Weber, et al v. TMG Logistics Inc., et al

Filing 36

ORDER signed by Magistrate Judge Allison Claire on 11/22/201 GRANTING-IN-PART and DENYING-IN-PART 23 Motion to Compel. Defendants motion is GRANTED with respect to RFA 12 and plaintiffs must provide a clarified admission or denial; Defendants motion is GRANTED with respect to RFPs 21, 22, 18, 19, 20, 23, 31, 32, 33, 34, 35, 54, 55, 55(A), and 56 and plaintiffs must make complete productions; and Defendants motion with respect to FRPs 38, 39 and 40 is DENIED. (Hunt, G)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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STACY L. WEBER and TIMOTHY J.
WEBER,
Plaintiffs,

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No. 2:15-cv-01829-JAM-AC

ORDER
v.
TMG LOGISTICS, INC., et al.,
Defendants.

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This matter is before the court on defendants’ motion to compel. The parties filed

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multiple papers in relation to the motion, contrary to Local Rule 251, including ECF Nos. 23, 29,

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31, 32, 33, and 34. A hearing was held before the undersigned on November 15, 2017. ECF No.

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35. All parties appeared. Id. At the hearing, the court informed the parties it would consider

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only the joint statement filed by the parties, ECF No. 34, and the exhibits filed at ECF 23-2 which

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are incorporated in the joint statement. Based on the hearing and a review of all papers filed, the

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court GRANTS defendants’ motion in part and DENIES the motion in part.
I.

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A.

Relevant Background

Allegations of the Complaint

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Plaintiffs are a husband and wife, Stacy and Timothy Weber. ECF No. 1. Plaintiffs allege that on

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September 6, 2013, Ms. Weber was driving northbound on Highway 99 in the County of San

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Joaquin, California. At the same time, defendant Davinder Sing Minhas was driving a tractor1

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trailer owned by defendant TMG logistics, following directly behind Ms. Weber. ECF No. 1 at 2.

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Plaintiffs allege Mr. Minhas was driving at an unsafe speed for the conditions, failed to stop for

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traffic, and struck the rear of Ms. Weber’s vehicle, causing injuries and damages to plaintiffs. Id.

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B.

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Plaintiffs bring only two claims for relief. Plaintiff Stacy Weber brings a claim for

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personal injuries. ECF No 1 at 2. She seeks compensation for non-economic damages, all

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medical and incidental expenses, all loss of earnings “according to proof,” prejudgment interest,

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costs of suit, and any other relief the court may deem proper. Id. at 3. Plaintiff Timothy Weber

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brings a loss of consortium claim, seeking non-economic damages, prejudgment interest, costs of

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The Claims

suit, and any other relief the court may deem proper. Id. at 3-4.

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II.

Motion to Compel

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The key point of contention in this discovery dispute is what financial records are

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discoverable by defendant in light of plaintiff’s claim of “past and future income and/or earning

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capacity loss” (ECF No. 1 at ¶10). ECF No. 34 at 6.

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Defendants seek production of, essentially, three categories of documents. First,

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defendants make a request for production (“RFP”) of Ms. Weber’s personal tax documents from

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2006 to present (RFPs 21, 22). Second, defendants seek documents (financial and advertising)

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related to Ms. Weber’s business entities and investments (RFPs 18, 19, 20, 23, 31, 32, 33, 34, 35,

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38, 39, 40). And third, defendants seek documents related to Ms. Weber’s real property holdings

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(RFPs 54, 55, 55(A), 56). Defendant also seeks to compel Ms. Weber to respond to one request

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for admission (“RFA”) which asks her to affirm that she has never been told by a medical

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professional that she is unable to “work.” RFA 12.

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The parties have engaged in an extensive meet and confer process beginning in December

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of 2016. ECF No. 34 at 5. Despite substantial meet and confer efforts, the parties have been

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unable to resolve their disagreements regarding the scope of discovery and their respective

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obligations in this case. Id. at 8-9.

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III.

Analysis

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A.

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The scope of discovery under Fed. R. Civ. P. 26(b)(1) is broad, although not unlimited.

