Catrinar v Wynnestone Communities Corporation et al

Filing 56

ORDER GRANTING PLAINTIFF'S 17 Motion to Compel. Signed by Magistrate Judge R. Steven Whalen. (CCie)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

LAWRENCE CATRINAR,
Plaintiff,

No. 14-11872

v.

District Judge John Corbett O’Meara
Magistrate Judge R. Steven Whalen

WYNNESTONE COMMUNITIES
CORPORATION, ET AL.
Defendants.
/
ORDER
Currently before the Court is Plaintiff Lawrence Catrinar’s (“Plaintiff’s”) Motion
to Compel Discovery and Discovery Sanctions [Dock. #17], which has been referred to
the undersigned for hearing and determination. For the reasons set forth below, the
motion is GRANTED.
On May 9, 2014, Plaintiff filed suit against his former employer Defendant Wynne
stone Communities Corporation and Gilbert B. Silverman (“Defendants”), alleging violations
of the Family Medical Leave Act (“FMLA”), 29 U.S.C. § 2614, et seq. as well as claims of
breach of contract and promissory estoppel. On July 1, 2014, Defendants filed a
counterclaim, alleging breach of fiduciary duty, theft, conversion, fraudulent concealment,
and fraudulent misrepresentation by Plaintiff. Docket #7.

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Plaintiff filed the present motion on December 14, 2014. On January 15, 2015, parties
filed a stipulation resolving all the disputed issues with the exception of Request for
Production No. 70 calling for production of Defendant Silverman’s state and federal tax
returns from 2001 forward. Docket #24, Plaintiff’s Exhibit 2, pg. 61. Defendants objected
to the request “on the grounds that it is unduly broad and overly burdensome as to time and
subject matter, harassing and seeks documents that are irrelevant to the claims asserted in the
present action.” Plaintiff’s Exhibit 2 at pg. 61. In his motion, Plaintiff argues that the tax
returns are required to support his breach of contract claims and to rebut Defendant’s
counterclaims. Motion, 27.
Defendants argue in response that Silverman’s personal tax returns are irrelevant to
the FMLA claim. Response, Docket #30. They note that Plaintiff’s purported need for
Defendant Silverman’s tax returns involves his alleged entitlement under a deferred
compensation plan through E&S Equities I Limited Partnership (“E&S LP”). Id. at 3.
Defendants note that Wynnestone, not Defendant Silverman, was the intended recipient of
the investment income to which Plaintiff claims a percentage. Id. They point out that
Defendant Wynnestone has already agreed to produce its tax returns and other financial
records as well as “documents reflecting payments made to [Defendant] Silverman from
[E&S LP] directly.” Id. at 7. As to the FMLA claim, they argue that Defendant Silverman
is, in effect, a “third party” to the claims against Wynnestone. Id. at 6. Defendants note that
the only claims against Silverman are for wrongful termination. Id.

