• When is Personal Financial Discovery Appropriate?
  • May 16, 2011 | Author: Robert W. Pyles
  • Law Firm: McCumber, Daniels, Buntz, Hartig & Puig, P.A. - Tampa Office
  • Discovery requests for a party’s personal financial information are frequently the source of aggravation for clients and often generate costly and voluminous motion practice by their attorneys.  While such requests are justifiable in some cases at certain junctures, practitioners are painfully aware that the practice of seeking such confidential financial information is often generated to harass and frustrate the opposing party.  This article provides a general overview of some of the contexts in commercial litigation where personal financial discovery is appropriate and offers suggestions on arguments that should be made to protect your client where the requests constitute untenable violations of your client’s privacy.

    An individual’s financial information is protected from disclosure by Florida’s constitutional right of privacy, pursuant to Art. I, § 23, Fla. Const.,1 unless there is a relevant or compelling reason to compel disclosure.2 The Florida Supreme Court has held that this provision in the Florida Constitution “recognizes an individual’s legitimate expectation of privacy in financial institution records.” 3  The Florida Constitution’s safeguarding of an individuals’ private financial information extends to all state action, which includes court orders compelling discovery.” 4

    The Florida Supreme Court held that the right of privacy demands the “compelling state interest standard.”  5 This means that the “party seeking discovery of confidential information must make a showing of necessity which outweighs the countervailing interest in maintaining the confidentiality of such information.” 6  Florida’s discovery rules are designed to provide counsel with a framework within which to challenge discovery where the requested discovery will result in an unjustified invasion of privacy and to provide judges with a structure of judicial analysis to review those challenges.7  
    The discovery rules permit broad discovery in furtherance of the state’s interest in the “fair and efficient resolution of disputes” while also providing protections to individuals “to minimize the impact of the discovery on competing privacy interests.” 8

    Under the compelling interest standard, only where the discovery of the confidential financial information is required to move the case forward will the interference with individual’s right to privacy be justified.  Thus, the general rule in Florida is that personal financial information is discoverable only in aid of execution after a judgment has been entered. 9   The disclosure of personal financial information may cause irreparable harm to the disclosing party; therefore, the financial records of a party are not discoverable unless the information sought is relevant to contested issues.  10

    Relevancy is usually tied to the allegations in the complaint or counterclaim or the defending party’s defenses.  For example, where a defendant’s profits are relevant to the damages sought in a complaint alleging a profit-sharing participation agreement, financial records establishing the defendant’s profits are relevant.11

    Where possible, courts will utilize means that are less intrusive than the release of confidential information in furtherance of the discovery process.12 For example, in some cases, where an individual’s identifying information can be redacted from responses to discovery requests, the individual’s privacy rights can be protected without sacrificing the ability to discover legitimate information. 13   The trial court may also conduct an in camera inspection of the requested discovery to ensure that the individual’s privacy rights are protected. 14   This avenue may be utilized where a non-party’s tax returns are requested to ensure that the information remaining after redaction is relevant to the dispute between the parties. 15

    Under certain circumstances in the commercial litigation context, propounding discovery targeted to elicit personal financial information is well warranted, recognized, and necessary.  The practitioner may find themselves entwined with a matter that involves personal financial malfeasance or fraud.  Personal financial discovery may be the only way to prove that a party concealed information from another, perpetrated a financial fraud, or otherwise aggrieved another financially.  Under Florida law, discovery of personal financial information should be well received and allowed when faced with such allegations.

    Extension of Protection to Corporations

    Although a company’s bank statements and bank records, balance sheets, general ledger accounts, inventory reports and other financial records, as well as corporate minutes, are not necessarily confidential, 16  the personal right of privacy may also be used to protect a corporate entity from disclosing certain financial information.

    In Berkeley, the plaintiff investors sued the investment house for allegedly placing their funds in unsuitable high-risk investments.  Plaintiffs sought to obtain the addresses and telephone numbers of 75 non-party investors in furtherance of their efforts to depose the other investors to determine if Berkeley had similarly invested those investors’ accounts. 17   The Fourth District found that while Berkeley had disclosed the names of the 75 non-party investors in discovery, the non-party investors had not waived their privacy rights and those rights were the non-party investors to waive - not Berkeley’s. 18   The court’s inquiry became whether the plaintiffs had established a countervailing need for the non-parties’ private information that justified overriding the non-parties’ privacy rights. 19   Noting that the plaintiffs could obtain the same information using search services and private investigators, the court held that “cost alone is insufficient to demonstrate that the [plaintiffs’] need for the addresses overrides the non-party clients’ privacy rights.” 20  While acknowledging that “Berkeley may be using its clients’ shield of privacy for its own protection,” the court held that “this possibility is not reason enough to cause a judicial invasion into the individual non-party’s constitutional right of privacy in this case.” 21  

