Louisiana Health Care Self Insurance Fund v. The United States of America

Filing 88

RULING and ORDER: The Court will DEFER ruling on the 45 Motion in Limine to Exclude Testimony and Report of Edward W. Buttner, IV until a Daubert hearing is conducted on the first day of trial prior to the selection of a jury. The 70 Motion in L imine to Exclude Evidence is GRANTED, except that the Court will DEFER ruling on the admissibility of the Buttner survey of property and casualty insurers until trial. The Court will GRANT 40 Motion in Limine Regarding Proposed Testimony of Craig L . Pichette in part to the extent that the parties are instructed that neither expert will be permitted to give opinion testimony on legal conclusions, but the Court will DEFER until the time of trial a ruling on whether specific questions call for a legal conclusion. The 69 Motion in Limine Regarding Plaintiffs Proposed Evidence of Administrative Proceedings Before the Internal Revenue Service is GRANTED IN PART and DEFERRED IN PART until a question-by-question determination can be made on the day of trial outside the presence of the jury. Signed by Judge John W. deGravelles on 9/29/2014. (SMG) Modified to edit text on 9/29/2014 (SMG).

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
LOUISIANA HEALTH CARE SELF
INSURANCE FUND

CIVIL ACTION NO. 12-766
JUDGE JOHN W. deGRAVELLES

VERSUS

MAG. JUDGE RICHARD L.
BOURGEOIS, JR.

THE UNITED STATES OF AMERICA

JURY TRIAL

RULING AND ORDER ON MOTIONS IN LIMINE
This Ruling and Order addresses several motions in limine filed by the parties.1
Specifically, Plaintiff Louisiana Health Care Self Insurance Fund (the “Taxpayer”) has filed a
Motion in Limine to Exclude Testimony and Report of Edward W. Buttner, IV (R. Doc. 45) and
a Motion in Limine to Exclude Evidence (R. Doc. 70). The Defendant United States of America
(the “IRS”) has filed a Motion in Limine Regarding Proposed Testimony of Craig L. Pichette
(R. Doc. 40) and a Motion in Limine Regarding Plaintiffs’ Proposed Evidence of Administrative
Proceedings Before the Internal Revenue Service (R. Doc. 69). The Court heard oral argument
on each motion on September 23, 2014.
Considering the law, the facts in the record, and the arguments of the parties, the Court
will DEFER ruling on Taxpayer’s Motion in Limine to Exclude Testimony and Report of
Edward W. Buttner, IV (R. Doc. 45) until a Daubert hearing is conducted on the first day of trial
prior to the selection of a jury. Further, Taxpayer’s Motion in Limine to Exclude Evidence (R.
Doc. 70) is GRANTED, except that the Court will DEFER ruling on the admissibility of the
Buttner survey of property and casualty insurers until trial. The Court will GRANT the IRS’s
Motion in Limine Regarding Proposed Testimony of Craig L. Pichette (R. Doc. 40) in part to the
extent that the parties are instructed that neither expert will be permitted to give opinion
1

Plaintiff Louisiana Health Care Self Insurance Fund has also filed a Motion for Partial Summary Judgment (R. Doc.
44). The Court will issue a separate Ruling and Order dealing with this motion.

testimony on legal conclusions, but the Court will DEFER until the time of trial a ruling on
whether specific questions call for a legal conclusion. Finally, the IRS’s Motion in Limine
Regarding Plaintiffs’ Proposed Evidence of Administrative Proceedings Before the Internal
Revenue Service (R. Doc. 69) is GRANTED IN PART, except that that the Court will DEFER
ruling on questions related to the credibility of Edward Buttner until the Court can determine the
validity of each question at trial outside the presence of the jury.
I.

