FUNDACION SEGARRA-BOERMAN E HIJOS, INC. ET AL, Plaintiffs, v. MARTINEZ-ALVAREZ, ET AL., Defendants CIV. NO. 16-2914 (DRD)(MDM) United States District Court, D. Puerto Rico Filed May 04, 2021 Counsel Hans H. Hertell-Stubbe, Pryor Cashman LLP, Rasheed K. Nader, Benjamin J. Widlanski, Tal J. Lifshitz, Kozyak Tropin & Throckmorton, LLP, James G. Sammataro, Pro Hac Vice, Miami, FL, Manuel San-Juan-DeMartino, Manuel San Juan Law Office, Ricardo F. Casellas, Diana Perez-Seda, Casellas, Alcover & Burgos PSC, San Juan, PR, Carla S. Loubriel, Hato Rey, PR, Michael Volkov, Pro Hac Vice, Alexandria, VA, for Plaintiff Fundacion Segarra-Boerman e Hijos, Inc. Hans H. Hertell-Stubbe, Pryor Cashman LLP, Rasheed K. Nader, Benjamin J. Widlanski, Tal J. Lifshitz, Kozyak Tropin & Throckmorton, LLP, James G. Sammataro, Pro Hac Vice, Miami, FL, Ricardo F. Casellas, Diana Perez-Seda, Casellas, Alcover & Burgos PSC, San Juan, PR, Carla S. Loubriel, Hato Rey, PR, Michael Volkov, Pro Hac Vice, Alexandria, VA, for Plaintiff Mildred Segarra-Boerman. Alana M. Vizcarrondo-Santana, Rafael Escalera-Rodriguez, Laura C. Malave-Seda, Reichard & Escalera, LLC, San Juan, PR, Andrew P. Marks, Pro Hac Vice, Yariv Pierce, Pro Hac Vice, New York, NY, Daniel A. Salinas-Serrano, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, for Defendants Alfredo Martinez-Alvarez, Jose Ramon Quinones-Coll, Martinez-Alvarez, Menendez-Cortada & Lefranc Romero, PSC, Martinal Real Estate Corp, Sofia Martinez-Alvarez, Alfredo Martinez-Alvarez, Jr., Titin Foundation, Inc., Felipe Segarra Investment Corporation. Daniel A. Salinas-Serrano, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, Rafael Escalera-Rodriguez, Alana M. Vizcarrondo-Santana, Laura C. Malave-Seda, Reichard & Escalera, LLC, San Juan, PR, for Defendant Martinal Management Corp. Morgan, Marshal D., United States Magistrate Judge MINUTE AND MEMORANDUM ORDER *1 On April 29, 2021, the undersigned Magistrate Judge presided over a hearing in the nature of a meet-and-confer to assist the parties so that they could resolve in good faith three hotly contested discovery disputes that have somewhat hindered the parties’ continuing discovery efforts. Present on behalf of all plaintiffs were the following attorneys: Manuel San Juan, Carla Loubriel, Ricardo Casellas, Diana Pérez-Seda, and Hans Hertell. The principal spokesperson for the plaintiffs was Counsel San Juan. Present on behalf of all defendants were the following attorneys: Daniel Salinas, Yariv Pierce, Rafael Escalera, Laura Malavé, Alana Vizcarrondo and Tom Barnes. The principal spokesperson for the defendants was Counsel Salinas. The three discovery disputes discussed during this hearing were: (1) an issue related to the discovery of metadata in computer disks and ESI; (2) the disclosure of defendants’ tax returns; and, (3) plaintiffs’ alleged failure to comply with their duty to disclose a computation of each category of damages claimed pursuant to Rule 26(a)(1)(A)(iii). All three issues were amicably resolved as follows. First, with respect to the metadata issue, the parties informed the Court that they had reached an agreement over the production of ESI, the disclosure of which will be conducted in two phases.[1] For the grounds discussed during the conference, the Court approves the agreements reached by the parties at Docket Nos. 457 and 463 and therefore finds as moot the discovery dispute related to the disclosure of metadata raised in the Motion for Reconsideration at Docket No. 370. Second, the parties jousted over the production of defendants’ tax returns. Plaintiffs had requested tax returns from all defendants and defendants had objected to their disclosure. The Court, acting through the presiding judge of this case, had determined that “[t]he tax returns are not to be provided unless there is an absolute probability that the documents will lead to other relevant evidence.” Presently before the Court is plaintiff's request for the Court to reconsider or modify that prior mandate and allow the discovery of defendants’ tax returns. *2 Defendants challenge the plaintiff's request for production of the tax returns on intrusiveness and proportionality grounds. More specifically, they take issue with the production of the individual defendants’ tax returns and the span of the many years requested for certain defendants. Certainly, the Court recognizes that sensitive information is contained within individual tax returns. And, while tax returns should not be routinely or loosely required, it is well settled that tax returns do not enjoy an absolute privilege from discovery. See St. Regis Paper Co. v. United States, 368 U.S. 208, 218–19 (1961); Rule 37(a) of the Federal Rules of Civil Procedure. In fact, Wright & Miller recognizes that a few early decisions found tax returns privileged but that there is now “overwhelming authority to the contrary and the matter should now be considered resolved.” 