Coach, Inc. et al v. Visitors Flea Market, LLC et al

Filing 155

ORDER granting 146 Motion to Compel production of tax returns. Signed by Magistrate Judge Thomas B. Smith on 10/24/2013. (Smith, Thomas)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
COACH, INC., a Maryland corporation, and
COACH SERVICES, INC., a Maryland
corporation,
Plaintiffs,
v.

Case No. 6:11-cv-1905-Orl-19TBS

VISITORS FLEA MARKET, LLC, DELROY
JOSEPHS, JULIO BATISTA, LUIS
FREITES, LILY SY, SOMPRATHANA,
VONGUILATH, MATILDE SEGURA, and
DOES 1 THROUGH 3,
Defendants.
__________________________________
ORDER
Pending before the Court is Plaintiffs’ Renewed Motion to Compel
Defendants to Produce Documents.1 (Doc. 146). The motion is fully briefed and
ripe for decision.
I. Background
Plaintiffs Coach, Inc. and Coach Services, Inc. (collectively “Coach”) filed
this action for trademark and trade dress infringement, counterfeiting, false
designation of origin, false advertising, and trademark dilution. (Doc. 1). Their
complaint includes claims for violation of the Lanham Act, 15 U.S.C. §§ 1114,

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The original motion to compel was denied without prejudice due to the Court staying this action
for 90 days. (Docs. 138, 139). The Court reasoned that with the passage of time some of the issues
raised in the motion to compel may be resolved and new discovery issues might arise. The Court may
have been right since the current motion to compel seeks narrower relief than the original motion.

