ELAINE D. KAPLAN, Judge.
Currently before the Court is plaintiff's motion to compel discovery and for sanctions pursuant to Rules of the Court of Federal Claims ("RCFC") 37(a)(5). In its
The background of this case is discussed in the earlier decisions and orders of the Court.
The Reward Agreement was modified by the mutual consent of the parties sometime in the spring of 2005. Second Am. Compl. ¶¶ 14-18;
On or about May 3, 2005, the IRS requested that plaintiff and plaintiff's counsel meet with the criminal investigation division of the IRS and provide proof of plaintiff's identity. Second Am. Compl. ¶ 19. A week later, plaintiff provided the IRS with "new information concerning an additional [. . .] in the United States engaging in [. . .] cash skimming."
Plaintiff contends that on or between May 3, 2005 and December 31, 2005, it had "multiple" telephone conversations with Agent Tyska, as well as one or two in-person meetings, without its counsel present.
The purpose of a Form 211 (the document plaintiff alleges that Agent Tyska demanded that plaintiff execute) is to request a monetary reward from the IRS under 26 U.S.C. § 7623 (2006).
According to plaintiff, in a November 28, 2005 email to Agent Tyska, plaintiff stated that it did not wish to sign and submit a Standard Form 211 in lieu of the existing Reward Agreement.
In December 2010, plaintiff "made a formal demand on . . . Defendant to duly render an accounting with respect to the information and documentation submitted."
Plaintiff filed its initial complaint setting forth three causes of action in March 2011. Plaintiff has since twice amended its complaint. In Count I of plaintiff's second amended complaint (entitled "Anticipatory Repudiation"), plaintiff alleges that after it fully performed its obligations under the Reward Agreement, the IRS repudiated the agreement when, acting through Special Agent Tyska, it attempted to coerce the plaintiff to execute a new agreement and agree to submit a Form 211 by threatening that if plaintiff refused to do so the IRS would "refus[e] to proceed and perform . . . under the Reward Agreement." Second Am. Compl. ¶ 40. Further, plaintiff alleges, the IRS also engaged in anticipatory repudiation when it failed to provide plaintiff with "assurances" that the information it had supplied was not stale and that IRS intended to go ahead with an investigation based on the information.
Count II is a claim for damages for breach of the duty of good faith and fair dealing.
The government previously moved to dismiss plaintiff's first complaint for failure to state a claim upon which relief can be granted. Def.'s Mot. to Dismiss, June 8, 2011, ECF No. 7. It contended that the Reward Agreement did not obligate the IRS to conduct an investigation based on the information plaintiff provided; accordingly, even assuming the truth of plaintiff's allegations that the IRS had threatened not to investigate unless plaintiff agreed to modify the agreement, plaintiff failed to state a claim for anticipatory repudiation.
The judge previously assigned to this case rejected the government's argument. While the court agreed that the Reward Agreement did not obligate the government to investigate, it observed that the agreement's "plain language" did require the IRS "to protect plaintiff's identity from disclosure and to pay plaintiff a percentage of the money recovered from the investigation of the Taxpayers identified by plaintiff."
The court also rejected the government's motion to dismiss Count II of the complaint, alleging a violation of the duty of good faith and fair dealing. It concluded that plaintiff's allegation—that Agent Tyska sought to "force a renegotiation" of plaintiff's bargained for benefits after plaintiff had fully performed under the Reward Agreement by threatening that the IRS would not provide any reward payment under the agreement—was sufficient to support a claim for breach of the covenant of good faith and fair dealing.
The Court declined to address Count III of plaintiff's claims, only noting that "[t]he Reward Agreement contemplates the possibility that plaintiff may, in appropriate circumstances, seek an accounting."
The motion to compel that is currently before the court is the second one plaintiff has filed in this case. In its first motion to compel, filed on October 25, 2012, plaintiff sought, among other things, the production of documents which the government had withheld on the basis of a variety of privileges. The court partially granted and partially denied plaintiff's motion to compel as reflected in its decision of December 11, 2012.
