Opinion
15069-19
12-28-2021
Stephen R. Kelley & Isabelle Kelley, Petitioners v. Commissioner of Internal Revenue, Respondent
ORDER
Elizabeth A. Copeland, Judge
This case was tried at the Court's November 1, 2021, remote trial session for cases where Houston, Texas was listed as the place of trial. On October 13, 2021, Petitioners, Stephen R. Kelley and Isabelle Kelley, filed a pretrial memorandum wherein they identified three witnesses that they expected to call at trial: Yvette Nunez, Paul Feinberg, and "Representatives of Core Laboratories LP * * *."
On October 27, 2021, the Kelleys filed a status report wherein they notified the Court that they served subpoenas upon Yvette Nunez (an employee of Respondent's Office of Chief Counsel) and Leticia Rodriguez (an employee of Core Laboratories, LP). The Kelleys attached copies of the subpoenas they served on Mses. Nunez and Rodriguez. The return of service dates on the subpoenas are October 26, 2021, and October 20, 2021, respectively.
On October 28, 2021, counsel for Core Laboratories, LP ("Core Labs"), on behalf of Ms. Rodriguez, filed a Motion to Quash Subpoena for the subpoena issued to Leticia Rodriguez. On October 29, 2021, counsel for Respondent, on behalf of Ms. Nunez, filed a Motion to Quash Subpoena Issued to Yvette Nunez.
On October 30, 2021, the Kelleys filed an Objection to Motion to Quash Subpoena Issued to Yvette Nunez, wherein they object to the relief Respondent seeks in his October 29, 2021, motion. On November 1, 2021, the Kelleys filed a similar objection wherein they object to the relief Core Labs seeks in its October 28, 2021, motion. The aforementioned subpoenas and motions to quash (and the objections thereto) were considered by the Court when this case was called for trial on November 1, 2021.
Our standing pretrial order (which was served on the Kelleys on June 2, 2021) requires that a pretrial memorandum be filed no later than 21 days before the first day of the trial session and that witnesses "shall be identified in the pretrial memorandum with a brief summary of their anticipated testimony. Witnesses who are not identified will not be permitted to testify at the trial without a showing of good cause."
Core Labs' October 28, 2021, Motion to Quash Subpoena
In their subpoena to Ms. Rodriguez, the Kelleys requested that she appear before the Court at trial to give testimony on their behalf and that she bring with her a "[D]eclaration titled 'Declaration of Leticia Rodriguez' dated July 13, 2021." Core Labs objects to the subpoena on the ground that it does not call for Ms. Rodriguez to produce any admissible evidence. That is, the subpoena does not request any actual business records of Ms. Rodriguez's employer and the one document that it does request is "classic hearsay."
Subpoenas in this Court are largely governed by Rule 147. A litigant may use a subpoena to direct a person to give testimony at trial and to "command the person to whom it is directed to produce the books, papers, documents, electronically stored information, or tangible things designated therein * * *." Rule 147(a), (b). However, the Court, upon motion, may quash or modify the subpoena if it imposes an "undue burden," meaning one that outweighs the value of the subpoenaed information to the serving party. See Amazon.com, Inc. v. Commissioner, T.C. Memo. 2014-245, at *6-*7; Rule 147(b). The party moving to quash a subpoena bears the burden of persuasion. Id. at *8.
Unless otherwise stated, all Rule references are to the Tax Court Rules of Practice and Procedure.
The decision to quash or modify a subpoena lies within the Court's discretion. Id. In exercising this discretion, we "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." Id. "Relevance" for this purpose means "likely to be useful in the case." Bane v. Commissioner, T.C. Memo. 1971-31, 1971 Tax Ct. Memo LEXIS 302, at *17. We apply the same test regardless of whether a subpoena calls for testimony under Rule 147(a) or the production of documents under Rule 147(b). See Amazon.com, Inc. v. Commissioner, at *8-*9.
We find that Core Labs has met its burden of persuasion for two reasons. First, the contents of Ms. Rodriguez's declaration constitutes inadmissible hearsay and her testimony as to its contents would also be inadmissible hearsay. Thus, we fail to see how Ms. Rodriguez's testimony (or the production of her declaration) would be useful in this case. Second, the Kelleys served Ms. Rodriguez with their subpoena less than two weeks before trial. Such short notice imposed a burden on Ms. Rodriguez as it did not give her adequate time to prepare to give testimony. These two facts evince that the burden the subpoena would have on her outweighs the value of the information that she could provide for the Kelleys, which value appears to be limited at best.
Additionally, we note that our standing pretrial order required the Kelleys to list all witnesses that they would be calling at trial in their pretrial memorandum along with a summary of anticipated testimony. The order states that failure to comply will result in the unlisted witness not being permitted to testify, unless good cause can be shown. The Kelleys did not list Ms. Rodriguez in their pretrial memorandum nor did they identify the nature of her proposed testimony. At trial, they did not show good cause for not doing so. Consequently, the Kelley's failure to comply with our standing pretrial order was prejudicial to Respondent's ability to prepare for trial in that he was give no time to interview or otherwise depose Ms. Rodriguez, and no time to adequately prepare for any cross-examination of her expected testimony; thus, we cannot (and did not) permit her to testify.
For all these reasons, we will grant Core Labs' motion to quash subpoena.
Respondent's October 29, 2021, Motion to Quash Subpoena
In their subpoena to Ms. Nunez, the Kelleys requested that she appear at trial to give testimony on their behalf and that she bring with her:
1) All communication between Paul C. Feinberg and Yvette Nunez involving imposition of a § 6662 penalty against * * * [the Kelleys]; 2) Documents that identify the individual, if any, who initiated the §6662 penalty that appears on the Notice CP3219A of May 18, 2019 sent to * * * [the Kelleys]; 3) copy of 2017 return received by the IRS on which NOD was based.Respondent objects on three grounds. First, with respect to the Kelley's first request, Respondent contends that there are "no documents evidencing communications between Mr. Feinberg and Mrs. Nunez concerning the assertion of * * * the accuracy-related penalty under I.R.C. § 6662(b)(1). Accordingly, there are no documents to produce responsive of * * * [the Kelley's] request." Second, with respect to the Kelley's second request, Respondent contends that he conceded the accuracy-related penalty that was asserted in the Kelley's May 28, 2019, notice of deficiency. Thus, "this request is not relevant and will not lead to the production of admissible evidence." Finally, with respect to the Kelley's third request, Respondent contends that the Kelleys already have the requested documents in their possession.
We agree with Respondent on all three grounds. However, Respondent did assert a penalty under section 6662(a) and (b)(1) in his answer, and he bears the burden of proof on that penalty. See Rule 142(a)(1). His burden of proof includes showing compliance with section 6751(b)(1). Because Ms. Nunez made the initial determination to assert that penalty at issue, her testimony had value at trial. However, she should not be obligated to produce documents that are irrelevant, nonexistent, or already in the Kelley's possession. Therefore, we will grant Respondent's motion to quash subpoena to the extent that it requires production of documents under Rule 147(b); and we will deny his motion to quash subpoena to the extent that it requires that Ms. Nunez's testimony be given under Rule 147(a).
For the foregoing reasons, and for cause, it is
ORDERED that the Motion to Quash Subpoena Issued to Leticia Rodriguez, filed on October 28, 2021, is granted. It is further
ORDERED that the Motion to Quash Subpoena Issued to Yvette Nunez, filed on October 29, 2021, is granted insofar as it relates to the production of documents under Rule 147(b) and denied in all other respects.