RIOR COURT OF GUAM
2 CHEN YU MACK, ) CIVIL CASE NO.~'CtVo65ItHI 3 ) Plaintiff, ) 4 ) vs. ) 5 ) DECISION AND ORDER 6 ) DONALD B. DAVIS, ) 7 ) Defendant. ) 8
9 INTRODUCTION 10 This matter came before the HONORABLE VERNON P. PEREZ on November 8, 2013 11 on Defendant's Motion to Compel Discovery Responses. Attorney Jehan'ad G. Martinez 12 appeared on behalf of the Defendant. Attorney Daniel J. Berman appeared on behalf of the 13 Plaintiff. Having reviewed the pleadings, the arguments presented and the record, the Court 14 now issues the following Decision and Order. 15 BACKGROUND 16 This case arises from a complaint for Injunctive Relief and Damages. Plaintiff alleges 17 that Defendant granted her an irrevocable proxy. Plaintiff and Defendant came to an agreement 18 in 2008 where they would put up their own money to form IHIAC, Inc. in addition to acquiring 19 a joint loan from Bank of Guam ("BOG") also for that purpose. The intent was to purchase 20 Zurich Insurance Guam, Inc. ("ZIG"). After forming IHIAC, both parties were issued 1,999 21 shares of IHIAC stock and 2 shares went to one Francis Santos as a tie breaker. The agreement 22 came to fruition and IHIAC bought all of the stock of ZIG, after which ZIG's name was 23 changed to Island Home Insurance ("IHIC"). After the company consolidation was completed, 24 Plaintiff alleges that she invested $1,525,000.00 into IHIAC, transferred her Staywell Guam, 25 Inc., stock worth approximately $3,000,000.00 to IHIAC, became jointly liable on a 26 $9,415,000.00 loan from BOG and allowed her $1,960,000.00 valued real property to be used as 27
28 security on the BOG loan.
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-II -Page I of 5- Thereafter, Plaintiff alleges that Defendant promised Plaintiff a proxy of Defendant's 2 shares to allow Narcissa Samonte ("Samonte") to become a I 0% shareholder in IHIAC to calm 3 Plaintiffs concerns over becoming a minority shareholder. Plaintiff also alleges that Defendant 4 granted her a proxy of his shares via email. Plaintiff attempted to use the alleged proxy at a 5 shareholders meeting on April 8, 20 II in order to pass a resolution that would grant her 6 $10,000.00 a month and reduce Defendant's annual salary. Yet, when attempting to use the 7 alleged proxy, Defendant revoked his proxy and Plaintiffs resolution failed. 8 On January I2, 20 I2, this Court issued a Preliminary Injunction ordering Defendant to 9 desist from voting his share of his IHIAC stock until the resolution of this matter at trial. The 10 Guam Supreme Court subsequently affirmed the Court's decision. There were, however, 11 pending issues regarding discovery. Defendant brought a Motion to Compel Discovery 12 responses and Plaintiff opposed. The Court now addresses that motion. 13 DISCUSSION 14 At issue is whether the Court should compel production of Plaintiffs tax returns an 15 other documents relative to Plaintiffs financial condition. The Supreme Court of Guam i 16 Haeuser v. Dept. of Law, Gov't of Guam explained that "[t]he United States Supreme Court an 17 the Ninth Circuit have recognized that tax returns are privileged documents, but do not enjoy a 18
19 absolute privilege from discovery." Haeuser v. Dept. of Law, Gov't. ofGuam, I999 Guam 12
20 23. (citing St. Regis Paper Co. v. United States, 368 U.S. 208, 219; Premium Service Corp. v. 21 Sperry & Hutchinson Co., 5II F.2d 225, 229 (9th Cir. 1975). Furthermore, "[a] public polic 22 exists against unnecessary disclosure in order to encourage taxpayers to file complete an 23 accurate returns." !d. (citing Premium Service Corp., 511 F.2d at 229). 24 25 The Supreme Court in Haeuser adopted a rule to determine whether tax returns should b
26 disclosed in discovery. "[A] court must determine whether: I) the tax return is relevant to th 27 subject matter in dispute; and 2) a compelling need exists for the return because the informatio 28
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-Il -Page 2 of 5- sought is not obtainable from other sources." ld. (citing Terwilliger v. York Int 'l Corporation 2 176 F.R.D. 214,216-217 (W.D. Va. 1997). "The party seeking discovery oftax returns bears th 3 burden of establishing its relevance, while the resisting party has the task of identifying a 4 alternative source for information." Id. 5
6 The trial court in the underlying case in Haeuser ruled against production of tax returns
7 finding that there were other sources from which to draw the information from those documents. 8 The Supreme Court affirmed the trial court's decision, ruling that the "government present[ed] 9 only general assertions of relevance and [did] not offer any other arguments to justify reversin 10 the trial judge's determination that these documents were not needed." Haeuser at~ 28. 11