After the court issued its opinion on plaintiff's motion to compel, the government informed the court that it possessed additional documents within the scope of the court's order that it had previously asserted were not available. Def.'s Status Report 1, 4-6, Dec. 19, 2012, ECF No. 62. In particular, the government advised the court that when it initially responded to plaintiff's document requests, it had not conducted any searches of the computers of former employees because counsel had understood that the IRS routinely deleted any electronically stored information ("ESI") from former employees' computers upon their departure from the IRS.
In an order issued on January 7, 2013, the court directed the government to obtain and review these records for production to plaintiff's counsel. Order at 1, ECF No. 68. In addition, the court ordered the defendant to produce to plaintiff's counsel, "from time to time as they become available, . . . records responsive to plaintiff's production requests that it obtains and reviews."
From March to September 2013, the government produced ESI generated by the IRS discovery office.
In addition, during the period between December 2012 and July 2013, the government provided revised privilege logs to plaintiff. It also produced transcripts of audio recordings related to the 2007 undercover operation as plaintiff had requested. Def.'s Status Report 3, Feb. 19, 2013, ECF No. 69. Because the recordings were of undercover agents who still used their aliases for other undercover work,
In the meantime, while this production of documents was proceeding, the plaintiff continued to express concerns about the government's compliance. On March 27, 2013, the plaintiff filed a "Notice of Filing" in which it alleged that the government had allowed spoliation of evidence by failing to place a litigation hold on potentially relevant documents as early as May of 2005. Pl.'s Objections to Def.'s Mar. 21, 2013 Status Report 3-8, Mar. 27, 2013, ECF No. 74. Plaintiff also objected to, among other things, the pace of the government's production of documents,
In a May 7, 2013 Order, the court rejected the plaintiff's spoliation argument, noting that the plaintiff "failed to persuade the court that defendant's duty to preserve documents in this case arose prior to December 2010, when plaintiff's counsel sent a letter to the IRS Whistleblower Office." Order at 3, ECF No. 82. It also rejected the plaintiff's other claims that the government's document production efforts were inadequate.
On June 19, 2013, in a joint status report, the parties notified the court that, in the government's view, it had completed production of all documents the plaintiff had requested. Def.'s Status Report 1, ECF No. 86. The report further recited that plaintiff's counsel wished to have additional time to "review the documents produced, to propound appropriate follow-up requests to the Government, and to determine what further objections he may have to the Government's means of document production or remedies that he may seek."
Unfortunately, the parties were unable to agree on a way forward and each filed its own separate status report on September 5, 2013. The government stated that it had provided to counsel for plaintiff "all documents referenced in prior status reports, as well as their accompanying privilege logs." Def.'s Status Report 1, ECF No. 88. "The final production," the government represented, was made on September 4, 2013 and "included documents that had not been previously produced due to technical problems, but all those documents with technical problems that we have been able to resolve have been provided and all those with technical problems that cannot be resolved have been identified, and that information conveyed to counsel for [plaintiff]."
The plaintiff, on the other hand, stated that it was "concerned that the same discovery problems previously arising are rearing their head again as the Defendant appears determined to `wall off' areas of inquiry." Pl.'s Status Report, ECF No. 89. Therefore, the plaintiff proposed that it would file a second motion to compel, possibly coupled with a motion for sanctions under RCFC 37(a)(5)(A).
The case was reassigned to the undersigned on November 25, 2013. On January 8, 2014, following a status conference, the Court issued an order setting a schedule for the briefing of plaintiff's motion to compel additional discovery and for sanctions. ECF No. 95. In accordance with that Order, plaintiff filed its motion on February 8, 2014. Mot. to Compel, ECF No. 98 [hereinafter "Pl.'s Mot."]. The Court held oral argument on the motions on January 27, 2015.
Plaintiff has filed lengthy memoranda, along with voluminous declarations and exhibits in support of its second motion to compel and for sanctions. See Pl.'s Mot., ECF No. 98; Tufts Decl. of Correspondences, Feb. 7, 2014, ECF No. 97; Tufts Decl. of Deposition Costs, Feb. 7, 2014, ECF No. 96; Tufts Decl. in Supp. of Reply, March 24, 2014, ECF No. 100; Confidential Informant Decl., March 24, 2014, ECF No. 101. Portions of its memoranda and declarations re-plow old ground.
