The two truisms of taking discovery of the other party’s private financial information: Relevance alone is not enough to compel disclosure; and, courts must engage in balancing in deciding what financial discovery to allow.
“[W]hen a discovery request seeks information implicating the constitutional right of privacy, to order discovery simply upon a showing that the Code of Civil Procedure section 2017.010 test for relevance has been met is an abuse of discretion.” Williams v. Superior Court, 3 Cal. 5th 531, 556 (2017).
In evaluating potential invasions of privacy, “[t]he party asserting a privacy right must establish a legally protected privacy interest, an objectively reasonable expectation of privacy in the given circumstances, and a threatened intrusion that is serious.” Id. at 552. “The party seeking information may raise in response whatever legitimate and important countervailing interests disclosure serves, while the party seeking protection may identify feasible alternatives that serve the same interests or protective measures that would diminish the loss of privacy. A court must then balance these competing considerations.” Id. A compelling interest or compelling need is not required in all cases, although it “is still required to justify ‘an obvious invasion of an interest fundamental to personal autonomy.’” Id. at p. 556.
There is a constitutional right to privacy in financial information. Valley Bank of Nevada v. Superior Court, 15 Cal. 3d 652, 655-656 (1975); Cobb v. Superior Court, 99 Cal. App. 3d 543, 550 (1979). “The right of privacy protects against the unwarranted, compelled disclosure of private or personal information and ‘extends to one’s confidential financial affairs as well as to the details of one’s personal life.’” SCC Acquisitions, Inc. v. Superior Court, 243 Cal. App. 4th 741, 754 (2015).
The zone of privacy protected by Article I, Section 1 of the California Constitution encompasses personal financial information, but does not provide absolute protection. Id. “‘[C]ourts must balance the rights of civil litigants to discovery relevant facts against the privacy interests of persons subject to discovery.’ ‘In determining whether disclosure is required, the court must indulge in a “careful balancing” of the right of a civil litigant to discovery facts, on the one hand, and the right of third parties to maintain reasonable privacy regarding their sensitive personal affairs, on the other. The court must consider the purpose of the information sought, the effect of that disclosure will have on the affected persons and parties, the nature of the objections urged by the party resisting disclosure and availability of alternative, less intrusive means for obtaining the requested information. Based on an application of these factors, the more sensitive the nature of the personal information that is sought to be discovered, the more substantial the showing of the need for the discovery that will be required before disclosure will be permitted.’” Id. at 754-755 (internal citations omitted).
Where a constitutional right to privacy is implicated, disclosure may be ordered only when the information is directly relevant and essential to the fair resolution of the lawsuit, and where the need for disclosure outweighs privacy concerns. “The scope of any disclosure must be narrowly circumscribed, drawn with narrow specificity, and must proceed by the least intrusive manner.” Davis v. Superior Court, 7 Cal. App. 4th 1008, 1014 (1992). The party seeking disclosure of the constitutionally protected information bears the burden of establishing direct relevance. Id. at 1017. “Unless otherwise limited by order of the court . . . any party may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved . . . if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence . . . .” Code Civ. Proc. § 2017.010. “For discovery purposes, information is relevant if it ‘might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement.’ . . . Admissibility is not the test and information, unless privileged, is discoverable if it might reasonably lead to admissible evidence . . . . ‘Thus, the scope of permissible discovery is one of reason, logic and common sense.’. . . These rules are applied liberally in favor of discovery.” Lipton v. Superior Court, 48 Cal. App. 4th 1599, 1611–1612 (1996).
Corporations have a privacy right, but do not have a right of privacy protected by the California Constitution because they are not “people”. SCC Acquisitions, Inc. v. Superior Court, 243 Cal. App. 4th 741, 755-756 (2015). Because the corporate privacy right is not constitutionally protected, the issue presented in determining whether a request for production infringes that right is resolved by a balancing test. Id. at p. 756. “The discovery’s relevance to the subject matter of the pending dispute and whether the discovery ‘“appears reasonably calculated to lead to the discovery of admissible evidence”’ is balanced against the corporate right of privacy. Doubts about relevance generally are resolved in favor of permitting discovery.” Id