JEFFREY RAPAPORT M.D., P.A. et al v. ROBIN S. WEINGAST & ASSOCIATES, INC. et al
Filing
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OPINION. Signed by Judge Stanley R. Chesler on 11/13/13. (DD, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JEFFREY RAPAPORT M.D., P.A.,
JEFFREY RAPAPORT, and AMANDA
RAPAPORT,
Plaintiffs,
v.
ROBIN S. WEINGAST & ASSOCIATES,
INC. and ROBIN S. WEINGAST,
Defendants and Third-Party Plaintiffs,
v.
WAYNE WASSERMAN and
WASSERMAN & WISE,
Third-Party Defendants.
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Civil Action No. 11-02254 (SRC)
OPINION
CHESLER, District Judge
On September 12, 2013, Magistrate Judge Cathy L. Waldor issued a Discovery Order
that, among other things, directed Defendants Robin S. Weingast & Associates, Inc. and Robin
S. Weingast (“Defendants”) to produce certain communications with their clients regarding the
tax consequences of an investment in a sophisticated type of welfare benefit plan. [Docket Entry
138 (September 12, 2013 Order at ¶ 9).] Defendants now appeal this portion of the Discovery
Order, pursuant to Federal Rule of Civil Procedure 72(a) and Local Civil Rule 72.1(c). [Docket
Entry 141.] Plaintiffs Jeffrey Rapaport M.D., P.A., Jeffrey Rapaport, and Amanda Rapaport
(“Plaintiffs”) have opposed. [Docket Entry 150.] For the reasons that follow, Judge Waldor’s
Order is affirmed.
I.
Background
Plaintiffs’ lawsuit seeks redress for the adverse tax consequences allegedly resulting from
a “Beta Plan” – i.e., an Internal Revenue Code § 419 Welfare Benefit Plan – established by
Defendants for Plaintiffs’ benefit. 1 The instant motion asks the Court to wade into the murky
waters of ongoing discovery and substitute its judgment for that of Judge Waldor as it pertains to
the scope of discovery of advice given by Defendants to third parties regarding the tax
consequences of these so-called Beta Plans. In particular, Judge Waldor has directed Defendants
to “produce any records or communications dated 1995, 2002, 2003, and 2004 that discuss the
deductibility of amounts paid as premiums in connection with the Beta Plan[.]” (September 12,
2013 Discovery Order at ¶ 9.) Plaintiffs seek the information described in Paragraph Nine of
Judge Waldor’s Discovery Order “to discover whether or not the Weingast Defendants were
giving similar advice about the [tax] deductibility of the BETA plan to any of their other clients.”
(Opp. Br. at 11.) Defendants regard this information as inadmissible Fed. R. Evid. 404(b) prior
bad acts evidence, a characterization that Defendants argue renders the information both
irrelevant and unduly burdensome for purposes of Federal Rule of Civil Procedure 26(b). (Mov.
Br. at 1.)
II.
Discussion
Pursuant to the Federal Magistrates Act of 1968, Rule 72(a) of the Federal Rules of Civil
Procedure, and Local Civil Rule 72.1, a magistrate judge is authorized to determine nondispositive matters, such as those concerning pretrial discovery. Krounelis v. Sherrer, 529 F.
1
A more detailed factual background of underlying dispute is set forth in earlier Opinions by
Judge Cavanaugh, see Jeffrey Rapaport, M.D., P.A. v. Robin S. Weingast & Associates, Inc.,
859 F. Supp. 2d 706 (D.N.J. 2012), and this Court, see id., No. 11-2254 (SRC), 2013 WL
4607104 (D.N.J. Aug. 29, 2013). Because the Court writes solely for parties, it will not repeat
this factual background here.
2
Supp. 2d 503, 517-18 (D.N.J. 2008). On an appeal of such a matter, brought pursuant to Local
Civil Rule 72.1(c)(1)(A), a District Court may reverse the decision of a magistrate judge only if
the decision is “clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P.