In that regard, and admittedly without the benefit of briefing on the merits, the Court remains uncertain as to the exact nature of plaintiff's current claims. Plaintiff has never contended, for example, that the IRS did in fact recover back taxes based on the information plaintiff provided, and the government has produced several declarations from IRS officials that it did not. Further, plaintiff does not appear to be making the claim that the judge previously assigned to this case concluded might fairly be read from its complaint: that when the IRS allegedly threatened to "proceed" or "perform" on the Reward Agreement with plaintiff, the IRS was threatening not to either not protect plaintiff's identity or not pay plaintiff any reward even if back taxes were recovered.
The basis for plaintiff's allegation that the government violated the implied duty of good faith and fair dealing in its interactions with the plaintiff is also murky. "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement."
In general, "what th[e] duty entails depends in part on what [the] contract promises (or disclaims)."
In the second amended complaint, the plaintiff recites that the duty of good faith and fair dealing requires that the government "avoid the taking of any actions that may unreasonably delay or hinder any contractual performance," ¶ 62, but the complaint fails to specify what actions plaintiff alleges the government took to delay or hinder either its own contract performance or plaintiff's. Instead, plaintiff alleges that the government "acted with bad faith insofar as it made repeated statements and representations to induce Plaintiff to proceed without counsel and to wrongfully attempt to abrogate the Reward Agreement, after having obtained the Plaintiff's identity," and that "[u]p to and including the time of Defendant's repudiation and refusal, Plaintiff was ready, willing, and able to continue performance of the Reward Agreement." Second Am. Compl. ¶¶ 63-64.
Again reading the allegations in the complaint liberally, the prior judge assigned to this case concluded that plaintiff's complaint stated a claim that the government violated the duty of good faith and fair dealing by alleging that—after plaintiff had fully performed under the contract—the IRS sought to force a renegotiation of the contract terms by threatening not to pay plaintiff any reward money that might become due under the agreement unless plaintiff agreed to modify the agreement.
The merits of plaintiff's claims, of course, are not currently before the Court. Nonetheless, in exercising its discretion whether and to what extent to direct further discovery, the Court must take into consideration whether the additional proposed discovery is relevant to the plaintiff's claims (or at least reasonably calculated to lead to relevant evidence) within the meaning of Rule 26(b). The lack of clarity in plaintiff's presentation of its claims has not been helpful to that endeavor.
At the same time, the Court also recognizes that—as the government itself has acknowledged—the IRS's initial document production efforts left much to be desired. In addition, the Court believes that plaintiff was prejudiced to some extent by the shortcomings of the government's efforts. In particular, plaintiff was hampered in its ability to conduct effective depositions of several of the individuals it has identified as key actors in this matter by the government's failure to produce documents in a timely fashion.
With the above considerations in mind, the Court turns to plaintiff's motion to compel and for sanctions. For ease of reference, the Court breaks its discussion into three categories: (1) plaintiff's challenges to the defendant's assertion of attorney-client privilege in connection with both the pre-December 2012 production and the most recent production; (2) plaintiff's request that the government undertake additional document searches; and (3) plaintiff's request for sanctions against the government in the form of an award of costs.
Plaintiff does not challenge the sufficiency of the privilege logs the government has supplied since the court granted in part plaintiff's first motion to compel. Instead, plaintiff challenges the government's assertion of attorney-client privilege with respect to a number of the documents identified in the logs, including some documents for which the previous judge assigned to this case had already found the privilege properly invoked. Pl.'s Mot. 14-21. Plaintiff argues that the privilege is either inapplicable or that it should be pierced based on either the crime/fraud exception or on plaintiff's allegedly "compelling need" for the privileged material.
"The attorney-client privilege protects the confidentiality of communications between attorney and client made for the purpose of obtaining legal advice."
