Opinion
286-21
01-04-2024
CURTIS K. KADAU & LORI A. KADAU, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler Judge
This case is calendared for trial at a two-week special trial session of the Court in Tampa, Florida, commencing on February 20, 2024. On November 22, 2023, respondent served a Motion to Compel Respondent's Third Request for Production of Documents (Motion to Compel). On December 19, 2023, petitioners served a Response to Respondent's Motion to Compel Production of Documents.
We are now prepared to rule on respondent's Motion to Compel, and will grant in part, and deny in part, the Motion to Compel as explained herein.
Background
The following facts are derived from the parties' pleadings, motion papers, and exhibits attached thereto. These facts are stated solely for the purpose of deciding the motions before us and not as findings of fact in this case. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd, 17 F.3d 965 (7th Cir. 1994).
On October 19, 2023, respondent served his Second Request for Production of Documents on petitioners. In his Request, respondent made 37 total Requests for Production (RFPs). Additionally, respondent had previously requested information from petitioners through a series of informal letters, dated: July 6, 2021; January 5, 2022; and September 30, 2023. On November 20, 2023, petitioners responded to respondent's Request. Petitioners made a response to each of respondent's RPFs. Respondent argues petitioners' responses to RFPs Nos. 15, 19, 20, 28, 29, 30 and 34 were not sufficiently responsive and that petitioners failed to fully respond to the RFPs. Petitioners argue as to RFPs Nos. 15, 19, 28, and 29 that these requests are overly broad and unduly burdensome. As to RFPs Nos. 20, 30, and 34, petitioners argue that they have already produced all responsive documents in their possession or control, or they will produce such documents. Petitioners also argue that RFP No. 19 was not made with specificity and is confusing.
Discussion
I. Discovery Standard
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) directs 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. For purposes of discovery the standard of relevancy is liberal: our Rules permit discovery of any material relevant "to the entire 'subject matter' of the case." Zaentz v. Commissioner, 73 T.C. 469, 471 (1979) (quoting Rule 70(b)). A party may seek discovery of information if that information is reasonably calculated to lead to admissible evidence or if it may assist that party in understanding relevant material. Id. at 471-72.
II. Analysis
Pursuant to Rule 72, the answering party shall serve a written response, and objections, if any, within 30 days after service of the request. Rule 72(a)(1) requires a person to produce items that "are in the possession, custody, or control of the party on whom the request is served." Rule 72(a)(1); see Marsh v. Commissioner, 62 T.C. 256, 258 (1984). By its terms, this rule is not limited to actual possession. We have previously required parties to obtain information from advisors or entities that have actual possession when the party has sufficient control to be able to obtain the documents. See Rosenfeld v. Commissioner, 82 T.C. 105, 116-18 (1984); see also Coventry Capital U.S. LLC v. EEA Life Settlement, Inc., 334 F.R.D. 68,72-73 (S.D.N.Y. 2020) (finding a party to have sufficient control over requested documents when it has demonstrated the ability to obtain them in the ordinary course of business).
The party objecting to discovery has the burden of establishing that the documents sought by the other party are not relevant or that they are otherwise not discoverable. See Rosenfeld, 82 T.C. at 116-18 (1984); Rutter v. Commissioner, 81 T.C. 191, 193 (1975). We have also concluded that any claim that a party is not in possession, custody, or control of documents constitutes an objection to the production of documents. Gaw v. Commissioner, T.C. Memo. 1995-531, 1995 WL 664592, at * 31 (citing Henderson v. Zurn Indus., Inc., 131 F.R.D. 560 (S.D. Ind. 1990) (construing analogous provision of Federal Rules of Civil Procedure)).
A. Respondent's Motion to Compel Production of Documents
Respondent's Motion to Compel seeks to compel petitioners to file supplemental responses to RFPs Numbers 15, 19, 20, 28, 29, 30 and 34. Since the filing of this Motion to Compel, petitioners filed a response thereto, supplementing their responses to each of these RFPs.
Respondent's Motion to Compel contends RFP No. 15 requested documentation, including workpapers and journal entries, supporting the amount of uncollectible and/or bad debts claimed on Surface's 2012 through 2017 federal income tax returns and documentation showing when Surface determined the debt was uncollectible; however, petitioners' response to RFP No. 15, only referenced previously provided documents for taxable year 2016 and is therefore incomplete.
Next, respondent's Motion to Compel contends petitioners' response to RFP No. 19 is incomplete since petitioners failed to provide the requested contract relating to Tampa Brass & Aluminum, Fisher Barton, Renegade Performance Coatings, Milacron, Surface Engineering Alloy Powers, Whertec, Liquid Metal Coatings Solutions, LLC, and Wexco. Respondent's Motion to Compel also contends petitioners' response to RFP No. 20 is incomplete since petitioners failed to provide copies of any policies that covered risk of loss from the loss of key contracts that were in effect November 1, 2016, through December 31, 2017. For RFP No. 28, respondent contends petitioners failed to provide any of R&A's General Ledgers; while for RFP No. 29, petitioners provided only a balance sheet for 2012 and 2013, not for years 2012 through 2017, as requested. For RFP No. 30 respondent contends petitioners failed to provide any of Surface's General Ledgers, and similarly for RFP No. 34 petitioners have failed to provide the requested commercial policies.
In their response to respondent's Motion to Compel, petitioners object to RFP Nos. 15, 19, 28, and 29 as overly broad and unduly burdensome. Notwithstanding this objection, petitioners provided responsive documents to each of these RFPs, or intends to do so in the immediate future.
With respect to the remaining RFPs, namely 20, 30, and 34; petitioners have either agreed to provide supplemental responsive documents or confirmed there are no additional responsive documents in their custody or control.
We find petitioners' responses, including their supplemental responses, to be adequate and made in good faith, and in accordance with our Rules. Accordingly, we find that any further relief to respondent is not necessary or appropriate here.
After due consideration and for the efficient disposition of this case, it is
ORDERED that respondent's Motion to Compel Respondent's Third Request for Production of Documents served on November 22, 2023 (Index No. 56), is denied.