USA v. Talmage et al

Filing 115

MEMORANDUM DECISION AND ORDER granting 70 Motion for Protective Order; granting 70 Motion for Scheduling Order Deadlines (Expert Discovery due by 10/16/2017; Motions due by 11/17/2017; Final Pretrial Conference set for 3/19/20 18 at 02:00 PM in Rm 3.100 before Judge David Nuffer; 10-Day Jury Trial set for 4/2/2018 at 08:30 AM in Rm 3.100 before Judge David Nuffer); granting in part and denying in part 79 Motion for Relief from Standard Protective Order. Signed by Magistrate Judge Paul M. Warner on 3/17/17 (alt)

UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, NORTHERN DIVISION

UNITED STATES,
Plaintiff,
v.

MEMORANDUM DECISION AND
ORDER

RONALD B. TALMAGE; ANNETTE C.
TALMAGE; WESTERN LAND &
LIVESTOCK, LLC; and WESTERN RESERVE
MORTGAGE, LLC,

Case No. 1:16-cv-19-DN-PMW

Chief District Judge David Nuffer
Chief Magistrate Judge Paul M. Warner

Defendant.

Chief Judge David Nuffer referred this case to Chief Magistrate Judge Paul M. Warner
pursuant to 28 U.S.C. § 636(b)(1)(A). 1 Before the court are two motions: Defendants Western
Land & Livestock, LLC’s and Western Reserve Mortgage’s (collectively, the “Western
Entities”) Request for Scheduling Conference and Motion for Protective Order 2 and (2) Plaintiff
United States’ Motion for Relief from Standard Protective Order. 3
On March 15, 2017, the court held a hearing on the motions. 4 The Western Entities were
represented by William B. Ingram and Alan R. Houston. Lindsay L. Clayton and Jennifer Y.
Golden represented the United States. At the conclusion of the hearing, the court took the
motions under advisement. Now being fully advised, the court renders the following
Memorandum Decision and Order.

1

Dkt. No. 57.
Dkt. No. 70.
3
Dkt. No. 79.
4
Dkt. No. 114.
2

1

BACKGROUND
In August 2016, the United States obtained a $20 million default judgment against
accused tax cheats Ronald B. Talmage and Annette C. Talmage (the “Talmages”). 5 The current
dispute involves the government’s attempt to foreclose on real property located in Liberty, Utah
(“Liberty Property”). 6 The government contends that the Liberty Property was purchased by
John Wadsworth (“Mr. Wadsworth”) and the Western Entities at the direction of Ronald
Talmage. 7 The government claims that the Talmages resided at the Liberty Property in the
months leading up to this lawsuit. 8 Furthermore, in response to the Western Entities’ motion for
summary judgment, the government has outlined a complex web of ownership of both the
Western Entities and the Liberty Property that the government claims demonstrates that the
Western Entities are the nominees, alter egos, or fraudulent transferees of the Talmages. 9
The Western Entities dispute any relationship with the Talmages that would subject them
to the Talmages’ tax liabilities. The Western Entities claim that Mr. Wadsworth holds 100% of
the beneficial ownership interest in the Western Entities. 10 The Western Entities contend that the
Talmages have never been involved in the Western Entities’ business or the purchase of the
Liberty Property. The Western Entities assert that Mr. Wadsworth has “made all decisions to
purchase the Liberty Property, negotiate the [Real Estate Purchase Contract], close on the
property, pay the mortgage, pay the property taxes, pay and shut off the utilities, lease out the
property, and evict the Talmages.” 11

5

Dkt. No. 38.
Dkt. No. 2 at ¶ 53.
7
See id. at ¶¶ 60–65.
8
Id. at ¶ 70.
9
Dkt. No. 77 at 7, 9–10.
10
Dkt. No. 64 at 6.
11
Id. at 11.
6