Factual Background
This is a tax refund case. Taxpayer is a workers’ compensation self-insurers’ fund

formed under the laws of the State of Louisiana. (See stipulation in Proposed Pretrial Order, R.
Doc. 58, p. 3). At all times relevant to this action, it was engaged in the business of providing
workers compensation coverage to its member employers. (Id.) Taxpayer collects funds from its
members and pays the members’ workers compensation liabilities over time. (Id.)
This case involves its 2002, 2003, and 2004 tax returns. In these years, Taxpayer
claimed certain deductions for “Dividends to Policyholders.” (Id. at 4). The IRS later undertook
an audit of those years and raised an issue with the deductibility of those dividends under 26
U.S.C. § 832(c)(11). (Id.) The IRS issued a Notice of Deficiency to Taxpayer dated January 6,
2012 determining that Taxpayer had a deficiency in its tax amount. (Id.) The deficiencies relate
solely to the deductions from Taxpayer’s income for member employer dividends declared for
the 2002 through 2004 calendar years. (Id.)
On March 30, 2012, Taxpayer made a payment under protest to the IRS in the amount of
$2,751,669.40 for all alleged tax deficiencies and penalties assessed against Taxpayer for the
January 6, 2012, Statutory Notice. (Id).

2

Taxpayer claims it was erroneously assessed taxes for amounts that were purportedly
claimed as dividends deductible under 26 U.S.C. § 832(c)(11) for the tax periods ending
December 31, 2002; December 31, 2003; and December 31, 2004. (Id. at 1). Plaintiff now seeks
repayment of the $2,751,669.40, plus interest, attorneys’ fees, expert fees, and costs.
The IRS originally claimed that the Taxpayer was not entitled to a refund because it was
subject to the economic performance rule and all-events test under 26 U.S.C. § 461(h). On
September 2, 2014, the IRS submitted a Supplemental Brief (R. Doc. 67) admitting that the allevents test and economic performance rule did not apply in this case.
The IRS now claims that the Taxpayer is not entitled to a refund because the Taxpayer
never “declared” a “dividend.” (R. Doc. 67, p. 2). That is the sole issue that remains for the
Taxpayer’s Motion for Partial Summary Judgment. (Id). The IRS claims that, according to the
government’s expert witness Edward Buttner, the Taxpayer “declared a de facto surplus, not a
dividend.” (Id.). The IRS explains that Buttner “based his opinions on the fact that [Taxpayer]
refrained from returning its revenues in excess of expenses to its members in order to pay future
and/or unforeseen financial obligations, amongst other reasons.” (Id.)
II.

Taxpayer’s Motion in Limine to Exclude Testimony and Report of Edward W.
Buttner, IV (R. Doc. 45)
Taxpayer’s first Motion in Limine seeks to exclude the IRS’s expert Edward Buttner.

For the reasons discussed below, Taxpayer claims Buttner’s testimony and report are irrelevant
and unreliable.
This Court has explained:
The admissibility of expert testimony is governed by Federal Rule of Evidence
702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., (509 U.S. 579) (1973),
which provide that the court serves as a gatekeeper, ensuring all scientific
testimony is relevant and reliable. This gatekeeping role extends to all expert
testimony, whether scientific or not. Kumho Tire Co., Ltd. v. Carmichael, 526
3

