Aroeste et al v. The United States of America et al
Filing
42
ORDER on 36 Joint Discovery Motion. Signed by Magistrate Judge Karen S. Crawford on 2/13/2023. (All non-registered users served via U.S. Mail Service)(ave)
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.323 Page 1 of 12
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
SOUTHERN DISTRICT OF CALIFORNIA
10
11
12
ALBERTO AROESTE and ESTELLA
AROESTE,
15
ORDER ON JOINT DISCOVERY
MOTION [Doc. No. 36]
Plaintiffs,
13
14
Case No.: 22-cv-682-AJB-KSC
v.
UNITED STATES OF AMERICA,
Defendant.
16
17
18
19
20
21
22
23
24
25
26
27
28
I.
Introduction
Plaintiffs Alberto and Estella Aroeste sued the United States seeking to recoup
penalty payments and to discharge their liability for penalties still outstanding for the nonfiling of a Report of Foreign Bank and Financial Accounts (“FBAR”) for the years 2012
and 2013 pursuant to 31 U.S.C. § 5321. Doc. No. 1 ¶ 9. The FBAR penalties at issue were
assessed against the plaintiffs after a three-year administrative audit of their filings for tax
years 2011 through 2015. See Doc. No. 1 ¶¶ 11, 40-44. The United States counterclaimed
against plaintiffs to recover the balance of unpaid penalties. Doc. No. 11. On September
26, 2022, the District Court partially stayed this case pending the Supreme Court’s
resolution of United States v. Bittner, 19 F.4th 734 (9th Cir. 2021), cert. granted 142 S. Ct.
2833 (2022), on grounds the Bittner decision will control the monetary penalties allegedly
1
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.324 Page 2 of 12
1
owed by plaintiffs to the United States. See Doc. Nos. 24, 25. Notwithstanding the stay,
2
the parties are permitted to litigate the following two issues: “(1) whether Alberto Aroeste
3
was a resident of Mexico under the United States – Mexico income tax treaty; and (2)
4
[whether Alberto was] a ‘United States person’ required to file a Report of Foreign Bank
5
and Financial Accounts (FBAR) for 2012 and/or 2013.” Doc. No. 25.
6
On January 3, 2023, counsel for both parties jointly spoke with the Court’s staff
7
about a discovery dispute. Based on the information provided by counsel, the Court
8
understands that plaintiffs seek in discovery the entire administrative record generated by
9
the Internal Revenue Service (“IRS”) during the (now completed) IRS audit of plaintiffs.
10
See Doc. No. 34 at 2. After hearing the parties’ basic positions on the issue, the Court
11
ordered the parties to file a Joint Discovery Motion. See id. at 3-4. The Court specifically
12
directed the parties to focus their briefing on the following two issues:
13
1.
How is Alberto Aroeste’s status under the United States – Mexico tax treaty
14
germane to the issue of whether Mr. Aroeste was required to file the FBAR reports at issue
15
in this case?
16
2.
Assuming Mr. Aroeste’s status under the tax treaty is relevant, how is
17
discovery of the entire administrative record in this matter relevant and proportional
18
(within the meaning of Rule 26) to determining Mr. Aroeste’s status under the tax treaty
19
and determining whether he was a “United States person” for purposes of filing an FBAR?
20
See Doc. No. 34 at 3
21
The parties filed the Joint Motion on January 17, 2023. See Doc. No. 36. On January
22
20, 2023, the Court held a discovery conference at which counsel for both parties argued
23
their respective positions. See Doc. Nos. 37, 41. Having reviewed the papers and heard
24
argument from the parties, the Court GRANTS IN PART AND DENIES IN PART the
25
plaintiffs’ request to discover the entire administrative record for the reasons set forth in
26
this Order.
27
//
28
//
2
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.325 Page 3 of 12
1
II.
2
Based on the briefing and the Court’s multiple colloquies with counsel for the
3
parties, the Court understands the following facts are essentially undisputed: The IRS
4
audited both plaintiffs’ tax filings for the 2011 through 2015 tax years. That audit resulted
5
in an assessment of approximately $3,000,000 of tax and penalty liability. The bulk of
6
plaintiffs’ liability arose from penalties assessed for failure to file so-called “information
7
returns.” Those amounts are not directly at issue in this lawsuit, and the plaintiffs are not,
8
at least at this time, directly contesting them in any judicial or administrative forum. Post-
9
audit income tax assessments accounted for another portion of plaintiffs’ liability to the
10
government. Those tax assessments are likewise not at issue in this lawsuit, but the
11
plaintiffs have challenged them before the United States Tax Court. Finally, the audit led
12
to the FBAR penalties at issue in this lawsuit, which were assessed only for tax years 2012
13
and 2013, because, whether rightly or wrongly, the plaintiffs did not disclose their holdings
14
in various foreign bank accounts during those tax years.
