Opinion
12235-20 12249-20
12-22-2023
JACKSON CROSSROADS LLC, GREENCONE INVESTMENTS LLC, TAX MATTERS PARTNER ET. AL., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
CHRISTIAN N. WEILER JUDGE
These consolidated cases are set for trial at special trial session of the Court commencing on January 8, 2024, in Atlanta, Georgia. On November 20, 2023, petitioner filed a Motion for Protective Order Pursuant to Rule 103 in each of these consolidated cases. In its Motion, petitioner asserts that respondent seeks to subpoena for trial some 28 non-managing members of Jackson Crossroads LLC and/or Long Branch Investments, LLC (collectively, LLCs), including their financial and/or tax advisors, (Witnesses) as fact witnesses for respondent's case in chief.
Rule references are to the Tax Court Rules of Practice and Procedure.
Petitioner contends that testimony from these Witnesses would have little, if any, benefit to the Court, since the LLCs are manager-managed entities, and the managers hold full and complete authority and discretion over the business affairs of these entities. Petitioner also contends that granting its Motion and thereby quashing these trial subpoenas would prevent an undue burden and expense from being imposed on these Witnesses.
On December 19, 2023, respondent filed his Response to Motion for Protective Order Pursuant to Rule 103 in each of these consolidated cases, indicating that he has issued 12 trial subpoenas to non-managing members of the LLCs. In his response, respondent contends that petitioner lacks standing to seek to quash these trial subpoenas, and that the testimony from the Witnesses will establish that "Greencone was actively selling the 'investors' guaranteed charitable contribution deductions via partnership interests" in the LLCs, and that the Witnesses "testimony will establish that it was a foregone conclusion when the 'investors' paid Greencone, each one would receive a passthrough deduction in a certain range."
Background
In the Tax Court, when a subpoena is issued solely for the attendance of a witness at trial and that person objects thereto, he or she may move for a protective order pursuant to Rule 103(a) or for an order quashing or modifying the subpoena pursuant to rule 45(d) of the Federal Rules of Civil Procedure. See Grandbouche v. Commissioner, 99 T.C. 604, 616-17 (1992); Rule 1(b) ("Where in any instance there is no applicable rule," the Court may give "particular weight to the Federal Rules of Civil Procedure."). Under either of these rules, the Court may quash a subpoena if it places an "undue burden" on the person subpoenaed. See Rule 103(a) (authorizing the Court to "make any order that justice requires to protect a party or other person from . . . undue burden or expense"); Fed.R.Civ.P. 45(d)(3) (authorizing court to quash a subpoena if it "subjects a person to undue burden").
The party moving to quash a subpoena bears the burden of persuasion. Goodman v. United States, 369 F.2d 166, 169 (9th Cir.1966); Moon v. SCP Pool Corp., 232 F.R.D. 633, 636 (C.D. Cal. 2005). Whether to quash or modify a subpoena lies within the Court's discretion. See, e.g., Exxon Shipping Co. v. U.S. Dept. of Interior, 34 F.3d 774 (9th Cir.1994); Grandbouche, 99 T.C. at 617. In exercising this discretion, the Court must balance the burden upon the subpoenaed party against the value of the information to the serving party. Factors to be considered include the relevance of the information sought, the serving party's need for that information, the breadth of the request, the time period covered by the subpoena, the particularity of the request, and the burden imposed. See Amazon.com, Inc. v. Commissioner, T.C. Memo. 2014-245, at *8.
We have applied essentially the same balancing test when deciding whether to quash or modify a subpoena for production of documents under Rule 147(b). See Durkin v. Commissioner, 87 T.C. 1329, 1401-03 (1986) (weighing burden on subpoenaed party against likely probative value of the evidence sought), aff'd, 872 F.2d 1271 (7th Cir.1989); Hunt v. Commissioner, T.C. Memo. 1990-248, 59 T.C.M. (CCH) 635, 651-52 (employing balancing test).
Analysis
According to respondent, and as stated in his response: "only the non-managing partners who respondent has subpoenaed can explain the representations that were made to them regarding their investment in the transactions and who promoted the investments to them." The Court disagrees and finds that there are far more less burdensome ways to establish these facts at trial.
First, the Court reminds the parties of their mutual obligation to stipulate to facts and evidence to the fullest extent possible. See Rule 91. Second, the Court finds that the subpoenas of these Witnesses, forcing them to travel, some as far as Florida and Kentucky, as being unduly burdensome given the limited nature of the potential testimony to be furnished.
On January 8, 2023, the Court ruled in advance of trial, on petitioner's Motion for Partial Summary Judgment, finding that both LLCs made noncash charitable contributions and that the Deeds of Conservation Easement constitute a qualified real property interest under section 170. Accordingly, we find the burden in obtaining much of the proposed testimony, as summarized by respondent, to be outweighed by the probative value of the evidence being sought. See Amazon.com v. Commissioner, T.C. Memo. 2014-245, at *9. Finally, the Court generally finds having some 12 non-managing members testify at trial to be cumulative and that they would potentially be lacking in unique personal knowledge of relevant facts. Fed.R.Evid. 403; see also Amazon.com v. Commissioner, T.C. Memo. 2014-245, at *10.
Considering the foregoing, the Court will grant, in part, petitioner's Motion, in that, the Court will not require these Witnesses to appear in person as fact witnesses. However, should respondent seek to have one or more of these Witnesses testify remotely (presumably via Zoom), or if one or more Witnesses appears voluntarily and not pursuant to a subpoena, the Court is willing to hear testimony from these fact Witnesses.
Considering the foregoing, and the arguments of the parties, it is
ORDERED that petitioner's Motion for Protective Order Pursuant to Rule 103, filed November 20, 2023, is granted, in part, in that the Court will not require these Witnesses to appear in person as fact witnesses. It is further, ORDERED that on or before December 29, 2023, respondent is to notify each of the Witnesses, in writing, that they have been released from the Court's trial subpoenas and are no longer commanded to appear in person at trial of these cases; however, respondent is also free to inform the Witnesses that he or she may still be called to testify remotely (presumably via Zoom) or may choose to appear voluntarily and testify. It is further, ORDERED that, other than the foregoing relief granted herein, petitioner's Motion for Protective Order Pursuant to Rule 103, filed November 20, 2023, is otherwise denied.