U.S. 137, 147 (1999). Under Rule 702, the court must consider three primary
requirements in determining the admissibility of expert testimony:
1) qualifications of the expert witness; 2) relevance of the testimony; and 3)
reliability of the principles and methodology upon which the testimony is based.
Fayard v. Tire Kingdom, Inc., No. 09-171, 2010 WL 3999011, at *1 (M.D. La. Oct. 12, 2010).
“Trial courts have ‘wide discretion’ in deciding whether or not a particular witness
qualifies as an expert under the Federal Rules of Evidence.” Hidden Oaks Ltd. v. City of Austin,
138 F.3d 1036, 1050 (5th Cir.1998). As explained in Johnson v. Samsung Electronics America,
Inc., 277 F.R.D. 161, 164 (E.D.La. 2011):
When expert testimony is challenged under Daubert, the burden of proof rests
with the party seeking to present the testimony. Moore v. Ashland Chemical,
Inc., 151 F.3d 269 (5th Cir.1998). To meet this burden, a party cannot simply
rely on its expert's assurances that he has utilized generally accepted scientific
methodology. Rather, some objective, independent validation of the expert's
methodology is required. Id.
Further, as explained in Scordill v. Louisville Ladder Group, L.L.C., No. 02-2565, 2003 WL
22427981, at *3 (E.D.La. Oct. 24, 2003) (Vance, J.):
The Court notes that its role as a gatekeeper does not replace the traditional
adversary system and the place of the jury within the system. See Daubert, 509
U.S. at 596 [113 S.Ct. 2786]. As the Daubert Court noted, “[v]igorous crossexamination, presentation of contrary evidence, and careful instruction on the
burden of proof are the traditional and appropriate means of attacking shaky but
admissible evidence.” Id. (citing Rock v. Arkansas, 483 U.S. 44, 61, 107 S.Ct.
2704, 97 L.Ed.2d 37 (1987)). The Fifth Circuit has added that, in determining the
admissibility of expert testimony, a district court must defer to “ ‘the jury's role as
the proper arbiter of disputes between conflicting opinions. As a general rule,
questions relating to the bases and sources of an expert's opinion affect the weight
to be assigned that opinion rather than its admissibility and should be left for the
jury's consideration.’ ” United States v. 14.38 Acres of Land, More or Less Sit. in
Leflore County, Miss., 80 F.3d 1074, 1077 (5th Cir.1996) (quoting Viterbo v. Dow
Chemical Co., 826 F.2d 420, 422 (5th Cir.1987)).
“Notwithstanding Daubert, the Court remains cognizant that ‘the rejection of expert testimony is
the exception and not the rule.’” Johnson, 277 F.R.D. at 165 (citing Fed.R.Evid. 702 Advisory
Committee Notes to 2000 Amendments).
4

Taxpayer has objected to Buttner’s testimony as irrelevant and unreliable on several
grounds. Taxpayer first argues that self-insurance funds (SIFs) are distinct from other insurance
companies and that Butner has no experience working with Louisiana SIFs. Instead, Butner is
relying on opinions from his experience with GAAP for property and casualty insurance
companies. The IRS counters that SIFs and property and casualty insurance companies are
treated the same for federal tax purposes.
Taxpayer next attacks Buttner for his ignorance of tax law. Buttner has admitted he does
not “give tax advice”, does not “do tax returns,” and does not “typically do tax research.” “I
don’t do tax research, I don’t analyze tax cases, and I don’t provide tax advice to my insurance
clients. I think that’s a very highly specialized area.” (Deposition of Edward W. Buttner, IV, p.
18, 23, 77, R. Doc. 45-4). Further, Buttner has never read the federal cases dealing with
deductibility of dividends under Section 832(c)(11). (Buttner Depo., p. 6, R. Doc. 45-4).
Taxpayer particularly emphasizes the IRS’s statement that “this case is about federal tax law.”
(IRS’s Memorandum in Opposition to Motion in Limine to Exclude Textimony and Report of
Edward W. Buttner, IV., R. Doc. 49, p. 2-3).
Further, Buttner has only worked on Florida SIFs, and there are important differences
between Florida law and Louisiana law. For instance, Florida places limits on the distribution of
dividends. The IRS counters by stating that the issue is federal tax law and not variations of
state law.
Buttner’s claim that policyholder dividends should be paid within a year was based on a
review of property and casualty insurance companies that prepared and filed annual statements
with the National Association of Insurance Commissioners. But Taxpayer is not an insurer and
is not required to file these statements.

5

According to Taxpayer, Buttner’s testimony that the Taxpayer’s financial statements
were not GAAP compliant is irrelevant. Even if true, this fact has nothing to do with the
determination of the deduction taken by Taxpayer under § 832(c)(11).

The language in

§ 832(c)(11) says “dividends and similar distributions paid or declared to policyholders in their
capacity as such … For purposes of this paragraph, the term “paid or declared” shall be
construed according to the method of accounting regularly employed in keeping the books of the
insurance company.” Buttner claims this method of accounting refers to the method used in
preparing the financial statements Taxpayer files with the Louisiana Department of Insurance.
But, according to Taxpayer’s expert Craig Pichette, this language in the statute refers to the
overall tax method of accounting employed by the taxpayer (cash or accrual) for federal income
tax purposes, not the financial statement method of accounting. (See Declaration of Craig L.
Pichette, CPA, R. Doc. 45-9).

