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Disclosing Tax Returns in Litigation – The Good Cause Standard

Thomas W. Hartmann
The Hartmann Law Firm LLC
TheHartmannLawFirm.com; [email protected]; 908 769 6888

One of the greatest burdens, expenses and challenges of litigation is discovery (information disclosure). It is costly, complex and time consuming. An issue that often arises is disclosure of tax returns. Tax returns are full of information about a person, a family or a business and often have historical data, too. At the same time, the tax returns may have more information than is properly discoverable in litigation. A defined approach to this issue can save time and, therefore, money and frustration.
The Good Cause Standard of Ullmann v. Hartford Fire Ins. Co. In Ullmann v. Hartford Fire Ins. Co., 87 N.J. Super. 409 (App. Div. 1965), the New Jersey Supreme Court adopted a "good cause" standard to compel the production of a litigant's income tax returns. Accord Campione v. Soden,150 N.J. 163, 189-90 (1997); DeGraaf v. DeGraaf, 163 N.J. Super. 578, 583 (App. Div. 1978).
In Ullmann, the court observed that "[I]t is impossible to lay down a universal definition of good cause for disclosure and inspection, or an all-inclusive and definitive catalogue of all of the circumstances to be considered by a court in determining whether there is good cause. Each case must be decided upon its own facts." Ullmann v. Hartford Fire Ins. Co., 87 N.J. Super. 409, 419.
The Ullmann court set out the following procedure to guide the production of income tax returns:
If disclosure will not serve a substantial purpose it should not be ordered at all. If ordered, disclosure should be no greater than justice requires. The disclosure of entire returns should never be ordered if partial disclosure will suffice, and in all but the clearest cases the return should be examined by the judge before any disclosure is ordered. Even then the judge should impose such restrictions and limitations as may be necessary for the protection of the taxpayer.
Id. at 416.
Disclosure on Credibility Issues. Beyond the substance of the case, if credibility is an issue, disclosure of tax returns may meet the good cause standard, as well. FIK-Rymarkiewicz v. UMDNJ, 430 N.J. Super. 469 (App. Div. 2013).
Informed Resolution. While it is important to protect a litigant's privacy, it is equally important that information relevant to the litigation be disclosed. Counsel might consider an approach that masks or blacks out irrelevant information or an initial review by only attorneys to determine if the tax returns have any truly relevant information. If they do not, it is smarter to find this out early and avoid costly motions.
The parties might also turn to the court to ask for an in camera review by the court with no counsel present - though it seems that the lawyers should try to work together to accomplish the same thing before turning to the court.
Tax returns have valuable information - and the filer usually swears it is true at the time of filing. Such information is often critical to litigation, but a cautious approach may be warranted. Indeed, this may be a situation in which common sense and cooperation between counsel may be appropriate to advance the litigation effectively.
The Hartmann Law Firm LLC can assist in these matters to insure your business and your assets are protected. Beyond this, we can help guide businesses through issues ahead of litigation or aggressively advocate in litigation and business disputes should the need arise.

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