Opinion ID: 2451219
Heading Depth: 2
Heading Rank: 2

Heading: Discovery of the Requested Financial Information

Text: The Colorado Rules of Civil Procedure provide that parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party. . . . Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. C.R.C.P. 26(b)(1). Although the Colorado Rules of Civil Procedure allow for a broad scope of discovery, they do not allow for unlimited discovery of all available information. Stone v. State Farm Mut. Auto. Ins. Co., 185 P.3d 150, 155 (Colo.2008). There are certain situations where both the General Assembly and this Court have recognized the need to limit discovery. Alcon v. Spicer, 113 P.3d 735, 738 (Colo.2005).
One circumstance that warrants additional inquiry outside of the general requirement of relevancy is when a party opposes discovery on the grounds that it would violate his right to privacy. Corbetta, 975 P.2d at 720. This right to privacy, also commonly referred to as the right to confidentiality, protects `the individual interest in avoiding disclosure or personal matters.' Martinelli v. Dist. Court, 199 Colo. 163, 173, 612 P.2d 1083, 1091 (1980) (quoting Whalen v. Roe, 429 U.S. 589, 599, 97 S.Ct. 869, 51 L.Ed.2d 64 (1977)). This right includes `the power to control what we shall reveal about our intimate selves, to whom, and for what purpose.' Stone, 185 P.3d at 155 (quoting Martinelli, 199 Colo. at 173-74, 612 P.2d at 1091). When the right to privacy is at issue, the trial court must give the discovery request special consideration and balance an individual's right to keep personal information private with the general policy in favor of broad disclosure. Cantrell v. Cameron, 195 P.3d 659, 660 (Colo.2008). We have recognized numerous types of information that require special analysis based on the right to privacy. Specifically, we have given extra consideration to personnel files in Corbetta, 975 P.2d at 720-21, and Martinelli, 199 Colo. at 173-75, 612 P.2d at 1091-92, to computers in Cantrell, 195 P.3d at 661, to sexual history in Williams v. District Court, 866 P.2d 908, 912 (Colo.1993), and to tax returns in Stone, 185 P.3d at 155, and Alcon, 113 P.3d at 743.
We have articulated two different tests to apply when such information is at issue. In Martinelli, a case involving a request for personnel files maintained by the Denver Police Department, we laid out a three-part balancing test. 199 Colo. at 174, 612 P.2d at 1091. That test asks: (1) [D]oes the party seeking to come within the protection of right to confidentiality have a legitimate expectation that the materials or information will not be disclosed? (2) [I]s disclosure nonetheless required to serve a compelling state interest? (3) [I]f so, will the necessary disclosure occur in that manner which is least intrusive with respect to the right to confidentiality? Id. We have employed the Martinelli test in cases involving personnel files, Corbetta, 975 P.2d at 720-21; Martinelli, 199 Colo. at 174, 612 P.2d at 1091, computers, Cantrell, 195 P.3d at 661, and sexual history, Williams, 866 P.2d at 912. We have used a separate test, however, in cases involving requests for tax returns. Stone, 185 P.3d at 159; Alcon, 113 P.3d at 743. When a party seeks disclosure of tax returns, we require that it show that: (1) the information is relevant to the subject of the action; and (2) there is a compelling need for the information in the returns because the information sought is not otherwise readily obtainable. Stone, 185 P.3d at 159. Although we have only applied the Stone test to cases involving tax returns, federal courts have applied the test in other contexts as well. Spacecon Speciality Contractors, LLC v. Bensinger, No. 09-CV-02080-REB-KLM, 2010 WL 3927783, at -2, -7 (D.Colo. Oct.1, 2010) (requesting information relating to Spacecon from the Colorado State Directory of New Hires which is a confidential and secure repository for receiving new hire data reported by employers in Colorado); Bonanno v. Quizno's Franchise Co., LLC, 255 F.R.D. 550, 552, 555 (D.Colo.2009) (requesting information relating to a financial transaction); Gordanier v. Montezuma Water Co., No. 08-CV-01849-PAB-MJW, 2010 WL 1413109, at -2 (D.Colo. Apr. 2, 2010) (concerning a request for undescribed tapes and documents). Choosing which test to apply has proven difficult. See Cantrell, 195 P.3d at 660-61; Stone, 185 P.3d at 158;; see also Spacecon Speciality Contractors, 2010 WL 3927783, at ; Bonanno, 255 F.R.D. at 555; I'Mnaedaft, Ltd. v. Intelligent Office Sys., LLC, No. 08-CV-01804-LTB-KLM, 2009 WL 824304, at  (D.Colo. Mar. 30, 2009). Further, the facts of some cases do not lend themselves to analysis under either test. See Cantrell, 195 P.3d at 661 (recognizing that this Court has applied the Martinelli test in numerous instances where a state actor was not involved).
We hold that instead of choosing between the Martinelli and Stone tests, trial courts should apply a comprehensive frameworkincorporating, as appropriate, the principles from both teststo all discovery requests implicating the right to privacy. The party requesting the information must always first prove that the information requested is relevant to the subject of the action. Next, the party opposing the discovery request must show that it has a legitimate expectation that the requested materials or information is confidential and will not be disclosed. If the trial court determines that there is a legitimate expectation of privacy in the materials or information, the requesting party must prove either that disclosure is required to serve a compelling state interest or that there is a compelling need for the information. If the requesting party is successful in proving one of these two elements, it must then also show that the information is not available from other sources. Lastly, if the information is available from other sources, the requesting party must prove that it is using the least intrusive means to obtain the information. In this case, M/M requested a broad category of documents regarding Judd's compensation, specifically: (1) Each and every DOCUMENT that identifies Judd's compensation from RWO for the years 2004, 2005, 2006, and 2007; and (2) Each and every DOCUMENT that describes the methodology by which RWO determined the amount of compensation it paid to JUDD for the years 2004, 2005, 2006 and 2007. (emphasis in original). Despite M/M's contentions, this broad discovery request likely includes tax returns as well as other financial documents and potentially confidential information regarding Judd and RWO. We hold that, based on the broader protection that we have afforded to financial records in other contexts, see, e.g., Leidholt v. Dist. Court, 619 P.2d 768, 770 (Colo.1980) (in the context of punitive damages), these documents fall under the umbrella of the right to privacy and necessitate analysis under the framework discussed above. Therefore, M/M must prove that the requested financial information is relevant to the subject of the actionlegal malpractice and breach of fiduciary dutyand that there is a compelling need for the documents. Further, because M/M has requested all potential documents that contain the desired information, M/M must prove that it is using the least intrusive means to obtain the information contained therein. We have repeatedly held that it must be apparent from the order that the trial court performed the required balancing test. See Stone, 185 P.3d at 160-61; Corbetta, 975 P.2d at 721; Martinelli, 199 Colo. at 175, 612 P.2d at 1092. Here, the trial court provided minimal analysis in its order granting M/M's motion to compel. The trial court, in relevant part, stated: Plaintiffs claim Mr. Judd continued to represent Plaintiffs despite conflicts of interest in order to increase fee revenues. They further allege Mr. Judd's conduct in collecting legal fees violated his fee agreement with Plaintiffs. Thus, information related to Mr. Judd's compensation is directly relevant to this case. The Court finds Defendants have failed to show good cause for protecting the information from discovery. It is clear to us from this statement that the trial court did not consider whether there is a compelling need for the information or whether M/M is using the least intrusive means to obtain the information. Further, the trial court placed the burden on Judd and RWO to show good cause for protecting the information where the burden should be on M/M to show a compelling need for the information.