12 In the present case, Defendant argues that establishing the truthfulness of Plaintiff, an
13 her financial claims, necessitates the requests for production. Def s. Mot. pg. 5. Defendan 14 further argues that there are no public sources of the information being sought as Plaintiff is not 15 publicly traded company, or a public employee whose financial condition is subject to reportin 16
17 requirements and public scrutiny. Defs Mot. pg. 5. On that basis, Defendant concludes tha
18 Plaintiff should be ordered to produce the documents requested. 19 Plaintiff first argues that her financial information is not relevant to any issue in thi 20 litigation. She further argues that the legal issue at hand is not whether she needs the money bu 21 instead whether she is legally entitled to it. Plaintiff cites to 6 Moore's Federal Practice 22 23 26.1(8)(a)-(b), which states in relevant part: "[c]ourts continue to apply the general principle tha
24 a party's financial information is relevant for purposes of discovery if it implicates specifi 25 elements of a claim or defense. Plaintiff also cites to case law for the notion that disclosure o 26 tax returns is especially disfavored. US. v. Bonnano Organized Crime family of La Costr 27 Nostra, 119 F.R.D. 625, 627 (E.D.N.Y 1998). 28
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-ll -Page 3 of5- The Court is tasked with balancing the discovery needs of a party against the publi 2 policy favoring non-disclosure. In the Bonnano case cited by Defendant, the Court set aside a 3 order precluding the production of tax returns and held that the tax returns were "clearl 4 relevant" because of the Government's contentions that the party, from whom the tax return 5
6 were sought, did not have adequate income to make purchases and operate as he did. Bonnano a
7 628. In Smith v. Bader, the court noted that along with the test of relevance and whether ther 8 was a compelling need for the information, some courts also considered whether the taxpayer ha 9 made an issue ofhis income. Smith v. Bader, 84 F.R.D. 437, 438 (1979). In that case the Cou 10 ordered the production of the plaintiffs tax returns, holding that "[p]laintiffs have placed thei 11
12 income in issue by claiming that they have suffered a loss due to defendants' actions and i
13 would be inequitable to prevent the defendants from obtaining the necessary evidence t 14 disprove this claim." In Mitsui & Co., v. Puerto Rico Water Resources Authority, the court als 15 ordered the plaintiffs therein to produce their income tax returns. Mitsui & Co. Inc. v. Puert 16
17 Rico Water Resources Authority, 79 F.R.D. 72, 81 (1978). In that case, the plaintiff claimed ove
Free access — add to your briefcase to read the full text and ask questions with AI
RIOR COURT OF GUAM
2 CHEN YU MACK, ) CIVIL CASE NO.~'CtVo65ItHI 3 ) Plaintiff, ) 4 ) vs. ) 5 ) DECISION AND ORDER 6 ) DONALD B. DAVIS, ) 7 ) Defendant. ) 8
9 INTRODUCTION 10 This matter came before the HONORABLE VERNON P. PEREZ on November 8, 2013 11 on Defendant's Motion to Compel Discovery Responses. Attorney Jehan'ad G. Martinez 12 appeared on behalf of the Defendant. Attorney Daniel J. Berman appeared on behalf of the 13 Plaintiff. Having reviewed the pleadings, the arguments presented and the record, the Court 14 now issues the following Decision and Order. 15 BACKGROUND 16 This case arises from a complaint for Injunctive Relief and Damages. Plaintiff alleges 17 that Defendant granted her an irrevocable proxy. Plaintiff and Defendant came to an agreement 18 in 2008 where they would put up their own money to form IHIAC, Inc. in addition to acquiring 19 a joint loan from Bank of Guam ("BOG") also for that purpose. The intent was to purchase 20 Zurich Insurance Guam, Inc. ("ZIG"). After forming IHIAC, both parties were issued 1,999 21 shares of IHIAC stock and 2 shares went to one Francis Santos as a tie breaker. The agreement 22 came to fruition and IHIAC bought all of the stock of ZIG, after which ZIG's name was 23 changed to Island Home Insurance ("IHIC"). After the company consolidation was completed, 24 Plaintiff alleges that she invested $1,525,000.00 into IHIAC, transferred her Staywell Guam, 25 Inc., stock worth approximately $3,000,000.00 to IHIAC, became jointly liable on a 26 $9,415,000.00 loan from BOG and allowed her $1,960,000.00 valued real property to be used as 27
28 security on the BOG loan.