Thus, Taxpayer argues, even if the dividends were not

“liabilities” for GAAP, they are still proper deductions for tax purposes.
Taxpayer also argues that the case law indicates that declarations do not need to be in a
fixed amount and can be calculated by fixed formula.
And finally, Taxpayer argues that Butter is simply wrong when he says that, because
Taxpayer had sufficient cash to pay a larger portion of the declared dividend, the declared
dividend liability somehow is transformed into a surplus. Taxpayer argues that it was still
legally required to pay the dividend once declared. And as Taxpayer asserted at oral argument,
the Taxpayer has paid almost $38 million of the $48 million declared as dividends. (See
Plaintiff’s Exhibit Q, R. Doc. 84).
The Court believes that Taxpayer has raised serious questions about the relevance of
Buttner’s testimony and the reliability thereof. The Court was particularly troubled by Buttner’s

6

lack of expertise in tax law and the fact that the IRS had difficulty identifying the basis for
Buttner’s opinions that the alleged distributions were not in fact “dividend[s] and similar
distributions paid or declared to policyholders” as contemplated by 26 U.S.C. § 832(c)(11).
However, the Court will not rule on the admissibility of Buttner’s report and testimony at
this time. Rather, the Court feels that, in fairness to both sides, it will conduct a Daubert hearing
on the first day of trial, before the selection of a jury, to address these issues more fully. After
the hearing, the Court will render a ruling concerning the admissibility of Buttner’s testimony
and report. See United States v. Pigott, No. CR. A. 01-84, 2001 WL 815593, at *2 (E.D. La.
July 18, 2001) (deferring ruling on admissibility of scientific testimony until after presentation of
analyst’s qualifications and methodology); Chandler v. R&B Falcon Inland, Inc., No. 00-2137
2001 WL 839019, at *5-6 (E.D. La. July 23, 2001) (“With regard to the Motion in Limine to
exclude Dr. Manale's testimony regarding chemical radiculopathy and Substance P, this Court is
of the opinion that said motion would be best dealt with by conducting a Daubert hearing”).
Accordingly, the Court will defer ruling on the Taxpayer’s Motion in Limine to Exclude
Testimony and Report of Edward W. Buttner, IV (R. Doc. 45).
III.

Taxpayer’s Motion in Limine to Exclude Evidence (R. Doc. 70).
Taxpayer originally sought the exclusion of eight categories of evidence. The IRS has

conceded four of these categories and will not offer evidence on them.2 Accordingly, the Motion
in Limine is granted as to these items. There are four remaining items.

2

Specifically, the IRS will not offer evidence as to (3) November 14, 1989 Articles of Association and By-Laws; (4)
Minutes of 10/16/99 Annual Member Meetings; (5) Taxpayer’s 10/16/96 Certificate of Authority; and (7) testimony
and evidence regarding criminal charges against KPMG. (See United States’ Response to Plaintiff’s Motion In
Limine, R. Doc. 74, p. 4-5).

7

A.

Taxpayer’s financial records for the years 1990-2000 and 2005-2012

Taxpayer claims these records are irrelevant because the only years at issue are 2002,
2003, and 2004. The Taxpayer further argues these records will confuse the jury. The IRS
Claims these records are relevant because they show a pattern of when dividends are declared
and when they are paid (and the fact that dividends are not paid in the year declared). Taxpayer
counters that they are willing to stipulate that it has a consistent pattern of declaring dividends to
its policy holders and paying those dividends in subsequent years.
Given the Taxpayer’s willingness to stipulate to the above, the Court agrees that these
records are irrelevant and could confuse the jury. Accordingly, the Court will grant Taxpayer’s
motion in limine as to these documents.
B.

