Breen v. State Taxation & Revenue Dep't

287 P.3d 379

Peter BREEN, Plaintiff,andTami Schneider, Non–Party Appellant,

v.STATE of New Mexico TAXATION AND REVENUE DEPARTMENT, Dona Cook, and Carolyn Wolf, Defendants–Appellees.

Nos. 30,066, 30,048.

Court of Appeals of New Mexico.

Aug. 28, 2012.

Tami Schneider, Santa Fe, NM, Pro Se, Appellant.

Michael Dickman, Santa Fe, NM, for Appellees.

OPINION

KENNEDY, Judge.

{1} In this consolidated appeal, we address whether the Tax Administration Act's (Act) provisions protecting the privacy of citizens' tax information, together with Rule 11–502 NMRA, which provides an evidentiary privilege for records and returns that are required by law to be made, applies to exclude gross receipts tax returns and other related documents from discovery in this case. Tami Schneider is not a party to this action, which is a case involving employment discrimination between her husband, Peter Breen (Plaintiff), his employer, the Department, and two of his supervisors, Dona Cook and Carolyn Wolf (collectively, Defendants). Schneider appeals an order of the district court permitting subpoenas duces tecum to be issued to herself and the Department as requested by Defendants in this case for various tax-related documents from her law practice. Before the district court, Schneider unsuccessfully asserted that her gross receipts tax information was privileged based on confidentiality provisions in NMSA 1978 Chapter 7, Article 1 (1965, as amended through 2009) of the Act and Rule 11–502 in response to Defendants' request for the subpoenas in question. Schneider seeks review of the district court's order, both by direct appeal and writ of error.

{2} We hold that the Act, whose taxpayer confidentiality provisions are properly recognized and utilized to create an evidentiary privilege against disclosure of tax information by Rule 11–502, bars discovery of Schneider's gross receipts tax information by way of either subpoena that was issued in this case. Further, we hold that Schneider has not waived her rights or the privilege. Accordingly, we reverse the district court and remand to quash the subpoenas.

I. BACKGROUND

{3} Plaintiff filed suit against Defendants as an appeal from an Equal Employment Opportunity Commission's finding of no probable cause regarding various employment-related causes of action, including discrimination and retaliation. Defendants were provided counsel through the State's Risk Management Division. Included in Plaintiff's allegations of fact was the accusation that, upon filing his complaint against Defendants, they had retaliated against him by asserting irregularities with regard to gross receipts returns filed by Schneider's private law practice. In his deposition, Plaintiff expanded on this episode, stating that Defendants' ill intent was demonstrated by the fact that Schneider had filed non-compliant gross receipts returns for some years prior to his complaint without action by the Department. Defendants' timing of the notice from Plaintiff's supervisor thus demonstrated their intent to retaliate against him and his family.

{4} Two weeks after the deposition, Defendants added Schneider to their witness list. Immediately thereafter, they filed a motion seeking leave to subpoena Schneider and the Department seeking “[a]ll CRS–1 [f]orms, [r]egistration [c]ertificates, [a]ssessments, [d]elinquency [n]otices, correspondence[,] and all other documents related to the New Mexico gross receipts taxes reported and/or paid ... for the time period from January 1, 2000 through and including June 30, 2008.” ¹

{5} Defendants requested a hearing to precede the issuance of the subpoenas. Schneider did not attend the hearing requested by Defendants' counsel on its motion to issue the subpoenas. However, Defendants demonstrated their understanding that discovery of tax information was a potential problem early on. Defense counsel informed the court during the hearing on their motion to issue the subpoenas that “it is the policy of the ... Department statewide not to honor those subpoenas.” He further stated “that's because of the statutory confidentiality of tax records. I have not, I or my clients, do not have access to those records without violating the law.” Defense counsel further stated that absent a “really necessary” court order, release of the records would constitute “a gross breach of the statute [and] I believe a misdemeanor.”

{6} To provide Schneider an opportunity to respond to the subpoenas, the court issued the subpoena to her and waited for her to respond before allowing the subpoenas to issue. Schneider responded with a motion to quash the subpoenas and argued that confidentiality provisions contained in the Act, NMSA 1978, § 7–1–4.2 (2003), and the evidentiaryprivilege embodied in Rule 11–502, prohibited disclosure of the information without her permission. She also requested a protective order. Schneider furthermore argued that, pursuant to NMSA 1978, Section 9–11–11 (1977), Defendants' attorney could not represent them and, therefore, could not subpoena her tax records on their behalf. The district court denied Schneider's motion and ordered the subpoenas and protective orders to be issued to the Department and to her. The order was issued, and Schneider timely sought appellate review of the order, both by way of direct appeal and writ of error. We granted the petition for writ of error in February 2010.