Factual Background of This Discovery Dispute
15
Plaintiffs served a first set of requests for production of documents in November
16
2022. The parties have narrowed the scope of the requests through the meet-and-confer
17
process such that plaintiffs only seek the complete administrative record, including those
18
portions of the record generated during the administrative appeal process. The complete
19
administrative file for the IRS’s audit is a voluminous document that will, if fully produced,
20
include over 7,000 pages of documentary evidence. Only a portion of the IRS’s audit
21
directly concerned the actual imposition of FBAR penalties. The majority of the audit
22
concerned the IRS’s determination of the plaintiffs’ residency under the United States –
23
Mexico Tax Treaty (hereinafter “the Treaty”) for the tax years subject to audit. The
24
complete administrative record will contain not only information provided to the IRS by
25
the plaintiffs during the audit, but also evidence gathered as part of the IRS’s independent
26
investigation. The United States has thus far produced between 800 and 900 pages of
27
documents, at least some of which have been extracted from the administrative record, but
28
3
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.326 Page 4 of 12
1
it has limited its production to those portions of the record it contends are related solely to
2
imposing the FBAR penalties at issue in this lawsuit.
3
III.
4
The parties herein dispute the threshold issue of whether the IRS’s entire
5
administrative record is relevant to this action. The discovery process should, in theory, be
6
cooperative and require little to no supervision from the Court. Sali v. Corono Reg’l Med.
7
Ctr., 884 F.3d 1218, 1219 (9th Cir. 2018). However, a party seeking discovery may move
8
the Court to issue an order compelling production. Fed. R. Civ. P. 37(a). This Court has
9
broad discretion to permit or deny discovery. Hallett v. Morgan, 296 F.3d 732, 751 (9th
10
Cir. 2002). Discovery must be “relevant to any party's claim or defense and proportional
11
to the needs of the case.” See Fed. R. Civ. P. 26(b)(1). Ninth Circuit case law does not
12
clearly answer the question of whether the party seeking discovery bears an initial burden
13
of demonstrating the relevance of that discovery, or whether the party resisting discovery
14
must make a showing of irrelevance to sustain an objection. See Fei Fei Fan v. Yan Yao
15
Jiang, 2023 U.S. Dist. LEXIS 6544, at *5-6 (D. Nev. Jan. 13, 2023); V5 Techs v. Switch,
16
Ltc., 334 F.R.D. 306, 309-10 (D. Nev. 2019). It is settled, however, that if the information
17
sought is relevant, the party resisting discovery bears the ultimate burden of convincing the
18
Court that the discovery sought should not be permitted. See V5 Techs, 334 F.R.D. at 309
19
(citing Blankenship v. Hearst Corp., 519 F.2d 418, 429 (9th Cir. 1975)).
ANALYSIS
20
Whether this relevance standard is satisfied here depends on two distinct issues. The
21
first issue is purely legal: does Alberto Aroeste’s tax residency status under the Treaty have
22
any legal effect on whether he was required to file FBAR forms in 2012 and 2013? The
23
second issue is more inherently factual: if Mr. Aroeste’s tax residency status under the
24
treaty is relevant to this matter, does discovery of the administrative record properly further
25
that determination (as well as the determination of whether he was required to file FBARs
26
more generally)?
27
//
28
//
4
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.327 Page 5 of 12
Whether Mr. Aroeste’s Tax Residency Status Under the Treaty is Legally
1
(A)
2
Relevant to the IRS’s Imposition of FBAR Penalties
3
The answer to whether Alberto Aroeste’s status under the Treaty has any effect on
4
the issue of the FBAR filing requirement in tax years 2012 and 2013 depends on the
5
application of multiple, interconnected statutes and regulations. Anyone who qualifies as a
6
“United States person” must file an annual FBAR report to disclose foreign bank holdings,
7
and the IRS assesses penalties against those “United States persons” who fail to file. See
8
31 C.F.R. § 1010.350(a); Bedrosian v. U.S. Dep’t of Treasury, 912 F.3d 144, 147 (3d Cir.
9
2018). Thus, as the government acknowledges, whether Mr. Aroeste was a “United States
10
person” is potentially outcome determinative of his liability for the FBAR penalties at issue
11
in this case. See Doc. No. 36 at 7.