Plaintiff's challenges to the government's assertion of privilege fall into three buckets. First, plaintiff argues that several documents that were redacted to delete references to advice provided by counsel are not protected because neither the sender nor the recipient of the documents is an attorney. Pl.'s Mot. 15. The Court has examined these documents in camera and concludes that plaintiff's argument is without merit because, although the sender and recipient are not attorneys, the redacted portions of the documents contain passages that communicate the advice of counsel. The forwarding of documents containing counsel's advice by non-attorneys in an organization does not strip the advice contained within them of its privileged nature.
Plaintiff's second contention is that it has established a "compelling need" for all communications among IRS officials that occurred after June 2005, because, according to plaintiff, the documents that the government has recently produced show that Agent Tyska started to act in "bad faith" at the direction of his superiors, including UPM Paul Serletti, in June 2005. Pl.'s Mot. 14-15, 17-21. "Compelling need" may serve as a basis for overcoming the deliberative process privilege,
Plaintiff's final argument is that "certain materials described in the privilege log, even as amended, are
It is well established that the attorney-client privilege does not extend to "communications made for the purpose of getting advice for the commission of a fraud or crime."
No such prima facie showing has been made in this case. There is no allegation of crime or fraud at all with respect to the government's relationship with the plaintiff; rather, the claim is one for breach of contract. To be sure, the Federal Circuit has indicated in a non-precedential decision that the crime-fraud exception may be broad enough to encompass documents that are "incident" to alleged "fundamental misconduct."
In this case, plaintiff's argument is that the documents for which privilege is claimed were created during a window of time when plaintiff alleges that IRS personnel (including several attorneys) were conspiring to force the plaintiff to agree to a modification of the Reward Agreement. Pl.'s Mot. 13, 17-21. Plaintiff further alleges (as best as the Court can understand) that the documents generated during this period would be highly relevant to its inquiry into this "fundamental misconduct."
Plaintiff has moved to compel the production of additional documentation falling within five categories: (1) documents secured from searches of an additional 65 individuals, whose names plaintiff secured from an organizational chart for the IRS' Criminal Division during the years 2005-2008, Pl.'s Mot. 23-24; (2) copies of any IRS analyses of the [. . .], as well as the [. . .],
At the hearing on plaintiff's motion, the Court sought clarification from plaintiff regarding its request for the production of documents in the possession of the sixty-five individuals counsel identified by referring to an IRS organizational chart.
The Court has no reason to doubt the government's representations regarding the likelihood that additional searches will yield documents suggesting the involvement of other IRS employees and officials in the behind-the-scenes discussions regarding the potential modification of the Reward Agreement. And the Court is not unsympathetic to the government's contentions that the nexus between the additional searches plaintiff seeks and the allegations in plaintiff's complaint seems tenuous. Nonetheless, the Court believes it would be appropriate to indulge the plaintiff's requests for a few additional searches, particularly in light of the missteps by the government earlier in this case.
To that end, at the hearing in this case, the Court suggested that counsel for plaintiff consider whether his request could be narrowed by identifying for additional searches three key personnel on the list he supplied. Oral Arg. Tr. 53. Counsel agreed that it would be possible to do so, and the Court concludes that such compromise is a reasonable one. Accordingly, plaintiff's motion to compel the searches of the records of additional IRS employees for information related to its claims is
Plaintiff has requested information regarding an IRS analysis of certain [. . .] returns which it believes was referenced in a close out memorandum written in connection with the ending of a 2007 undercover operation. Pl.'s Mot. 22.
Def.'s App. 17. Specifically, plaintiff requests the analysis of the "additional returns." Pl.'s Mot. 22-23. According to the Declaration of James Cortier, the Special Agent who wrote the memorandum, he did not intend to suggest in this passage that he had in fact ordered copies of the [. . .] of the [. . .] and that, in fact, he did not do so. Def.'s App. 10 ¶ 5. He further stated that he was involved in no further investigations of any [. . .] based on the information plaintiff provided and that there was no reason to believe such investigations were pursued by others in his office.
