Free Amended Document (NOT Motion/Complaint) - District Court of Arizona - Arizona

Robert Hardy Falk, Esq. (TX 06795300 , pro hac vice) 2 ROBERT HARDY FALK, P.C. Post Office Box 794748 3 Dallas, Texas 75379 Tel.: (214) 954-400 4 Fax: (214) 969-5941 E-mail: [email protected]
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Michael G. Ackerman, Esq. (CA 64997, pro hac vice) ACKERMAN, KEVORKIAN & MASH 7 2391 The Alameda, Suite 100 Santa Clara, CA 95050 8 Tel.: (408) 261-5800 Fax: (408) 261-5900 9 E-mail: [email protected]
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Attorneys for Plaintiff, RONALD CRAIG FISH, a law corporation UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) ) ) Plaintiff, ) ) vs. ) ) THOMAS G. WATKINS, III, an ) individual; SKYLINE MANUFACTURING, INC., an Arizona ) ) corporation, ) ) Defendants. RONALD CRAIG FISH, a law corporation, a California corporation, Case No. CIV-03-67-PHX-SMM AMENDED MEMORANDUM OF POINTS AND AUTHORITIES OF PLAINTIFF RONALD CRAIG FISH, A LAW CORPORATION, IN OPPOSITION TO DEFENDANT'S REQUEST FOR DISCOVERY OF PLAINTIFF'S TAX RETURNS

INTRODUCTION: This court previously granted plaintiff's motion to quash a notice of deposition and a subpoena duces tecum which was issued by this court to be served on Bradley Allen Leach, a certified public account, having his offices in Morgan Hill, California. At the time of the court's ruling granting the motion to quash, the court indicate that the court was reserving its ruling on the issue of whether plaintiff's tax returns are discoverable in this case and that the
-1AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV1 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C

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discovery cut-off November 25, 2005, would not apply as to plaintiff's tax returns. The parties were ordered to submit memoranda to the court on or before December 9, 2005 consisting of a maximum of five pages. GENERAL SCOPE OF DISCOVERY: Under Rule 26(b) each of the parties is entitled to conduct discovery regarding any unprivileged matter relevant to the claim or defense of any party. Pursuant to Rule 26(b)(1), the court, on a showing of good cause, may order discovery of any matter "relevant to the subject matter involved in the action." Plaintiff's amended complaint originally alleged two counts, the first for abuse of process and the second for malicious prosecution. This court granted defendants' motion to dismiss the first count, leaving only the count for malicious prosecution as the sole remaining claim in this litigation. Plaintiff alleges in his complaint as damages lost income from the loss of So-Lite's business, attorneys fees to defend the underlying action in excess of $450,000.00, at least $110,000.00 in lost income from the Fish, P.C. practice in defending the action as well as travel expenses, costs, emotional distress and lost income from the loss of So-Lite as a client. Since the filing of the complaint, plaintiff has stipulated that he is not pursing lost income for the loss of So-Lite's business nor is he pursuing a claim for emotional distress. The only remaining damages in this case are the attorneys fees incurred by counsel to defend Ronald Fish and the costs, expenses, and time spent by Ronald Fish personally in defending the underlying action. Ronald Craig Fish is a California resident. Under California law, tax returns and derivative information are privileged. (California Revenue & Taxation Code Section 19542; Webb v. Standard Oil Company of California (1957) 49 Cal.2d 509; 319 P.2d 621; Brown v. Superior Court (1997) 71 Cal.App.3d 141; 139 Cal.Rptr. 327). Under Federal law, there is a "qualified privilege" with respect to the production of tax returns. In the case of Premium Service Corporation v. Sperry
-2AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV2 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C

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& Hutchinson Company (9th Cir. 1975) 4511 F.2d 225, the court noted that although tax returns do not enjoy an absolute privilege from discovery, nevertheless a public policy against unnecessary public disclosures arises from the need, if the tax laws are to function properly to encourage taxpayers to file complete and accurate returns. (Sperry, at page 229). In the case of Alliotti v. The Vessel Senora (N.D. CA 2003) 217 F.R.D. 496, the court held that the defendant had the burden of establishing a compelling need to obtain access to plaintiff's tax returns. The court denied defendant's motion to obtain access to tax returns if there were less intrusive means by which defendant could obtain the needed information which had not been exhausted. As an example, defendant could have used special interrogatories focusing on plaintiff's identification and explanation of all sources of income as an alternative. In a claim for malicious prosecution, attorneys fees incurred in the prior action are part of the claim for damages sought in the principal action. As a result, the attorneys fees billed by Robert Falk and Weis & Moy are recoverable as damages. Plaintiff's claim for the time that he spent in defending himself in this litigation falls into a different category. When a plaintiff, at the time of injury, is self-employed, the loss of plaintiff's earnings or earning capacity is an element of damages. In this case, there is no actual loss of earnings resulting from the loss of any specific business or client. Instead, plaintiff is claiming a loss of earning capacity resulting from his having had to work long hours in researching, writing and making appearances, all for the purpose of obtaining a dismissal in the underlying case. The question before the court on this case is how does the court measure plaintiff's loss of earning capacity? Is it based upon the hourly rate that he commonly charged a client? Is it based upon plaintiff's actual income during calendar years 2001 and 2002 (the years during which the underlying litigation was pending)? Or is it as defendant contends the difference between plaintiff's
-3AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV3 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C

