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Lakepont Land II, LLC v. Comm'r of Internal Revenue

United States Tax Court
Nov 23, 2022
No. 13925-17 (U.S.T.C. Nov. 23, 2022)

Opinion

13925-17

11-23-2022

LAKEPONT LAND II, LLC, LAKEPOINT LAND GROUP, LLC, TAX MATTERS PARTNER Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent


ORDER

CHRISTIAN N. WEILER JUDGE

On August 11, 2022, respondent filed a Motion for Partial Summary Judgment regarding his compliance with section 6751(b)(1). On October 7, 2022, petitioner filed a Motion to Depose IRS Employee Catherine Brooks and a Motion to Depose IRS Employee Pamela Stafford, pursuant to Rule 74 (collectively "Motions to Depose Catherine Brooks and Pamela Stafford"). On November 7, 2022, respondent filed Notices of Objections to the Motions to Depose Catherine Brooks and Pamela Stafford. On November 10, 2022, petitioner filed Motions for Leave to File Replies to respondent's Notices of Objections to the Motions to Depose Catherine Brooks and Pamela Stafford.

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.

For the reasons outlined below, we will grant petitioner's Motions for Leave to File Replies and will deny petitioner's Motions to Depose Catherine Brooks and Pamela Stafford, pursuant to Rule 74.

I. Nonconsensual Depositions

Nonconsensual depositions are an extraordinary method of discovery that can only be taken pursuant to an order from our 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.

a. Petitioner Has Not Satisfied the Requirements Under Our Rules and Case Law

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's 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 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.

Here petitioner seeks to depose IRS employees Catherine Brooks and Pamela Stafford regarding "respondent's initial determination to assert alternative penalties under Section 6662(e), 6662(h), 6662(d), 6662(c) ("Penalties") against Lakepoint and the alleged approval of the same."

From ¶ 6 of petitioner's Motions to Depose.

Although the information sought through the depositions appears to be discoverable, (as we will show below) we conclude petitioner has not shown to the satisfaction of the Court why it needs to conduct the depositions of Catherine Brooks and Pamela Stafford and how the information sought cannot be obtained through other methods of discovery which are more convenient, less burdensome, or less expensive.

b. The Evidence Sought Can be Obtained Through Other Methods

Petitioner 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. While petitioner has shown that respondent has been less than forthcoming with informal discovery responses, it is not clear to the Court whether respondent has exhausted the other methods of discovery.

Based on recent emails between counsel dated October 6, 2022, it appears that respondent will be furnishing to petitioner the administrative file in this matter, which, according to respondent, "might answer all of your questions." Additionally, at the time of filing the Motions to Depose, respondent has not provided a response to petitioner's request for informal interviews of Ms. Brooks and Ms. Stafford. While informal requests for admission and production were sent, no formal discovery attempts were made to obtain the information through one of these other methods, such as a written interrogatories or requests for production of documents.

Should petitioner deem respondent's answers to any future formal written discovery to be inadequate, incomplete or not in compliance with our Rules, petitioner can seek relief from this Court through an appropriately filed motion to compel.

Based on the foregoing, the Court finds that petitioner has not made sufficient attempts to obtain the information sought through other methods of discovery prescribed in Rule 74(c)(1)(B) and has failed to adequately show that the information sought cannot practicably be obtained through one of these 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 finds that these factors weigh against allowing the nonconsensual depositions of Ms. Brooks and Ms. Stafford.

First, we find that petitioner has not demonstrated a compelling need to take the depositions of Ms. Brooks and Ms. Stafford in this case. As mentioned previously, respondent seeks to depose both Ms. Brooks and Ms. Stafford about "respondent's initial determination to assert alternative penalties under Section 6662(e), 6662(h), 6662(d), 6662(c) ("Penalties") against Lakepoint and the alleged approval of the same."

The single issue in respondent's Motion for Partial Summary Judgment is whether respondent has complied with section 6751(b). We believe it is undisputed between the parties that Ms. Stafford, as the IRS agent assigned to the audit of petitioner, made the "initial determination" to assert penalties in this matter. It is further undisputed that Ms. Brooks was Ms. Stafford's immediate supervisor.

What is in dispute between the parties appears to relate to the sequence of events surrounding the assertion of penalties and whether Ms. Brooks informed petitioner of the assertion of penalties earlier than July 16, 2016. To test the declaration of Ms. Brooks (which is attached to respondent's Motion for Partial Summary Judgment), petitioner has issued substantial informal requests for admission and production of documents to respondent. Some of this informal discovery includes earlier correspondence from Ms. Stafford to petitioner dated May 9, 2016 and May 12, 2016. We assume these documents could be used by petitioner to dispute the declaration of Ms. Brooks without a deposition and establish a genuine dispute as to material facts precluding summary adjudication of the issue.

The date respondent maintains the Penalty Consideration Lead Sheet related to this case and prepared by Ms. Stafford was signed and approved by Ms. Brooks.

Second, respondent has not established that he intends the deposition to serve as more than a substitute for cross-examination at trial. While Ms. Brooks and Ms. Stafford appear to have direct knowledge of the information sought, we cannot find justification in granting the depositions at this time. This case is not calendared for trial and respondent asserts that petitioner's Motions to Depose Ms. Brooks and Ms. Stafford could serve as a test run at cross-examination insofar as they want to contradict Ms. Brooks' written declaration. We believe that such questioning is best reserved for cross-examination at trial.

Finally, it has not been fully established that petitioner's requested informal interview of Ms. Brooks and Ms. Stafford have been declined, and (as discussed above) petitioner has failed to persuade the Court that the information sought cannot be obtained through other means, e.g., requests for production of documents, written interrogatories, etc. Since trial remains unscheduled, petitioner has ample time and opportunity to seek information sought from respondent by other means.

At this point in the litigation, petitioner has failed to demonstrate that they are entitled to depose Ms. Brooks and Ms. Stafford under our Rules when considering the case law factors.

II. Conclusion

After considering the foregoing, it is

ORDERED that petitioner's Motions for Leave to File Replies to respondent's Notices of Objections to the Motions to Depose Catherine Brooks and Pamela Stafford, both filed on November 10, 2022, are granted. It is further

ORDERED that the Clerk of Court is directed to file petitioner's Replies to respondent's Notices of Objections to the Motions to Depose Catherine Brooks and Pamela Stafford, both lodged on November 10, 2022. It is further

ORDERED that petitioner's Motions to Depose Catherine Brooks and Pamela Stafford, both filed on October 7, 2022, are denied without prejudice. It is further

ORDERED that a video status conference (via Microsoft Teams) with the Court and the parties herein is set for December 7, 2022, at 11:00a.m. (EST) to discuss the status of this case. The Court will separately furnish counsel for the parties the Teams information for the video status conference. Should either party not be available for the conference, the parties are to immediately notify the Court by contacting the chambers of undersigned at 202-521-0649.

One purpose of the conference is to determine whether this case is ready for trial and (if so) to pick a trial date; the parties are asked to confer in advance as to mutually available dates for trial.


Summaries of

Lakepont Land II, LLC v. Comm'r of Internal Revenue

United States Tax Court
Nov 23, 2022
No. 13925-17 (U.S.T.C. Nov. 23, 2022)
Case details for

Lakepont Land II, LLC v. Comm'r of Internal Revenue

Case Details

Full title:LAKEPONT LAND II, LLC, LAKEPOINT LAND GROUP, LLC, TAX MATTERS PARTNER…

Court:United States Tax Court

Date published: Nov 23, 2022

Citations

No. 13925-17 (U.S.T.C. Nov. 23, 2022)