Opinion ID: 2517270
Heading Depth: 2
Heading Rank: 5

Heading: Application to the Current Case

Text: In its order granting State Farm's motion to compel, the trial court stated, The Court finds that under the specific facts of this case, and based upon [State Farm's] Reply, that [State Farm] has stated a compelling interest in the disclosure of the Tax returns filed by [Stone]. Stone argues that this finding suggests that the court did not apply the appropriate factors in reaching its decision. Further, Stone claims that the lower court committed reversible error by failing to identify State Farm's compelling interest. Stone contends that, because the information can be obtained through less intrusive means, State Farm does not have a compelling need for the returns. It is difficult to discern from the brief findings of the trial court whether the court weighed the concerns presented in Alcon. Under the test we clarify today, we first look to the initial prong of relevance. Here, Stone sought damages in the form of past and future loss of earnings and earning capacity. She has put her income at issue in the case, and therefore, tax returns containing information regarding her income are relevant. Next, we consider whether State Farm satisfied its burden of showing compelling need. In its reply, on which the trial court specifically relied in making its finding, State Farm argued that, unlike in Alcon where the plaintiff was paid an hourly wage, in the current case, Stone's income is based on assets under her management. While in Alcon all of the information relevant to the plaintiff's wage loss claim could be found in the plaintiff's W-2 statements, here, State Farm alleges that Stone's W-2 statements do not provide sufficient information to determine whether any loss of income is due to injuries caused by the accident or due to other factors, such as changes in the market, business expenses, and changes in her accounts or clients. In other words, due to the complicated nature of Stone's income calculation, State Farm contends that it needs Stone's tax returns to defend against her wage loss claim. More particularly, State Farm seeks to compare Stone's deductions for business expenses on her tax returns both before and after the accident to determine whether she maintained the same level of activity. State Farm does not specifically mention any other type of information that the tax returns are likely to contain, which could be relevant to its defense against Stone's claims. Presumably, the trial court's ruling regarding the discovery of the returns was based on these arguments. However, it did not limit the scope of its disclosure order to specific information, such as business expense deductions, contained in the tax returns. Stone, on the other hand, contends that State Farm could not have met its burden of showing compelling need because the desired information was readily obtainable from less intrusive sources. In both her reply regarding her motion for reconsideration of the trial court's order and her reply brief to this court, Stone explains that information on stock market conditions is readily available to the public by means of various indices. In addition, she asserts that State Farm could learn about her business expenses by acquiring her business expense reports from her employer, Smith Barney. Stone also alleges that State Farm could depose her co-workers to determine how much she worked following the accident. Further, Stone states in her reply brief that, after this court's ruling but prior to the expert disclosure deadline, she provided State Farm with a lost earnings report prepared by Dr. James Evenson, which detailed her wage loss claim. Because less intrusive methods of obtaining the information exist, Stone concludes that the trial court erred in granting State Farm's motion to compel. While State Farm has continuously asserted that Stone's W-2 statements are insufficient to allow it to defend against Stone's claims, State Farm does not address or attempt to evaluateat least in the record before usthe other possible sources of information proposed by Stone. The record before us now on appeal is limited. The court's order is overbroad, requiring disclosure of the entire tax returns without limitation. In addition, there is no indication from the trial court's order that the court considered alternative sources of information in rendering its finding of compelling need. Consequently, we find that the trial court abused its discretion. We make our rule to show cause absolute and remand the case with directions to apply the test we have laid out in this opinion. In doing so, the court should focus on the information that State Farm believes it can obtain from the tax returnsdeductions for business expensesand consider whether less intrusive sources of this specific information exist. [9] If State Farm proves that there is a compelling need for the returns because the information sought is not otherwise readily obtainable, the court should limit discovery to those portions of the tax returns relevant and necessary to State Farm's defense against Stone's wage loss claims.