Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-02277/USCOURTS-cand-3_15-cv-02277-12/pdf.json

Nature of Suit Code: 790
Nature of Suit: Other Labor Litigation
Cause of Action: 28:1332 Diversity-Petition for Removal

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JULIA BERNSTEIN, et al.,

Plaintiffs,

v.

VIRGIN AMERICA, INC.,

Defendant.

Case No.15-cv-02277-JST (JSC)

ORDER RE DEFENDANT’S REQUEST 

FOR PLAINTIFFS' TAX RETURNS

Re: Dkt. Nos. 154, 155, 156

Plaintiff Julia Bernstein, Lisa Marie Smith, and Esther Garcia (collectively, “Plaintiffs”) 

represent a class of flight attendants suing Defendant Virgin America, Inc. (“Defendant”) for 

allegedly denying Plaintiffs’ wages and benefits. Discovery disputes in this class action have been 

referred to the undersigned magistrate judge. (Dkt. No. 130.) On May 18, 2017, the Court held a 

hearing on the parties’ discovery dispute regarding Defendant’s request for Plaintiffs’ tax returns, 

and ordered additional briefing. (Dkt. No. 155.) Now pending before the Court is the parties’

joint letter brief regarding Defendant’s request for an order compelling Plaintiffs to produce their 

tax returns. (Dkt. No. 156.) Having carefully considered the parties’ arguments, the Court 

DENIES Defendant’s request for Plaintiffs’ tax returns. 

DISCUSSION

“In diversity actions, questions of privilege are controlled by state law.” In re Cal. Pub. 

Utils. Comm'n, 892 F.2d 778, 781 (9th Cir. 1989). Under California law, a privilege protects 

forced disclosure of income tax returns. Schnabel v. Super. Ct. of Orange Cnty., 5 Cal. 4th 704, 

719 (1993) (quoting Webb v. Standard Oil, 49 Cal.2d 509, 513 (1957)). The privilege is meant “to 

facilitate tax enforcement by encouraging a taxpayer to make full and truthful declarations in his 

return, without fear that his statements will be revealed or used against him for other 

Case 3:15-cv-02277-JST Document 159 Filed 06/12/17 Page 1 of 3
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United States District Court

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purposes.” Id. California courts have extended the privilege to cover records submitted with tax 

returns, including, for example, W-2s. See Brown v. Super. Ct. of the City & Cnty. of San 

Francisco, 71 Cal. App. 3d 141, 143-44 (1977) (holding that W-2s are “information contained in 

the returns” and thus fall within the scope of the privilege) (citation omitted); Bowerman v. Field 

Assert Servs., Inc., No. 13-cv-00057-WHO, 2013 WL 6057043, at *2-3 (N.D. Cal. Nov. 14, 

2013) (concluding that the privilege protected Schedule Cs, payroll tax records, and 1099s for any 

employees hired). 

The tax privilege is not absolute and is waived or inapplicable where: “(1) there is an 

intentional relinquishment, (2) the gravamen of the lawsuit is so inconsistent with the continued 

assertion of the taxpayer's privilege as to compel the conclusion that the privilege has in fact been 

waived, or (3) a public policy greater than that of confidentiality of tax returns is 

involved.” Schnabel, 5 Cal. 4th at 721 (internal quotation marks, citations, and brackets omitted). 

None of the three exceptions apply here.

Defendant argues Plaintiffs resigned their privilege when they placed their residency at 

issue, sought certification of a residency based subclass, and relied upon where they filed their tax 

returns to establish residency. The Court disagrees. While residency is relevant to determine 

subclass membership, production of the tax returns is not necessary to decide residency. See 

Bowerman v. Field Asset Servs., No. 13-cv-00057-WHO, 2013 WL 6057043, at *2 (N.D. Cal. 

Nov. 14, 2013) (where Plaintiff can testify to information and/or information can be obtained from 

other sources, tax returns will not be compelled). First, Plaintiffs testified under oath to where 

they file tax returns. Second, Defendant possesses Plaintiffs’ W-4s, which state their home 

addresses for the purposes of income tax residency. Third, Defendant can turn to its own business 

records, including the class list, which identifies the address each flight attendant provided to 

Defendant or the state for which the flight attendant had income taxes withheld. There is no need 

for production of the highly privileged returns themselves.

Defendant’s insistence that due process requires that it be allow to verify the veracity of 

Plaintiffs’ deposition testimony and whether each Plaintiff properly filed their returns in 

California is unpersuasive. Defendant offers no explanation, and the Court cannot discern any, as 

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to why a flight attendant would have California income taxes withheld from her paycheck if her 

residency was actually somewhere else. The cases Defendant cites are inapposite. Moss and 

Marks concern citizenship, not residency, and do not require the production of tax returns. Moss 

v. Infinity Insurance Co., No. 15-CV-03456-JSC, 2016 WL 7178559, (N.D. Cal. Dec. 9, 2016); 

Marks v. American Airlines, Inc., No. 2:05-cv-08947- CAS-AJW, Dkt. 22 (C.D. Cal. Feb. 27, 

2016). Alakozai and Liberty Mutual do not discuss the tax privilege. Alakozai v. Chase 

Investment Services, Corp., No. 11-cv-09178, Dkt. 125, *1 (C.D. Cal. Aug. 7, 2014); Liberty Mut. 

Ins. Co. v. California Auto Assigned Risk Plan, No. 3:11-cv-01419-MMC, 2012 WL 892188 (N.D. 

Cal. Mar. 14, 2012). Plaintiffs did not intentionally relinquished their privilege.

Nor do the second or third exceptions apply. Defendant has not made the argument that 

the gravamen of the lawsuit is so inconsistent with the continued assertion of the taxpayer 

privilege as to conclude that the privilege has been waived, nor has Defendant identified any 

public policy that outweighs the protection of tax returns under the circumstances presented here.

CONCLUSION

For the reasons discussed above, the Court DENIES Defendant’s request for an order 

compelling Plaintiffs to produce their tax returns. 

This Order disposes of Docket No. 156.

IT IS SO ORDERED.

Dated: June 9, 2017

JACQUELINE SCOTT CORLEY

United States Magistrate Judge

Case 3:15-cv-02277-JST Document 159 Filed 06/12/17 Page 3 of 3