12
The parties dispute whether Mr. Aroeste’s status under the Treaty has any bearing
13
on whether he was properly considered a “United States person” for purposes of filing
14
FBARs. Compare id. at 2-4 with id. at 7-9. Plaintiffs contend that, if Mr.Aroeste was
15
treated as a Mexican resident under the Treaty, that fact would disqualify him from being
16
counted as a “United States person” under the FBAR regulations. See id. at 2-3. Defendant
17
contends Mr. Aroeste’s status under the Treaty is irrelevant because the Treaty solely
18
concerns residency for purposes of income tax and excise tax assessments under Title 26
19
of the United States Code, whereas FBAR penalties are assessed under Title 31. See id. at
20
7-8.
21
“United States person,” as used in the context of FBAR assessments, is a term of art
22
specifically defined in the applicable Title 31 regulations. See generally 31 C.F.R.
23
§ 1010.350(b). The term applies to, among other things, “[a] resident of the United States.”
24
Id. § 1010.350(b)(2). “[R]esident of the United States” is further defined to include an
25
individual who is a “resident alien” under 26 U.S.C. 7701(b) and the regulations
26
thereunder. Id.
27
A non-U.S. citizen is treated as a “resident alien” if he or she is a “lawful permanent
28
resident of the United States at any time” during an applicable calendar year. 26 U.S.C.
5
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.328 Page 6 of 12
1
§ 7701(b)(1)(A)(i). An individual is a “lawful permanent resident” if he or she has been
2
“lawfully accorded the privilege of residing permanently in the United States as an
3
immigrant in accordance with immigration laws” and if “such status has not been revoked
4
(and has not been administratively or judicially determined to have been abandoned).” Id.
5
§ 7701(b)(6). However, “lawful permanent resident” status ceases to exist—at least for tax
6
purposes—if an individual “commences to be treated as a resident of a foreign country
7
under the provisions of a tax treaty between the United States and the foreign country, does
8
not waive the benefits of such treaty applicable to residents of the foreign country, and
9
notifies the Secretary of the commencement of such treatment.” Id.1
10
The upshot of this statutory and regulatory framework applicable to this action, in
11
which tax treaties provide a potential escape hatch that excuses certain “United States
12
persons” from filing FBARs, can be expressed as a 5-step process:
13
(1)
Under 26 U.S.C. § 7701(b)(6), anyone allowed to permanently reside within
14
the United States by virtue of US immigration laws is a “lawful permanent
15
resident” for tax purposes unless an applicable tax treaty allows that person
16
to be treated as a resident of a foreign country for tax purposes only;
17
(2)
Under 26 U.S.C. § 7701(b)(1)(A)(i), any “lawful permanent resident” is a
“resident alien”;
18
19
(3)
Under 31 C.F.R. § 1010.350(b)(2), any “resident alien” is a “resident of the
United States”;
20
21
(4)
Under 31 C.F.R. § 1010.350(b), Any “resident of the United States” is a
“United States person” required to file an FBAR;
22
23
24
25
26
27
28
Plaintiffs’ counsel emphasizes that one can remain a lawful permanent resident for
immigration purposes, but at the same time be treated as a resident of a foreign country for
tax filing purposes under a tax treaty. See Doc. No. 41 at 15:16-17:9. Thus, Mr. Aroeste’s
country of “residency” under the Treaty might be “Mexico” when it comes to filing his
taxes, but he can remain a lawful permanent resident who, as a matter of immigration law,
is free to permanently reside in the United States.
1
6
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.329 Page 7 of 12
1
(5)
Therefore, any person allowed to permanently reside in the United States by
2
virtue of US immigration laws must file an FBAR unless that person is entitled
3
to be treated as a resident of a foreign country under a tax treaty.
