Opinion
14870-20 14875-20
07-07-2023
MICHAEL DAVIS & AMY L. DAVIS, ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler, Judge
This is a conservation easement case. On May 22, 2023, respondent moved in these consolidated cases, pursuant to Rule 74(c)(3) that the Court enter an order compelling petitioners, Michael Davis (Davis) and Jonathan Gallant (Gallant), as individuals and on behalf of D&G to appear and testify at a deposition for discovery purposes, to be conducted on a date and time convenient to both sides, with respect to specific matters relating to the transactional details of this case, the knowledge and belief of Davis and Gallant, and their reasonable cause and good faith, including any reliance on third parties. As discussed below, we will deny the Motion to Take Depositions without prejudice.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Background
This case involves the donation of a conservation easement on 9.92 acres of property located in DeKalb County, Georgia. Davis and Gallant shared distinct roles in the syndicated conservation easement transaction at issue. They are co-founders of D&G Development Group. D&G Acquisition, LLC (D&G) is an entity within D&G Development Group which is co-owned, 50-50 by Davis and Gallant. Both Davis and Gallant are responsible for the day-to-day operations of D&G Development Group. Each partner's portion of the deduction from the conservation easement was reported on their 2016 tax returns, filed with the filing status of married filing jointly. Accordingly, respondent asserts that he has been unable to obtain the information by informal consultation, informal communication, or other practical means and the information sought is relevant and not privileged.
On August 8, 2022, respondent mailed his first Branerton letter to petitioners as well as a proposed stipulation of facts. Respondent represents that petitioners did not provide a substantive response to this letter. On January 12, 2023, respondent served a First Request for Admissions on petitioners' counsel. On January 23, 2023, respondent served a Motion to Compel Production of Documents. Respondent indicated, in a status report filed March 31, 2023, that petitioners had resolved all but one item related to the Motion to Compel.
On April 27, 2023, respondent asked petitioners' counsel if it would be possible to schedule interviews of Messrs. Davis and Gallant. Petitioners originally agreed to provide dates for an interview. On May 3, 2023, and May 16, 2023, respondent renewed his request for interviews. On May 17, 2023, respondent indicated that petitioners declined to participate in any interview. Accordingly, respondent asserts that he has been unable to obtain this information through informal or other methods.
Petitioners argue that respondent did not attempt to engage in any discovery until after the Motions for Partial Summary Judgment in these cases had been resolved. Petitioners specifically note that the petitions in these cases were filed December 16, 2020, and the first Branerton letter was not mailed until August 8, 2022. Petitioners assert that they originally agreed to an "informal conference" with respondent solely for the limited purpose of discussing a settlement. Following a telephone discussion between petitioners' counsel and respondent, petitioners declined to be interviewed as the necessity, scope, format, and timing of the interviews were objectionable. Respondent proposed interviews that would last one day each for Messrs. Davis and Gallant, for a total of sixteen hours in Atlanta, Georgia.
Petitioners' counsel asserts that they have been cooperative with respondent's discovery requests. In the Response to Motion to Take Deposition, petitioners' counsel indicate that they have addressed respondent's complaints regarding their participation in the discovery process in the Motion for Continuance filed with the Court on June 11, 2023. In the Motion for Continuance, petitioners assert that they were attempting to fulfill respondent's discovery requests while simultaneously preparing for their Appeals Conference. They indicate that they were explicit in limiting their agreement to an informal interview solely for the purpose of settlement negotiations. Petitioners' counsel represents that he worked with respondent to file a First Stipulation of Facts, scheduled a site visit for respondent to view the property at issue in this case, and produced the original documents that were requested on February 17, 2023, along with two supplemental productions on February 24, 2023, and March 7, 2023.Additionally, petitioners' counsel asserts that he has responded to respondent's 2nd and 3rd Requests for Admissions filed on May 5, 2023, and the 1st Interrogatories and 2nd Request for Production of Documents served on May 8, 2023.
Discussion
I. Nonconsensual Depositions
Nonconsensual depositions are an extraordinary method of discovery that can only be taken pursuant to an order from the Court. These depositions are available only where a party or nonparty witness can give testimony that is discoverable within the meaning of Rule 70(b) and where such testimony practicably cannot be obtained through informal consultation or communication under Rule 70(a)(1), interrogatories under Rule 71, requests for production of documents under Rule 72, or consensual depositions under Rule 74(b). The decision to require an individual to submit to a nonconsensual discovery deposition is a matter that is solely within the discretion of the presiding judge. In addition to the essential criteria that the moving party must show under Rule 74(c), the Court weighs various factors to determine whether a particular case warrants an extraordinary discovery method. In K & M La Botica Pharmacy, Inc. v. Commissioner, T.C. Memo. 2001-33, 2001 WL 117701, we identified three factors to consider:
(1) Whether the movant has established a specific and compelling basis for the deposition;
(2) Whether the movant intends the deposition to serve as more than a substitute for cross-examination at trial; and
(3) Whether the movant has had prior opportunities to obtain the desired information or could obtain it through other means or from another source.
