Markson v. CRST Int'l, Inc.
Markson v. CRST Int'l, Inc.
2021 WL 4027541 (C.D. Cal. 2021)
April 14, 2021
Pym, Sheri, United States Magistrate Judge
Summary
The court denied the motion to compel plaintiffs to produce their IRS Forms W-2, 1099, and 1040 lines 1 through 9 without prejudice, finding that the tax returns were not discoverable at this juncture. The court found that the tax returns were not sufficiently relevant to the damages at issue, and ordered plaintiffs to cooperate with defendants' efforts to obtain compensation records from other employers.
Additional Decisions
Curtis Markson, et al.
v.
CRST International, Inc., et al
v.
CRST International, Inc., et al
Case No. ED CV 17-1261-SB (SPx)
United States District Court, C.D. California
Filed April 14, 2021
Counsel
William J. Gorham, III, Robert J. Wasserman, Vladimir J. Kozina, Nicholas J. Scardigli, Mayall Hurley PC, Stockton, CA, Brandon Hallett Thomas, Krysta Kauble Pachman, Susman Godfrey LLP, Los Angeles, CA, Craig J. Ackermann, Ackermann and Tilajef PC, Los Angeles, CA, Ian M. Gore, Pro Hac Vice, Matthew R. Berry, Pro Hac Vice, Susman Godfrey LLP, Seattle, WA, Jonathan Melmed, Melmed Law Group PC, Los Angeles, CA, Marc M. Seltzer, Rohit D. Nath, Steven G. Sklaver, Susman Godfrey LLP, Los Angeles, CA, for Curtis Markson, et al.Brandon Hallett Thomas, Marc M. Seltzer, Rohit D. Nath, Steven G. Sklaver, Susman Godfrey LLP, Los Angeles, CA, Ian M. Gore, Pro Hac Vice, Matthew R. Berry, Pro Hac Vice, Susman Godfrey LLP, Seattle, WA, Krysta Kauble Pachman, Susman Godfrey LLP, Los Angeles, CA, Robert J. Wasserman, Mayall Hurley PC, Stockon, CA, for Eric Clark, Clois McClendon.
Charles Andrewscavage, Pro Hac Vice, Jared S. Kramer, Pro Hac Vice, Scopelitis Garvin Light Hanson and Feary PC, Chicago, IL, Christopher Chad McNatt, Jr., Scopelitis Garvin Light Hanson and Feary LLP, Pasadena, CA, Clare Cavaliero Pincoski, Pro Hac Vice, David C. Grossman, Pro Hac Vice, James V. Dick, Pro Hac Vice, Jeetander T. Dulani, Pro Hac Vice, Pillsbury Winthrop Shaw Pittman LLP, Washington, DC, Emily Hsuan Fang Huang, Pillsbury Winthrop Shaw Pittman LLP, Los Angeles, CA, James H. Hanson, Pro Hac Vice, R. Jay Taylor, Jr., Pro Hac Vice, Scopelitis Garvin Light Hanson and Feary PC, Indianapolis, IN, for CRST International, Inc., et al.
Drew R. Hansen, J. Randall Boyer, Roy Z. Silva, Seth M. Goldstein, Nossaman LLP, Irvine, CA, for C.R. England, Inc.
Ankit H. Bhakta, Christopher S. Milligan, Jeff T. Olsen, Richard D. Marca, Varner and Brandt LLP, Riverside, CA, for Western Express, Inc.
Ashley Dorris Egerer, Snyder Burnett Egerer LLP, Santa Barbara, CA, Jessica Farley, Snyder Burnett Egerer LLP, Santa Barbara, CA, Christopher J. Merrick, Pro Hac Vice, Flaster Greenberg PC, Conshohocken, PA, Jeffrey K. Riffer, Elkins Kalt Weintraub Reuben Gartside LLP, Los Angeles, CA, Timothy L. Frey, Pro Hac Vice, Cohen and Merrick PC, Ardmore, PA, for Southern Refrigerated Transport, Inc.
