A TCPA defendant is demanding my tax returns in discovery. Do I have to give them over?

There comes a time in every serial TCPA plaintiff's life that a desperate TCPA defendant's defense attorney has a novel thought - he read somewhere that 47 U.S. Code § 227(c) claims only apply to "residential phone lines", not businesses. And a lightbulb goes off - he'll argue that the plaintiff's sequential telephone consumer protection act claims mean the plaintiff is now in the business of filing TCPA lawsuits, ergo, the TCPA no longer applies to the TCPA plaintiffs residential phone line. Because it's now a business line!

This is the same brilliant argument a shoplifter made against 7-11 - 7-11 has been shoplifted so much, they should no longer have the right to pursue shoplifters! Because as you were taught in school, you only have rights so long as you don't exercise them too much.

Except that this clever defense attorney is going argue you've defended your privacy to much in court. “in pleading the elements of a TCPA claim, a plaintiff pleads an invasion of privacy claim.” L.A. Lakers, Inc. v. Fed. Ins. Co., 869 F.3d 795, 804 (9th Cir. 2017).

To prove his novel theory, your clever defense attorney may ask for many years of your past tax returns. Do you have to give them up? Let's look at the law. In my federal circuit, any decision on the matter would likely reference the governing principle in court opinion Premium Service Corp. v. Sperry Hutchinson, 511 F.2d 225, 229 (9th Cir. 1975)

Tax returns do not enjoy an absolute privilege from discovery . . . 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

The ninth circuit set the high level principle of when tax returns are discoverable, but didn't really offer specific guidance. This means each US District Court is going to flesh out a rule for themselves, and my home district wrote a lengthy analysis in 2020. Tax returns have to be relevant and there has to be a compelling need for them.

In general, "[t]ax returns do not enjoy an absolute privilege from discovery." Premium Service Corp. v. Sperry and Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975). Specifically, "tax returns held by the government are confidential under federal law, but copies retained by the taxpayer are subject to discovery." St. Regis Paper Co. v. U.S., 368 U.S. 208, 218-19 (1961). However, the Ninth Circuit recognizes that unnecessary public disclosure of tax returns must be limited to "encourage taxpayers to file complete and accurate returns." Aliotti v. Vessel SENORA, 217 F.R.D. 496, 497 (N.D. Cal. 2003) (quoting Premium Service Corp., 511 F.2d at 229). In the Western District of Washington, courts have applied a two-part test to determine if a party's tax returns should be disclosed: "the Court may only order the production of [a party's] tax returns if they are relevant and when there is a compelling need for them because the information sought is not otherwise available." Id.; see, e.g., Alaskan Anvil, LLC v. Majestik Fisheries, Case No. C13-5702 BJR, Dkt. No. 25 at 2 (W.D. Wash. 2014) (denying plaintiff's request for production of the defendant's tax returns because the plaintiff's claims did not depend on information contained in the tax returns and plaintiff did not demonstrate a "compelling need" for the information in the returns). Int'l News, Inc. v. 10 Deep Clothing, Inc., CASE NO. C18-0302-JCC, 4 (W.D. Wash. Apr. 16, 2020)

Specifically, the party asking for them must demonstrate relevancy, and then the party resisting discovery has the burden to show how the other party can get the information from alternative sources.

Next, the court turns to the question of whether the requested documents are relevant to Plaintiffs' claims and whether they have a compelling interest in obtaining the documents. "Tax returns do not enjoy an absolute privilege from discovery" in the Ninth Circuit. Premium Service Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975). Tax returns are subject to discovery if they are relevant and there is a compelling need for the returns because their information is not otherwise readily attainable from an alternative source. See Hackett v. Feedey, 2011 WL 4433663, *4 (D.Nev. Sept. 22, 2011) (citing Ullmann v. Hartford Fire Ins. Co, 87 N.J. Super 409, 415-16 (App. Div. 1965)). The party seeking discovery has the burden of showing relevancy, while the party resisting discovery has the burden of identifying the alternative source of information. Terwilliger v. York Int'l, 176 F.R.D. 214, 218 (W.D. Va. 1997). Rockhill v. Jeude, CASE NO. 2:011-cv-01308 BJR, 7-8 (W.D. Wash. Jul. 18, 2012).

