Opinion
22581-22
07-22-2024
UBIQUITI INC. F.K.A. UBIQUITI NETWORK INC., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Albert G. Lauber, Judge.
This case involving petitioner's fiscal tax years ending June 30, 2015 and 2016 was continued from the Court's January 22, 2024, New York, New York, trial session, and jurisdiction was retained by the undersigned. On June 7, 2024, respondent filed, at docket entries ##30-33, Motions to Compel the Taking of Depositions of four non-party witnesses: Sanjiv Sanghvi, David Hemenway, Al Kendrick, and Joshua Rosenberg. On June 11, 2024, the Court held an informal conference call with the parties and Brian A. Kahn, who represents the four individuals sought to be deposed. By Order served June 12, 2024, we directed petitioner and Mr. Kahn to file their respective responses to the Motions by July 12, which they did.
Rule 74(c) provides that nonconsensual depositions are an extraordinary method of discovery, generally available where the information sought is otherwise discoverable and "cannot be obtained through informal consultation or communication." Rules 70(b), 74(c)(1)(B). Under Rule 70(b), if the information sought is relevant to the subject matter and "appears reasonably calculated to lead to discovery of admissible evidence," then it is properly within the scope of discovery. The decision whether to permit a nonconsensual discovery deposition is a matter within the sound discretion of the presiding Judge.
At issue in this case is whether Ubiquiti Int'l Holding Co., Ltd. (International), petitioner's controlled foreign corporation, was a "pledgor or guarantor" of petitioner's obligations under credit agreements executed in 2014 and 2015 with Wells Fargo Bank and Wells Fargo Securities (collectively, Wells Fargo). Respondent contends that Joshua Rosenberg, Sanjiv Sanghvi, David Hemenway, and Al Kendrick have "personal knowledge of the[se] transactions and [the] associated documents" and can provide testimony relevant to the resolution of the question before the Court.
Messrs. Rosenberg, Sanghvi, Hemenway, and Kendrick are current or former executives of Wells Fargo who appear to have been involved with one or both credit agreements. In response to IDR 44, petitioner identified Messrs. Rosenberg and Sanghvi as having been "directly involved in negotiating the terms of the [2014 credit agreement]." Mr. Rosenberg signed both credit agreements. Mr. Rosenberg identified Mr. Kenrick as a reviewer of the credit report that provided a contemporaneous explanation of the 2015 credit agreement. And Mr. Hemenway allegedly explained to petitioner the lenders' understanding about how petitioner's repayment obligations under the credit agreement would be guaranteed. As individuals involved in various aspects of the transactions in question, the proposed deponents are in a position to supply testimony that will likely lead to relevant evidence.
Respondent has shown that the information he seeks cannot practically be obtained through informal consultation. As early as November 1, 2023, respondent contacted the proposed deponents and their counsel in an effort to schedule informal interviews. But respondent was unable to secure an agreement on the terms under which such interviews would be conducted. Counsel for the proposed deponents suggests that they provide affidavits in lieu of an interview or deposition. We do not think affidavits are an adequate substitute for a live deposition or interview.
As counsel for the proposed deponents notes, discovery must be "proportional to the needs of the case." Rule 70(b)(1). This is a complex case in which the IRS has determined deficiencies in excess of $11 million. Those deficiencies flow from respondent's determination that International guaranteed petitioner's obligations to Wells Fargo. The proper interpretation of the credit agreements is key to resolution of the "guarantee" question. And the guarantee question is the central issue presented by the litigation. That being so, we do not regard respondent's request to depose four Wells Fargo representatives as "disproportionate to the needs of the case."
Upon due consideration, it is
ORDERED that respondent's Motions to Take Depositions Pursuant to Rule 74(c)(3), filed June 7, 2024, at docket entries ##30-33, are granted in that respondent may take the depositions of Messrs. Rosenberg, Sanghvi, Hemenway, and Kendrick at 2 Embarcadero Center, 201 Clay St., Ste. 1300, San Francisco, CA 94111, or at another location mutually agreed upon, at a time and date to be mutually agreed upon. It is further
ORDRED that the parties shall endeavor to conduct the depositions within 45 days of this Order, subject to witness availability. It is further
ORDERED that, in addition to regular service, the Clerk of the Court shall serve a copy of this Order on Mr. Kahn as follows:
Mr. Brian A. Kahn
McGuireWoods LLP
201 North Tyron Street, Suite 3000
Charlotte, North Carolina 28202-2146