Amy E. Beverlin, Sabrina A. Beldner, Matthew Charles Kane, McGuireWoods LLP, Los Angeles, CA, Amy B. Manning, Pro Hac Vice, Jason L. Chrestionson, Pro Hac Vice, Kali M. Yallourakis, Pro Hac Vice, McGuireWoods LLP, Chicago, IL, Andre V. Keels, Pro Hac Vice, Nicholas J. Giles, Pro Hac Vice, McGuireWoods LLP, Richmond, VA, Jasmine K. Gardner, Pro Hac Vice, McGuireWoods LLP, Charolotte, NC, Johnny B. Justus, McGuireWoods LLP, Richmond, VA, for Schneider National Carriers Inc.
Jeffrey K. Riffer, Elkins Kalt Weintraub Reuben Gartside LLP, Los Angeles, CA, Christopher J. Merrick, Flaster Greenberg PC, Conshohocken, PA, for Covenant Transport, Inc.
Brian C. Mohr, Pro Hac Vice, Joshua N. Drian, Pro Hac Vice, Manatt Phelps and Phillips LLP, Washington, DC, Craig J. de Recat, Emil Petrossian, Lillian Ava Levy, Manatt Phelps and Phillips LLP, Los Angeles, CA, Hilary Soloff, Manatt Phelps and Phillips LLP, San Francisco, CA, Jeffrey K. Riffer, Elkins Kalt Weintraub Reuben Gartside LLP, Los Angeles, CA, Patrick J. Pascarella, Pro Hac Vice, Bona Law PC, Dallas, TX, for Stevens Transport Inc.
Pym, Sheri, United States Magistrate Judge
Proceedings: (In Chambers) Order Denying Defendants' Motion to Compel Production of Plaintiffs' Financial Records Without Prejudice [397]
I. INTRODUCTION
*1 On March 10, 2021, defendants CRST International, Inc. and CRST Expedited, Inc. filed a motion to compel plaintiffs to produce IRS Forms W-2, 1099, and 1040 lines 1 though 9 pertaining to compensation they received from May 15, 2012 to April 15, 2020. Docket no. 397. The motion is supported and opposed in a Joint Stipulation (“JS”). Defendants' arguments are further supported by the declaration of defense counsel Charles Andrewscavage (“Andrewscavage Decl.”) and exhibits thereto. Plaintiffs' arguments are further supported by the declaration of plaintiffs' counsel Brandon Hallett (“Hallett Decl.”) and exhibits thereto.
On March 23, 2021, defendants filed a supplemental memorandum in support of their motion to compel (“D. Supp. Mem.”). Docket no. 402. On that same day, plaintiffs filed a supplemental memorandum in opposition to defendants' motion to compel (“P. Supp. Mem.”). Docket no. 404.
The court found a hearing on the motion would not be of assistance, and so vacated the hearing scheduled for April 6, 2021. The court now denies defendants' motion to compel without prejudice for the reasons discussed below.
II. BACKGROUND[1]
Plaintiffs are truck drivers who were formerly employed by defendants. Defendants are trucking companies that operate throughout the country. Plaintiffs allege defendants restrained competition by using a “no-poaching” hiring policy for drivers, and engaged in business practices that kept drivers in unfavorable employment agreements. The Third Amended Complaint was filed on July 26, 2018, and discovery commenced shortly thereafter. On February 14, 2020, plaintiffs sought leave to file a Fourth Amended Complaint (“4AC”), which was granted on April 14, 2020. The 4AC named additional defendants and expanded the scope of the putative class to reach nationwide.
Plaintiffs seek to certify the following class: all current or former drivers “under contract” as motor vehicle carrier drivers with defendants at any time from May 15, 2013 to the present. The proposed class includes the following three subclasses: (1) California residents; (2) all persons who signed a pre-employment driver training agreement or driver employment contract with defendant CRST Expedited, and who participated in CRST Expedited's training program and were charged for their DOT physical screening and drug tests from May 12, 2013 to the present; and (3) all persons who signed a driver employment contract with defendant CRST Expedited and who participated in CRST Expedited's driver training program but failed to complete the contractually required 10-month employment term and were charged $6,500.