Of course in TCPA cases they are asking for your tax returns to prove you are a "professional plaintiff". The defendant does not need your tax returns to prove how many lawsuits a plaintiff has filed. A plaintiff can provide testimony about past litigation, including the outcomes. What do tax returns prove for a defendant? According to the few courts I can find that have looked at the issue, very little.

TCPA lawsuits usually involve issues of consent, phone calls, calling technology, and call content. If a defendant wants to come after your tax returns, ask the court how your tax returns are going to help with any of these issues. The following is not a TCPA case but it illustrates the point. Defendants often ask for tax returns but they are not very relevant and the information a defendant claims they want from them is readily available from other sources.

The tax returns will not show what periods of time Mr. Malone worked for Bag Lady. Some of these factors can be readily determined elsewhere. Whether Mr. Malone received unemployment is available on the records from the Employment Security Department, which Plaintiff already has or can easily get. Whether Mr. Malone was an owner of Bag Lady will be on Bag Lady's tax return, which has already been produced. Thus, in light of the policy for keeping tax returns confidential and their lack of relevance, Mr. Malone's tax returns are exempt from discovery. Trustees of NW Laborers-Employers Health v. Malone, No. 09-05399 RBL, 3 (W.D. Wash. Nov. 10, 2010).

I found a few court opinions addressing the matter, mostly through the lens of, is the lead plaintiff representative of the class, as in Charvat v. Travel Servs., 110 F. Supp. 3d 894, 895 (N.D. Ill. 2015):

RCL also seeks review of the magistrate judge's denial of its motion to compel additional responses to four of its requests for production of documents. Document Request No. 10 seeks all of Charvat's tax returns that “reflect income from filing serial TCPA litigation for the past ten (10) years.” . . . RCL contends that Charvat's tax returns are relevant to show that he derives substantial income from TCPA litigation and that his motivation for filing this action is financial gain rather than selfless consumer advocacy . . . It contends that Charvat's purported financial motivation for this case is relevant to the issue of his fitness to serve as a class representative . . . Seventh Circuit precedent does not support this contention . . . The court rejected the “professional plaintiff” characterization as a basis for determining that the plaintiff was unfit to serve as representative of the proposed class, finding that “[n]othing about the frequency of [plaintiff's] litigation implies that she is less suited to represent others than is a person who received and sued on but a single offer.” . . . RCL cites CE Design v. King Architectural Metals, Inc., 637 F.3d 721 (7th Cir.2011), and Donaca v. Dish Network, LLC, 303 F.R.D. 390 (D.Colo.2014), as support for its assertion that a plaintiff's status as a serial litigant could be relevant to his ability to serve as a class representative and should be examined on a case-by-case basis. But neither case held that a plaintiff's income from prior repeated class action litigation could be considered as a factor weighing against his adequacy as a class representative . . . In the present case, RCL has had the opportunity to discover whether the actions of Charvat or his family members consented to the phone calls that are the subject of his complaint . . . RCL does not suggest that the request at issue here would lead to evidence of Charvat's consent to receive those calls. Murray and CE Design establish that Charvat's desire for financial gain is not relevant to impugn his credibility and RCL makes no attempt to argue that his tax returns are relevant for any other purpose.

This was litigated again in class action lawsuit Moser v. Health Ins. Innovations, Inc., Case No.: 17cv1127-WQH(KSC), 9 (S.D. Cal. May. 28, 2019). Again, the only inroads the defendant could make were on class representative grounds and the court refused to compel the production of the tax returns.

