Opinion
19540-15 11742-20
03-25-2022
RICHARD M. SOBEL & NGUYET DO SOBEL, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Christian N. Weiler, Judge
This case is calendared for trial commencing on March 29, 2022, at the Court's Tampa, Florida, trial session. On February 28, 2022 petitioners filed a motion for leave to file [expert] report, and lodged a copy of an expert witness report by John J. Rody, Jr., CPA. On March 7, 2022, respondent filed (i) an objection to petitioners' motion for leave and (ii) a motion in limine to exclude the testimony and expert witness report of Mr. Rody. Petitioners filed a response to respondent's motion in limine on March 23, 2022, along with a corrected report by Mr. Rody.
After a review of the record in this matter, the Court will grant respondent's motion in limine in part, and deny petitioners' motion for leave.
I. Relevant Law
Fed. R. Evid. 702 states: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
The Supreme Court set forth the following factors which are to be considered in determining the reliability of scientific expert testimony:
1) whether the expert's technique or theory can be or has been tested;
2) whether the technique or theory has been subject to peer review and publications;
3) the known or potential rate of error of the technique or theory when applied;
4) the existence and maintenance of standards and controls; and
5) whether the technique or theory has been generally accepted in the scientific community.Daubert v. Merrell Dow Pharms, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). When the expert is testifying as to general principles rather than their application to the facts of the case, Fed.R.Evid. 702 requires the following:
1) the expert be qualified;
2) the testimony address a subject matter on which the factfinder can be assisted by an expert;
3) the testimony be reliable; and
4) the testimony "fit" the facts of the case.Id. The Daubert factors may be applied not only to "scientific" testimony, but to all expert testimony. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).
It is not enough that a witness is qualified in some way related to the subject matter at hand. Instead, the witness must have special knowledge about the discrete subject on which he or she is to testify. The function of an expert witness is not simply to draw conclusions, but rather to help the trier of fact understand the evidence and to determine issues of fact by imparting to the trier of fact the benefit of the expert's specialized knowledge.
The United States Court of Appeals for the Eleventh Circuit has held that it would be inappropriate for a lawyer, as an expert witness, to testify before a jury about matters of domestic law (United States law). United States v. Oliveros, 275 F.3d 1299, 1307 (11th Cir. 2001). The Court's function is to instruct the jury on the law, and domestic law is not to be presented through testimony and argued to the jury as a question of fact. Id.; see also Montgomery v. Aetna Casualty & Surety Co., 898 F.2d 1537, 1541 (11th Cir. 1990) (a witness may not testify as to the legal implications of conduct; the Court must be the jury's only source of law).
Although special considerations apply to jury trials, the Daubert analysis applies to bench trials as well as jury trials. Boltar, L.L.C. v. Commissioner, 136 T.C. 326, 334 (2011) (citing Att'y Gen. of Okla. v. Tyson Foods, Inc., 565 F.3d 769, 779 (10th Cir. 2009)). Similarly, we have previously ruled that expert testimony about what the law is or that directs the finder of fact on how to apply the law in tax deficiency proceeding does not assist the trier of fact and is, thus, inadmissible. Feinberg v. Commissioner, T.C. Memo. 2017-211, at *10; Fed. R. Evid. 702(a).
II. Analysis
Rule 143 governs discovery before the Tax Court. Under Rule 143(g), expert reports are often treated as the expert's direct testimony. In sum, any party who calls an expert witness must also submit a written report prepared and signed by said witness that contains the following: (A) the witness's opinions, (B & C) the data from which they formed said opinions, (D & E) the witness's qualifications, and (F) compensation received. Rule 143(g)(1). Whether a person qualifies as an expert is a question of fact, left to the discretion of the court. The text of Rule 143(g)(2) provides that the Court will exclude a witness's testimony altogether if the report should fail to comply with the Rule.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Estate of Tanenblatt v. Commissioner, T.C. Memo. 2013-263, at *11. ("[R]eceived into evidence as his direct testimony," this phrase is also reiterated through the rest of the document.).