The “under contract” designation refers to individuals who attended one of defendants' driver training schools to obtain a commercial driver's license, and either had their tuition paid for by defendants outright or were later offered reimbursement for their tuition costs. Plaintiffs allege drivers who remained employed with a defendant for a sufficient period of time had their driver training school tuition costs waived, but drivers who were terminated or quit before that period were required to repay their tuition costs. Plaintiffs further allege drivers remained “under contract” until any outstanding amount was repaid, even if their employment had ended.
*2 On October 2, 2020, the CRST defendants served their first set of Requests for Production of Documents (“RFPs”) on plaintiffs, which included a request that plaintiffs produce documents “stating, analyzing, or describing compensation any other motor carrier paid [them] in [their] role as a truck driver.” See JS at 4-5. While plaintiffs agreed to search for and produce “non-privileged documents” responsive to the request, they primarily objected to the production of tax returns on the ground that their right to privacy protects those returns from disclosure. Id.
On January 25, 2021, defendants sent plaintiffs a meet and confer letter asserting a lack of merit in plaintiffs' privacy-based objection, among other deficiencies. Andrewscavage Decl. ¶ 8, Ex. 6. The parties met and conferred telephonically about the claimed deficiencies outlined in defendants' meet and confer letter on February 3, 2021. Id. ¶ 9. Later on that same day, defendants sent plaintiffs an email summarizing the issues discussed during their call. Id. ¶ 10, Ex. 7. On February 5, 2021, plaintiffs responded to that email reiterating that they will not produce any tax returns because they are “highly privileged under federal and state law regardless of any protective order in place” and because defendants articulated no need for tax returns that “would outweigh the tremendous privacy interests plaintiffs have in their tax returns.” Id. ¶ 11, Ex. 8.
On February 10, 2021, defendants proposed that plaintiffs limit any supplemental production responsive to the request to W-2 and 1099 forms issued to them during the relevant period, as well as lines 1 through 9 of any 1040 forms that they submitted to the IRS during the relevant period with the remaining lines redacted. Id. ¶ 7, Ex. 5. Defendants also requested that plaintiffs identify the compensation documents that they produced and believe “adequately detail” plaintiffs' compensation information. Id. On February 12, 2021, plaintiffs responded that they “stand on their position that tax records are privileged.” Id. ¶ 13, Ex. 10. In response to defendants' question asking plaintiffs to clarify whether they were refusing to identify documents that adequately detail plaintiffs' income, plaintiffs responded that they would list “exemplar documents” that they produced. Id. ¶ 14, Ex. 11. On February 19, 2021, plaintiffs identified three such documents: a W-2, 1099, and pay stubs for plaintiff Curtis Markson for 2019. Id. ¶ 15, Ex. 12.
III. DISCUSSION
In the instant motion, the CRST defendants seek to compel the production of documents responsive to RFP No. 20 related to plaintiffs' compensation information from May 15, 2012 to April 15, 2020. See JS at 1. Specifically, defendants request that the court compel the four named plaintiffs to produce all W-2 forms, 1099 forms, and lines 1 through 9 of any 1040 forms they submitted to the IRS pertaining to compensation they received from May 15, 2012 to April 15, 2020, allowing the remaining information to be redacted. Id. Plaintiffs indicate they have already produced all pay stubs, 1099, and W-2 forms located in their custody, possession, and control, and that if they locate any additional 1099s and W-2s, they will produce them. See id. at 15. As such, only lines 1 through 9 of plaintiffs' tax returns are still at issue.
A. Legal Standards
Federal Rule of Civil Procedure 26 provides that a party may obtain discovery “regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” Fed. R. Civ. P. 26(b)(1). “Information within this scope of discovery need not be admissible in evidence to be discoverable.” Id. “Relevancy, for the purposes of discovery, is defined broadly, although it is not without ultimate and necessary boundaries.” Gonzales v. Google, Inc., 234 F.R.D. 674, 679-80 (N.D. Cal. 2006) (citation and internal quotation marks omitted).
