Tipsword v. I.F.D.A. Services, Inc. et al
Filing
305
ORDER denying 289 Motion to Compel brought by Defendant Paul W. Felsch; see attached order for details. Signed by Judge G. Patrick Murphy on 5/23/2011. (jhs)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
DAVID TIPSWORD, as Trustee of the
Mildred E. Tipsword Trust, individually and
on behalf of all others similarly situated,
et al.,
)
)
)
)
)
Plaintiffs,
)
)
vs.
)
)
I.F.D.A. SERVICES, INC., an Illinois )
corporation, et al.,
)
)
Defendants.
)
CIVIL NO. 09-390-GPM
Consolidated with:
CIVIL NO. 09-1008-GPM and
CIVIL NO. 10-1000-GPM
MEMORANDUM AND ORDER
MURPHY, District Judge:
This matter is before the Court on a motion to compel brought by Defendant Paul W. Felsch
(Doc. 289). Plaintiffs Clancy-Gernon Funeral Homes, Inc., Aaron Todd Dean d/b/a Bass Patton
Dean Funeral Home and Toberman-Dean Funeral Home, Fred C. Dames Funeral Homes, Inc.,
McCracken-Dean Funeral Home, Inc., Knapp Funeral Homes, Inc., John G. Adinamis Funeral
Director, Ltd., and L.R. Osborn & Son Funeral Home (hereinafter, collectively, “the Funeral
Directors”) are funeral directors licensed by the State of Illinois. The Funeral Directors bring suit
on behalf of themselves and a proposed class of Illinois funeral directors for losses to the Illinois
Funeral Directors Pre-Need Trust (“the Trust”) allegedly caused by Defendants Merill, Lynch,
Pierce, Fenner & Smith, Inc., Merrill Lynch Life Agency, Merrill Lynch Bank & Trust Company,
FSB, Edward Louis Schainker, Felsch, Mark A. Summer, Mark K. Cullen, and Sorling, Northrup,
Hanna, Cullen & Cochran, Ltd. Under the Illinois Funeral or Burial Funds Act (“Funds Act”), 225
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ILCS 45/1 et seq., when a consumer enters a pre-need contract with a funeral home for future funeral
and burial services and agrees to have the contract funded by the Trust, the consumer’s funds then
are held by the Trust until such time as the consumer withdraws the funds or the funds are used for
the funeral and burial services.
See 225 ILCS 45/1b; 225 ILCS 45/4.
According to the
Funeral Directors, Defendants have dissipated the Trusts’s assets, with the result that the
Funeral Directors have suffered substantial financial losses in furnishing funeral and burial services
to pre-need customers.
Felsch has served requests for production of documents on the Funeral Directors. The
Funeral Directors contest Felsch’s requests for the following categories of documents, which Felsch
contends are necessary to ascertain the Funeral Directors’ damages:
13. All documents relating to your alleged injuries and alleged damages, including
but not limited to lost profits, costs, expenses and expenditures incurred in or
projected to occur in the future.
14. All documents concerning any expenses incurred or expenditures made in
connection with the funeral or burial services rendered to or on behalf of a Pre-Need
Patron in excess of the amount tendered to you from the IFDA Pre-Need Trust.
15. All documents relating to any purported shortfall in the Pre-Need Trust as alleged
by Plaintiffs in this Action.
Doc. 289 at 2. The Funeral Directors challenge these requests for production as overbroad and
unduly burdensome, in that they appear to call for production of virtually every document pertinent
to the operation of the Funeral Directors’ businesses, right down to utility bills and cancelled checks.
The Funeral Directors charge also that the requests for production infringe the limited privilege for
income tax returns recognized by the courts, and that information about the Funeral Directors’
damages can be obtained readily and more easily from data that already is in Defendants’ possession.
Felsch in turn has moved to compel production of the challenged categories of documents. Felsch’s
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motion has been fully briefed, and the Court has conducted a hearing on the motion. Accordingly,
the Court now rules as follows.
Under Rule 26 of the Federal Rules of Civil Procedure, “[p]arties may obtain discovery
regarding any nonprivileged 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). “Relevant information need not be admissible at the trial if the discovery
appears reasonably calculated to lead to the discovery of admissible evidence.” Id. For the
purpose of discovery, relevancy is to be construed 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.”