1116, 1117, and 1125, and the United States Copyright Act, 17 U.S.C. § 101, et
seq. (Doc. 1). Among other things, Coach alleges that Defendant Delroy Josephs,
Sr. (“Josephs”) is the principal owner, director and manager of Defendant Visitors
Flea Market, LLC (“ Visitors”). (Doc. 1, ¶ 7). Visitors manages a flea market in
Kissimmee, Florida. (Id. ¶ 6). Some of the flea market vendors allegedly sell
counterfeit Coach products and other products that infringe on Coach’s trade dress
and marks. (Docs. 1 ¶¶ 8-13, 31-47; 130-13 p.19). Coach maintains that Josephs
and Visitors are facilitating and contributing to the promotion and sale of the
counterfeit and infringing products. (Doc. 1 ¶¶ 7, 51). It also alleges that Josephs
and Visitors have made substantial profits from the infringing activity they have
allowed to occur. (Doc. 1 ¶ 61). For these alleged violations, Coach seeks
damages calculated using the statutory methods provided in Section 35 of the
Lanham Act, 15 U.S.C. § 1117 and Section 504 of the Copyright Act, 17 U.S.C. §
504(c). (Doc. 41).
On December 28, 2012, Coach formally requested the production of
Josephs and Visitors’ 2008-2011 tax returns. (Doc. 130-11). Both Defendants
objected on the ground that their returns are not relevant and are not contemplated
to lead to the discovery of admissible evidence. (Doc. 130-12). After the stay was
lifted, Coach renewed its request for Josephs and Visitors’ tax returns and they
refused to comply. (Doc. 146 p. 2). Coach is moving to compel production of the
tax returns and Josephs and Visitors have renewed their objections that their
returns are irrelevant and not calculated to lead to the discovery of admissible
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evidence. (Doc. 151 p. 1).
II. Legal Standards
Federal Rule of Civil Procedure 26(b) generally permits parties to “obtain
discovery regarding any non-privileged matter that is relevant to any party’s claim
or defense-including the existence, description, nature, custody, condition, and
location of any documents or other tangible things and the identity and location of
persons who know of any discoverable matter.” FED. R. CIV. P. 26(b)(1). Courts
interpret relevancy “broadly to encompass any matter that bears on, or that
reasonably could lead to other matter that could bear on, any issue that is or may
be in the case.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98 S.Ct.
2380, 57 L.Ed.2d 253 (1978). “Discovery should ordinarily be allowed under the
concept of relevancy unless it is clear that the information sought has no possible
bearing on the subject matter of the action.” Dunkin’ Donuts, Inc. v. Mary’s
Donuts, Inc., No. 01-0392-CIV-GOLD, 2001 WL 34079319 * 2 (S.D. Fla. Nov. 1,
2001).
Using the procedure in Rule 34(a), parties can request the production of
documents and other things within the scope of FED. R. CIV. P. 26(b). However,
when a party asks for tax returns, most courts acknowledge that the request raises
public policy concerns. Camp v. Correctional Medical Services, No. 2:08cv227WKW(WO), 2009 WL 424723 * 2 (M.D. Ala. Feb. 17, 2009); Platypus Wear, Inc. v.
Clarke Modet & Co., Inc., No. 06-20976-CIV, 2008 WL 728540 * 3 (S.D. Fla. Mar.
17, 2008). Federal courts are split on the question whether income tax returns are
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entitled to enhanced protection from discovery. United States v. Certain Real
Property, 444 F. Supp. 2d 1258, 1262-64 (S.D. Fla. 2006) (collecting cases). For
example, some courts in the Southern District of Florida hold that a party seeking
the production of tax returns must show a compelling need, in addition to
relevance, while other courts in the same district find that ordinary relevance is all
that is required. Id. And, even courts which hold that relevancy is the sole issue
have taken steps to protect the confidentiality of tax returns. See EEOC v. Dimare
Ruskin, Inc., No. 2:11-cv-158-FtM-36SPC, 2011 WL 3715067 * 4 (M.D. Fla. Aug.
24, 2011); Platypus Wear, Inc. v. Clarke Modet & Co., Inc., 2008 WL 728540 at *
3. The Eleventh Circuit has not explicitly addressed the issue or recognized a
special privilege for tax records. But, in Maddow v. Proctor & Gamble Co., Inc.,
107 F.3d 846, 853 (11th Cir. 1997), the court found that the district court did not
abuse its discretion in compelling tax records because they were “arguably
relevant to the case.”
III. Analysis
The Court follows Maddow and the cases interpreting the Maddow decision
to mean a party does not have to demonstrate a compelling need to obtain
production of tax returns. Josephs and Visitors returns are discoverable if they are
relevant to this controversy. “A party infringes vicariously by ‘profiting from direct
infringement while declining to exercise a right to stop or limit it.’” Pegasus
Imaging Corp. v. Northrop Grumman Corp., 8:07-cv-1937-T-27EAJ, 2008 WL
5099691 * 2 (M.D. Fla. Nov. 25, 2008) (quoting Metro-Goldwyn-Mayer Studios,
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Inc. v. Grokster, Ltd., 545 U.S. 913, 930, 125 S.Ct. 2764, 162 L.Ed.2d 781
(2005)). Coach alleges that Josephs and Visitors reaped profits from turning a
blind eye to the sale of counterfeit and infringing merchandise at the flea market.
If true, then their tax returns may contain information relevant to prove that they
benefitted financially from the flea market vendors activities.
Coach has invoked its right to recover statutory damages. In at least three
infringement cases courts have found that a defendant’s tax returns are relevant
when the plaintiff asks for statutory damages. See, Coach, Inc. v. Swap Shop,
Inc., No. 12-60400-CIV, 2013 WL 4407064 * 3 holding that “‘Defendant’s corporate
federal income tax returns are relevant to the issue of statutory damages under
section 504(c)(1) in a copyright infringement action.’” (quoting Quackenbush
Music, Ltd. v. Alana, Inc., No. 92-10687-S, 1992 WL 439746 * 2 (D. Mass. Nov. 2,
1992)); Coach, Inc. v. Hubert Keller, Inc., Case No. CV411-285, 911 F.Supp.2d
1303, 1310 (S.D. Ga. 2012) (recognizing that if plaintiff had invoked its right to
statutory damages it would be entitled to the defendant’s tax returns.).
Accordingly, the motion to compel is GRANTED. Josephs and Visitors shall
produce their complete 2008-2011 tax returns to counsel for Coach within 14 days
from the rendition of this Order.
Tax returns routinely contain sensitive financial information and society
tends to view and treat tax returns as confidential documents. The Court directs
the parties to meet and confer to come to an agreement on a confidentiality
agreement or proposed protective order of confidentiality for the tax returns. This
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should be accomplished within 14 days from the rendition of this Order. Until the
issue of confidentiality is resolved, counsel for Coach shall not reveal the
information contained in the tax returns.
IV. Attorney Fees and Costs
The party that prevails on a motion to compel is ordinarily entitled to recover
its legal expenses, including reasonable attorney’s fees. FED.R.CIV.P. 37(a)(5)(A).
There are three exceptions to the general rule: (1) when the motion to compel is
filed before the moving party attempts in good faith to get the discovery without
court action; (2) when the losing party’s position was substantially justified; or (3) if
other circumstances make an award unjust. Id. None of the exceptions apply in
this case. Coach shall file its motion for fees and costs incurred in connection with
this motion within 14 days from the rendition of this Order.
DONE AND ORDERED in Orlando, Florida, on October 24, 2013.

Copies to all Counsel

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