United States of America v. Allen

Filing 35

ORDER denying 34 Plaintiff's Motion for Sanctions, but granting to the extent that Defendant is directed to provide further responses to discovery. Signed by Magistrate Judge Terence P Kemp on 3/5/14. (sem1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
United States of America,

:

Plaintiff,

:

v.

:

John D. Allen, individually and
doing business as
Allen & Associates,

Case No. 2:12-cv-1034

:

JUDGE GEORGE C. SMITH
Magistrate Judge Kemp

:

Defendants.
OPINION AND ORDER
This matter is before the Court on a motion for sanctions
filed by Plaintiff the United States of America.

(Doc. #34).

For the following reasons, the motion will be denied to the
extent a default judgment is sought, but granted to the extent
that Mr. Allen will be directed to provide further responses to
discovery.
I.

Background

In its motion, the United States moves for sanctions against
Defendant John D. Allen based on his alleged failure to comply
with this Court’s order compelling him to respond to
interrogatories and requests for production of documents.

The

United States asserts that Mr. Allen has not provided the
requested discovery despite multiple requests and this Court’s
order.

Consequently, the United States seeks an entry of default

against Mr. Allen as a sanction.

Mr. Allen has not filed an

opposition to the motion for sanctions.
II. Discussion
Fed. R. Civ. P. 37(b) authorizes sanctions for a party’s
failure to obey an order requiring discovery.

The strongest

sanction available to address discovery abuses is the entry of a
default judgment against a defendant or an order of dismissal

against a plaintiff.

See Quinn v. Kennedy, No. 1:07-cv-1036,

2008 WL 4145445, at *1 (W.D. Mich. Aug. 20, 2008)(citing Grange
Mut. Cas. Co. v. Mack, 270 F. App’x 372, 376 (6th Cir. 2008)).
In the Sixth Circuit, courts are to consider four factors
including “(1) whether the party’s failure to cooperate in
discovery is due to willfulness, bad faith, or fault; (2) whether
the adversary was prejudiced by the party’s failure to cooperate
in discovery; (3) whether the party was warned that failure to
cooperate could lead to the sanction; and (4) whether less
drastic sanctions were first imposed or considered.”

Id. (citing

Freeland v. Amigo, 103 F.3d 1271, 1277 (6th Cir. 1997)).
As this Court found in its previous opinion and order, the
relevance of the requested discovery is apparent, given that the
United States brought this action seeking to enjoin Mr. Allen
from, among other activities, preparing federal tax returns for
others, promoting any plan or arrangement that advises or helps
taxpayers to violate internal revenue laws or unlawfully evade
the assessment or collection of their federal tax liabilities,
and engaging in any other conduct that is subject to penalty
under the Internal Revenue Code or that interferes with the
proper administration and enforcement of internal revenue laws.
(Doc. #1).

Consequently, the Court found that Mr. Allen bore the

burden of establishing that the information either is not
relevant or is so marginally relevant that the presumption of
broad disclosure is outweighed by the potential for undue burden
or harm.

To that end, Mr. Allen has provided an explanation for

his failure to produce documents and has made several objections
to the interrogatories.

The Court now examines Mr. Allen’s

arguments.
1. Document Requests
With respect to the document requests numbered 1 through 7,
Mr. Allen responded by handwriting “NONE” in response to each
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request.

The United States argues against Mr. Allen’s position

that he does not have any responsive documents, stating that it
already possesses “a limited number of documents, obtained from
Allen’s customers . . . which bore Allen’s signature or to which
were appended post-it notes bearing Allen’s handwriting, name, or
signature.”

(Doc. #34 at 3).

The United States asserts that

“Allen likely has many other similar documents, related to these
and other customers, which are responsive to these document
requests.”

Id.

In essence, the United States argues that Mr.

Allen has not made a good faith effort to produce documents in
response to the request.
Ordinarily, a party’s representation that responsive
documents no do not exist is sufficient absent credible evidence
that the representation is inaccurate.

See Brown v. Tellermate

Holdings, Ltd., No. 2:11-cv-1122, 2013 WL 1363738, at *6 (S.D.
Ohio Apr. 3, 2013)(citing Alexander v. F.B.I., 194 F.R.D. 299,
301 (D.D.C. 2000)).