The plaintiff, as noted above, seeks the production of three documents that plaintiff states were referenced in the audio recording of the undercover operation. Pl.'s Mot. 23. Plaintiff identifies these documents as a "form requested from one of the principals for one of the targeted groups"; a "[. . .] provided to one of the undercover agents"; and the undercover agent's "translation of [. . .] telephone conversations the undercover agent had with a [. . .] as provided to her supervisors."
Plaintiff has requested that the government supply copies of a "letter of deactivation" that is referenced in an internal memorandum that Special Agent Tyska prepared in connection with the closure of plaintiff's file. Pl.'s Mot. 24. Although the letter is referenced in a memorandum, and although the memorandum indicates that the letter was mailed to the plaintiff, Def.'s App. 22, plaintiff never received such letter. Def.'s Resp. 27. In addition, the government asserts that neither its search of Special Agent Tyska's files, nor its search through the files of the other custodians using the relevant key words, uncovered such a letter. Def.'s Resp. 27. In light of those representations, the plaintiff's request to compel production of the deactivation letter is
Plaintiff requests additional discovery based on a newly-provided three-page document (titled "[. . .]") that counsel claims alerted plaintiff for the first time that the IRS had conducted an investigation of a "[. . .]." Pl.'s Mot. 8-11, Pl.'s Mot. Ex. D. Plaintiff requests that the defendant search for information concerning any investigations pursued by the IRS as to [. . .]. Pl.'s Mot. 8.
In its response, the government represents that it "has not hidden the information related to the mention of [. . .] from [plaintiff]" because it provided to plaintiff a shorter version of the three-page summary in May 2012. Def.'s Mot. 23 (citing Def.'s App. 110). Furthermore, the government states that its searches "turned up no `hits' on [. . .] that have not already been provided."
In its December 11, 2012 Order, the judge previously assigned to this case gave the plaintiff an opportunity to file a motion under RCFC 37(a)(5)(C) requesting an apportionment of the reasonable expenses plaintiff incurred in bringing the first motion to compel because the motion was granted in part and denied in part.
In its current motion to compel and for sanctions, plaintiff cites RCFC 37(a)(5)(A). Pl.'s Mot. 25. Rule 37(a)(5)(A) governs in cases where a motion to compel is either granted in full or where the discovery sought in the motion is provided after the motion is filed. In such cases, "the court must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion . . . to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees," unless "the movant filed the motion before attempting in good faith to obtain the disclosure or discovery without court action;" or "the opposing party's nondisclosure, response, or objection was substantially justified;" or "other circumstances make an award of expenses unjust." RCFC 37(a)(5)(A) (emphasis added). In contrast, under RCFC 37(a)(5)(C), governing cases where a motion to compel is granted in part and denied in part, the award of expenses is discretionary; thus the rule provides that the court "
The Court believes that the applicable rule here is, as the prior judge instructed, RCFC 37(a)(5)(C). While it is true that the government began supplying some additional documents to plaintiff after plaintiff filed its motion to compel, but before the court ruled on it, the continued production of those documents was mandated by the court's order.
Along with its opening brief in support of its motion to compel, the plaintiff submitted an affidavit of costs for $15,124.61 in connection with the depositions of Paul Serletti, the two undercover agents, Marsha Griffith, Ashley Crystal, James Cortier, AngeloTroncoso, and Casimir Tyska. Tuft's Aff. of Costs, Feb. 7, 2014, ECF No. 96. This affidavit was supported by an itemized list of the expenses incurred, along with copies of receipts.
In its response, the government agrees that "a party should be made whole for any costs it reasonably incurred re-taking depositions that must be re-taken as a result of inadequate discovery responses." Def.'s Resp. 34. It argues, however, that plaintiff has not sufficiently "linked the costs in its Affidavit of Costs to the discovery problems alleged."