4
It is undisputed that Mr. Aroeste is, and for many years has been, a “lawful
5
permanent resident” of the United States as a matter of immigration law. Doc. No. 41 at
6
15:11-24. To use the colloquial terminology, he has a “green card.” Id. His status as a
7
“lawful permanent resident” in turn makes him a “resident alien,” which means he is a
8
“resident of the United States” and therefore, by operation of the statutes and regulations,
9
at least presumptively a “United States person” required to file FBARs. The question is
10
whether the Treaty provides him an escape hatch. Because the United States and Mexico
11
indisputably have a tax treaty, Mr. Aroeste would not be a lawful permanent resident within
12
the meaning of 26 U.S.C. section 7701(b)(6) if he commenced to be treated as a resident
13
of Mexico under the Treaty (with the additional caveats enumerated in the statute); which
14
might in turn have ultimately excused him from the requirement to file FBARs as a “United
15
States person.” The Court therefore concludes a determination of Mr. Aroeste’s tax
16
residency under the Treaty is directly relevant to—indeed it is outcome determinative of—
17
the issue of whether he was required to file the FBARs at issue in this lawsuit.
18
The United States first suggests application of the Treaty is irrelevant here because
19
the Treaty only concerns income taxes and excises taxes, and Mr. Aroeste was assessed
20
FBAR penalties under a wholly different body of law. See Doc. No. 36 at 7. But this
21
argument does not refute the plain language of the FBAR regulations, which explicitly
22
invoke provisions of Title 26, including the provision that requires consideration of an
23
individual’s status under an applicable tax treaty for the purpose of determining whether
24
an individual is a “United States person” subject to FBAR filing.
25
The United States further suggests it “does not matter” how Mr. Aroeste was treated
26
under the Treaty because “[i]t only matters that Mr. Aroeste has lawful permanent
27
residence and has not rescinded that residency.” Doc. No. 36 at 8. But, again, the statutory
28
framework explicitly provides that “lawful permanent resident” status can be abrogated,
7
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.330 Page 8 of 12
1
for tax purposes only, by application of the Treaty, without requiring individuals to forsake
2
their immigration status to claim the taxation benefits of a tax treaty. See 26 U.S.C.
3
§ 7701(b)(6). Based on the Court’s reading of the controlling law, the Court
4
OVERRULES defendant’s objection that considerations of the Treaty are legally
5
irrelevant to this lawsuit. Accordingly, if the administrative record is factually relevant and
6
proportional to determining Mr. Aroeste’s residency status under the Treaty (and also to
7
assessing whether Mr. Aroeste was a “United States person” for any other reasons), it is
8
discoverable.
9
(B) Whether the Administrative Record is Relevant to Determining Mr.
10
Aroeste’s Status Under the Treaty or Determining Whether He Was Otherwise
11
a “United States Person” For Purposes of Filing an FBAR
12
Plaintiffs have acquired a redacted copy of the IRS’s administrative record from the
13
audit through a provision of the Taxpayer First Act. Doc. Nos. 1 ¶ 42; 36 at 5-6; 41 at 7:24-
14
8:7. That copy is, according to plaintiffs, incomplete because it omits any information
15
added to the record after the initial audit, and it was heavily redacted by the IRS when
16
produced to plaintiff during the administrative appeal. Doc. No. 41 at 7:24-8:7, 8:19-9:4.2
17
According to plaintiffs, their review of the documents suggests the vast majority of the
18
IRS’s audit concerned whether Mr. Aroeste was a resident of the United States or of
19
Mexico under the Treaty. See Doc. Nos. 36 at 5; 41 at 7:5-18. As represented, the IRS’s
20
record includes information gathered by the IRS auditor to determine how much time Mr.
21
Aroeste spent in the United State and Mexico during the tax years at issue, which country
22
was his permanent home, and in which country he has the most significant economic and
23
family relationships. Doc. No. 41 at 7:5-18. All this information bears upon whether he is
24
25
2
26
27
28
Plaintiffs’ counsel further suggests the administrative record is still being augmented
as the IRS commences further penalty proceedings against the plaintiffs. See Doc. No. 41
at 10:22-11:4. If that is true, then the United States could conceivably be under a continuing
duty to supplement if newly incorporated documents fall within the scope of any order
compelling production. See Fed. R. Civ. P. 26(e).
8
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.331 Page 9 of 12
1
a resident, for tax-filing purposes only, of the United States or of Mexico under the Treaty.
2
Id. at 4:19-5:17, 7:10-18. The United States does not appear to meaningfully dispute this
3
assertion about the nature and contents of the record.