Consequently, the United States has the

burden to demonstrate that such documents indeed exist and are
being improperly withheld.

See id.

Here, the United States has

not satisfied that burden.

The fact that Mr. Allen’s customers

may have documents responsive to the discovery requests is not
evidence that Mr. Allen maintained responsive documents.

Thus,

the Court will not award the United States sanctions based upon
Mr. Allen’s failure to produce documents in response to document
requests numbered 1 through 7.
Document requests 8 and 9, and Mr. Allen’s objections to
those requests, are as follows
8.

All documents identified in your response to the
interrogatories served upon you.
Objection: over burdensome.

9.

All documents which support the factual contentions
in your Answer to the Complaint.
3

Objection: over burdensome and not possible.
(Doc. #34, Ex. 3 at 17).

The United States argues that Mr.

Allen’s objections are untimely and waived.
Pursuant to Fed. R. Civ. P. 34, a party objecting to
document requests must make such an objection within thirty days
after being served with the request.

Fed. R. Civ. P. 34(b)(2).

Thus, this Court agrees that Mr. Allen’s objections are untimely.
Even if the objections were timely, however, the Court is
unconvinced that documents exist which would be responsive to the
requests.

With respect to document request number 8, Mr. Allen

did not provide substantive responses to the interrogatories.
Instead, Mr. Allen objected to each interrogatory and relied upon
various statutes as the basis for each objection.

Similarly, as

to document request number 9, Mr. Allen did not set forth any
“factual contentions” in his answer as described by the request.
To the extent that any documents responsive to requests 8 and 9
indeed exist, Mr. Allen may not withhold them based upon his
objections.

Rather, the Court will order Mr. Allen to produce

any documents responsive to those requests within twenty-eight
days of the issuance of this opinion and order.
2. Interrogatories
In the motion for sanctions, the United States argues that
Mr. Allen “refused to answer any of the interrogatories, instead
asserting incoherent objections.”

(Doc. #34 at 3-4).

