Pesky et al v. United States of America

Filing 52

MEMORANDUM AND ORDER Re: Motion to Compel Production of Documents and Interrogatory Responses. Granting 36 Motion to Compel production of documents and interrogatory responses. Signed by Judge William B. Shubb. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by jm)

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UNITED STATES DISTRICT COURT
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FOR THE DISTRICT OF IDAHO
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NO. CIV. 1:10-186 WBS

ALAN PESKY AND WENDY PESKY,
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Plaintiffs,
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MEMORANDUM AND ORDER RE:
MOTION TO COMPEL PRODUCTION OF
DOCUMENTS AND INTERROGATORY
RESPONSES

v.
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UNITED STATES OF AMERICA,
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Defendant.
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Defendant moves to compel production of documents in

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response to defendant’s request for production of documents and

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to compel further responses to interrogatories 22 and 23 in

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defendant’s first set of interrogatories.

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to plaintiffs’ reasonable cause exception to tax penalties.

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the purpose of the instant motion, the parties do not dispute

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that the requested documents or interrogatory responses are

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Both requests relate
For

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protected by attorney-client or work-product privileges.1

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primary issue is whether plaintiffs have impliedly waived the

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privileges.

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The

Numerous courts have held that the defense of reliance

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on the advice of counsel impliedly waives the attorney-client

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privilege.

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App’x 908, 919 (6th Cir. 2010); Columbia Pictures Television,

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Inc. v. Krypton Broad. of Birmingham, Inc., 259 F.3d 1186, 1196

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(9th Cir. 2001); United States v. Workman, 138 F.3d 1261, 1263

See, e.g., New Phx. Sunrise Corp. v. C.I.R., 408 F.

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(8th Cir. 1998); Glenmede Trust Co. v. Thompson, 56 F.3d 476, 486

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(3d Cir. 1995); Chevron Corp. v. Pennzoil Co., 974 F.2d 1156,

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1162 (9th Cir. 1992); Gonzales v. United States, No. C-08-03189,

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2010 WL 1838948, at *2 (N.D. Cal. May 4, 2010); In re Broadcom

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Corp. Sec. Litig., No. SACV 01275, 2005 WL 1403513, at *2 (C.D.

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Cal. Apr. 7, 2005), affirmed by, No. SA CV 01275, 2005 WL 1403508

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(C.D. Cal. May 10, 2005); In re G-I Holdings, Inc., 218 F.R.D.

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428, 431 (D.N.J. 2003); Johnston v. C.I.R., 119 T.C. 27, 35 (U.S.

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Tax Ct. 2002), supplemented by 122 T.C. 124 (2004), aff’d on

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other grounds, 461 F.3d 1162 (9th Cir. 2006); see also Kaiser

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Found. Health Plan, Inc. v. Abbott Labs., Inc., 552 F.3d 1033,

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1042 (9th Cir. 2009) (dictum); In re Lott, 424 F.3d 446, 453 (6th

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Cir. 2005) (same); In re Pioneer Hi-Bred Int’l, Inc., 238 F.3d

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1370, 1374 (Fed. Cir. 2001) (same); Evergreen Trading, LLC ex

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rel. Nussdorf, 80 Fed. Cl. 122, 130 (2007) (same).

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A discussion of the attorney-client and work-product
privileges can be found in United States v. Richey, 632 F.3d 559,
560 (9th Cir. 2011), a case involving the Internal Revenue
Service’s petition to enforce a summons against one of Alan Pesky
and Wendy Pesky’s appraisers.
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In Chevron Corp., the Ninth Circuit held:
The
privilege
which
protects
attorney-client
communications may not be used both as a sword and a
shield. Where a party raises a claim which in fairness
requires disclosure of the protected communication, the
privilege may be implicitly waived. . . . [T]o the extent
that [defendant] claims that its tax position is
reasonable because it was based on advice of counsel,
[defendant] puts at issue the tax advice it received.

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Chevron Corp., 974 F.2d at 1162 (citation omitted).