II. DISCUSSION

{7} Schneider argues several issues. First, as a threshold issue, she contends that we have jurisdiction to hear her case either by writ of error or on direct appeal. Second, she argues that Defendants' counsel is inappropriate because he is not a commissioned or special attorney general. Last, she argues that the confidentiality of her gross receipts tax information is privileged from disclosure. We address each argument in turn.

A. The District Court Order is a Collateral Order Properly Considered Pursuant to a Writ of Error

{8} Schneider argues, and we agree, that the order authorizing the subpoenas in this case is, at least in part, reviewable by writ of error under the collateral order doctrine as defined in Carrillo v. Rostro, and we therefore have jurisdiction to hear this writ of error. 114 N.M. 607, 612–13, 845 P.2d 130, 135–36 (1992). “A writ of error is the procedural device for invoking the collateral order doctrine. The collateral order doctrine is a narrow exception [to the final order requirement], whose reach is limited to trial court orders affecting rights that will be irretrievably lost in the absence of an immediate appeal.” Williams v. Rio Rancho Pub. Sch., 2008–NMCA–150, ¶ 7, 145 N.M. 214, 195 P.3d 879 (alteration in original) (internal quotation marks and citations omitted). Under the collateral order doctrine, the order for which review is sought by writ of error “must conclusively determine the disputed question, resolve an important issue completely separate from the merits of the action, and be effectively unreviewable on appeal from a final judgment.” Carrillo, 114 N.M. at 613, 845 P.2d at 136 (internal quotation marks and citation omitted).

{9} The order that Schneider seeks to overturn is conclusive that, despite her objections, the subpoenas will be issued and her gross receipts tax information will be disclosed, if not by her personally, then by the Department. The issue of her rights and privileges concerning the confidentiality of this information, and Defendants' attempts to bootstrap this information as a component of joint income tax returns, have nothing to do with the claims Plaintiff asserts against Defendants.

{10} The order at issue here is not a final order disposing of merits concerning the underlying case. Cf. Capco Acquisub, Inc. v. Greka Energy Corp., 2007–NMCA–011, ¶ 17, 140 N.M. 920, 149 P.3d 1017 (stating the characteristics of a final, appealable order). Rather, this matter solely and finally determines whether records of a non-party to the case are allowed to be disclosed at all. Defendants have sought the same records from two sources. Schneider alleges statutory and evidentiary privileges against disclosure of her records by herself, as well as special statutory provisions prohibiting disclosure by the Department under the circumstances of this case. If the requested information is, as Schneider asserts, non-discoverable, then the records cannot be produced under either subpoena. Schneider's issues cannot fairly be resolved at the end of a trial of the underlying case and would be unreviewable on appeal from a final judgment because she is not a party to the action. St. Sauver v. N.M. Peterbilt, Inc., 101 N.M. 84, 87, 678 P.2d 712, 715 (Ct.App.1984) (dismissing an appeal where a party was “not an aggrieved party” to the underlying lawsuit). Thus, our Opinion will resolve an issue regarding a non-party's rights that are completely separate from the merits of the action.

{11} We note that this Court has held in King v. Allstate Ins. Co. that an order compellingdiscovery is not ordinarily a collateral order. 2004–NMCA–031, ¶ 18, 135 N.M. 206, 86 P.3d 631. Yet, in King, this principle applied to the parties in a lawsuit, as the order in that case compelled discovery from a party insurance company, who had the option of refusing to comply, being held in contempt, and taking a direct appeal from that final order. Id. ¶ 19. Here, Schneider is not a party, and her dispute cannot be resolved so simply as by appealing an order of contempt as we directed in King.

{12} We also distinguish the present case from In re Estate of Pino, where we denied a writ of error concerning an order compelling a paternity test of the estate's executor and his wife concerning the deceased because the issue would be reviewable on appeal from a final judgment. 115 N.M. 759, 761–62, 858 P.2d 426, 428–29 (Ct.App.1993). Similarly to King, this Court concluded that “[i]f it is the very taking of their blood to which the [appealing party] object[s], they could...