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26 ORDER REGARDING

MOTION TO COMPEL - 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

MIKE KREIDLER, 

Plaintiff,

v.

DANNY L. PIXLER, et al.,

Defendants.

Case No. C06-0697RSL

ORDER GRANTING IN PART 

AND DENYING IN PART 

MOTION TO COMPEL

I. INTRODUCTION

This matter comes before the Court on plaintiff’s motion to compel production of

documents (Dkt. #93). Plaintiff, the Insurance Commissioner for the State of

Washington, seeks to compel defendants to produce various financial, corporate, and

accounting documents from the corporate and the individual defendants. Plaintiff alleges

that defendants engaged in fraud and other misconduct to divert and retain monies due to

Cascade National Insurance Company (“Cascade”), which has been placed into

receivership.

For the reasons set forth below, the Court grants the motion in part and denies it in

part.

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1

 Counsel conferred by telephone on August 15, 2007, then exchanged letters and

e-mails regarding the requests for production in the following days. Declaration of

Victoria Vreeland (Dkt. #94). Although the conference minimally met Local Rule 37's

requirement, the Court has found that parties are more likely to resolve discovery matters

if they confer as the last step prior to filing a motion. In the future, counsel should follow

that practice.

ORDER REGARDING

MOTION TO COMPEL - 2

II. DISCUSSION

The Federal Rules of Civil Procedure permit broad discovery of information

“reasonably calculated to lead to the discovery of admissible evidence.” Fed. R. Civ. P.

26(b)(1). The parties met and conferred prior to plaintiff’s filing this motion but were

unable to resolve the matter.1

 

1. Corporate Records

From ASRC, Certified Services, Inc. and Midwest Merger Management, LLC

(collectively, the “corporate entities”), plaintiff seeks information regarding stock

ownership records, meeting minutes, tax returns, financial statements, accounting reports,

monthly bank statements, and check copies from 2002 to 2005. The Court finds that all

of these requests are reasonably calculated to lead to the discovery of admissible

evidence. The documents could show whether defendants disregarded corporate

formalities as plaintiff alleges. The documents could also reflect financial transactions

and decisions. Defendants have not supported their objections that the requests are

overly broad or unduly burdensome. In their response to the motion, defendants note that

after plaintiff filed this motion they agreed to produce documents responsive to requests

51-54. Defendants must respond to these requests.

2. Individual Tax Returns and Financial Records

Request for production 55 seeks tax returns from the individual defendants from

2002 to 2005. Requests for production 57 and 61 seek copies of all monthly bank

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26 ORDER REGARDING

MOTION TO COMPEL - 3

statements and check copies, brokerage account statements, and other investment records

for each individual defendant (the “other financial documents”).

As the Ninth Circuit has noted, “[t]ax returns do not enjoy an absolute privilege

from discovery” although there is a public policy against their unnecessary public

disclosure. Premium Serv. Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th

Cir. 1975). Some courts have used a two-part test to determine if compelling their

production is appropriate; the test requires a court to find that (1) the tax returns are

relevant, and (2) “there is a compelling need for the returns because the information

contained therein is not otherwise readily attainable.” United States v. Bonanno

Organized Crime Family, 119 F.R.D. 625, 627 (E.D.N.Y. 1988) (internal citation and

quotation omitted).

In this case, although defendants allege that plaintiff is on a “fishing expedition,”

plaintiff’s motion includes a detailed and informative description of plaintiff’s need for

the personal financial documents. Plaintiff argues, and the Court finds, that the tax

returns and other financial documents are relevant to show whether defendants collected

and retained monies from third parties that were due to Cascade as plaintiff alleges. The

financial documents will also assist plaintiff in tracing the funds. Those issues are

relevant to plaintiff’s claims for fraud, criminal profiteering, unjust enrichment, and

constructive trust. The financial documents could also lead to admissible evidence

regarding plaintiff’s claim that defendants disregarded the corporate forms by reflecting

the flow of funds between or among the defendants. To lessen defendants’ privacy

concerns, the Court orders that the returns and other financial information shall be treated

as confidential and used only for purposes of this litigation. 

Furthermore, there is no evidence or argument that plaintiff can obtain the

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26 ORDER REGARDING

MOTION TO COMPEL - 4

information from other sources. Defendants must therefore respond to the requests. 

The Court also finds that plaintiff’s requested 2002 to 2005 time period for the tax

returns is appropriate. Even though the relevant transactions did not occur until 2003, the

2002 returns will reflect the individuals’ financial situation prior to the transactions and

serve as benchmarks. However, the requests for the other financial documents are not

limited in time. The relevant transactions occurred in 2003 and 2004, and plaintiff has not

shown that documents from earlier than 2002 or later than 2005 are reasonably calculated

to lead to the discovery of admissible evidence. Therefore, defendants must produce

documents responsive to requests 57 and 61 only for the time period from 2002 to 2005.

3. Payments Among the Defendants

Plaintiff requests that all defendants produce documents regarding payments or

distributions between them. Plaintiff alleges that the defendants conspired together to

defraud, including creating corporate entities to assist in the scheme. Responsive

documents could contain information regarding the financial relationships between and

among the parties. The request is therefore reasonably calculated to lead to the discovery

of admissible evidence. In their response, defendants argue that the request contains no

time limitation. However, defendants have not shown that responding to the request will

be unduly burdensome or shown that the parties’ relationship spans a long period of time. 

Also, the issue of payments among the parties is so central to plaintiff’s claims that the

Court will require defendants to respond to the request without any time limitation.

4. Fees and Costs

Plaintiff requests an award of its fees and costs in bringing this motion pursuant to

Federal Rule of Civil Procedure 37(a)(4)(A) which permits an award unless the party’s

failure to disclose was “substantially justified.” Defendants’ refusal to produce the

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2

 Because request for production 60 duplicates request 54 with the exception that

60 is unlimited in time, defendants are not required to respond to request 60.

ORDER REGARDING

MOTION TO COMPEL - 5

individual’s personal financial records was substantially justified. Although the Court

will require production, defendants had a good faith argument that their privacy interests

protected the documents from production. 

Defendants’ refusal to produce documents regarding the corporate entities,

however, was not substantially justified. Defendants agreed to produce documents

regarding the corporate entities after plaintiff filed this motion. Their response to the

motion is devoid of meritorious excuses for failing to produce the documents earlier. 

Instead, defendants note that one of the requests sought, in part, “personal” financial

information from the corporate entities. Although such a request makes little sense, they

apparently did not address it or confirm whether it was a typographical error during the

discovery conference. Similarly, defendants’ notation that one of the requests duplicates

another does not justify their refusal to produce documents.2

Accordingly, the Court will award plaintiff half of his fees and costs in bringing

this motion. Defendants shall be jointly and severally required to pay the fees and costs. 

Plaintiff shall, within twenty days, file a statement of his reasonable fees and costs

incurred in filing this motion. 

III. CONCLUSION

For all of the reasons set forth above, plaintiff’s motion to compel (Dkt. #93) is 

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MOTION TO COMPEL - 6

GRANTED IN PART AND DENIED IN PART.

DATED this 17th day of October, 2007.

A

Robert S. Lasnik

United States District Judge

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