Standards on Motion to Compel

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Discovery may be obtained as to “any nonprivileged matter that is relevant to any party’s claim or

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defense and proportional to the needs of the case, considering the importance of the issues at

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stake in the action ... and whether the burden or expense of the proposed discovery outweighs its

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likely benefit.” Fed. R. Civ. P. (“Rule”) 26(b)(1). “Information within this scope of discovery

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need not be admissible in evidence to be discoverable.” Id. “Evidence is relevant if: (a) it has

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any tendency to make a fact more or less probable than it would be without the evidence; and (b)

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the fact is of consequence in determining the action.” Fed. R. Evid. 401.

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Federal Rule of Civil Procedure 34(a) permits each party to serve the opposing party with

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document requests within the scope of Rule 26(b). In responding to a document request, “the

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response must either state that inspection and related activities will be permitted as requested or

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state with specificity the grounds for objecting to the request, including the reasons.” Rule

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34(b)(2)(B).

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If a responding party is withholding responsive documents, its objection to the request for

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those documents must state that responsive documents are being withheld. Rule 34(b)(2)(C). If

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the responding party withholds otherwise discoverable documents under a claim of privilege, it

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must provide the requesting party with a privilege log. Rule 26(b)(5)(A)(ii). If a party objects to

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part of a document request, the objection “must specify the part and permit inspection of the rest.”

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Id.

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Under Rule 37(a), a party may move for an order compelling disclosure or discovery if “a

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party fails to produce documents...as requested under Rule 34.” Rule 37(a)(3)(B)(iv). “The party

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seeking to compel discovery has the burden of establishing that its request satisfies the relevancy

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requirements of Rule 26(b)(1). The party opposing discovery then has the burden of showing that

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the discovery should be prohibited, and the burden of clarifying, explaining or supporting its

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objections.” See Bryant v. Ochoa, 2009 WL 1390794 at * 1, 2009 U.S. Dist. LEXIS 42339 at *3

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(S.D. Cal. 2009). The party opposing discovery is “required to carry a heavy burden of showing”
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why discovery should be denied. Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir.1975).

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B.

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Analysis
i.

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Ms. Weber’s Personal Tax Information (RFPs 21, 22)

Plaintiffs object to production of Ms. Weber’s tax returns on grounds of California’s

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statutory tax return privilege. Defendants contend that the privilege has been waived, and the

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court agrees.

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Because this action is before the court on diversity jurisdiction, state law applies when

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analyzing claims of privilege. See Conestoga Servs. Corp. v. Exec. Risk Indem., Inc., 312 F.3d

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976, 980-81 (9th Cir. 2002) (citations omitted); Fed. R. Evid. 501. “California courts have

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interpreted state taxation statutes as creating a statutory privilege against disclosing tax returns.”

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Lindsey v. Elsevier Inc., No. 16CV00959GPCDHB, 2017 WL 4518483, at *6 (S.D. Cal. Oct. 10,

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2017) (citing Schnabel v. Super. Ct., 5 Cal. 4th 704, 718-21 (1993); Weingarten v. Super. Ct., 102

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Cal. App. 4th 268, 274 (2002)). Ordinarily, a claim for lost earnings in a personal injury case

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would not waive the privilege on a plaintiff’s tax returns. See Palacios v. Ameriwood Indus.,

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Inc., No. 14-CV-04066-KAW, 2015 WL 7852167, at *3 (N.D. Cal. Dec. 4, 2015). However, the

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California statutory tax return privilege is not absolute and may be waived or inapplicable in

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certain circumstances. Schnabel, 5 Cal. 4th at 721. The privilege is not applicable when: (1) the

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circumstances indicate an intentional waiver of the privilege; (2) the gravamen of the lawsuit is

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inconsistent with the privilege; or (3) a public policy greater than that of the confidentiality of tax

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returns is involved. Id. The requesting party bears the burden of demonstrating that an exception

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applies. See Schnabel, 5 Cal. 4th at 721.