The first

set of interrogatories, and Mr. Allen’s responses to them, are as
follows
1. Identify all Customers for whom you or Allen &
Associates filed, prepared, and/or signed Form 1040
federal income tax returns or Form 1040X amended federal
income tax returns and for whom you or Allen & Associated
[sic] advised or assisted with the preparation of Form
1040 federal income tax returns or Form 1040X amended
federal income tax returns, from January 1, 2006 to the
present. For each Customer, identify: the name of the
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person who filed, prepared, and/or signed the federal tax
return, whether it was you, your employee, an employee of
Allen & Associates, or the Customer; the address,
telephone number, and social security number or employer
identification number of the individual or entity; and
the tax year of the federal tax return(s).
ANSWER:
Objection: see 26 USC 7701(36)(B) and the Privacy Act.
2. Identify all Customers for whom you or Allen &
Associates prepared and/or filed, or advised or assisted
with the preparation and/or filing of, Forms 4852, Forms
1099-R, Forms W-2, or Forms W-4 with the IRS from January
1, 2006 to the present. For each Customer, identify:
the name of person who filed, prepared, and/or signed the
Form 4852, Form 1099-R, Form W-2, or Form W-4, whether it
was you, your employee, or an employee of Allen &
Associates, or the Customer; the address, telephone
number, and social security number or employer
identification number of the individual or entity; and
the tax year of the Form 4852, Form 1099-R, Form W-2, or
Form W-4.
ANSWER:
Objection: see 26 USC 7701(36)(B) + Privacy Act.
3. Identify all individuals or entities to whom or to
which you or Allen & Associates marketed, promoted, or
sold the tax arrangements described in the Complaint and
identified as “Scheme 1: Tax Returns Reporting ‘None’ for
Income and Tax,” “Scheme 2: Tax Returns Reporting Bogus
Itemized Deductions to Offset Income,” and “Scheme 3:
Frivolous Amended Tax Returns Claiming That Wages Are
Non-Taxable,” since January 1, 2006, whether or not they
participated in the tax arrangement or whether or not you
or Allen & Associates filed, prepared, and/or signed
federal tax returns.
For each individual or entity,
identify: which arrangement you or Allen & Associates
marketed, promoted, or sold to the individual or entity;
when you or Allen & Associates marketed, promoted, or
sold the program, product, or arrangement to the
individual or entity; the documents provided to the
individual or entity; the name of the person who
marketed, promoted, or sold the arrangement, product, or
arrangement [sic]; and the address, telephone number,
[sic] and the name, address, phone number, and email
address of the individuals or entities to whom you or
Allen & Associates marketed, promoted, or sold the
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program, product, or arrangement.
ANSWER:
Objection: see 26 USC 7701(36)(B) + Privacy Act.
4. Identify all of your employees and employees of Allen
& Associates from January 1, 2006 to the present.
Include their name, home address, telephone, position(s)
at Allen & Associates, duties performed for you or in
their position(s) at Allen & Associates, and dates of
employment for you or at Allen & Associates.
ANSWER:
Objection: see Privacy Act and U.S. + Ohio constitutions.
5. Identify all partners, shareholders, managers, and/or
directors of Allen & Associates from January 1, 2006 to
the present.
Include their name, home address,
telephone, position(s) at Allen & Associates and dates
each person held such position.
ANSWER:
Objection: see #4.
6. Identify your most recent employer(s), including the
positions that you have held since January 1, 2006, and
your duties in each position.
ANSWER:
Objection: see #4.
7. Describe in detail the ownership and managerial
structure of Allen & Associates, including all positions
that you have held at Allen & Associates, and the duties
and responsibilities for each position you have held.
Include the dates that you held each position and, if you
oversaw employees in any position, the names and
positions of the employees acting under your authority.
ANSWER:
Objection: see #4.
8. Describe how you and/or Allen & Associates were
compensated for filing, preparation, and/or signing of
federal tax returns for Customers from January 1, 2006 to
the present. For each Customer for whom you and/or Allen
& Associates filed, prepared, signed, and/or advised or
assisted with the preparation of federal tax returns
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since January 1, 2006, your answer should include the
amount of payment received, a description of the services
provided for such payment, how you calculated such
payment, and when the individual or entity made the
payment.
ANSWER:
Objection: see 26 USC 7701(36)(B), Privacy Act + U.S. +
Ohio constitutions.
9. Identify any and all steps you have taken to determine
whether the federal tax returns filed, prepared, signed
by you or Allen & Associates, and tax returns which you
or Allen & Associates advised or assisted with the
preparation of, described in interrogatory number 1
above, are lawful, including the name of any publication
you have consulted, the specific relevant information or
opinions contained in the publication, the identity of
any person with whom you have conferred, the specific
information or opinions provided by that person, any job
titles held by that person, and the basis of that
person’s knowledge.
ANSWER:
Objection: see #8.
10. Describe in detail how you learned to prepare returns
utilizing tax arrangements described in the Complaint and
identified as “Scheme 1: Tax Returns Reporting ‘None’ for
Income Tax,” “Scheme 2: Tax Returns Reporting Bogus
Itemized Deductions to Offset Income,” and “Scheme 3:
Frivolous Amended Tax Returns Claiming That Wages Are
Non-Taxable,” including identifying the individuals,
entities, publications, software, promotional materials,
or other tax law or tax preparation material you
consulted.
ANSWER:
Objection: see #8.
11. Identify by date, type of communication, location (if
it occurred in person), and name and contact information
of the Customer on whose behalf you were communicating,
all instances in which you have communicated with any IRS
employee relating to your and/or Allen & Associates’s
preparing, filing, and/or signing of federal tax returns,
and your advising and assisting with the preparation of
federal tax returns, since January 1, 2006.
7

ANSWER:
Objection: see #8.
12. Please describe in detail all education or training
you have received on the subject of federal income
taxation.
ANSWER:
Objection: see #8.
Id., Ex. 3 at 5-14.

The “second set of interrogatories” consists

of just one interrogatory.