8 Wright & Miller, Federal Practice and Procedure, § 2019 at 163 (1970). See Buntzman v. Springfield Redevelopment Auth., 146 F.R.D. 30, 32 (D. Mass. 1993). Defense counsel has not and cannot argue that their clients’ financial condition is not relevant to this litigation. In the present case, indeed, the defendants’ financial condition is germane to the subject matter of this litigation, namely, a multi-million-dollar RICO claim involving alleged fraud and malfeasance of funds. “Where a party has put in issue the amount of [his] income, that party's tax returns or reasonable substitutes are discoverable.” See Federal Savs. & Loan Ins. Corp. v. Krueger, 55 F.R.D. 512, 514 (N.D. Ill. 1972); In Halperin v. Berlandi, 114 F.R.D. 8 (D. Mass. 1986), (“[t]ax returns are subject to discovery as long as they are relevant to the subject matter of the litigation”) (citing Heathman v. United States Dist. Court for Cent. District, 503 F.2d 1032 (9th Cir. 1974). The Court understands that relevant discoverable information, such as tax returns, cannot be withheld on the ground that discomfort arises in disclosing it, especially when that information may lead to potential discovery of admissible evidence. Moreover, the Court finds that the defendants’ privacy and invasiveness concerns can be appeased to a certain extent by a confidentiality agreement, which the parties seem to have already in place, and a protective order. Accordingly, the plaintiff's motion to compel at Docket No. 428 will be allowed. Defendants shall produce the requested tax returns at pages 15 and 16 of Docket No. 428 for inspection and copies within two weeks, that is, by May 14, 2021. The disclosure of the tax returns will be made in strict accordance with any existing confidentiality agreements and the Protective Order issued by the Court at Docket No. 223, on the understanding that the tax returns may be reviewed only by counsel, retained experts, or necessary clerical personnel. No use of these documents will be made of them except for the purpose of this litigation. Lastly, the Court turns to the final discovery issue—defendants’ claim that plaintiffs failed to comply with their discovery obligations under Rule 26(a) with respect to their initial disclosure of computations of damages. Plaintiffs claim that their Rule 26(a)(1)(A)(iii) initial disclosure related to the computation of the damages claimed, dated November 21, 2019, was compliant and sufficiently made. They further maintain that they could be in a position to supplement that initial computation once they review the documents produced by the defendants. Defendants strongly challenge that contention, citing to the text of Rule 26(a)(1)(A)(iii) for the proposition that disclosing the computation of each category of damages claimed by the plaintiffs should have been made at the inception of this case and when the initial disclosures were exchanged. Defendants argue that the computation of damages provided by plaintiffs was inadequate, at best, and failed to include any calculation whatsoever or breakdown of each category of damages claimed. After hearing both parties and reviewing the computation of damages produced by the plaintiffs, the Court found that the computation of damages provided by the plaintiffs was insufficient and that defendants had made a plausible claim for prejudice resulting therefrom. Defendants are entitled to a detailed and reasonable calculation of the damages claimed by the plaintiffs, as provided by law. That computation cannot solely rest on plaintiffs’ subjective belief of a sum-total valuation of the damages, rather plaintiffs must provide a specific calculation of each category of the damages claimed in the complaint as it applies to each plaintiff, and the documents or other evidentiary material on which each computation is based. Plaintiffs shall comply with this order by May 31, 2021. *3 IT IS SO ORDERED. In San Juan, Puerto Rico, this 4th day of May 2021. Footnotes [1] The parties informed the Court that part of the agreement consists of the plaintiffs paying $5,000 to an entity known as CloudNine Review so that defendants can upgrade their ESI software and review the metadata. Once the plaintiffs receive the ESI production during Phase #1, they may request additional documents that they deem relevant to the case. The parties also indicated that potential issues could arise during Phase #2 of the production of ESI. However, those issues are not yet ripe, as the plaintiffs would first need to review the documents produced in Phase #1 before determining whether any additional relevant metadata fields would be requested in Phase #2 and whether defendants raise any objection to the production of such additional documents. The parties are strongly advised to try to resolve any discovery issue that may arise reasonably, and in good faith, without seeking further intervention from the Court for judicial economy.