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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: June 25, 2020

Tax Returns Not Discoverable Without Strong Showing That Information is Indispensable

On April 22, 2020, Justice Knipel of the Kings County Commercial Division issued a decision in Safir v Charm City House, LLC, 2020 NY Slip Op. 31619(U), holding that tax returns were not discoverable without a strong showing that the information in them was indispensable to a party’s case, explaining:

Contrary to defendants’ contention, they are not entitled to discovery of plaintiff’s tax returns and the W-9 forms. It is well established that tax returns are generally not discoverable in the absence of a strong showing that the information is indispensable to the defense. Defendants have failed to demonstrate the existence of special circumstances warranting disclosure of plaintiff’s tax returns and the W-9 forms. More fundamentally, under the circumstances of this case where defendants allegedly owe plaintiff money which he invested with defendants from time to time, the initial source(s) of plaintiffs funds and how he subsequently accounted to the taxing authorities regarding those funds, including the monthly income therefrom, are not material and necessary to the defense of this action. Any impeachment value of any false statements that plaintiff may have made to the taxing authorities is far removed from the narrow issue in the case – namely, whether defendants owe plaintiff money – and is outweighed by the strong policy disfavoring disclosure of tax returns and related information, such as the W-9 forms. In that regard, the Court notes that both the pending criminal case against plaintiff (see defendants’ cross motion, and the defendant, Amos Weinberg’s, prior one-year suspension of his law license regarding matters not involving plaintiff, are unrelated to the substantive issue of this case.

(Internal quotations and citations omitted).

A big part of complex commercial litigation is giving, receiving and evaluating evidence (this is called “discovery”). The scope of discovery in New York is broad, but as this decision shows, it is not unlimited. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client has a question regarding discovery obligations (and what to do if a litigant is not honoring those obligations).

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