Travelers Casualty v. Dunmore, et al

Filing 235

ORDER signed by Judge Lawrence K. Karlton on 9/29/2011 DENYING 197 Motion for Reconsideration. (Michel, G)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA,
a Connecticut corporation,

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NO. CIV. S-07-2493 LKK/DAD
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Plaintiff,
v.
O R D E R

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SIDNEY B. DUNMORE, an
individual; SID DUNMORE
TRUST DATED FEBRUARY 28,
2003, a California trust;
SIDNEY B. DUNMORE, Trustee
for Sid Dunmore Trust Dated
February 28, 2003; DHI
DEVELOPMENT, a California
corporation,
Defendants.
/

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Pending before the court is defendant Sidney Dunmore’s Request

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for Reconsideration of the Magistrate Judge’s ruling on plaintiff’s

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motion to compel production of defendant Dunmore’s tax returns.

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I. Procedural Background

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In this action, plaintiff seeks to be indemnified against loss

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related to bonds issued to Dunmore Homes and related entities,
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pursuant to applicable indemnity agreements. On January 15, 2010,

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plaintiff served a Request for Production of Documents on defendant

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Dunmore, requesting federal income tax documents for the years

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2003-2008.

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production stated that the tax documents were privileged and

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irrelevant. Plaintiff filed a motion to compel production of the

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tax documents on September 24, 2010, and a hearing was held before

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Magistrate Judge Drozd on October 22, 2010.

Defendant

Dunmore’s

response

to

the

request

for

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On October 25, 2010, the magistrate judge granted a motion by

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plaintiffs to compel production of defendant’s tax returns. ECF No.

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191. The magistrate judge stated that the motion was granted “for

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the reasons stated on the record.” Id. Defendant timely filed a

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motion to reconsider the magistrate’s order on November 4, 2010,

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but did not file a transcript of the hearing until March 24, 2011.

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Plaintiff Travelers Casualty and Surety Company have filed an

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opposition to the Motion to Reconsider, ECF No. 202. For the

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reasons discussed below, defendant’s motion to reconsider is

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DENIED.

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I. Standard for a Motion to Reconsider a

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Magistrate Judge’s Nondispositive Ruling

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Local Rule 303 provides that a party may seek reconsideration

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by a district judge of a magistrate judge’s rulings on discovery

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matters. “The standard that the assigned judge shall use in all

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such requests is the ‘clearly erroneous or contrary to law’

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standard.” Local Rule 303 (f). See also Fed. R. Civ. P. 72(a) (for

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nondispositive matters decided by a magistrate judge, the district
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judge must “modify or set aside any part of the order that is

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clearly erroneous or contrary to law.”)
II. Analysis

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California courts have “interpreted state taxation statutes

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as creating a statutory privilege against disclosing tax returns.”

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

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This

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intentional waiver of the privilege.” Id.

privilege

is

waived

when

“circumstances

indicate

an

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At the hearing on plaintiff’s motion to compel production of

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defendant’s tax returns, the Magistrate Judge stated that an

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indemnity agreement between the parties that states that defendant

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Dunmore “shall furnish, upon demand, and [Travelers] shall have the

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right of free access to, at reasonable times, the records of

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indemnitors including, but not limited to books, papers, records,

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documents, contracts, reports, financial information, accounts and

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electronically stored information, for the purposes of examining

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and copying them” constitutes a waiver of the state-law privilege

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against disclosing tax returns. See Transcript of October 22, 2010

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Hearing (“hearing transcript”) 2:19-3:2, ECF No. 231. Magistrate

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Judge Drozd stated “. . . it’s a very broad disclosure provision.

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. . I can’t fathom any interpretation of that clause that would not

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require him to turn over his tax returns under the agreement.” Id.

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The court finds no clear error in Magistrate Judge Drozd’s

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conclusion that defendant had waived the California law privilege

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against disclosing tax returns. The indemnity agreement between the

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parties requires defendant to turn over “records, documents, . .
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financial information” and other documents listed. The court finds

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no clear error in Magistrate Judge Drozd’s conclusion that this

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broad

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intentional waiver of the privilege.

provision

constitutes

circumstances

that

indicate

an

IV. Conclusion

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Defendant’s Motion for Reconsideration, ECF No. 197 is DENIED.

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IT IS SO ORDERED.

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DATED:

September 29, 2011.

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