72(a); L.Civ.R. 72.1(c)(1)(A). As this Court has previously stated, under the clearly erroneous
standard “the reviewing [District Court] will not reverse the magistrate judge's determination
even if the [Court] might have decided the matter differently.” In re Bristol-Myers Squibb Sec.
Litig., Civ. No. 00-1990 (SRC), 2003 WL 25962198, at *2 (D.N.J. June 25, 2003).
A District Court should therefore only reverse a magistrate judge's decision when “the
reviewing court on the entire evidence is left with the definite and firm conviction that a mistake
has been committed.” Mruz v. Caring, Inc., 166 F. Supp. 2d 61, 66 (D.N.J. 2001) (quotation
omitted). Moreover, the District Court accords “[p]articular deference . . . to magistrate judges
on discovery issues.” United States v. Sensient Colors, Inc., 649 F. Supp. 2d 309, 315 (D.N.J.
2009). The burden of showing a magistrate judge’s ruling is “clearly erroneous or contrary to
law rests with the party filing the appeal.” Kounelis, 529 F. Supp. 2d at 518 (quoting Marks v.
Struble, 347 F. Supp. 2d 136, 149 (D.N.J. 2004)).
In this case, Defendants attempt to carry that burden by making two separate but
interrelated arguments. First, Defendants argue that Paragraph Nine of the Discovery Order
directs the production of documents that are “plainly” inadmissible as propensity evidence under
Fed. R. Evid. 404(b); this, in turn, renders such information “irrelevant” for purposes of Rule
26(b)(1) and thus undiscoverable. (Mov. Br. at 8.) Piggybacking on this argument, Defendants
also contend that because Paragraph Nine of the Discovery Order directs the production of
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“irrelevant and inadmissible” matters, the burden of producing such discovery “grossly
outweighs the benefit” of production. (See Mov. Br. at 13 (bold typeface in original).)
These arguments miss the mark to such a degree as to border on the frivolous. Rule 26
(b)(1), which governs the scope of permissible discovery, entitles a party to discover information
that is “relevant to any party’s claim or defense”; such information need not be “admissible at the
trial if the discovery appears reasonably calculated to lead to the discovery of admissible
evidence.” As this language implies, “[t]he contemplated breadth of permissible discovery
[under Rule 26(b)] extends well beyond the more confined universe of evidence admissible at
trial.” Bell v. Lockheed Martin Corp., No. 08-6292 (RBK), 2010 WL 3724271, at *7 (Sept. 15,
2010) (citing Hickman v. Taylor, 329 U.S. 495, 507-08 (1947)), aff’g 270 F.R.D. 186 (Donio,
M.J.); see also Frank v. County of Hudson, 924 F. Supp. 620, 623 (D.N.J. 1996) (“it is important
to distinguish the right to obtain information by discovery from the right to use it at trial”
(quotation omitted)). Defendants, however, ask the Court to apply Rule 26(b) in the opposite
manner: confine the universe of permissible discovery by what may or may not be admissible at
trial. If relevance under the discovery rules is indeed “a term of art,” see Bell, 2010 WL
3724271, at *7, Defendants’ appeal applies the term with a surrealistic brush.
Defendants choose a particularly flawed vehicle – Federal Rule of Evidence Rule 404,
which addresses the admissibility of “[c]haracter” and “[o]ther [a]cts” evidence – by which to
raise their objection. Rule 26(b)(1) speaks in terms of relevance. Rule 404, however, starts from
the assumption that character or propensity evidence is itself relevant for purposes of Rule 401
but should otherwise be excluded for policy reasons. See Michelson v. United States, 335 U.S.
469, 476 (1948) (“The overriding policy of excluding [character or propensity] evidence, despite
4
its admitted probative value, is the practical experience that its disallowance tends to prevent
confusion of issues, unfair surprise and undue prejudice.”). Defendants’ appeal, relying as it
does entirely on Rule 404, therefore assumes that the discovery they are objecting to is itself
relevant.