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total income and expenses on an annual basis divided by the total number of hours worked resulting in an average hourly profit? As indicated in the attached declaration, plaintiff offered to provide to defendants a copy of the first page of his tax return showing his total gross income and the schedule of his expenses from his tax return showing all of his business expenses for calendar years 2001 and 2002. Defendants declined to accept this compromise resolution of this discovery dispute. Plaintiff has previously produced detailed billing records showing the amount of hours billed for each client for each relevant year plus one or two years on either side of the ligation, as well as the total number of hours billed each year to all clients during the litigation and for one or two years on each side of the litigation. In addition, plaintiff has produced income statements and balance sheets for each year during the litigation and for several years on each side of the litigation. The income statements show total gross receipts and detailed expenses broken down into each of many categories such that overhead can be calculated if needed. The balance sheets show total assets and liabilities of the corporation. In addition, plaintiff has produced detailed spreadsheets which prove the hours worked by plaintiff on this litigation during each year of the litigation (i.e., 2001 and 2002). In addition, plaintiff has produced documents which show total hours billed to all clients in each of the years 1999 through 2004. The question before the court is whether there is compelling need for plaintiff's tax returns to obtain information that could not be obtained from any other source. In order to answer this question, the court must first determine on what basis the court will determine the value of plaintiff's time. Is plaintiff's time any less valuable because plaintiff is required in order to operate his business to pay for insurance, telephones, books, equipment leases, office supplies, seminars and travel and entertainment? Is an attorneys' time more valuable because he does
-4AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV4 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C

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not purchase books, insurance, equipment, etc. and therefore has less business expenses? Plaintiff submits to the court that the reasonable value of his services is the average hourly rate charged to his clients, or, in the alternative, the amount of money which plaintiff received as income in each of the years in question which information has already been produced in the annual income statements. CONCLUSION: Based upon the foregoing authorities, it is respectfully submitted that the scope of discovery in this case should limited to documents seeking to obtain plaintiff's average hourly rate charged to his clients, or, in the alternative, the actual amount of income plaintiff received in calendar years 2001 and 2002, which information has already been produced. There is no compelling need for plaintiff's tax returns. Based upon the foregoing, it is respectfully requested that the court limit discovery in this case to interrogatories to Mr. Fish as the deems appropriate to determine the value of the time spent by Mr. Fish in defending the underlying litigation. DATED: December __, 2005 By: Fish, ACKERMAN, KEVORKIAN & MASH ______________________________ __ MICHAEL G. ACKERMAN, ESQ. Attorneys for Plaintiff, Ronald Craig a Professional Corporation

-5AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV5 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C

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The undersigned declares: I am a citizen of the United States and a resident of Santa Clara County, State of California. I am over the age of eighteen (18) years and not a party to the within above-entitled action. My business address is 2391 The Alameda, Suite 100, Santa Clara, CA 95050. On December 9, 2005, I served a copy of the following document(s) described as: MEMORANDUM OF POINTS AND AUTHORITIES OF PLAINTIFF RONALD CRAIG FISH, A LAW CORPORATION, IN OPPOSITION TO DEFENDANT'S REQUEST FOR DISCOVERY OF PLAINTIFF'S TAX RETURNS

on the interested parties in this action by placing true copies thereof in a sealed envelope addressed to the person(s) listed below: Robert Hardy Falk, Esq. ROBERT HARDY FALK, P.C. P.O. Box 794748 Dallas, Texas 75379 Email: [email protected] (Attorneys for Plaintiff, Ronald Craig Fish, A Law Corporation)

Darrell S. Dudzik, Esq. HINSHAW & CULBERTSON 3800 North Central Avenue, Suite 1600 14 Phoenix, Arizona 85012-1946 Email: [email protected] 15 Facsimile: (602) 631-4404 (Attorneys for Defendant, Thomas G. 16 Watkins, III)
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( )

(By U.S. Mail) I am readily familiar with my employer's business practice

for collection and processing of correspondence for mailing with the United States Postal Service. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter is more than one day after dated of deposit for mailing in affidavit. I deposited such envelope(s) with postage thereon fully paid to be placed in the United States Mail at Santa Clara, California. (X ) (By E-Mail) I caused a true copy of the foregoing document to be served on Darrell S. Dudzik and Robert Hardy Falk via e-mail at the e-mail address listed above. Each e-mail was complete and no reports of error were received. ( ) (By Facsimile) I served a true and correct copy by facsimile pursuant to
-6AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV6 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C

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C.C.P. 1013(e), calling for agreement and written confirmation of that agreement on court order, to the number(s) listed above or on an attached sheet. Said transmission was reported complete and without error. ( ) (By California Overnight Mail) I served a true and correct copy enclosed in a sealed package, for California Overnight collection and for overnight delivery. I marked said envelope for collection and overnight delivery to the addressed and to the office of the addressee(s) as above indicated. In the ordinary course of business and including said overnight envelopes, will be deposited with California Overnight at Santa Clara, California ( X ) (Federal Only) I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America and the State of California that the foregoing is true and correct and that this declaration was executed on December 9, 2005, at Santa Clara, California. ______________________________________ CAMI J. SMURPHAT
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18 19 20 21 22 23 24 25 26 27 28 -7AMEND ED MEM ORANDUM OF POINTS & AUTHORITIES OF PLAINTIFF RON ALD C RAIG FISH IN O PPOSITION TO DEFEND ANT'S Case 2:03-cv-00067-SMM OF PLAINTIFF'S TAX RETURNS Document 106 Filed 12/09/2005ase No. C IV7 of 7 Page -03-67-PHX-SMM REQUEST FOR DISCOVERY C