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-II -Page I of 5- Thereafter, Plaintiff alleges that Defendant promised Plaintiff a proxy of Defendant's 2 shares to allow Narcissa Samonte ("Samonte") to become a I 0% shareholder in IHIAC to calm 3 Plaintiffs concerns over becoming a minority shareholder. Plaintiff also alleges that Defendant 4 granted her a proxy of his shares via email. Plaintiff attempted to use the alleged proxy at a 5 shareholders meeting on April 8, 20 II in order to pass a resolution that would grant her 6 $10,000.00 a month and reduce Defendant's annual salary. Yet, when attempting to use the 7 alleged proxy, Defendant revoked his proxy and Plaintiffs resolution failed. 8 On January I2, 20 I2, this Court issued a Preliminary Injunction ordering Defendant to 9 desist from voting his share of his IHIAC stock until the resolution of this matter at trial. The 10 Guam Supreme Court subsequently affirmed the Court's decision. There were, however, 11 pending issues regarding discovery. Defendant brought a Motion to Compel Discovery 12 responses and Plaintiff opposed. The Court now addresses that motion. 13 DISCUSSION 14 At issue is whether the Court should compel production of Plaintiffs tax returns an 15 other documents relative to Plaintiffs financial condition. The Supreme Court of Guam i 16 Haeuser v. Dept. of Law, Gov't of Guam explained that "[t]he United States Supreme Court an 17 the Ninth Circuit have recognized that tax returns are privileged documents, but do not enjoy a 18
19 absolute privilege from discovery." Haeuser v. Dept. of Law, Gov't. ofGuam, I999 Guam 12
20 23. (citing St. Regis Paper Co. v. United States, 368 U.S. 208, 219; Premium Service Corp. v. 21 Sperry & Hutchinson Co., 5II F.2d 225, 229 (9th Cir. 1975). Furthermore, "[a] public polic 22 exists against unnecessary disclosure in order to encourage taxpayers to file complete an 23 accurate returns." !d. (citing Premium Service Corp., 511 F.2d at 229). 24 25 The Supreme Court in Haeuser adopted a rule to determine whether tax returns should b
26 disclosed in discovery. "[A] court must determine whether: I) the tax return is relevant to th 27 subject matter in dispute; and 2) a compelling need exists for the return because the informatio 28
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-Il -Page 2 of 5- sought is not obtainable from other sources." ld. (citing Terwilliger v. York Int 'l Corporation 2 176 F.R.D. 214,216-217 (W.D. Va. 1997). "The party seeking discovery oftax returns bears th 3 burden of establishing its relevance, while the resisting party has the task of identifying a 4 alternative source for information." Id. 5
6 The trial court in the underlying case in Haeuser ruled against production of tax returns
7 finding that there were other sources from which to draw the information from those documents. 8 The Supreme Court affirmed the trial court's decision, ruling that the "government present[ed] 9 only general assertions of relevance and [did] not offer any other arguments to justify reversin 10 the trial judge's determination that these documents were not needed." Haeuser at~ 28. 11
12 In the present case, Defendant argues that establishing the truthfulness of Plaintiff, an
13 her financial claims, necessitates the requests for production. Def s. Mot. pg. 5. Defendan 14 further argues that there are no public sources of the information being sought as Plaintiff is not 15 publicly traded company, or a public employee whose financial condition is subject to reportin 16
17 requirements and public scrutiny. Defs Mot. pg. 5. On that basis, Defendant concludes tha
18 Plaintiff should be ordered to produce the documents requested. 19 Plaintiff first argues that her financial information is not relevant to any issue in thi 20 litigation. She further argues that the legal issue at hand is not whether she needs the money bu 21 instead whether she is legally entitled to it. Plaintiff cites to 6 Moore's Federal Practice 22 23 26.1(8)(a)-(b), which states in relevant part: "[c]ourts continue to apply the general principle tha
