People of the State of New York, etc., et al., Plaintiffs-Respondents,
Sprint Communications Inc., formerly known as Sprint Nextel Corp., et al., Defendants-Appellants.
Williams & Connolly LLP, Washington, D.C. (David S. Blatt
of the bar of the Commonwealth of Pennsylvania and District
of Columbia, admitted pro hac vice, of counsel), for
T. Schneiderman, Attorney General, New York (Eric Del Pozo of
counsel), for respondents.
Acosta, J.P., Renwick, Moskowitz, Feinman, Gesmer, JJ.
Supreme Court, New York County (O. Peter Sherwood, J.),
entered on or about July 6, 2016, which, insofar as appealed
from, denied defendants' motion to compel the Attorney
General to produce documents, unanimously modified, on the
law, to grant the motion except as to the names of the
taxpayers (other than defendants) filing sales tax returns
and reports, without prejudice to seeking further redaction
in the motion court, and otherwise affirmed, without costs.
extent defendants seek the production of documents
"sufficient to identify every provider of mobile
telecommunications voice services... that has paid sales tax
related to those services, " the court correctly denied
their motion to compel. Tax Law § 1146(a) states:
Except in accordance with proper judicial order... it shall
be unlawful for... any officer or employee of the department
of taxation and finance... or any person who in any manner
may acquire knowledge of the contents of a return or report
filed with the tax commission pursuant to this article, to
divulge or make known in any manner any particulars set
forth or disclosed in any such return or report. The
officers charged with the custody of such returns and reports
shall not be required to produce any of them or evidence
of anything contained in them in any action... in any
court, except on behalf of the tax commission in an action...
under the provisions of the tax law or in any other action...
involving the collection of a tax due under this chapter to
which the state... is a party... or on behalf of any party to
any action... when the returns, reports or facts shown
thereby are directly involved in such action... in any
of which events the court... may require the production of...
so much of said returns, reports or of the facts shown
thereby, as are pertinent to the action... and no more....
Nothing herein shall be construed to prohibit... the
publication of statistics so classified as to prevent the
identification of particular returns or reports and the items
thereof (emphasis added). 
sales tax return and a sales tax report include the
Tax Law provides, one exception to the prohibition is
disclosure " on behalf of the tax commission in
an action... under the provisions of the tax law or in any
other action... involving the collection of a tax due under
this chapter to which the state... is a party" (Tax Law
§ 1146[a] [emphasis added]). The third cause of action
of the amended superseding complaint alleges violation of
article 28 of the Tax Law, and the State is a party to this
action. Nevertheless, in light of the structure of Tax Law
§ 1146(a) (see discussion of the second
exception, below) and the severe penalties for violating tax
secrecy (see Tax Law § 1146[f]), we accept the
People's argument that this exception does not apply
because DTF did not request disclosure.
set forth in the Tax Law, a further exception is for
disclosure " on behalf of any party to any
action... when the returns, reports or facts shown thereby
are directly involved in such action" (emphasis
added). This exception does not apply because this action is
about defendants' alleged underpayment of tax,
and the facts shown in defendants'
competitors' tax returns or reports are not
directly involved (see Matter of Manufacturers Trust Co.
v Browne, 269 A.D. 108, 112-113 [1st Dept 1945],
affd 296 NY 549 ; see also Matter of
Capitol Cablevision Sys. v State Tax Commn., 98 A.D.2d
100, 102 [3d Dept 1983]).
defendants' remaining requests, a taxpayer's or
DTF's opinions about debundling, the Mobile
Telecommunications Sourcing Act, the 2002 amendments to the
New York Tax Law, the 2002 Technical Services Bureau
Memorandum, etc., are not "particulars set forth or
disclosed in" a sales tax return or report,
"evidence of anything contained in" such a
document, or "facts shown" by such documents;
therefore, Tax Law § 1146(a) does not shield these items
from disclosure (see Matter of KLM Royal Dutch Airlines v
New York State Tax Commn., 87 A.D.2d 902');">87 A.D.2d 902 [3d Dept
of Tartan Oil Corp. v State of New York Dept. of Taxation
& Fin. (239 A.D.2d 36');">239 A.D.2d 36 [3d Dept 1998]), on which the
People rely, is distinguishable. In that case, one company
sought another company's "cash disbursement journal,
cash receipts journal, check disbursement journal, purchase
invoices, general ledger and a day book" (id.
at 37) for use in a lawsuit between the two companies. The
Third Department observed that "a major purpose of tax
secrecy statutes is to facilitate tax enforcement by
encouraging taxpayers to make full and truthful declarations
without fear that these statements will be revealed or used
against them for other purposes" (id. at 38).
In the case at bar, defendants do not seek to use other cell
phone companies' views about debundling against them in
private litigation; rather, defendants seek this information
to defend themselves in a tax collection case brought by the
People - a case, moreover, in which the People are relying,
at least in part, on other cell phone companies' conduct
to show that defendants' conduct was unreasonable.
People claim that they will use only material obtained from
third-party discovery and that they have disclosed those
materials to defendants. However, the fact that the People
have chosen to restrict the materials they will use to
prosecute defendants does not mean that defendants must
restrict the materials they will use to defend themselves.
Moreover, defendants cannot obtain DTF's documents from
document that shows another cell phone company's or
DTF's position about debundling, etc., happens to mention
the other cell phone company's name, the People may not
withhold the entire document. Matter of Moody's Corp.
& Subsidiaries v New York State Dept. of Taxation &
Fin. (141 A.D.3d 997');">141 A.D.3d 997 [3d Dept 2016]), on which the
People rely, is distinguishable, because it is based on
language specific to the Freedom of Information Law (see
Matter of Short v Board of Mgrs. of Nassau County Med.
Ctr., 57 N.Y.2d 399, 404-405 ). Instead, ...