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Defendants argue further that the tax returns are not relevant to the counterclaims. Id.
at 7-9. They contend that the counterclaims of fiduciary duty, theft, conversion, fraudulent
concealment, and fraudulent misrepresentation “all relate exclusively to actions taken by
[Plaintiff] as part of his employment with Wynnestone” and allege damage to Wynnestone
rather than Defendant Silverman. Id. at 7. They argue that “Wynnestone’s tax returns and
the additional Wynnestone financial records that will be produced will provide [Plaintiff]
with a full picture of Wynnestone’s financial condition over the period of time in question.”
Id. Finally, Defendants request that if the Court finds that Plaintiff “has demonstrated a
compelling need” for Defendant Silverman’s tax returns, that they be given “an opportunity
to either propose disclosing other information to satisfy such a need or redact information
unrelated to E&S LP or the Limited Partnerships.” Id. at 9, fn 2.
Plaintiff counters that he has already produced all of his personal tax returns back to
1989 to Defendants. Reply, 3, Docket #31. He argues that Defendant Wynnestone’s tax
returns are insufficient to defend against Defendant Silverman’s counterclaims. He notes
that Defendants’ counterclaim states that as a result of Plaintiff’s alleged actions:
Wynnestone, and thus Silverman, have been damaged by the resultant decrease
in value of Wynnestone, including reputational damage, loss of assets due to
theft, loss of business opportunities and the accumulation of significant fees
and expenses. Docket #7, pg. 26, ¶44.
Further, Plaintiff states that in defending against the counterclaims, he intends to show that
Defendants“did not actually lose any money,” but “[r]ather, Wynnestone and Silverman
simply prevented that money from showing up on Wynnestone’s books by paying it to
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Silverman personally . . .” Reply at 4-5. In regard to his own claims, he notes that while
Defendant Silverman “is not personally a party to his breach of contract claim related to
E&S LP, “he is an officer and the sole owner of Wynnestone which is a party to the breach
of contract claim.” Id. at 7. He argues that Defendant Silverman’s tax returns are necessary
to determine, in effect, whether funds to which Wynnestone was entitled were diverted to
Defendant Silverman. Id.
“‘Tax returns are subject to discovery in civil litigation between private parties.’”
White v. Michigan Dept. of Human Services 2011 WL 1882924, *1 (E.D.Mich. May 17,
2011)(Majzoub, MJ.)(citing Credit Life Ins. Co. v. Uniworld Ins. Co. Ltd., 94 F.R.D. 113,
119 (S.D.Ohio 1982)). “However, there are limitations to when a party may be ordered to
provide tax returns to an opposing party.” Id. “Tax returns do not enjoy an absolute
privilege from discovery.” Premium Serv. Corp. v. Sperry & Hutchinson Co., 511 F.2d 225,
229 (9th Cir.1975). Nevertheless, a public policy against unnecessary public disclosure
arises from the need, if the tax laws are to function properly, to encourage taxpayers to file
complete and accurate returns.” Id.
As noted Judge Majzoub further noted, “‘[a] party may seek discovery of a tax return
if it is relevant to the subject matter in dispute and a compelling need exists for the return
because the information is not readily available from another source.’” White at *1 (citing
Ruth v. Superior Consultant Holdings Corp., No. 99–CV–71190, 2000 WL 1769576, at *2
(E.D.Mich. Oct.16, 2000)). “Once the party seeking production has made the required

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showing of relevancy, the burden then shifts to the party opposing production to identify an
alternative source for the information.” Id. (citations omitted).
At a minimum, Plaintiff has shown that Defendant Silverman’s personal tax returns
are relevant to his claim that he was improperly deprived of E&S LP funds by Wynnestone
and by extension, Defendant Silverman, a 50 percent shareholder in Wynnestone between
1999 and March, 2006 and sole shareholder from that time to the present. Complaint at ¶
10. Plaintiff has shown that Defendant Silverman’s tax returns are relevant to the claim that
he was terminated for asserting his rights under the FMLA rather than for alleged financial
improprieties. Motion at 26. Defendant Silverman’s counterclaim that he experienced
personal financial losses as a result of Plaintiff’s alleged improprieties from 2001 forward,
Docket #7, pg. 26, ¶44, even more strongly supports the need for the tax returns. Phoenix
Life Ins. Co. v. Raider-Dennis Agency, Inc. 2010 WL 1782251, *2 (E.D.Mich. May 3,
2010)(Majzoub, M.J.)(tax returns relevant to CounterPlaintiff’s “financial condition” and
“net worth” for the years in question).
Although Defendants claim that the relevant information can be gleaned from
Defendant Wynnestone’s tax returns and financial records, Response at 7, the Wynnestone
documents would not wholly address Plaintiff’s claim that some of the funds in dispute
would not show up on Wynnestone’s records because they were paid to Silverman
personally. Reply at 4-5. For the same reasons, I decline to grant Defendants’ request to
limit discovery to the portion of the tax returns pertaining to E&S LP.

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IT IS THEREFORE ORDERED that Plaintiff’s Motion for Request for Production
No. 70 [Docket #17] is GRANTED, subject to the terms of the January 9, 2015 stipulated
protective order.

s/ R. Steven Whalen
R. STEVEN WHALEN
UNITED STATES MAGISTRATE JUDGE
Dated: September 21, 2015

CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing document was sent to parties of
record on September 21, 2015, electronically and/or by U.S. mail.
s/Carolyn M. Ciesla
Case Manager to the
Honorable R. Steven Whalen

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