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In this case, Ms. Weber produced numerous financial documents as part of her initial
disclosures, including the following:

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

2009-2012 Federal Tax Returns for Norcal Assets LLC,

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2009-2012 California Tax Returns Form 568 for Norcal Assets LLC,

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2009-2012 Federal Tax Returns Form 1040 for Timothy and Stacy Weber,

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2011-2014 Federal Tax Returns Form 1040 for Weber Realty, and

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

2009-2014 Federal Tax Return Form 1040s for Timothy and Stacy Weber
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ECF 23-2 at ¶ 3. This production, which was made intentionally by Ms. Weber, operates as an

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intentional waiver of the California tax privilege because it is a behavior inconsistent with

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maintaining the privacy of tax documents. Unlike in Schnabel, where the court found the

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producing party had done “nothing inconsistent with the assertion of the privilege” and therefore

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had not created a waiver, 5 Cal. 4th at 721, plaintiffs affirmatively produced tax documents.

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Plaintiffs argued at hearing that the initial production of tax documents was made when they

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intended to advance a theory of calculating Ms. Weber’s lost income that they no longer intend to

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pursue, but neither plaintiff’s motivation for the disclosure nor plaintiff’s subsequent change in

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theories affect the waiver analysis. Plaintiffs’ partial production mandates a finding of waiver

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because plaintiffs cannot be allowed to produce only the portion of privileged material that they

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find convenient or favorable.

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The court finds the tax returns to be relevant to the issues of lost income and/or earning

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capacity, and proportional to the needs of the case. Accordingly, plaintiffs must make full

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productions in response to RFPs 21 and 22.

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ii.

Ms. Weber’s Business Entity Information

Defendants make several requests for financial and advertising documents related to Ms.

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Weber’s business entities and investments (RFPs 18, 19, 20, 23, 31, 32, 33, 34, 35, 38, 39, 40).

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As a preliminary matter, the above analysis regarding wavier and relevance applies to the tax

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documents of Norcal Assets and Weber Realty, and Schedule C profit and loss statements from

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entities from which plaintiff received income. These documents are discoverable because

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plaintiff made partial productions of business tax documents. ECF 23-2 at ¶ 3. A selective

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production creates a waiver of the California tax privilege. The documents are relevant to the

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issues of lost income and/or earning capacity, and proportional to the needs of the case.

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Accordingly, plaintiffs must make productions in response to RFPs 19, 23, 31, 33, 34, 35.

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Plaintiffs must also comply with defendants’ requests for financial documents and balance

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sheets from entities from which Ms. Weber has received income since 2006 (RFPs 18, 20, 32).

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Plaintiffs’ claim that “[a]s a result of the negligence of Defendants, Plaintiff STACY L. WEBER

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suffered personal/bodily injuries, resulting in economic and non-economic damages. Economic
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damages include, but are not limited to . . . (2) past and future income and/or earning capacity

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loss” put those documents at issue. ECF No. 1 at 3. Ms. Weber testified that before the accident,

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she worked as a real estate broker and property manager for Norcal Assets, LLC, a business in

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which she and her husband were equal partners. ECF No. 23-2 at 19. Ms. Weber also bought and

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sold homes under a separate sole proprietorship, Weber Realty. Id. at 20. This is not a situation

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in which Ms. Weber was merely an employee of a large corporation from which she received a

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paycheck. The financial status of Ms. Weber’s businesses weighs directly on her “income and/or

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earning capacity.” ECF No. 1 at 3. This information is relevant and discoverable.

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With respect to RFP’s 38, 39 and 40, Ms. Weber responded that she is “not in possession

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of documents responsive” to the requests. ECF No. 34 at 27-30. In the absence of evidence to

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the contrary, defendant is required to accept that plaintiff does not possess responsive documents.

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See e.g. Mootry v. Flores, 2014 WL 3587839, *2 (E.D. Cal.2014) (“Defendants cannot be

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required to produce documents that do not exist. Absent evidence to the contrary, which has not

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been presented, Plaintiff is required to accept Defendants’ response no such documents exist.”);

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accord, Holt v. Nicholas, 2014 WL 250340, *4 (E.D. Cal.2014) (“Absent evidence to the

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contrary, which has not been presented, Plaintiff is required to accept Defendant’s amended

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response that no such documents responsive to his request exist.”). Here, defendants make no

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argument that plaintiffs do, in fact, have responsive documents. The court finds the current

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answers to RFPs 38, 39 and 40 to be sufficient.

