Opinion ID: 736305
Heading Depth: 2
Heading Rank: 3

Heading: Discovery and Costs

Text: 34 We review district court rulings on discovery motions and discovery sanctions for abuse of discretion. Harris v. Chapman, 97 F.3d 499, 506 (11th Cir.1996). 35 Plaintiffs initially did not comply with defendants' discovery requests for income tax forms and details of their attorney fee arrangement. Plaintiffs supplied defendants with W-2 and 1099 forms as evidence of earnings, but argued that the tax records would reveal irrelevant and qualifiedly privileged information. Plaintiffs also informed defendants that the attorney fee arrangement was contingent and plaintiffs were responsible for costs, but did not supply the contingency percentage on the grounds that it was irrelevant. 36 The district court held that the tax records would reveal income information not contained in W-2 forms and that the information would be protected by the Protective Order entered into by the parties. The court held that the contingency percentage was relevant because plaintiffs sought attorney's fees, and the percentage would be relevant to calculating reasonable attorney's fees. The court therefore compelled discovery of these two items, and sanctioned plaintiffs $3,000 in attorney's fees for their initial failure to comply. 37 The court's decision to compel discovery was not an abuse of discretion: both items of information are arguably relevant to the case. The award of sanctions, however, was. 38 A court must impose attorney's fees and expenses when compelling discovery unless the party was substantially justified in resisting discovery. Fed.R.Civ.P. 37(a)(4)(A). Substantially justified means that reasonable people could differ as to the appropriateness of the contested action. Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550, 101 L.Ed.2d 490 (1988). 39 Here, the plaintiffs were substantially justified in relying on Supreme Court dictum regarding the attorney's fees issue, and relying on out-of-circuit district court caselaw, where there was no in-circuit caselaw, regarding the tax form issue. See Blanchard v. Bergeron, 489 U.S. 87, 93, 109 S.Ct. 939, 944, 103 L.Ed.2d 67 (1989) (evidence of specific details of contingency fee arrangement is not necessary for a court to calculate reasonable attorney's fees; it is at most one factor); City of Burlington v. Dague, 505 U.S. 557, 565, 112 S.Ct. 2638, 2643, 120 L.Ed.2d 449 (1992) (contingency fee is not grounds for a fee enhancement); Lemanik v. McKinley Allsopp, Inc., 125 F.R.D. 602, 609 (S.D.N.Y.1989) (there is a public policy of confidentiality of tax returns; to require discovery, a party must establish relevancy and the court must find a compelling need for the returns because the information is not otherwise obtainable); Biliske v. American Live Stock Inc., 73 F.R.D. 124, 126 n. 1 (W.D.Okla.1977) (public policy against unnecessary disclosure of tax returns). 40 The plaintiffs were substantially justified in initially refusing discovery. The award of attorney's fees was an abuse of discretion. We affirm the district court's decision to compel discovery but reverse its sanction of attorney's fees. 41