Judge: Maurice A. Leiter, Case: 22STCV04058, Date: 2023-04-18 Tentative Ruling

Case Number: 22STCV04058    Hearing Date: April 18, 2023    Dept: 54

Hearing Date: April 18, 2023

Department 54, Judge Maurice A. Leiter

Motion to Compel Further Responses to Discovery

Moving Party: Plaintiff Terrence Craig

Responding Party: Defendants The Impact Seat LLC, Tethered LLC, The Impact Seat Foundation Corp. and Barbara Clarke

T/R:     PLAINTIFF’S MOTION TO COMPEL FURTHER RESPONSES IS GRANTED AS AGAINST DEFENDANT THE IMPACT SEAT FOUNDATION CORP.  IT IS DENIED AS TO TETHERED LLC AND CLARKE.

DEFENDANT THE IMPACT SEAT FOUNDATION CORP. TO SERVE FURTHER RESPONSES TO DISCOVERY WITHIN 30 DAYS OF NOTICE OF RULING.

PLAINTIFF’S REQUEST FOR SANCTIONS IS DENIED.

            PLAINTIFF TO NOTICE.

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

The moving party on a motion to compel further responses to requests for production of documents (“RPDs”) must submit “specific facts showing good cause justifying the discovery sought by the inspection demand.”  (CCP § 2031.310(b)(1).)  If the moving party has shown good cause for the RPDs, the burden is on the objecting party to justify the objections.  (Kirkland v. Sup.Ct (2002) 95 Cal. App.4th 92, 98.) 

            Plaintiff moves to compel further responses to RPDs nos. 6, 8 and 10 from Defendant Barbara Clarke; RPDs nos. 87 and 88 from Defendant Tethered LLC; and RPDs nos. 88-90 and 94 from Defendant The Impact Seat Foundation Corp. These requests seek information relating to the creation, funding, and budget of The Impact Seat Foundation Corp. Plaintiff asserts he was fired for raising concerns about Defendants’ using non-profit The Impact Seat Foundation Corp. for self-dealing and tax fraud.

A. Requests to Defendant Clarke and Tethered LLC

            Plaintiff seeks Clarke’s tax returns and information about Clarke’s and Tethered’s tax deductions in funding The Impact Seat Foundation Corp. Clarke objected to the requests on the grounds that they are irrelevant and infringe on Clarke’s privacy rights. In opposition, Defendants assert the requests run afoul of the tax privilege.

There is no recognized federal or state constitutional right to maintain the privacy of tax returns. (See Couch v. United States (1973) 409 U.S. 322, 336-337 [93 S.Ct. 611, 620, 34 L.Ed.2d 548]; Deary v. Superior Court (2001) 87 Cal.App.4th 1072, 1075, fn. 2, 1077-1078 [105 Cal.Rptr.2d 132].) California courts, however, have interpreted state taxation statutes as creating a statutory privilege against disclosing tax returns. (Schnabel v. Superior Court (1993) 5 Cal.4th 704, 718-721 [21 Cal.Rptr.2d 200, 854 P.2d 1117]; Webb v. Standard Oil Co. (1957) 49 Cal.2d 509, 513 [319 P.2d 621].) The purpose of the privilege is to encourage voluntary filing of tax returns and truthful reporting of income, and thus to facilitate tax collection. (Webb v. Standard Oil Co., supra, 49 Cal.2d at p. 513.) 

But this statutory tax return privilege is not absolute. 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. (Schnabel v. Superior Court, supra, 5 Cal.4th at p. 721.) This latter exception is narrow and applies only “when warranted by a legislatively declared public policy.” (Ibid.) A trial court has broad discretion in determining the applicability of a statutory privilege. (See National Football League Properties, Inc. v. Superior Court (1998) 65 Cal.App.4th 100, 106-107 [75 Cal.Rptr.2d 893].) 

(Weingarten v. Superior Court (2002) 102 Cal.App.4th 268, 274.)

            Plaintiff asserts the tax privilege does not apply because Defendants’ tax information is essential to prove his case. This is insufficient to establish an exception to privilege as to Defendant Clarke. Plaintiff has not shown a public policy greater than the need for confidentiality of Clarke’s and Tethered’s tax information. Further response is not necessary.

            The Court also finds the requests for Clarke’s investment portfolio infringe on Clarke’s right to privacy. Generally, a Defendant’s financial condition is not discoverable until the punitive damages phase of trial.

            The motion as to Clarke and Tethered LLC is DENIED.

B. Requests to The Impact Seat Foundation Corp.

            Plaintiff seeks the financial and tax records of The Impact Seat LLC. Defendants stated in discovery responses that Plaintiff’s employment was terminated to reduce expenses in connection with restructuring The Impact Seat LLC into a non-profit foundation. This places The Impact Seat Foundation Corp.’s financial records at issue in the action. Further, as a non-profit, the foundation’s tax returns are not privileged. Further response is necessary.

            The motion as to the Impact Seat Foundation Corp. is GRANTED. As the motion has been granted in part and denied in part, the Court declines to award sanctions.