4
As the Court has already concluded, Mr. Aroeste’s residency under the Treaty is a
5
potentially dispositive issue in this matter. If, under the Treaty, he was a Mexican resident
6
in 2012 and 2013, he would have no obligation to file FBARs; but if he was a resident of
7
the United States during this time frame, he is liable for some amount of FBAR penalties.
8
Mr. Aroeste seeks to prove he was a Mexican resident for tax purposes, and thereby avoid
9
any liability for his admitted failure to file FBARs. Doc. No. 41 at 5:21-6:7. The IRS’s
10
administrative record bears directly on that issue. It is, therefore, relevant to this matter.
11
However, Mr. Aroeste was only assessed FBAR penalties in 2012 and 2013, and the
12
administrative audit encompassed tax years 2011 through 2015. See Doc. No. 1 ¶¶ 9, 11,
13
40-44. Mr. Aroeste has not explained to the Court how his residency in any years other
14
than 2012 or 2013 has any bearing on whether he was a resident of the United States during
15
those years. Indeed, his counsel appears to agree it would be sufficient to consider only the
16
information bearing on the tax years in which Mr. Aroeste was assessed FBARS, i.e., 2012
17
and 2013. Doc. No. 41 at 18:6-20.3 Thus, the Court concludes the only portions of the
18
record relevant to this case are those portions that bear upon Mr. Aroeste’s residency under
19
the Treaty for tax years 2012 and 2013.
20
The United States argues discovery of the administrative record would violate the
21
stay in this case. Doc. Nos. 36 at 9-10; 41 at 11-12. This Court disagrees. Mr. Aroeste’s
22
residency under the Treaty is open to discovery notwithstanding the partial stay. See Doc.
23
24
25
26
27
28
Plaintiffs’ counsel asserts that it does not matter when information entered the
record, e.g., if it were added to the record after the initial audit yet bore upon Mr. Aroeste’s
residency during 2012 and 2013, it should nonetheless be discoverable. See Doc. No. 41 at
19. The Court agrees. The proper focus here is on whether the information in the record
pertains to determining Mr. Aroeste’s residency in 2012 and 2013 under the Treaty, not
when the information was created or when it became a part of the record.
3
9
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.332 Page 10 of 12
1
Nos. 25, 27. Insofar as portions of the administrative record relate to Mr. Aroeste’s
2
residency under the Treaty for tax years 2012 and 2013, they are relevant and within the
3
permissible scope of discovery set forth in the District Court’s September 26, 2022, Order.
4
The United States further states the bulk of the record is not relevant because it
5
concerns liability for income taxes and information penalties not at issue in this lawsuit
6
and that discovery should be limited exclusively to the assessment of FBAR penalties. Doc.
7
No. 36 at 9. The United States claims it can parse the information in the record and produce
8
that which it “deems relevant to the income tax treaty and the 2012, 2013 FBAR penalty”
9
while at the same time withholding those portions that pertain to the assessment of Mr.
10
Aroeste’s residency under the Treaty but are somehow “not relevant to the FBARs.” See,
11
e.g., Doc. No. 41 at 24:5-25:8, 28:25-30:22. Mr. Aroeste’s counsel correctly notes
12
residency under the Treaty is a single question that is not divisible into ‘FBAR purposes’
13
or ‘income tax purposes.’ Doc. No. 41 at 26:12-28:24, 31:3-32:23. There is simply no
14
authority for the government’s contention that application of the Treaty’s test for tax
15
residency differs on the basis of the taxes or penalties assessed against a taxpayer. Thus,
16
although Mr. Aroeste’s residency under the Treaty may be relevant to assessing liabilities
17
not at issue in this case, the United States’ argument creates an illusory distinction. In sum,
18
assessment of the Title 26 (tax and information penalty) issues are resolved on the same
19
factual basis as the Title 31 (FBAR penalty) issues in the audit. Doc. No. 36 at 6. The Court
20
therefore concludes that all information related to determining Mr. Aroeste’s residency
21
under the Treaty in 2012 and 2013 is discoverable, not just that information related to the
22
imposition of FBAR penalties.4
23
24
25
26
27
28
Plaintiff’s counsel has expressed concern about the United States construing the
scope of relevant information narrowly, and thereby refusing to produce otherwise
discoverable information. See, e.g., Doc. No. 41 at 26:12-28:24, 30:24-32:23. The Court is
confident the United States will abide by the Court’s determination of what is relevant and
discoverable as delineated in this Order. The Court’s Order requires the United States to
4
10
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.333 Page 11 of 12
1
The United States also argues evidence related to Mr. Aroeste’s residency under the
2
Treaty is not relevant to this case because Mr. Aroeste did not timely claim the benefits of
3
the Treaty. See Doc. No. 41 at 13:25-15:1, 20:3-23:8. Litigants, however, are not required
4
to supply proof of their claims as a precondition of obtaining discovery. See generally Big
5
City Dynasty v. FP Holdings, L.P., 336 F.R.D. 507, 512-13 (D. Nev. 2020) (collecting
6
cases); accord Reed v. 1-800 Contacts, Inc., 3:12-cv-2359-JM-BGS, 2013 U.S. Dist.