Louisiana Department of Insurance Examination Report as of 12/31/99

Taxpayer claims that this is irrelevant because it is outside of the years at issue and
prepared before the creation of Statutory Accounting Principles codified by the National
Association of Insurance Commissioners in January 1, 2001. Taxpayer further claims the report
is inadmissible hearsay. Finally, Taxpayer claims it is also inadmissible under Fed. R. Evid.
401/403 analysis; the “report was never intended to be used for any purpose other than an
examination by the Department of Insurance to ensure the financial stability of [Taxpayer] as of
1999,” (Taxpayer’s Memorandum in Support of Motion in Limine to Exclude Evidence, R.Doc.
70-1, p. 4), and its terms are too different from those used in the Statutory Accounting
Principles.
The IRS claims this is relevant as to whether the “declared-but-unpaid dividends should
be treated as a nondeductible surplus.” (United States’ Response to Plaintiff’s Motion In Limine,
R. Doc. 74, p. 3). At oral argument, the IRS explained that this was relevant despite being

8

outside the years at issue because the Taxpayer had stipulated that it declared dividends in the
same way for the years covered by the report. Further, IRS claims that it satisfies the public
records exception to the hearsay rule under Fed. R. Evid. 803(8). Taxpayer counters that “the
source of information [and] other circumstances indicate a lack of trustworthiness” under Fed. R.
Evid. 803(8)(B) because no one can cross examine the author or know his qualifications.
The Court has reviewed the document at issue and initially notes that much of it does not
concern dividends and distributions. The report never articulates its exact purpose, and the IRS
submits no evidence establishing its purpose.

The report does note that its “Examination

procedures included a verification of assets, a determination of liabilities, and review of income
and disbursement items” and that the examination included a review of “minutes of meetings,
contractual relations, related party transactions, and other records or procedures relating to the
Fund’s operating practices.”

“Specific attention was given to compliance with” certain

insurance regulations and statutes, which seems to reflect its primary purpose.
The Taxpayer correctly notes that the author of the document cannot be cross examined
about his qualifications and thought process. And its relevance is questionable. Even if the
Department of Insurance considered some of the Taxpayer’s assets a surplus, as claimed, it is
questionable whether that conclusion would have any probative value toward the issue of
whether a dividend was declared for purposes of the federal tax statutes at issue.
Accordingly, given the relatively little probative value, the potential for prejudice, and
the unfairness of the Taxpayer’s inability to cross examine the document, the Court grants the
Motion in Limine on this issue.
C.

Complaint in Richard, et al. v. KPMG, LLP, and Testimony Regarding Same

9

Taxpayer seeks the exclusion of a Complaint regarding KPMG, the employer of
Taxpayer’s expert, Craig Pichette. The Complaint alleges that KPMG marketed certain tax
shelter transactions to its clients.

One paragraph of that Complaint alleges that Pichette

marketed a tax shelter transaction to the plaintiff and that the plaintiff was offered an opinion
letter by KPMG declaring that the transaction would likely not withstand IRS challenge.
Taxpayer claims this is irrelevant and that there was no finding of liability or judgment against
KPMG or Pichette.
The IRS says that it will not question Pichette about the complaint but intends to question
him about advice he gave to KPMG clients about investing in tax shelters before allegation of
illegality and about his role in promoting tax shelters. The IRS claims these shelters were
abusive and that this goes to his credibility. While the IRS concedes that Pichette withdrew the
advice once the shelters were declared illegal, it claims that this demonstrates his advice “goes
up to the line.”
This is not a tax shelter case. This evidence would have no probative value and would be
highly prejudicial to the Taxpayer. Accordingly, the Court grants the Motion in Limine on this
issue.
D.

Evidence of Buttner’s Survey of Property and Casualty Insurers

The IRS’s expert Buttner did a survey of property and casualty insurers and concluded
that the predominant practice in the property and casualty insurance industry was to pay
dividends within one year from the year the dividends were declared. Taxpayer seeks to exclude
these because it is not a property and casualty company and, as a SIF, it is substantially different
than one. The IRS contends that, for purposes of federal tax law, Taxpayer is treated as a
property and casualty company, so the comparison is relevant.

10

The Court will defer ruling on this issue until after the Daubert hearing of Edward
Buttner. Accordingly, Taxpayer’s Motion in Limine to Exclude Evidence (R. Doc. 70) is
granted in part and deferred in part.
IV.