Document Request Nos 23 , 24 , 25 , and 26 seek production of plaintiff's personal tax returns, as well as the tax returns for any business he owned, for the period 2008 through 2018 . . . Defendant argues that plaintiff's employment history, compensation information, sources of income, tax returns, and other financial records are relevant to determine how much of his income derives from TCPA litigation . . . Defendant claims that plaintiff's income from TCPA litigation is relevant to whether his claims are typical of the class; whether he can adequately represent the class; and whether he is a "professional or habitual TCPA litigant." . . . Plaintiff argues that the Court should deny defendant's request for an order compelling him to further respond to these discovery requests, because there is no "professional plaintiff" defense, and defendant already has "ample evidence" of his involvement in other TCPA cases . . . it appears that defendant only seeks to discover plaintiff's private, confidential financial documents and information to discredit him as a "professional plaintiff." However, plaintiff has already testified in his deposition that he has been involved in more than 100 TCPA lawsuits and small claims actions. In addition, as outlined more fully below, plaintiff has also been ordered to produce documents and information about many of these lawsuits. Therefore, to the extent plaintiff's involvement in other TCPA litigation is relevant, it is difficult to imagine why defendant would also need all the requested financial documents to further its theory that plaintiff's status as a "professional plaintiff" should disqualify him as a class representative . . . it is also this Court's view that the balance of interests does not weigh in favor of compelling plaintiff or any business he owns or has owned to produce many years of private, confidential financial and income statements, bank records, and income tax returns so that defendant can rummage through them only to learn how much income plaintiff and/or his business or businesses may have made over many years from TCPA litigation . . . To the extent plaintiff's income from his involvement in TCPA litigation is relevant to the class issues of typicality, adequacy, and credibility, there are means to discover this type of information that are less burdensome and less intrusive than requiring plaintiff to produce a broad range of confidential financial documents or to search through many years' worth of financial records to produce confidential documents showing his income from TCPA lawsuits

If you are serving as a class representative in a class action lawsuit and a TCPA defendant comes after your tax returns, the few cases out there suggest that all they are entitled to is:

Defendant is also seeking six years of plaintiffs' tax returns, as well as “all documents and things that identify any person, company, or entity that you received income from for an alleged TCPA violation or violations.” Courts have denied requests for tax returns in TCPA cases, finding that “[t]o the extent plaintiff's income from his involvement in TCPA litigation is relevant to the class issues of typicality, adequacy, and credibility, there are means to discover this type of information that are less burdensome and less intrusive than requiring plaintiff to produce a broad range of confidential financial documents or to search through many years' worth of financial records to produce confidential documents showing his income from TCPA lawsuits.” . . . The Court finds it appropriate that plaintiffs should be required to produce a list of TCPA cases in which plaintiffs were are or parties, the case numbers, and name of the court where the case was filed. Further, plaintiffs may be questioned about their TCPA lawsuits and activity, including income received from TCPA litigation, at their depositions. A1 On Track Sliding Door Repair & Installation, Inc. v. Brandrep LLC, 21-cv-03013-ST, 1 (N.D. Cal. Apr. 28, 2022).

If you are not a class action plaintiff, I would argue they are entitled to even less because there are no class issues of typicality or adequacy, but to prevent a motion to compel (or at least the attorney fees that can come with losing one) what is the harm in offering up a list of prior TCPA cases, and answering questions in a deposition that are not covered by confidentiality clauses. Otherwise, I politely tell them no on the tax returns.

Would you like a free case review? Do you have a question or a telemarketing, debt collection, or bankruptcy case that would make a great blog article? We might even review your pro-se complaint or motion in a blog post. Email peter@nwdebtresolution.com and/or nathen@nwdebtresolution.com and we may answer it for everyone!

Are telemarketers harassing you in Washington, Oregon, or Montana? My Washington State TCPA plaintiff law practice can help, just give us a call at 206-800-6000 or email peter@nwdebtresolution.com.

The thoughts, opinions and musings of this blog are those of Peter Schneider, a consumer advocate and Washington State plaintiff's TCPA attorney at Northwest Debt Resolution, LLC. They are just that, his thoughts, opinions and musings and should be treated as such. They are not legal advice. If you are looking to file a lawsuit for TCPA violations and unwanted calls please contact me for a consultation.

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