7
LEXIS 192753, at *5-6 (S.D. Cal. Mar. 29, 2013). Rather, discovery must merely be
8
relevant to an asserted claim. Fed. R. Civ. P. 26(b)(1). Whether a litigant can satisfy the
9
ultimate burden of persuasion is a factual question wholly separate from the discoverability
10
of facts and information relevant to those claims. Big City Dynasty, 336 F.R.D. at 512-13.
11
The United States’ final argument derives from a concern that plaintiffs are trying
12
to obtain the entire IRS administrative record so they can use it for “leverage” in their case
13
currently pending before the United States Tax Court or to prepare for a yet-unfiled action
14
challenging the information penalties. See Doc. No. 36 at 8-9. The Court is responsible for
15
determining whether the administrative record is discoverable in this case. In any event,
16
the Court has already restricted the information that will be disclosed to the plaintiffs to
17
that which is germane to this lawsuit and the FBAR penalties at issue. The Court, having
18
19
20
21
22
23
24
25
26
27
28
turn over any information that is relevant to determining Mr. Aroeste’s residency under the
Treaty, whether that information tends to inculpate or exculpate him in this matter. The
Court also notes the United States has a subject matter expert on hand, namely, the IRS
auditor who compiled the record at issue. Because the IRS was presumably competent to
assess Mr. Aroeste’s status under the Treaty when it imposed penalties against him, the
IRS is likewise competent to assist the United States’ counsel in determining the scope of
responsive documents. The Court notes, however, that counsel for the United States may
not rely entirely on the IRS to make this determination, because an attorney appearing
before this Court has an independent obligation, imposed as a function of her signature on
a party’s discovery responses, to ensure all responses and disclosures comply with a party’s
discovery obligations. See Fed. R. Civ. P. 26(g). As such, counsel for the United States
must be involved in the process of identifying responsive documents and must
independently determine that any information withheld in discovery falls outside the scope
of this Order.
11
22-cv-682-AJB-KSC
Case 3:22-cv-00682-AJB-KSC Document 42 Filed 02/13/23 PageID.334 Page 12 of 12
1
concluded the portions of the record that pertain to Mr. Aroeste’s status under the Treaty
2
for tax years 2012 and 2013 are discoverable, accordingly OVERRULES IN PART AND
3
SUSTAINS IN PART the United States objection that the administrative record exceeds
4
the scope of discovery permissible under Rule 26.
5
III.
6
The legal question of Mr. Aroeste’s residency under the Treaty during tax years 2012
7
and 2013 is directly relevant to this matter. The IRS’s administrative record contains
8
information that is relevant to that issue because it contains the information the IRS
9
considered in determining that Mr. Aroeste was a resident of the United States under the
10
Treaty for tax years 2012 and 2013. It is, therefore, discoverable. However, only
11
information in the record related to determining Mr. Aroeste’s status under the Treaty
12
during tax years 2012 and 2013 is relevant and subject to production because other tax
13
years are not at issue in this matter.
CONCLUSION
14
Accordingly, the United States must produce all portions of the administrative
15
record, whether generated during the initial audit or during any subsequent
16
proceedings, which are relevant to Mr. Aroeste’s residency under the Treaty during
17
tax years 2012 and 2013. To the extent the United States seeks to withhold information
18
on the basis of a privilege, the government must simultaneously produce a privilege log
19
that fully complies with Paragraph IX of this Court’s Chambers’ Rules. The United States
20
is ordered to produce all documents as delineated herein within 14 days of the date of this
21
Order.
22
23
IT IS SO ORDERED.
Dated: February 13, 2023
24
25
26
27
28
12
22-cv-682-AJB-KSC
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?