That interrogatory, and Mr. Allen’s

response, are as follows
1. If you deny any of the United States’ First Set of
Requests for Admission to John Allen, for each denial and
with supporting facts the basis for your denial.
ANSWER:
Objection: see 26 USC 7701 (36)(B), Privacy Act + U.S. +
Ohio constitutions.
Id., Ex. 4 at 1. The United States argues, inter alia, that Mr.
Allen’s objections are untimely and waived.

This Court agrees.

At the outset, Mr. Allen failed to comply with Fed. R. Civ.
P. 33(b)(2)’s requirement that he answer or object to the
interrogatories within 30 days after service.

Thereafter, on

August 19, 2003, this Court issued an opinion and order granting
the motion to compel and ordering Mr. Allen to provide the
requested discovery within fourteen days.

The United States did

not receive Mr. Allen’s responses to the discovery requests until
October 10, 2013.

Although Mr. Allen filed an objection to the

decision granting the motion to compel, which the Court
overruled, the Court did not grant Mr. Allen any extension to
respond pending resolution of any objections to the opinion and
order.

When a party fails to make timely objections to

interrogatory requests, those objections are deemed to have been
waived.

See, e.g., Drutis v. Rand McNally & Co., 236 F.R.D. 325,

327 (E.D. Ky. 2006) (finding that plaintiffs waived any
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objections by failing to make them in a timely fashion)(citing
Richmark Corp. v. Timber Falling Consultants, 959 F.2d 1468, 1473
(9th Cir. 1992).

Here, Mr. Allen failed to raise timely

objections to the interrogatories made by the United States.
Consequently, Mr. Allen waived those objections.
Even if it were to consider Mr. Allen’s objections on their
merits, the Court would overrule them.

Mr. Allen’s objections

are based upon 26 U.S.C. §7701(36)(B), the Privacy Act, and the
United States and Ohio Constitutions.

As the United States

argues, Mr. Allen does not explain how these authorities pertain
to the interrogatories and why they provide a basis for
withholding the requested information.

The United States

explained this in its November 5, 2013 letter to Mr. Allen, again
urging Mr. Allen to comply with his discovery obligations.

Fed.

R. Civ. P. 26 is to be construed liberally in favor of allowing
discovery, and any matter not privileged that is relevant, in the
sense that it reasonably may lead to the discovery of admissible
evidence, can be discovered.

See Dunn v. Midwestern Indem., 88

F.R.D. 191, 194-95 (S.D. Ohio 1980).

Because the requested

information is within the permissible scope of discovery, this
Court will order Mr. Allen to provide interrogatory responses
within twenty-eight days of the issuance of this opinion and
order.
III. Conclusion
From the outset of this litigation, Mr. Allen has
continuously refused to participate meaningfully in discovery.
Although Mr. Allen is acting without counsel, this does not
excuse him from producing discovery.

In re Family Resorts of

Am., Inc., 972 F.2d 347 (Table), No. 91-4127, 1992 WL 174539, at
*3 (6th Cir. July 24, 1992).

Mr. Allen is, therefore, ordered to

produce the discovery as set forth herein within twenty-eight
days of the issuance of this opinion and order.
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At this

juncture, the Court will provide Mr. Allen an additional
opportunity to respond and, consequently, the motion for
sanctions is denied.

(Doc. #34).

This Court warns Mr. Allen for

a second time that his failure to provide discovery responses
could result in the imposition of sanctions including a default
judgment under Fed. R. Civ. P. 37(b).
IV. Procedure on Objections
Any party may, within fourteen days after this opinion and
order is filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.

28 U.S.C. §636(b)(1)(A),

Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.
I., F., 5.

The motion must specifically designate the order or

part in question and the basis for any objection.

Responses to

objections are due fourteen days after objections are filed and
replies by the objecting party are due seven days thereafter.
The District Judge, upon consideration of the motion, shall set
aside any part of this order found to be clearly erroneous or
contrary to law.
This opinion and order is in full force and effect,
notwithstanding the filing of any objections, unless stayed by
the Magistrate Judge or District Judge.

S.D. Ohio L.R. 72.3.

/s/ Terence P. Kemp
United States Magistrate Judge

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