*3 While tax returns “do not enjoy an absolute privilege from discovery,” there is a “public policy against unnecessary disclosure.” Premium Serv. Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir. 1975). “To determine whether the disclosure of tax returns is required, the courts generally apply [ ] ‘a two-pronged test to assure a balance between the liberal scope of discovery and the policy favoring the confidentiality of tax returns.’ ” Brill v. Napolitano, 2010 WL 11512400, *6 (C.D. Cal. May 12, 2010) (citing Hilt v. SFC, Inc., 170 F.R.D. 182, 189 (D. Kan. 1997)). Under that test, the court must find that: (1) the tax returns are relevant; and (2) there is a compelling need for the returns because the information in them “is not otherwise readily obtainable.” Id. “ ‘The party seeking production has the burden of showing relevancy, and once that burden is met, the burden shifts to the party opposing production to show that other sources exist from which the information is readily obtainable.’ ” Id.
B. Plaintiffs' Tax Returns Are Not Discoverable at This Juncture
Here, defendants assert that plaintiffs admitted they have performed work for other motor carriers during the time they were allegedly suffering from wage suppression, and thus plaintiffs' annual compensation information is relevant to help determine whether plaintiffs' compensation was actually suppressed, and if it was, the extent and duration of such suppression. See JS at 7-9; D. Supp. Mem. at 1-2. Defendants also assert that plaintiffs' full compensation information is relevant to determine both antitrust injury and damages, and that such information is not “readily obtainable” from another source, since plaintiffs have not produced compensation data for each named plaintiff for the entire relevant time period. See JS at 8-10, 15; D. Supp. Mem. at 3-4. Defendants further contend plaintiffs have essentially waived their privacy argument by producing some exemplars of their tax records, and to the extent there is a greater privacy intrusion by producing the remaining records, such concerns can be addressed by the protective order already in place. See JS at 10-11.
Plaintiffs argue that what they earned at motor carriers not alleged to be a part of the conspiracy, and especially what they earned outside of the trucking industry altogether, is irrelevant as to whether and by how much plaintiffs' compensation may have been artificially deflated due to the alleged unlawful conspiracy. See JS at 12-15; P. Supp. Mem. at 1-2. Plaintiffs also contend defendants do not need plaintiffs' tax returns to test their allegations that they were precluded from working for other motor carriers in the trucking industry, since plaintiffs have already answered interrogatories identifying the other motor carriers they have worked for. JS at 16; P. Supp. Mem. at 2. Plaintiffs further argue it is unreasonable for them to be expected to maintain a seamless record of their pay history given the nature of the trucking industry, and if defendants need additional financial information that plaintiffs have not already produced, they can subpoena plaintiffs' former employers, which at least one other defendant has already done. JS at 15-17.
Although plaintiffs rightly argue that their earnings from sources outside the trucking industry have no bearing on the damages at issue, the same cannot be said regarding plaintiffs' compensation information from employers within the trucking industry. Plaintiffs allege that defendants' conduct suppressed the compensation of workers seeking a new job, and made it “difficult or nearly impossible” for former employees who were deemed to be “under contract” to obtain any compensation by “working for any companies in the trucking industry.” 4AC ¶¶ 34-35. Nonetheless, the tax return information defendants seek here would do little to inform them what plaintiffs earned from other trucking companies. Lines 1 through 9 of form 1040 simply show yearly earnings from all sources – and in the case of joint returns, show the combined total earnings of both spouses – without breaking the income down by source. As plaintiffs argue, unlike defendants' compensation data, plaintiffs' yearly income is a single data point of total earnings in a given year, which may include income from carriers not alleged to be apart of the conspiracy as well as sources outside of the trucking industry altogether. Plaintiffs' annual compensation information that may be from a combination of jobs in and out of the trucking industry therefore would not reveal whether plaintiffs' earnings reflected, or how far off they were from, the rate they would have earned but for the alleged conspiracy. As such, plaintiffs' tax records do not appear sufficiently relevant to damages at issue in this case. See Advanced Visual Image Design, LLC v. Exist, Inc., 2015 WL 4934178, at *6-7 (C.D. Cal. Aug. 18, 2015) (holding defendant failed to establish that plaintiff's “tax records will provide relevant information to determine ... lost profits” although plaintiff “put its losses at issue in this case” and defendant desired to “determine and verify [plaintiff's] alleged losses through its tax records”).
