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Discovery of Income Tax Returns Requires Showing of "High" Relevance

Ex parte Wrenn, [Ms. 1190567, Apr. 30, 2021], ___ So. 3d ___ (Ala. 2021). The Court (Seller, J.; Parker, C.J., and Bolin, Wise, Bryan, and Stewart, JJ., concur; Shaw, Mendheim, and Mitchell, JJ., dissent) issues a writ of mandamus to the Etowah Circuit Court vacating an order requiring Edward Wrenn and David Wrenn to produce their personal tax returns. Wright sought certification of a limited fund class action under Rule 23(b)(1)(B) against A-1 Exterminating. Ms. *3. The Wrenns are 50/50 owners of Wrenn Enterprises, Inc. which owns A-1 Exterminating. Ms. *2, n. 2.

The Court explains that tax returns “contain significant personal and confidential information wholly unrelated to assets and liabilities. Thus, Edward’s and David’s tax returns are not ‘highly’ relevant to Wright’s theory that a class should be certified because the defendants have limited assets available to satisfy potential judgments,” Ms. *7, and holds

Before directing the disclosure of tax returns, trial courts should carefully consider the private nature of the information contained in the returns, the specific information sought by a litigant, and whether that information can be obtained from a different source. For tax returns to be discoverable, they must be highly relevant, the litigant seeking their disclosure must show a compelling need for them, and their disclosure must be clearly required in the interests of justice.

Ms. *8.

Justice Mitchell’s dissent asserts that the majority opinion departs from the exacting mandamus standard of review of discovery orders and encourages “litigants to view this Court not as a guardian against clear abuses of the discovery process, but as a second bite at the apple.” Ms. *12. The dissent also notes that confidential information in the tax returns could be protected via a protective order and that there was no indication in the record that the Wrenns had sought such protection in the trial court. Ms. *14.

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