Consequently, Defendants fail to cite any authority that supports their novel application
of Rule 26(b). As Plaintiffs point out, the two main cases cited by Defendants, J & R Ice Cream
Corp. v. California Smoothie Licensing Corp. and Becker v. ARCO Chemical Co., do not
involve disputes under the Rule. (Opp. Br. at 11.) Rather, in both cases the Third Circuit was
reviewing the District Court’s application of Fed. R. Evid. 404(b) to determine the admissibility
of evidence at trial. See J.R. Ice Cream, 31 F.3d 1259, 1267 (3d Cir. 1994); Becker, 207 F.3d
176, 184-85 (3d Cir. 2000). Insofar as Defendants cite those cases for the proposition that other
wrongs or acts evidence is inadmissible if it is proffered strictly to create a character-based
inference, Defendants are correct; but what the Third Circuit has established about the proper use
of propensity evidence at trial says nothing about the scope of pretrial discovery under Rule
26(b).
All of the foregoing is longhand for the simple proposition that the Court does not rule on
admissibility at this stage of a case, and Paragraph 9 of Judge Waldor’s Discovery Order –
grounded in relevance – is therefore not clearly erroneous or contrary to law. The September 12,
2013 Discovery Order will be affirmed in its entirety. The Court, however, is compelled to note
that, based on the motion record, not only do Defendants fail to show that Judge Waldor erred, it
is patently obvious Judge Waldor’s decision is correct. Rule 404(b), upon which Defendants’
entire appeal rests, is a rule of inclusion, not exclusion. United States v. Sriyuth, 98 F.3d 739,
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745 (3d Cir. 1996). As such, the Rule operates to exclude evidence of prior bad acts if that
evidence is relevant only because it tends to prove “a propensity or disposition” to act in a
certain manner. See Ansell v. Green Acres Contracting Co., Inc., 347 F.3d 515, 520 (3d Cir.
2003). In other words, evidence should not be excluded under Rule 404(b) if the party proffering
it can articulate a theory of relevance other than propensity. See Huddleston v. United States,
485 U.S. 681, 686 (1988).
For example, the Rule itself contemplates admission of prior acts evidence to “prove the
existence of a ‘plan’” where “the logical relevance of the prior act to the fact in issue . . . is that
[the prior act] shares with the subsequent a similar purpose or motivation – a common goal.”
See Becker, 207 F.3d at 197. Here, Plaintiffs articulate a substantially similar theory of
relevance for requesting communications between Defendants and their clients regarding the taxdeductibility of Beta Plans: to wit, Defendants discussed the tax benefits of Beta Plans with
Plaintiffs and other clients to facilitate a larger goal or large-scale plan of continuing to make
money by administering Beta Plans for their clients. (See Opp. Br. at 11.) Under this theory,
Defendants “committed to a course of conduct” that included providing the alleged tax advice at
issue in this case, and the tax-related communications with other clients will be proffered “to
show this larger goal,” not to demonstrate a propensity. See Becker, 207 F.3d at 197 (quoting 22
Wright & Graham, Federal Practice and Procedure § 5244 (2d ed.)). As discussed above, it is
not the Court’s role at this early stage to determine whether or not Plaintiffs’ theory of relevance
will render the information discovered pursuant to Paragraph Nine admissible at trial; indeed, it
would be impossible to do so, having not seen what that information is. Suffice it to say,
however, that Plaintiffs’ theory presents a sufficiently colorable basis upon which to determine
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that Paragraph Nine ”appears reasonably calculated to lead to the discovery of admissible
evidence.” See Fed R. Civ. P. 26(b)(1). It follows that Judge Waldor operated comfortably
within her discretion by compelling the information contemplated by Paragraph Nine of the
Discovery Order.
III.
Conclusion
For the foregoing reasons, the Court will affirm Judge Waldor’s September 12, 2013
Discovery Order [Docket Entry 138] in its entirety. An appropriate form of Order accompanies
this Opinion.
s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: November 13, 2013
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