discovery request seeks information implicating the constitutional right of privacy, to order discovery simply upon a showing that the Code of Civil Procedure section 2017.010 test for relevance has been met is an abuse of discretion.” Williams v. Superior Court (2017) 3 Cal.5th 531, 556.

Such discovery must be “directly relevant” and it is not enough if the discovery might lead to admissible evidence. Board of Trustees v. Superior Court (1981) 119 Cal. App. 3d 516, 526 disapproved of on other grounds by Williams v. Superior Court (2017) 3 Cal.5th 531.

Then, the court balances whether the invasion of the privacy interest is justified by a competing interest. Hill v. National Collegiate Athletic Ass’n (1994) 7 Cal.4th 1, 38.

Here, Plaintiff has claimed lost income as part of his damages. Moreover, he has produced some bank statements to support his claim of lost income. Plaintiff produced bank statements for the two months that he contends he lost income. On the motion directed at Plaintiff’s banking documents, the court found that Defendant was entitled to statements and documents from 1/1/19 through 1/31/22.

Similarly, here, for documents that GLI has relating to work done by Plaintiff and money paid to Plaintiff for that work, for the period of 1/1/19 through 1/31/22, Defendant’s interest in obtaining these documents to prepare its defense to Plaintiff’s loss of income claim outweighs Plaintiff’s privacy in those documents.

From Plaintiff’s opposition, it appears he is also asserting his tax return privilege – thus suggesting or implying that GLI has possession of documents covered by that privilege. Plaintiff does not explain how a third party, who is not is accountant and who Plaintiff insists is not his employer, would have tax documents pertaining to Plaintiff. The Court will hear from Plaintiff on this at the hearing; Plaintiff should be prepared to identify and specify what documents Plaintiff contends GLI has that Plaintiff contends are covered by Plaintiff’s tax return privilege.

Tax Return Privilege

The following, taken from The Rutter Guide, Civil Procedure Before Trial, provides a useful summary of the law of privilege for tax returns:

Impliedly based on statute: A privilege to resist compelled disclosure of personal and business tax returns is implied from various statutes making it a misdemeanor for taxing authorities to divulge the particulars contained in a required tax return or report. [Rev. & Tax.C. § 19542 (amended Stats. 2020, Ch. 230; eff. 1/1/21); Unemp.Ins.C. § 1094; Webb v. Standard Oil Co. of Calif. (1957) 49 C2d 509, 513, 319 P2d 621, 624; Schnabel v. Sup.Ct. (Schnabel) (1993) 5 C4th 704, 718-722, 21 CR2d 200, 208-210 & fn. 4; Fortunato v. Sup.Ct. (Ingrassia) (2003) 114 CA4th 475, 479, 8 CR3d 82, 85]

(1) Purpose: The purpose of the privilege is to facilitate collection of taxes. Permitting compelled disclosure would likely discourage taxpayers from making full and truthful declarations in their tax returns, out of concern their returns could be used against them for other purposes. [Webb v. Standard Oil Co. of Calif., supra, 49 C2d at 513, 319 P2d at 624; Sav-On Drugs, Inc. v. Sup.Ct. (Botney) (1975) 15 C3d 1, 6, 123 CR 283, 286; Fortunato v. Sup.Ct. (Ingrassia), supra, 114 CA4th at 482, 8 CR3d at 87]

. . .

b. Protected information

(1) All tax returns: The privilege protects all tax returns, whether personal or corporate, including income, employment, estate, payroll and sales tax returns. [Schnabel v. Sup.Ct. (Schnabel) (1993) 5 C4th 704, 720-721, 21 CR2d 200, 209-210; Deary v. Sup.Ct. (Hendrick) (2001) 87 CA4th 1072, 1078, 105 CR2d 132, 136—extending privilege to estate tax returns]

It also covers business (corporate and partnership) tax returns. [Rifkind v. Sup.Ct. (Rifkind) (1981) 123 CA3d 1045, 1048-1049, 177 CR 82, 83-84 (disapproved on other grounds by Schnabel v. Sup.Ct. (Schnabel), supra, 5 C4th at 723, 21 CR2d at 211)—spouse could not compel pretrial disclosure of other spouse's tax returns in attempt to determine financial worth for community property division purposes]

(2) Information entered on returns: Further, the privilege protects all entries made on tax returns (e.g., amounts of income reported, deductions claimed, etc.). I.e., the content of the return, as well as production of the returns themselves, is privileged. [Sav-On Drugs, Inc. v. Sup.Ct. (Botney) (1975) 15 C3d 1, 7, 123 CR 283, 287]