24 a party's financial information is relevant for purposes of discovery if it implicates specifi 25 elements of a claim or defense. Plaintiff also cites to case law for the notion that disclosure o 26 tax returns is especially disfavored. US. v. Bonnano Organized Crime family of La Costr 27 Nostra, 119 F.R.D. 625, 627 (E.D.N.Y 1998). 28
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-ll -Page 3 of5- The Court is tasked with balancing the discovery needs of a party against the publi 2 policy favoring non-disclosure. In the Bonnano case cited by Defendant, the Court set aside a 3 order precluding the production of tax returns and held that the tax returns were "clearl 4 relevant" because of the Government's contentions that the party, from whom the tax return 5
6 were sought, did not have adequate income to make purchases and operate as he did. Bonnano a
7 628. In Smith v. Bader, the court noted that along with the test of relevance and whether ther 8 was a compelling need for the information, some courts also considered whether the taxpayer ha 9 made an issue ofhis income. Smith v. Bader, 84 F.R.D. 437, 438 (1979). In that case the Cou 10 ordered the production of the plaintiffs tax returns, holding that "[p]laintiffs have placed thei 11
12 income in issue by claiming that they have suffered a loss due to defendants' actions and i
13 would be inequitable to prevent the defendants from obtaining the necessary evidence t 14 disprove this claim." In Mitsui & Co., v. Puerto Rico Water Resources Authority, the court als 15 ordered the plaintiffs therein to produce their income tax returns. Mitsui & Co. Inc. v. Puert 16
17 Rico Water Resources Authority, 79 F.R.D. 72, 81 (1978). In that case, the plaintiff claimed ove
18 thirty million dollars for losses and damages due to defendants' alleged non-compliance wit 19 their obligations under the contract. The Court ultimately held that the plaintiff "clearly put a 20 stake its income ... so as to waive any right it may have to maintain undisclosed its tax returns' 21 matters." Id. 22 23 Here, we have a similar situation. Plaintiff alleges: Because of [Defendant's] breach o
24 the irrevocable Mack Proxy, [Plaintiff] has suffered general, consequential, and compensator 25 damages, including, but not limited to, damages for lost profits, attorney's fees and expenses, 26 pre-judgment interest, future and loss bargain damages in an amount to be proven at trial. Pl' 27 Compl. ~ 52. 28
Chen Yu Alack v. Donald B. Davis Decision and Order Civil Case No. CV0651-Il -Page 4 of5- Further, in its April 22, 2011 letter to Defendant, Plaintiff wrote: "I have become unabl 2 to pay my debts monthly as they become due without the $10,000 monthly compensation yo 3 promised me in exchange for my investment and contribution in the companies. I will need t 4 admit to BOG shortly that I am unable to pay all my debts as they come due." See Decl. o 5
6 Jehan'ad Martinez, Decl. ~ 3; Ex. 1. The Court notes that Defendant is a co-borrower on th
7 BOG debt referenced by Plaintiff. 8 The Court deems the above two references sufficient for a finding that Plaintiffs incom 9 has been placed at issue. As such, the Court believes that production of tax returns and financia 10 documents is relevant to the subject matter in dispute. Furthermore, Plaintiff has not identifie 11
12 an alternative source for the information sought. On that basis, the Court will grant Defendant'
13 Motion to Compel Production of Discovery Responses, as outlined in the parties' Amended CV 14 37.l(b) Stipulation filed on December 30, 2011. The Court, however, heeds the traditiona 15 privacy concerns relative to these documents, and orders that the parties sign a confidentialit 16
17 stipulation prohibiting the disclosure of documents produced to anyone other than counsel.
18 CONCLUSION 19 For the foregoing reasons, the Court GRANTS Defendant's Motion to Compel 20 Discovery Responses. 21 So ORDERED this \\~ day ofFebruary, 2014. 22 23
24 HO RABLE VERNON P. PEREZ 25 JUDGE, SUPERIOR COURT OF GUAM 26
27 28
Chen Yu Mack v. Donald B. Davis Decision and Order Civil Case No. CV0651-ll -Page 5 of 5-