Opinion
3823-19 4421-19
03-31-2023
ROYALTY MANAGEMENT INSURANCE COMPANY, LTD., ET AL., Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber, Judge
These "micro-captive" insurance cases were tried between February 14 and 22, 2023, in Oklahoma City, Oklahoma. On October 19, 2022, respondent filed a Motion to Compel Production of Documents. This Motion focused chiefly on the possible deletion by petitioners of emails within the scope of respondent's discovery requests. On November 21, 2022, petitioners filed a Response representing that the relevant emails were deleted by Mr. Sheperd as part of his ordinary business practice before the IRS examination commenced.
On November 29, 2022, we held an informal conference call with the parties. Petitioners stated that the deleted emails were unlikely to be recoverable due to Mr. Sheperd's use of an online deletion program. However, they represented that they would hire an independent e-discovery expert to ascertain whether any emails could be recovered. Petitioners agreed to provide respondent's counsel with the name of this individual and a copy of the scope-of-work instructions proposed to guide his work. We directed petitioners to file a Sur-Reply by December 28, 2022, reporting progress towards resolution of this issue.
Petitioners did not file a Sur-Reply by that date, and they did not supply respondent's counsel before trial with the name of their e-discovery expert or with the scope-of-work instructions he was given. Instead, on February 14, 2023, petitioners filed a document captioned "Report," representing that they hired Brian Major, an employee of Legion Technology computer services, who was unable to recover any of Mr. Sheperd's emails. During trial we indicated that, because petitioners did not comply in full with our Order, we would consider drawing an inference (if not inconsistent with other evidence in the record) that the deleted emails were: (1) relevant, (2) were exchanged about this insurance transaction, and (3) would have shown that Mr. Sheperd's dominant intent for entering into the micro-captive transactions was to secure a tax deduction. Because there appears to be no remaining dispute between the parties on this point, it is
ORDERED that respondent's Motion to Compel Production of Documents, filed October 19, 2022, is denied as moot.