(3) Related tax documents: Also protected are any other documents forming an “integral part” of the tax returns—such as W-2 forms. [Brown v. Sup.Ct. (Executive Car Leasing) (1977) 71 CA3d 141, 144, 139 CR 327, 328—personal injury plaintiff, claiming earnings loss, could not be compelled to produce W-2 forms received from employer]

Cal. Prac. Guide Civ. Trials & Ev. Ch. 8E-A

The privilege is not absolute; it may be lost if intentionally relinquished, or where the gravamen of the underlying action is inconsistent with assertion of the privilege or “a public policy greater than that of confidentiality of tax returns is involved.” (Schnabel v. Sup.Ct. (Schnabel) (1993) 5 Cal. 4th 704, 721; Weingarten v. Sup.Ct. (Pointe San Diego Residential Comm.) (2002) 102 Cal. App. 4th 268, 274; Miller v. Sup.Ct. (Miller) (1977) 71 Cal. App. 3d 145, 148—privilege subservient to need for information in child support enforcement proceedings; Li v. Yan (2016) 247 Cal. App. 4th 56, 67-70.)

The privilege is subject to disclosure where a public policy greater than that of confidentiality of tax returns is involved. (Schnabel v. Sup.Ct. (Schnabel), supra, 5 Cal. 4th at 721-722—legislative policy favoring fair child and spousal support awards and equal division of community estate defeated privilege.)

However, this exception is narrow, and only applies “when warranted by a legislatively declared public policy.” [Schnabel v. Sup.Ct. (Schnabel), supra, 5 Cal. 4th at 721; Weingarten v. Sup.Ct. (Pointe San Diego Residential Comm.), supra, 102 CA4th at 274; Deary v. Sup.Ct. (Hendrick) (2001) 87 CA4th 1072, 1080.)

A trial court has “broad discretion” in determining whether the statutory tax return privilege applies. [Weingarten v. Sup.Ct. (Pointe San Diego Residential Comm.), supra, 102 CA4th at 274.)

However, the trial court should use its discretion to compel disclosure of personal tax returns only in those “rare instances” where the public policy underlying the tax privilege is outweighed by other compelling public policies or where waiver principles apply. [Weingarten v. Sup.Ct. (Pointe San Diego Residential Comm.), supra, 102 CA4th at 276-277.)

The privilege is impliedly waived where a taxpayer, as plaintiff, directly places in issue the existence and content of tax returns and the tax consequences of the computations therein—i.e., in a malpractice action against the taxpayer's accountant. Here, “[t]he 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.” [Wilson v. Sup.Ct. (Enid) (1976) 63 CA3d 825, 830, 134 CR 130, 133—no privilege in suit against accountants for negligently and improperly advising taxpayer of tax consequences of real property sale]

(4) Waiver by “tender-of-income” issue? Arguably, plaintiffs also impliedly waive the privilege by seeking damages for loss of income … at least where they refuse to produce any other substantial evidence on the lost income issue. The theory is that plaintiffs should not be allowed to put defendants into an “evidentiary straightjacket” by testifying to some “phantom” existence of proof.

To date, there is no reported California authority expressly upholding a “tender-of-income issue” waiver. However, authority for a potential waiver may be inferred from one reported decision dealing with compelled tax return disclosure in a rent control board proceeding, where a landlord was seeking an increase in certified rent levels based on “hardship.” The court held that voluntarily submitting a “hardship application” did not imply the applicant's consent to waive the tax return privilege (akin to the principle that filing suit for lost income should not itself waive the privilege); but it conceded that verification of the applicant's financial status was needed to determine the “hardship” issue and therefore held the applicant should be given the option of either completing the rent board's financial information questionnaire or voluntarily producing its tax returns in lieu of completing the form. [King v. Mobile Home Rent Review Bd. of County of San Luis Obispo (1989) 216 CA3d 1532, 1538-1539, 265 CR 624, 628]

Cal. Prac. Guide Civ. Trials & Ev. Ch. 8E-A

Motion #2 – to quash subpoena to BLS Limousine

[ROA #104]

Defendant also subpoenaed documents from Plaintiff’s other client, BLS Limousine:

[Jurczak Decl. (ROA #105), Ex. A.]

A notice to consumer was served in connection with the subpoena to BLS [Jurczak Decl. (ROA #105), Ex. A.], but if BLS is not Plaintiff’s employer it is not clear that documents it has concerning Plaintiff would be consumer records.

The documents sought from BLS under Defendant’s subpoena are the same as those sought from GLI. Further, from Plaintiff’s deposition, his relationship with BLS is similar to his relationship with GLI so it is likely the same type of documents are in issue. Again, however, Plaintiff has not explained what kind of documents – especially those he contends are protected by his right to privacy or tax return privilege – BLS is likely to have.

The analysis above for the GLI subpoena applies equally to the BLS subpoena. The ruling is therefore the same.

Defendant is ordered to give notice.