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Aside from the Liberty Property dispute, Mr. Wadsworth claims he was the victim of a
Ponzi scheme perpetrated by Ronald Talmage. 12 Mr. Wadsworth is allegedly endeavoring to
recover embezzled funds from Ronald Talmage on behalf of himself and other purported
victims. 13
On December 19, 2016, the Western Entities filed a motion for summary judgment. 14 In
response, the government filed a Rule 56(d) motion seeking to delay the Western Entities’
motion until discovery could be conducted. 15 On March 6, 2017, Judge Nuffer granted the
government’s Rule 56(d) motion and stayed the Western Entities’ motion until more discovery
could be accomplished. 16
DISCUSSION
The parties disagree on the scope of discovery, the length of discovery, and the
application of the court’s Standard Protective Order. For the reasons that follow, the Western
Entities’ Request for Scheduling Conference and Motion for Protective Order is granted. At this
stage, the court is not convinced that this case warrants a protracted discovery plan
encompassing dozens of witnesses and years of discovery. Additionally, the United States’
Motion for Relief from Standard Protective Order is granted in part and denied in part. The court
believes a modified protective order is more than sufficient to ameliorate the government’s
recordkeeping and reporting concerns.
A. The Western Entities’ Motion for Scheduling Conference and Protective Order
Pursuant to Rule 26 of the Federal Rules of Civil Procedure, “[p]arties may obtain
discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense.”
12

Dkt. No. 49 at ¶ 18.
Id. at ¶ 18(m).
14
Dkt. No. 64.
15
Dkt. No. 88.
16
Dkt. No. 106.
13

3

Fed. R. Civ. P. 26(b)(1). Importantly, however, discovery must be “proportional to the needs of
the case.” Id. The factors that weigh on proportionality are: “[1] the importance of the issues at
stake in the action, [2] the amount in controversy, [3] the parties’ relative access to relevant
information, [4] the parties’ resources, [5] the importance of the discovery in resolving the
issues, and [6] whether the burden or expense of the proposed discovery outweighs its likely
benefit.” Id. The “proportionality concept seeks to ‘eliminate unnecessary or wasteful
discovery,’ and to impose ‘careful and realistic assessment of actual need.’” Swasey v. W. Valley
City, No. 2:13-CV-768 DN, 2016 WL 6947021, at *1 (D. Utah Sept. 6, 2016) (citing Chief
Justice John Roberts, 2015 Year—End Report on the Federal Judiciary at 7, available at
https://www.supremecourt.gov/publicinfo/year-end/2015year-endreport.pdf (last visited Mar. 14,
2017)). In essence, the proportionality limitation requires “judges to be more aggressive in
identifying and discouraging discovery overuse by emphasizing the need to analyze
proportionality before ordering production of relevant information.” Id.
In this case, the parties’ Rule 26(f) report identifies the following subjects where the
parties agree discovery is appropriate:
(i) the interests, if any, of Ronald B. Talmage, Annette C. Talmage, and/or the
Western [Entities] in the Liberty Property; (ii) the circumstances surrounding the
purchase of the Liberty Property in September 2011; (iii) the involvement of
Ronald B. Talmage, Annette C. Talmage, and John Wadsworth with the Liberty
Property; (iv) the ultimate ownership of the Western [Entities] and any of their
parent/subsidiary entities, including whether John Wadsworth is the beneficial
owner of these entities; and (v) the source of funds used to purchase the Liberty
Property in September 2011. 17
Apart from these agreed upon topics, the parties disagree on the complexity and scope of
discovery.

17

Dkt. No. 65 at ¶ 2(a).

4

The government disagrees that topics identified in the Rule 26(f) report should be the
outer limits of discovery. Mr. Wadsworth has claimed he was the victim of a Ponzi scheme
perpetrated by Ronald Talmage. 18 Therefore, the government argues that discovery should also
include allowing the government to seek information regarding whether “Ronald B. Talmage
defrauded John Wadsworth and/or various Japanese Investors in a multimillion-dollar Ponzi
scheme.” 19 The government believes that to determine whether the Western Entities are the
nominees, alter egos, or fraudulent transferees of the Talmages, the government must be
permitted to explore the Western Entities’ relationship with Ronald Talmage in depth. 20
Moreover, the government argues that discovery in this case is complex. The
government alleges that the purchase of the Liberty Property involved a complicated real estate
transaction involving several entities. The government has identified several witnesses—many
of which are abroad—who are necessary to understand the complex ownership structure of the
Liberty Property and the Western Entities. 21 The government argues that some depositions will
need to be obtained using The Hague Convention. The government contends that utilizing The
Hague Convention is a lengthy process warranting an extended discovery period. Moreover, the
government argues that this case is not about a single parcel of property. Rather, this case
involves a $20 million default judgment and a complex real estate transaction that may
demonstrate the Western Entities have aided and abetted the Talmages in avoiding their tax
liabilities. 22
The Western Entities, however, claim this is a simple case of ownership and a routine
discovery plan is more than necessary to resolve this dispute. The Western Entities claim that
18