Accordingly,

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by alleging that they relied on the advice of counsel in support

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of the reasonable cause exception to the tax penalties and by

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initially responding to defendant’s interrogatory 22 about this

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allegation by stating that they relied on counsel’s advice,

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plaintiffs have waived the attorney-client privilege.

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Compl. ¶¶ 78-79 (Docket No. 1); (Hatzimichalis Decl. Ex 3 at 9

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(Pls.’ Resp. to Def.’s First Set of Interrog.) (Docket No.

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36-2).)

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by some courts, the court would find that plaintiffs waived the

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privilege.

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(applying three-part test).

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(See

Even if the court were to apply the three-part test used

See In re G-I Holdings, Inc., 218 F.R.D. at 431

“Most courts recognize that a work product waiver is

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not automatic in cases involving a reliance on counsel defense. .

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. . However, many courts do find that waiver of the work product

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doctrine is proper under the same fairness considerations that

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govern waiver of attorney-client privilege.”

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Corp. Sec. Litig., 2005 WL 1403513, at *2 (citing cases).

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Accordingly, the court finds that plaintiffs have waived the

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work-product privilege here.

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In re Broadcom

Plaintiffs’ other arguments about relevance,
defendant’s burden of production, and the sufficiency of the
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identity of the documents are without merit.2

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responses to the instant discovery requests asserted privileges

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that the court finds that plaintiffs have waived and other

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arguments that the court now rejects.

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motion to compel production of documents and interrogatory

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responses will be granted.

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the requested documents fall outside of the scope of the waiver,

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the court will order plaintiffs to submit their proposed

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responses to the court for in camera review.

Plaintiffs’

Accordingly, defendant’s

In order to determine whether any of

IT IS THEREFORE ORDERED that defendant’s motion to

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compel production of documents and interrogatory responses be,

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and the same hereby is, GRANTED, subject to the following

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procedures.

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With respect to documents:

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(1)

Plaintiffs shall, using the two privilege logs

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that plaintiffs have already produced, place check marks next to

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all documents on the privilege logs that are responsive to the

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disputed request for production of documents relevant to

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plaintiffs’ reasonable cause exception to tax penalties and that

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plaintiffs may rely upon at trial to prove their reasonable cause

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exception.

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logs to defendant within ten days of the date of this Order.

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Plaintiffs shall provide these check-marked privilege

(2)

Defendant shall, using plaintiffs’ previously

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Plaintiffs have also argued, without specificity, that
fairness may not require all of the requested discovery. (Pls.’
Resp. at 4-8 (relying on, among other cases, Bittaker v.
Woodford, 331 F.3d 715, 720-21 (9th Cir. 2003) (en banc) (case
involving ineffective assistance of counsel claim in habeas
corpus context)) (Docket No. 47).) Here, however, the court
finds, to the contrary, that fairness requires discovery.

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check-marked privilege logs, place check marks next to additional

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documents on the privilege logs that defendant believes are

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responsive to the disputed request for production of documents

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relevant to the reasonable cause exception.

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return the check-marked privilege logs to plaintiffs within

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fifteen days of the date of this Order.
(3)

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Defendant shall

Plaintiffs shall provide all documents on the

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privilege logs by which either plaintiffs or defendant has placed

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a check mark to the court for in camera review within twenty days

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of the date of this Order.

In addition to the privileged

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documents, plaintiffs shall provide the check-marked privilege

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logs to the court.

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parties, which documents plaintiffs must produce to defendant in

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response to the disputed request for production of documents.

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With respect to interrogatory responses, plaintiffs

The court will then determine, and inform the

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shall provide proposed responses to the disputed interrogatories,

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22 and 23, which also relate to the reasonable cause exception,

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to the court for in camera review within twenty days of the date

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of this Order.

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whether plaintiffs’ proposed interrogatory responses are

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sufficient.

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The court will determine, and inform the parties,

Submissions may be e-mailed to the court’s Orders

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e-mail address: [e-mail].

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DATED:

July 26, 2011

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