    Similarly, the Third District found that a trial court departed from the essential requirements of the law where it ordered a bank to give the party defendants the right to “delve into bank records that involve the financial transactions of parties not even remotely (or peripherally) related to the defendants’ business in order to substantiate their contention that, somewhere in the bank’s minutes or files, they would find traces of the missing documents.” 22  The privacy rights of individuals who were not aware of the invasion, nor connected to the litigation in any manner, were clearly implicated by production of the requested discovery. 23  The Third District noted that the requested discovery was no less invasive due to the trial court’s order that confidentiality be maintained and defendants’ assurances that nonparty names would be redacted.  24  The court of appeal overturned the order, holding that not only did the defendants make no showing of relevancy, but defendants admitted that they wished to “go through all of Bayshore Bank’s minutes, letter of credit files, and release files for the time period in question, in hopes of finding some reference to the allegedly missing documents, or actually finding a misplaced document.” 25 The overturned order granted permission to conduct exactly the type of fishing expedition in confidential waters that Art. I, § 23 of the Florida Constitution sought to avoid.

    In conclusion, the first question a practitioner faced with a discovery request for otherwise confidential financial information should ask is whether or not there is a cognizable, well pled claim that contains allegations which make the requested discovery relevant to the underlying action.  If not, then “discovery of - extensive and intrusive financial records is improper.” 26   If the requested discovery is relevant to a contested issue in the litigation, the second question is whether the production of documents should be redacted or otherwise limited to protect the individual’s right to privacy.  Where either question is answered in the negative, the attorney should file a motion for protective order to ensure there is no unjustifiable invasion of the client’s - or non-party’s - right to privacy.
    For more information, please contact Rob Pyles at [email protected]

    1 Art. I, § 23, Fla. Const., provides that “Every natural person has the right to be let alone and free from governmental intrusion into the person’s private life except as otherwise provided herein.  This section shall not be construed to limit the public’s right of access to public records and meetings as provided by law.”

    2 Allstate Insurance Co. v. Langston, 655 So.2d 91, 95, n. 2 (Fla.1995); Mogul v. Mogul, 730 So.2d 1287, 1290 (Fla. 5th DCA 1999).

    3 Winfield v. Division of Pari-Mutuel Wagering, Dept. of Business Regulation, 477 So.2d 544, 548 (Fla. 1985).

    4 Berkeley v. Eisen, 699 So.2d 789, 790 (Fla. 4th DCA 1997).

    5 Winfield, 477 So.2d at 547.

    6 Higgs v. Kampgrounds of America, 526 So.2d 980, 981 (Fla. 3d DCA 1988).

    7 See Rasmussen v. South Florida Blood
    Services, Inc., 500 So.2d 533, 535 (Fla. 1987).

    8 Id. (citations omitted).

    9  See Friedman v. Heart Institute of Port St. Lucie, Inc., 863 So.2d 189, 194 (Fla. 2003).

    10 See Mogul v. Mogul, 730 So.2d 1287, 1290 (Fla. 5th DCA 1999); Woodward v. Berkery, 714 So.2d 1027 (Fla. 4th DCA), rev. denied, 717 So.2d 528 (Fla.1998); Graphic Assocs., Inc. v. Riviana Rest. Corp., 461 So.2d 1011 (Fla. 4th DCA 1984).
    11 Aspex Eyewear, Inc. v. Ross, 778 So.2d 481, 482 (Fla. 4th DCA 2001).
    12 Berkeley, 699 So.2d at 792.

    13 Id.
    14 See Friedman, 863 So.2d at 194.

    15 Voytish v. Ozycz, 695 So.2d 1301, 1302 (Fla. 4th DCA 1997).

    16 Caribbean Security Systems, Inc. v. Security Control Systems, Inc., 486 So.2d 654, 656 (Fla. 3d DCA 1986).

    17 Berkeley, 699 So.2d at 790.

    18 Id. at 791.

    19 Id.

    20 Id. at 792.

    21 Berkeley, 699 So.2d at 793.

    22 Federal Deposit Ins. Corp. v. Balkany, 564 So.2d 580, 581 (Fla. 3d DCA 1990).
    23 Id.

    24 Balkany, 564 So.2d at 581, n. 2.

    25 Balkany, 564 So.2d at 581.

    26 See Exit 242 Tourist Information v. Florida’s Room Service, Inc., 792 So.2d 1283, 1285 (Fla. 5th DCA 2001).