The Court concludes that some award of costs to plaintiff is appropriate based on the government's failure to timely produce records belonging to the male undercover agent and to former IRS employees. Thus, plaintiff has made a sufficient showing that its ability to effectively depose the two undercover agents was prejudiced by the government's failure to produce relevant documents contained in the male undercover agent's computer files prior to that deposition. Further, based on the representations made in counsel's declaration attached to plaintiff's reply brief, it appears to the Court that counsel's ability to effectively question Paul Serletti, as well as his supervisor, Marsha Griffith, and Special Agent Tyska, may have been hampered by the lack of certain emails and attachments which were subsequently produced by the government.
On the other hand, the plaintiff has failed to identify any basis for concluding that counsel's ability to effectively depose Ashley Crystal, James Cortier, or Angelo Troncoso would have been enhanced in any material way had plaintiff had in its possession the documents that have since been produced by the government. Accordingly, the Court will award the plaintiff $12,517.75, representing the expenses counsel has identified he incurred to travel to the depositions of the two undercovery agents and of Mr. Tyska, Ms. Griffith and Mr. Serletti.
Plaintiff did not request an award of attorney fees in its original motion for sanctions. Instead, in a lengthy affidavit submitted along with plaintiff's reply brief, counsel asserted that he had spent some 209 hours on the case between August 2012 and December 31, 2012, of which 20.6 hours were spent preparing the first motion to compel filed in October 2012. Tufts Decl. 38, March 24, 2014, ECF No. 100. Because the plaintiff did not clearly raise counsel's attorney fee claim in plaintiff's opening brief, the Court gave the government leave to file a surreply to address the allegations in the declaration accompanying plaintiff's reply brief. Order at 1, Apr. 11, 2014, ECF 106. In its surreply, the government opposes an award of attorney fees to plaintiff, arguing that the fee request was waived because it was not raised in the plaintiff's opening brief and/or that plaintiff is not entitled to an award of fees because plaintiff failed to submit adequate documentation that demonstrates that the fee request is reasonable. Def.'s Surreply 1, Apr. 17, 2014, ECF No. 107.
Attorney fees for sanctions pursuant to RCFC 37 or the identical provision of the Federal Rules of Civil Procedure must be "reasonable." RCFC 37(a)(5)(C) (referencing "reasonable expenses"); RCFC 37(b)(2)(C) (same);
It is clear that plaintiff's existing submission is insufficient to support an award of fees. The request for fees is not supported by any billing statements at all.
Thus, for the reasons set forth above, the Court has determined that the plaintiff's second motion to compel is largely without merit. Were the Court to direct an award of attorney fees to plaintiff based on its partial success in connection with the first motion to compel, fairness would require the court to give the government an opportunity under Rule 37(a)(5)(C) to seek an apportionment of reasonable expenses for the work it has performed in connection with its response to the second largely meritless motion to compel. In the Court's view, however, further rounds of briefing devoted to debating past discovery disputes would be counter-productive and would unduly delay the resolution of this case on its merits. Therefore, the Court concludes that both parties should bear their own costs in connection with the second motion to compel and that the plaintiff's recovery of costs with respect to the first motion shall be limited to the expenses it incurred with respect to those depositions identified above that counsel states that he will need to re-convene.
On the basis of the foregoing, plaintiff's motion to compel and for sanctions is
Further, within one week of the date of this Order, the plaintiff shall identify for the government no more than three additional IRS officials for whom it requests production of documents (if it has not already done so). The plaintiff may also depose those officials to the extent that any documents produced indicate that such depositions would provide relevant information within the meaning of Rule 26(b). In addition, plaintiff may reconvene the depositions of the two undercover agents, Ms. Griffith, Paul Serletti, and Agent Tyska for purposes of addressing matters raised in the document production that occurred subsequent to the time of their original depositions.
Discovery in this matter shall be completed by August 7, 2015. In the interim, the parties shall file a joint status report with the Court every 30 days beginning on May 15, 2015. In addition, the parties shall file a joint status report within 30 days after the close of discovery, suggesting a schedule for further proceedings in this matter.
The parties are strongly encouraged to resolve any discovery disputes going forward without the Court's intervention.
The Clerk of the Clerk is directed to enter judgment accordingly.
