United States of America v. Luther et al

Filing 143

ORDER - Laura Dodge Luther's Motion for Protective Order (filing 118 )is granted, in part. By or before July 5, 2013, the parties shall jointly submit a proposed protective order which incorporates the rulings delineated herein. Ordered by Magistrate Judge F.A. Gossett. (AOA)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
UNITED STATES OF AMERICA,

)
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Plaintiff,
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V.
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MICHAEL S. LUTHER, LAURA
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DODGE LUTHER, ATELIER
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PARTNERS, CYCLONE ASSETS,
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SCOTT J. ESPARZA, BARRY
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FEINER, GARY FROMM, JOSEPH )
M. HALLER, as trustee for the
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Joseph E. Haller Family Trust,
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RICHARD HIERONS, KLEINWORT )
BENSON (USA), INC., DRESDNER
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KLEINWORT HOLDINGS, INC.,
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GERALD C. KORTH, PORTFOLIO )
RECOVERY ASSOCIATES, LLC,
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TAG VIRGIN ISLANDS, INC.,
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ACCREDITED COLLECTION
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SERVICE, INC., and MSW
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CAPITAL, LLC,
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Defendants.

8:12CV80

ORDER

Defendant Laura Dodge Luther (“Ms. Luther”) has moved for a protective order
specifying terms for the disclosure of discovery and the manner in which certain documents
are filed in this Court. In particular, Ms. Luther wants to prevent public disclosure of
personal tax information, IRS collection information, and information regarding her personal
wealth and assets. (Filing 118.) Defendant Michael S. Luther (“Mr. Luther”), Ms. Luther’s
husband, has joined Ms. Luther’s motion. (Filing 136.) For the reasons explained below,
Ms. Luther’s motion will be granted, in part.
BACKGROUND
Plaintiff brought this action seeking (1) to reduce to judgment federal tax assessments

made against Mr. Luther; (2) a declaration that Ms. Luther is acting as Mr. Luther’s nominee;
and (3) to foreclose federal tax liens encumbering the Luthers’ home (the “property”), which
is held in Ms. Luther’s name.1 (Filing 1.) Plaintiff alleges that Ms. Luther holds title as Mr.
Luther’s nominee because, among other things, Mr. Luther provided the majority of the
funds used to purchase the property and pays for most of the household expenses. Plaintiff
maintains that Ms. Luther took title to the property, purportedly as a “gift” from her husband,
after Mr. Luther had incurred millions of dollars in debt and when legal action to collect this
debt was reasonably foreseeable. Plaintiff argues that Ms. Luther actively participated in
Mr. Luther’s efforts to evade his creditors by taking title to the home.
On May 10, 2013, Ms. Luther filed the present motion, along with a proposed
protective order. Ms. Luther’s proposed order restricts the disclosure of tax information,
including, tax returns, tax audits, and revenue officer and agent communications and notes
regarding Mr. and Ms. Luther, as well as other documents designated as confidential by the
parties. (Filing 119-3.) While documents designated as “confidential” would be available
to all parties to this action, Ms. Luther’s proposed order limits access to tax information to
Plaintiff and Mr. and Ms. Luther. (Id.) The proposed order does, however, permit the other
parties to move the Court for a determination that they are entitled to receive copies of such
documents. (Id.)
Plaintiff opposes Ms. Luther’s request for a protective order. The other parties to this
case have not filed a response.
DISCUSSION
Generally, parties may discover relevant, non-privileged information that is
reasonably calculated to lead to admissible evidence. Fed. R. Civ. P. 26. However, a court
may issue a protective order to prevent or limit discovery in order to “protect a party or
person from annoyance, embarrassment, oppression, or undue burden or expense.” Id. The
moving party bears the burden to “show the necessity of [the protective order’s] issuance,
which contemplates a particular and specific demonstration of fact, as distinguished from
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The other defendants in this action are judgment creditors of Mr. Luther.
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stereotyped and conclusory statements.” Gen. Dynamics Corp. v. Selb Mfg. Co., 481 F.2d
1204, 1212 (8th Cir. 1973) (internal quotation and citation omitted). When evaluating the
need for a protective order, courts must “include a consideration of the relative hardship to
the non-moving party should the protective order be granted.” Id. “Rule 26(c) confers broad
discretion on the trial court to decide when a protective order is appropriate and what degree
of protection is required.” Seattle Times Co. v. Rhinehart, 467 U.S. 20, 36 (1984).
Ms. Luther argues that good cause for a protective order exists because no party to this
lawsuit has a money judgment claim against her. She asserts that the disclosure of her
personal financial information, tax returns, IRS examinations, and IRS files regarding her and
Mr. Luther is an invasion of privacy and that the disclosure of this information would have
a negative impact on her children. Ms. Luther points out that no other party has objected to
her motion and that the proposed protective order places no restrictions on Plaintiff, other
than the manner in which certain documents are submitted to the Court and disclosed to
third-parties.
Plaintiff contends, however, that Ms. Luther actively participated in Mr. Luther’s
efforts to evade his creditors by taking title to the home as a sham “gift.” For this reason,
according to Plaintiff, Ms. Luther’s personal finances are highly relevant to this case.
Plaintiff argues that the imposition of a protective order is inappropriate because Ms. Luther
only seeks such an order to shield her attempts to place Mr. Luther’s assets beyond the reach
of his creditors from the public eye.
“[C]ourts have made it increasingly clear that tax returns in the hands of a taxpayer
are not privileged from civil discovery.” E-P Int’l Distribution, Inc. v. A & A Drug Co., No.
8:07CV186, 2009 WL 1442534, *5 (D. Neb. May 21, 2009) (quotation and citation omitted).
Still, courts often require a “heightened showing of relevance and necessity” before ordering
the disclosure of tax information. Id. Here, Ms. Luther is not asking that Plaintiff be
completely precluded from viewing tax and other confidential information. In fact, as
mentioned previously, Ms. Luther’s proposed order places few restrictions on Plaintiff - the
sole objector to Ms. Luther’s motion. Because the entry of a protective order which limits
public disclosure of tax and other information found to be confidential will not prejudice
Plaintiff, Ms. Luther’s request for a protective order will be granted.
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Nevertheless, the Court finds that Ms. Luther’s proposed protective order is overly
broad. The Court sees no reason why the other parties to this suit need to be completely
shielded from tax-related information. A protective order which allows these documents, and
others when appropriate, to be designated as confidential and limits access to all parties and
the Court is sufficient. Therefore, to the extent that Ms. Luther’s request for a protective
order seeks to preclude the other parties to this suit from having automatic access to tax
information, it is denied. The Court will, however, approve a reasonable protective order
which allows certain documents, including tax documents, to be designated as confidential
and limits access to the Court and the parties, as well as other individuals or groups identified
by the parties.
Accordingly,
IT IS ORDERED that Laura Dodge Luther’s Motion for Protective Order (filing 118)
is granted, in part. By or before July 5, 2013, the parties shall jointly submit a proposed
protective order which incorporates the rulings delineated herein.
DATED June 20, 2013.
BY THE COURT:
S/ F.A. Gossett
United States Magistrate Judge

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