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iii.

Ms. Weber’s Real Property Holdings

Plaintiffs must make productions in response to RFPs 54, 55, 55(A), and 56, which seek

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information on Ms. Weber’s real estate holdings. As discussed above, the scope of discovery

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under Fed.R.Civ.P. 26(b)(1) is broad. Discovery may be obtained as to “any nonprivileged matter

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that is relevant to any party’s claim or defense—including the existence, description, nature,

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custody, condition and location of any documents or other tangible things and the identity and

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location of persons who know of any discoverable matter.” Id. “Relevance for purposes of

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discovery is defined very broadly.” Garneau v. City of Seattle, 147 F.3d 802, 812 (9th Cir.1998).

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The analysis above applies here as well; because plaintiff earned her income owning, buying, and
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selling properties, her property holdings are relevant to her lost earnings/income claim. ECF No.

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1 at 3. Ms. Weber’s property ownership income cannot fairly be categorized as unrelated

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“investment” information as plaintiffs allege. See ECF No. 23-2 at 19-22. Ms. Weber must make

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productions in response to RFPs 54, 55, 55(A), and 56.

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iv.

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Response To RFA 12

Ms. Weber’s response to RFA 12 is inadequate. “The purpose of Rule 36(a)[, which

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allows a party to request admissions,] is to expedite trial by establishing certain material facts as

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true and thus narrowing the range of issues for trial.” Asea, Inc. v. S. Pac. Transp. Co., 669 F.2d

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1242, 1245 (9th Cir. 1981). The rule provides that a matter may be deemed admitted if an

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responding party does not submit a proper answer to an RFA. F.R.C.P 36(a). “It is undisputed

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that failure to answer or object to a proper request for admission is itself an admission: the Rule

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itself so states. It is also clear that an evasive denial, one that does not ‘specifically deny the

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matter,’ or a response that does not set forth ‘in detail’ the reasons why the answering party

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cannot truthfully admit or deny the matter, may be deemed an admission. Asea, Inc., 669 F.2d at

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1245.

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RFA 12 asks Ms. Weber to admit that “no medical professional” has ever told her that she

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can “no longer work” as a result of the incident at the heart of this case. ECF No. 34 at 38. Ms.

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Weber objects that this RFA is vague, and states that no response can be provided while referring

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defense counsel to the testimony of Dr. Nagy-Wilde and Dr. Jonson. Id. A responding party

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cannot refuse to answer an RFA on the ground that the request is ambiguous unless the request is

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so ambiguous that the responding party cannot, in good faith, provide a response. See Marchand

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v. Mercy Medical Ctr., 22 F.3d 933, 938 (9th Cir.1994) (a responding party “should admit to the

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fullest extent possible, and explain in detail why other portions of a request may not be

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admitted”). Upon review, the RFA is not vague, but Ms. Weber’s answer is. There is no

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apparent reason that Ms. Weber cannot admit or deny the RFA to the “fullest extent possible.”

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Rather than the extreme remedy of deeming the fact admitted, plaintiffs are ordered to revise their

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answer to RFA 12 to include a proper admission or denial, which may include a limiting

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explanation.
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III.

Conclusion

For the reasons explained above, it is hereby ordered that defendant’s motion to compel, ECF
No. 23, is GRANTED in part and DENIED in part as follows:
a. Defendants’ motion is GRANTED with respect to RFA 12 and plaintiffs must
provide a clarified admission or denial;
b. Defendants’ motion is GRANTED with respect to RFPs 21, 22, 18, 19, 20, 23, 31,

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32, 33, 34, 35, 54, 55, 55(A), and 56 and plaintiffs must make complete

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productions; and

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c. Defendants’ motion with respect to FRPs 38, 39 and 40 is DENIED.

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IT IS SO ORDERED.

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DATED: November 22, 2017

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