*4 Defendants also contend that plaintiffs' full compensation information is relevant to test plaintiffs' allegations that they were precluded from working for other carriers in the trucking industry. D. Supp. Mem. at 1-2. But given that plaintiffs have already identified the other motor carriers for whom they have worked in their interrogatory responses, to require plaintiffs to produce their tax returns simply to allow defendants to verify these interrogatory responses is of dubious relevance given the protected status of tax returns. See JS at 16. More importantly, as noted above, since lines 1 through 9 of the tax returns only show plaintiffs' annual total compensation, the tax records sought here would not reveal whether plaintiffs were able to find new work in the industry. Defendants therefore fail to establish how plaintiffs' tax records are relevant to assessing plaintiffs' “desire and ability” to seek other employment or how that information is relevant to demonstrating antitrust injury.
In addition, defendants fail to establish a compelling need for plaintiffs' tax returns given that there are alternative – and better – means for defendants to obtain the information they claim to seek from plaintiffs' tax returns. Plaintiff have already produced all pay stubs, 1099s, and W-2s located in their custody, possession, and control, and to the extent they locate any additional 1099s or W-2s, they have agreed to produce them. See JS at 15. Further, as plaintiffs rightly argue, defendants can subpoena plaintiffs' former employers to obtain any additional 1099s and W-2s that have not otherwise been produced. Indeed, at least one other defendant has done just that without any issues. See JS at 16, Ex. 15 at 5; Ex. 16 at 5. Unlike lines 1 through 9 of the tax returns, employer pay records would actually show plaintiffs' compensation from other employers in the trucking industry. As such, because there are other sources from which the information is readily obtainable, defendant has failed to establish a compelling need for plaintiffs' tax returns. See Aliotti v. Vessel SENORA, 217 F.R.D. 496, 498 (N.D. Cal. 2003) (holding that defendant failed to establish a compelling need for plaintiffs' tax returns despite their relevance, because there were alternative less intrusive means to obtain the needed information about plaintiff's earnings); Sec. & Exch. Comm'n v. Mazzo, 2013 WL 12172628, at *19 (C.D. Cal. Oct. 24, 2013) (denying request for defendant's tax returns despite defendant placing his wealth and financial security at issue because he agreed to produce other relevant financial documents); Brill v. Napolitano, 2010 WL 11512400, at *6 (C.D. Cal. May 12, 2010) (denying defendant's motion to compel tax returns because the requested information was otherwise available).
Although the court will not now order plaintiffs to produce their tax returns, the court will require plaintiffs to cooperate with defendants' efforts to obtain compensation records from plaintiffs' other employers. The parties should further meet and confer to determine how best to assist defendants in their efforts to obtain any additional W-2s and 1099s from plaintiffs' former employers, whether that be by subpoena from defendants or request from plaintiffs. At a minimum, plaintiffs must sign consents to release their W-2s and 1099 forms, so defendants can more efficiently obtain those documents. See A. Farber & Partners, Inc. v. Garber, 234 F.R.D. 186, 190 (C.D. Cal. 2006) (“[C]ourt will order defendant ... at a minimum, to sign consents to release his documents from various nonparties so plaintiff can expeditiously obtain those documents.”); U.S. ex rel. Woodard v. Tynan, 776 F.2d 250, 252 (10th Cir. 1985) (en banc) (“Federal district courts have ordered defendants to request release of their records from other parties maintaining custody of them so that defendants could comply with discovery obligations in federal civil proceedings.”).
If for some reason defendants are not able to obtain the information they seek from the third party compensation records, the court is willing to revisit the question of whether plaintiffs must produce their tax returns. But at this time, such production is not warranted.
IV. CONCLUSION
*5 For the foregoing reasons, the CRST defendants' motion to compel plaintiffs' financial records (docket no. 397) is denied without prejudice as set forth above.
Footnotes
The court draws part of the information in this section from the Fourth Amended Complaint (“4AC”). See docket no. 228.