II. Respondent Has Not Satisfied the Requirements Under Our Rules and Case Law
A. Evidence Discoverable Under Rule 70
Under Rule 70(b) "discovery may concern any matter not privileged and which is relevant to the subject matter involved in the pending case." Bernardo v. Commissioner, 104 T.C. 677, 682 (1995). It is up to the party opposing the production to show that the information is not discoverable. Rutter v. Commissioner, 81 T.C. 937, 948 (1983) (citing Branerton Corp. v. Commissioner, 64 T.C. 191, 193 (1975)). Rule 70(b) provides that the scope of discovery includes all information and responses that concern any nonprivileged matter that is relevant to the subject matter involved in the case. Under this rule, if the information or response sought "appears reasonably calculated to lead to discovery of admissible evidence," then it is properly within the scope of discovery.
However, Rule 70(a) also states how "[d]iscovery is not available under these Rules through [non-consensual] depositions except to the limited extent provided in Rule 74." The use of non-consensual depositions shall be limited by the Court if the discovery is obtainable from some other source that is more convenient, less burdensome and less expensive. Rule 70(c)(1).
Here, respondent seeks to depose Messrs. Davis and Gallant regarding specific matters relating to the transactional details of this case, the knowledge and belief of Messrs. Davis and Gallant, and their reasonable cause and good faith, including any reliance on third parties. Although the information sought may be discoverable, respondent has not shown to the satisfaction of the Court why a deposition of Messrs. Davis and Gallant is necessary at this time, and how the information sought cannot be obtained through other methods of discovery which are more convenient, less burdensome, or less expensive. See Rule 70(a), (b) and (c).
B. Evidence Cannot Practicably Be Obtained Through Other Methods
Respondent has failed to show that the information and documents sought cannot practically be obtained through informal consultation or communication, interrogatories, requests for production of documents, or consensual depositions. See Rule 74(c)(1)(B). While respondent has shown that Messrs. Davis and Gallant have declined an interview request, it is not clear to the Court whether respondent has exhausted other available methods of discovery or whether petitioners would be willing to engage in a future consensual deposition that they find less excessive and burdensome. Respondent has not adequately shown that their previous informal and formal attempts for discovery have been sufficiently unsuccessful, and that future attempts would not be practicable.
Based on the foregoing, the Court finds that respondent has not made sufficient attempts to obtain the information sought through other methods prescribed in Rule 74(c)(1)(B) and has failed to show that the information sought cannot practicably be obtained through other methods.
C. Case Law Factors
As stated above, the Court considers whether (1) the movant has established a specific and compelling basis for the deposition, (2) the movant intends the deposition to serve as more than a substitute for cross-examination at trial, and (3) the movant has had prior opportunities to obtain the desired information or could obtain it through other means or from another source. The Court notes that respondent has not directly addressed the case law factors in the Motion to Take Deposition. Accordingly, the Court finds that these factors weigh against allowing the nonconsensual deposition of Messrs. Davis and Gallant.
First, we find that respondent has not demonstrated a compelling need to take the depositions of Messrs. Davis and Gallant. As previously mentioned, respondent seeks to depose these individuals relating to the transactional details of this case, the knowledge and belief of Messrs. Davis and Gallant, and their reasonable cause and good faith, including any reliance on third parties. Respondent asserts that this information will aid the stipulation process, narrow disputes, and potentially conserve trial time. However, respondent has not satisfied the Court that a deposition would yield the specific and precise factual information essential to this case and that the information sought through the requested deposition is not duplicative or obtainable from another source.
Second, respondent has not established that he intends the deposition to serve as more than a substitute for cross-examination at trial. As noted above, respondent does not address this case law factor in his Motion. While Messrs. Davis and Gallant would likely have direct knowledge of the information sought, we cannot find justification in granting the deposition at this time.
Finally, while it is established that respondent has requested an informal interview of Messrs. Davis and Gallant, and that petitioners have declined, respondent has failed to persuade the Court that the information sought from Messrs. Davis and Gallant cannot be obtained through other means. Respondent has ample time and opportunity to seek additional information from Messrs. Davis and Gallant. The parties have demonstrated a willingness to participate in written discovery in lieu of depositions. Additionally, the filings seem to indicate the potential for Messrs. Davis and Gallant to agree to a consensual deposition in the future if the parties can agree to the scope, timing, and format of such deposition. If it remains necessary after further discovery, respondent is then free to file new motions to compel depositions of Messrs. Davis and Gallant.
Consequently, when considering the above-mentioned factors, respondent has failed to demonstrate that he is entitled to depose Messrs. Davis and Gallant at this time.
III. Conclusion
After considering the foregoing, it is
ORDERED that respondent's Motion to Take Deposition Pursuant to Rule 74(c)(3) of Michael Davis and Jonathan Gallant, filed May 22, 2023 in these consolidated cases, is denied without prejudice.