Chavez v. DaimlerChrysler Corp., 206 F.R.D. 615, 619 (S.D. Ind. 2002) (quoting
Oppenheimer Fund, Inc. v. Sanders, 437 U .S. 340, 351 (1978)) (internal citation omitted).
However, while discovery is to be permitted liberally, it is not without limits. “All discovery is
subject to the limitations imposed by Rule 26(b)(2)(C).” Fed. R. Civ. P. 26(b)(1). That provision
of Rule 26 states, in pertinent part,
On motion or on its own, the court must limit the frequency or extent of discovery
otherwise allowed by these rules or by local rule if it determines that:
(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained
from some other source that is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity to obtain the information
by discovery in the action; or
(iii) the burden or expense of the proposed discovery outweighs its likely benefit,
considering the needs of the case, the amount in controversy, the parties’ resources,
the importance of the issues at stake in the action, and the importance of the
discovery in resolving the issues.
Fed. R. Civ. P. 26(b)(2)(C). “[T]he Federal Rules of Civil Procedure give the trial judge the power
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to fashion virtually any order which justice requires to protect a party or person from annoyance,
embarrassment, oppression, or undue burden of expense[.]” Deitchman v. E.R. Squibb & Sons,
Inc., 740 F.2d 556, 564 (7th Cir. 1984) (quotation omitted). Said differently, “district courts
have broad discretion in matters related to discovery.” Sattar v. Motorola, Inc., 138 F.3d 1164, 1171
(7th Cir. 1998) (brackets omitted). Too, in ruling on a motion to compel, “a district court is not
limited to either compelling or not compelling a discovery request” and “in making its ruling, a
district
court
should
independently
determine
the
proper
course
of
discovery
based upon the arguments of the parties.” Gile v. United Airlines, Inc., 95 F.3d 492, 496
(7th Cir. 1996).
Having considered the matter carefully, the Court believes that the Funeral Directors have
the better of the argument on the matter of Felsch’s motion to compel. In general, courts recognize
a limited privilege for income tax returns, so that they are not routinely disclosed in discovery, at
least where the same information is available from another source. See June v. George C. Peterson
Co., 155 F.2d 963, 967 (7th Cir. 1946); Bagnall v. Freeman Decorating Co., 196 F.R.D 329, 333
(N.D. Ill. 2000); Shaver v. Yacht Outward Bound, 71 F.R.D. 561, 563-64 (N.D. Ill. 1976). Also, in
this case it appears that the information Felsch seeks regarding the Funeral Directors’ alleged
damages is available from another source, without the necessity of requiring the Funeral Directors
to produce bales of documents related to the day-to-day operations of their businesses. As the
Funeral Directors point out, their damages amount, in essence, to “the principal and the accumulated
earnings” on funds deposited with the Trust on behalf of pre-need customers. 225 ILCS 45/4a(c).
To put the matter another way, the Funeral Directors’ damages are the difference between the funds
that they put into the Trust and the funds, if any, that they were able to take out of the Trust,
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assuming, that is, that the Funeral Directors are able to show that Defendants wrongfully dissipated
the Trust’s assets. According to the Funeral Directors, detailed records of all transactions involving
the Trust during the times relevant to this case are available in a computer database maintained by
Defendant Illinois Funeral Directors Association that has been produced to the other parties to these
consolidated cases in discovery. According to the Funeral Directors, the information contained in
this AS400 database will apprise Defendants, including Felsch, of the losses the Funeral Directors
allegedly have suffered as a result of the misconduct claimed in this case far more accurately and,
obviously, with far less burden to the Funeral Directors than Defendants would be so apprised by
poring over day-to-day records of the operations of the Funeral Directors’ businesses. The Court
concurs. The Court has no reason to disbelieve the Funeral Directors’ representations concerning
the information contained in the AS400 database, nor does Felsch seem to contest those
representations. Accordingly, the Court will decline to compel the Funeral Directors to comply with
Felsch’s challenged requests for production. Naturally, in the event that Felsch and his counsel are
unable to procure the information they need through the AS400 database, they will be free to seek
information through other discovery channels, and may petition the Court for relief at an appropriate
time to procure the needed discovery. Until that time arrives, however, Felsch’s motion to
compel (Doc. 289) is DENIED.
IT IS SO ORDERED.
DATED: May 23, 2011
/s/ G. Patrick Murphy
G. PATRICK MURPHY
United States District Judge
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