Daubert v. Merrill Dow Pharms, Inc., 509 U.S. 579, 589 (1993); see Kumho Tire Co. v. Carmichael, 526 U.S. at 149 (extending the principles of Daubert to all expert testimony).
Rule 143(g)(2) ("An expert witness's testimony will be excluded altogether for failure to comply with the provisions of this paragraph, unless the failure is shown to be due to good cause and unless the failure does not unduly prejudice the opposing party.").
Testimony of a witness qualified by knowledge, skill, experience, training, or education is admissible whenever that scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to decide a fact in issue. Fed.R.Evid. 702. While testimony that expresses a legal conclusion and does not assist the trier of fact is not admissible. In addition to complying with Rule 143, an expert witness's report must also comply with the requirements set forth under Fed.R.Evid. 702. Purple Heart Patient Ctr., Inc. v. Commissioner, T.C. Memo. 2021-38, at *16. This is because the report serves as the witness's direct testimony under our Rules.
The Court finds that Mr. Rody meets the minimal qualifications as an expert witness under both Fed.R.Evid. 702 and Rule 143(g). (Notably, that Mr. Rody has been a CPA since 1996). However, moving away from Mr. Rody's qualifications as an expert witness, we are also to consider the admissibility of the report itself, since it would serve as Mr. Rody's direct testimony under our Rules.
As noted by respondent, the report (as originally offered) fails to comply with elements of Rule 143(g). Specifically, the report does not adequately list the facts and data considered by the witness, the report does not include as exhibits any of the documents the witness relied upon, the report fails to state the actual compensation amount, and most significantly, the report offers legal conclusions.
As noted by respondent, the report (as originally offered) fails to comply with elements of Rule 143(g). Specifically, the report does not adequately list the facts and data considered by the witness, the report does not include as exhibits any of the documents the witness relied upon, the report fails to state the actual compensation amount, and most significantly, the report offers legal conclusions.
On March 23, 2022, petitioners offered a supplemental report from Mr. Rody, correcting or modifying the report to address the issues raised by respondent in his motion in limine.
While some short comings found in the report (as amended) could be (and appear to be) corrected, we conclude that Mr. Rody's report (as amended) states legal conclusions applying law to facts and that those legal conclusion are not helpful to the Court. It simply expresses the declarant's personal opinion-aligning precisely with petitioners' argument-about how the legal question currently before the Court should be decided. That is the province of the Court, not of an expert. See, e.g., Hosp. Corp. of Am. v. Commissioner, 109 T.C. 21, 59 (1997) ("Testimony that expresses a legal conclusion and does not assist the trier of fact is not admissible."); Alumax, Inc. v. Commissioner, 109 T.C. 133, 171 (1997) ("We shall disregard any opinion of an expert that constitutes nothing more than that expert's legal opinion or conclusion about a particular matter."), aff'd, 165 F.3d 822 (11th Cir. 1999).
For example, Mr. Rody's expert testimony reaches legal conclusion when he states: "I have been asked to provide an Expert Testimony Report (ETR) to summarize what the tax law is regarding the qualification as a "real estate professional for tax purposes" and ". . . I have been asked to express my opinion as to whether Mrs. Sobel qualifies under those rules . . ."
Consequently, we will exclude Mr. Rody's report (as amended) containing his direct testimony at trial since it principally seeks to state legal conclusions applying relevant law to facts. However, Mr. Rody remains free to testify at trial, to the extent his testimony is limited to relevant factual matters in dispute.
For example, Mr. Rody's testimony may remain helpful as petitioners' tax preparer.
Considering the foregoing, it is
ORDERED that respondent's motion in limine, filed on March 7, 2022, is granted in part in that Mr. Rody's report (as amended) will be excluded and denied in part to the extent it seeks to exclude Mr. Rody as a witness at trial. It is further
ORDERED that petitioners' motion for leave, filed on February 28, 2022, is denied.