IRS’ Motion in Limine Regarding Proposed Testimony of Craig L. Pichette (R.
Doc. 40)
The IRS seeks to exclude Taxpayer’s expert Craig L. Pichette. The IRS contends that

Pichette is merely offering legal conclusions. On the other hand, Taxpayer argues that Pichette
has reviewed relevant laws and is merely offering an opinion that any expert in his field would
give after a review of these laws and cases.
Fed.R.Evid. 704 provides that “[a]n opinion is not objectionable just because it embraces
an ultimate issue.” However, the Fifth Circuit has “repeatedly held that this rule does not allow
an expert to render conclusions of law.” Snap-Drape, Inc. v. C.I.R., 98 F.3d 194, 198 (5th Cir.
1996); See also Owen v. Kerr–McGee Corp., 698 F.2d 236, 240 (5th Cir.1983).
“The task of separating impermissible questions which call for overbroad or legal
responses from permissible questions is not a facile one.” Owens, 698 F.2d at 240. In Owens,
the Fifth Circuit explained:
The example given in the Advisory Committee Notes to Rule 704 is helpful. The
question “Did T have capacity to make a will?” should be excluded. The question
“Did T have sufficient mental capacity to know the nature and extent of his
property and the natural objects of his bounty and to formulate a rational scheme
of distribution?” is permissible. The first question is phrased in such broad terms
that it could as readily elicit a legal as well as a fact based response. A direct
response, whether it be negative or affirmative, would supply the jury with no
information other than the expert's view of how its verdict should read. Moreover,
allowing an expert to give his opinion on the legal conclusions to be drawn from
the evidence both invades the court's province and is irrelevant.
Id.

11

Yet, in U.S. v. Fogg, 652 F.2d 551 (5th Cir. 1981), the Fifth Circuit found that a tax agent
did not testify as to legal conclusions in a criminal tax evasion case. The defendant objected to
the following statement: “Without any other evidence those monies (from FOJC) would be
considered constructive dividend (sic) to the taxpayer.” Id. at 556.

The appellate court

explained:
It appears to this Court that Agent Tepper merely stated his opinion as an
accountant, and did not attempt to assume the role of the court. Since the court
below instructed the jury about the weight to be afforded expert testimony, Agent
Tepper's statements were placed in the proper perspective. In reaching the
decision to affirm, we considered the testimony in its context, the complexity of
the case, and the correctness of the witness' statement.
Id. at 556-557. The Fifth Circuit has also emphasized “the trial court's admonitions to the jury to
accord no unusual deference to expert testimony and to take the court's instructions as the sole
source of applicable law....” Id. at 557 (quoting United States v. Milton, 555 F.2d 1198, 1204
(5th Cir. 1977)).
The Court agrees with the IRS that Pichette will not be permitted to testify as to legal
conclusions. However, it is impossible for the Court to determine at this point what questions
will be impermissible and what questions will be permissible. The Court cannot make its
decision generally but must rather do so on a question-by-question basis.
Accordingly, the Court will grant the IRS’ Motion in Limine Regarding Proposed
Testimony of Craig L. Pichette (R. Doc. 40) to the extent that the parties are instructed that
experts will not be allowed to give legal opinions. However, the Court will defer ruling on
specific questions until the time they are asked.
V.

IRS’ Motion in Limine Regarding Plaintiffs’ Proposed Evidence of Administrative
Proceedings Before the Internal Revenue Service (R. Doc. 69).

