33 Misc. 3d 500
N.Y. Sup. Ct.2011Background
- FTB audited Hyatt for 1991 and 1992 California income tax as a nonresident/part-year resident, leading to assessments in 1993 and 1996.
- Hyatt claimed he moved to Nevada on September 26, 1991 and did not owe California tax after that date; protests led to FTB final determinations in 2007 upholding assessments.
- In 2008 Hyatt appealed to the California SBE; discovery and briefing occurred, including a dispute over additional FTB briefing.
- On March 11, 2011, California issued subpoenas duces tecum on nonparties (U.S. Philips, Haken, Tamoshunas) seeking extensive documents related to Hyatt's patents and licensing.
- California Clerk commissions issued to take out-of-state depositions in New York; Hyatt moved to quash subpoenas or limit scope under CPLR 3119.
- Court must decide standing, FTB authority, breadth of subpoenas, and common interest/privilege implications.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to challenge subpoenas | Hyatt has statutory and proprietary standing. | Hyatt lacks proprietary interest; documents belong to U.S. Philips. | Hyatt has standing; qualified as party to the appeals with proprietary interest in confidential information. |
| FTB authority to issue subpoenas during SBE appeal | FTB authority ends when SBE appeal pending; needs SBE process. | FTB has broad subpoena power throughout proceedings per Cal. Rev. & Tax Code §19504 and acts in tandem with SBE. | FTB authority persists; subpoenas valid under §19504 and related provisions. |
| Breadth of subpoenas | Subpoenas seek irrelevant, broad, pre/post-audit materials; improper fishing expedition. | Documents relevant to Hyatt's residency, income, and licensing relationships; broad but tied to issues. | Subpoenas narrowed; limited to 1991–1992 tax years, residency, income, and licensing with U.S. Philips; unrelated patent prosecution materials struck. |
| Common interest privilege and protective measures | Nevada law governs common interest privilege; documents privileged between Hyatt and U.S. Philips. | New York law governs privilege; requires attorney-client relationship with shared counsel and common legal interest. | No valid attorney-client/common interest privilege; no established attorney-client relationship; privilege not attachable; disclosure allowed. |
| Confidentiality order | Protect confidential materials and review to avoid disclosure of privileged content. | No separate confidentiality order requested beyond scope mod; otherwise unnecessary. | Confidentiality order denied. |
Key Cases Cited
- Hogan v. Cuomo, 67 A.D.3d 1144 (3d Dept 2009) (movant must show subpoena is irrelevant or lacking factual basis)
- Spectrum Sys. Intl. Corp. v. Chemical Bank, 78 N.Y.2d 371 (N.Y. 1991) (privilege burden on party asserting privilege; confidentiality standards)
- Sieger v. Zak, 60 A.D.3d 661 (2d Dept 2009) (no attorney-client privilege without established relationship)
- Claverack Coop. Ins. Co. v. Nielsen, 296 A.D.2d 789 (3d Dept 2002) (privilege interpretations require narrow construction; burden on proponent)
- Osorio v. Blue Cross & Blue Shield of Greater NY, 75 N.Y.2d 80 (N.Y. 1989) (attorney-client privilege protective communications requirements)
- First Interstate Credit Alliance v. Andersen & Co., 150 A.D.2d 291 (1st Dept 1989) (relevance and scope of discovery under cross-jurisdictional contexts)