Facciola, et al v. Greenberg Traurig, LLP, et al

Filing 291

ORDER denying 271 Plaintiffs' Motion to Quash and Motion for Protective Order; granting 284 Greenberg's Motion to Compel. Signed by Judge Frederick J Martone on 11/30/11.(TLJ)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Robert Facciola, et al.,
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Plaintiffs,
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vs.
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Greenberg Traurig LLP, et al.,
Defendants.

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No. CV-10-1025-PHX-FJM
ORDER

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Before us is lead plaintiffs’ motion to quash subpoena duces tecum to Virgil Gladney
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and motion for protective order (doc. 271), defendant Greenberg Traurig’s response and
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cross-motion to compel production (doc. 284), plaintiffs’ response to the cross-motion and
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reply (doc. 287), and Greenberg’s reply (doc. 288).
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Greenberg issued a subpoena to Virgil Gladney, who performed tax-related work in
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2010 for lead plaintiff Reznik, including the preparation of amended tax returns. The
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subpoena requested, among other things, all documents related to Reznik’s ML investments,
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including documents related to any theft tax deduction that Reznik may have taken, as well
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as all documents showing any ML investment payment made or received by Reznik.
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Greenberg also seeks production of documents related to lead plaintiffs’ net worth.
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Plaintiffs’ object to the subpoena, arguing that tax records are presumptively non25
discoverable, and that plaintiffs’ tax consequences are not relevant to defendant’s liability.
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“Tax returns do not enjoy an absolute privilege from discovery.” Premium Serv.
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Corp. v. Speery & Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975); Stokwitz v. United
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States, 831 F.2d 893 (9th Cir. 1987). The confidentiality of relevant tax information can be

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preserved by the protective order already issued in this case (doc. 224).

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Greenberg argues that the requested accounting and tax information is relevant

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because plaintiffs are pursuing a “theft loss deduction” under IRS Rev. Proc. 2009-20, which

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requires a taxpayer to describe the alleged theft and identify its perpetrators. Therefore,

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according to Greenberg, the requested documents bear directly on the nature of the alleged

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“scheme” that forms the basis of plaintiffs’ claims and Greenberg’s defenses.

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Greenberg also contends that plaintiffs’ accounting and tax records (redacted to

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disclose information related to ML investments only) will contain information about what

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securities plaintiffs owned and still own, their value, the return on those investments, and the

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extent of any losses. Greenberg argues that plaintiffs’ own sworn statements on this topic

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have been shown to be inaccurate, making production of relevant portions of tax returns

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necessary.

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Finally, Greenberg seeks the production of information relating to plaintiffs’ net worth

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during the period they invested with ML. According to Greenberg, this evidence is relevant

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because ML required investors to provide information attesting to their net worth in order to

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qualify to participate in these speculative investments. Reznik has acknowledged that ML

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relied on that information in order to allow her to invest. Reznik Tr. at 116-17.

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We conclude that Greenberg has sufficiently shown that the requested documents are

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reasonably likely to lead to the discovery of admissible evidence. See Fed. R. Civ. P.

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26(b)(1).

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Therefore, IT IS ORDERED DENYING plaintiffs’ motion to quash and motion for

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protective order (doc. 271). IT IS FURTHER ORDERED GRANTING Greenberg’s

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motion to compel (doc. 284).

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DATED this 30th day of November, 2011.

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