12

In this Motion in Limine, the IRS wants to exclude all evidence of its position in the
Statutory Notice and the administrative proceedings. In essence, the IRS does not want the jury
to learn that the IRS reversed course on the all events test and economic performance test after
years of litigation. The IRS claims that tax refunds claims are de novo proceedings in which the
tax payer must prove its entitlement to a refund, regardless of what the IRS reached in its
administrative proceedings.
However, the Taxpayer, on the other hand, says that that the evidence is admissible for
other purposes. These include establishing the basis of the IRS’s determination and for attacking
the credibility of the IRS’s expert Buttner.
The law is clear in the Fifth Circuit that “[t]he Government may assert at the trial of a
refund suit a theory not previously presented in the course of the proceedings.” Kincaid v. United
States, 682 F.2d 1220, 1222-1223 n. 3 (5th Cir. 1982)(citations omitted). In King v. United
States, “the IRS presented one theory during the administrative process, discarded that theory,
then presented and discarded a second theory during the administrative process, then offered a
third theory; before trial, however, the government reverted to the first theory.” Cooper v. U.S.
ex rel. C.I.R., No. 07-10761, Slip Copy, 2008 WL 2325644, at *2 n. 4 (5th Cir. June 6, 2008)
(citing King v. United States, 641 F.2d 253, 258 (5th Cir. 1981) and King, 641 F.2d at 270 (Fay,
J., dissenting)). The King court held that IRS was permitted to do so, that the burden would not
shift in the case, and that the taxpayer’s only possible remedy was a continuance. 641 F.2d at
259. Thus, evidence of prior administrative proceedings is simply irrelevant to the overall merits
of the case.
Further, numerous cases from other courts support the conclusion that these documents
are irrelevant to the merits of the case. E.g., Xcel Energy, Inc. v. United States, 237 F.R.D. 416,

13

418 (D.Minn. 2006)(finding that documents from earlier administrative proceeding were
irrelevant and explaining, “a deficiency [tax] assessment may be sustained upon any legal
ground supporting it, even though the Commissioner did not rely thereon when the assessment
was made, so long as the assessment is right on any theory it must be sustained.”); Mayes v.
U.S., No. 84-5157, 1986 WL 10093, at *2-3 (W.D. Mo. June 12, 1986)(denying motion to
compel); McLeod v. United States, No. 98-1655, 2000 WL 1902257, at *2 (D. Nev. Nov. 15,
2000).
Taxpayer has identified case law indicating that the evidence is admissible, though not
for the merits. See Trinity Indus. Inc. v. United States, 757 F.3d 400, 413 (5th Cir. 2014). These
limited purposes include establishing background information and showing bias. Haag v. C.I.R.,
88 T.C. 604, 623 n. 14 (1987), aff’d, 855 F.2d 855 (8th Cir. 1988); Hudspeth v. Commissioner,
914 F.2d 1207, 1214 (9th Cir. 1990).
The Court will grant the Motion in Limine Regarding Plaintiffs’ Proposed Evidence of
Administrative Proceedings Before the Internal Revenue Service (R. Doc. 69) in part. Taxpayer
cannot use the evidence of the administrative proceeding to prove the merits of its case.
However, the Court may allow testimony of the administrative proceeding for the limited
purpose of contesting the credibility of Edward Buttner. The Taxpayer must give notice in open
court of its intention to ask any question on this issue. The Court will then hear the specific
question outside of the presence of the jury and rule on whether the Taxpayer will be allowed to
ask it.
VI.

CONCLUSION
Accordingly,

14

IT IS ORDERED that the Court will DEFER ruling on the Louisiana Health Care Self
Insurance Fund’s Motion in Limine to Exclude Testimony and Report of Edward W. Buttner, IV
(R. Doc. 45) until a Daubert hearing is conducted on the first day of trial prior to the selection of
a jury;
IT IS FURTHER ORDERED that the Louisiana Health Care Self Insurance Fund Motion
in Limine to Exclude Evidence (R. Doc. 70) is GRANTED, except that the Court will DEFER
ruling on the admissibility of the Buttner survey of property and casualty insurers until trial;
IT IS FURTHER ORDERED that the Court will GRANT the United States of America’s
Motion in Limine Regarding Proposed Testimony of Craig L. Pichette (R. Doc. 40) in part to the
extent that the parties are instructed that neither expert will be permitted to give opinion
testimony on legal conclusions, but the Court will DEFER until the time of trial a ruling on
whether specific questions call for a legal conclusion.
IT IS FURTHER ORDERED that the United States of America’s Motion in Limine
Regarding Plaintiffs’ Proposed Evidence of Administrative Proceedings Before the Internal
Revenue Service (R. Doc. 69) is GRANTED IN PART and DEFERRED IN PART until a
question-by-question determination can be made on the day of trial outside the presence of the
jury.
Signed in Baton Rouge, Louisiana, on September 29, 2014.

S
JUDGE JOHN W. deGRAVELLES
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

15