Dkt. No. 49 at ¶ 18.
Dkt. No. 65 at ¶ 2(a).
20
Dkt. No. 73 at 8.
21
Id. at 6–7.
22
Id. at 5–6.
19

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the Liberty Property is worth roughly $600,000. Moreover, the Western Entities contend that
“[a]lthough this case is set against a backdrop of the [Talmages’] embezzlement and Ponzi
scheme—of which . . . [Mr.] Wadsworth is a victim—that history is a collateral matter to the
discrete claim in this case; namely, whether the Government can show the Talmages have a
property interest in the Liberty Property according to the laws of the state of Utah.” 23 The
Western Entities argue that the government’s proposed discovery plan is not proportional to the
amount in controversy or the simplicity of the case.
Based on their competing views, the parties offer the following discovery plans.
Government
Proposal

Western Entities
Proposal

Duration:

2 Years

6 Months

Depositions:

40

10

Interrogatories, Requests
for Admission, and
Requests for Production:

100

25

The court has reviewed the parties’ dispositive motions and carefully weighed the factors
pertaining to proportionality. The court finds that a routine discovery plan will be sufficient to
resolve this dispute. The court agrees with the Western Entities that at its core this dispute
involves a single property worth approximately $600,000 and the government’s ability to
foreclose on the property. Pragmatically, the Talmages are no longer in this dispute. This is not
a case about a $20 million tax default judgment. Rather, this case is about a single parcel of
property and whether the government can demonstrate that the Western Entities are the
nominees, alter egos, or fraudulent transferees of the Talmages.

23

Dkt. No. 70 at 3–4.

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Resolving the Liberty Property’s true ownership may involve a complex real estate
transaction and may require some exploration into Mr. Wadsworth’s Ponzi scheme accusations.
However, the court is not satisfied that the government’s extended discovery plan is warranted in
light of the amount in controversy and the burden and expense an extended discovery plan will
likely entail. Moreover, the court is aware of the difficulties posed by the use of The Hague
Convention. However, in the court’s experience, working with The Hague Convention is
typically not as lengthy of a process as the government argues. Accordingly, the court is not
persuaded that two years of discovery is necessary merely because there is a possibility that the
government will seek to depose foreign witnesses.
Based on the forgoing, the court imposes the following Scheduling Order.
1. DISCOVERY LIMITATIONS
Last day to serve written discovery:

August 15, 2017

Close of fact discovery:

September 15, 2017 24

Maximum number of depositions by Plaintiff:

10

Maximum number of depositions by Defendants:

10

Maximum hours for each deposition:

7

Maximum number of interrogatories:

25

Maximum number of requests for admission:

25

Maximum number of requests for production:

25

24

The court has extended the discovery period to accommodate any scheduling delays caused by this
discovery dispute.

7

2. EXPERT DISCLOSURE, REPORTS, AND DISCOVERY
Reports and disclosures on issues for which a party bears the
July 17, 2017
burden of proof.
Rebuttal Reports
August 15, 2017

Deadline to complete expert deposition and expert discovery
cutoff.
3. MOTION DEADLINES
Deadline to file dispositive motions:

October 16, 2017

November 17, 2017

Deadline to file motions in limine seeking the exclusion of expert December 18, 2017
testimony, i.e. Daubert Motions:
4. PRETRIAL DISCLOSURES
Rule 26(a)(3) disclosure deadline – Plaintiff:

40 days prior to Final
Pretrial Conference

Rule 26(a)(3) disclosure deadline – Defendant:

30 days prior to Final
Pretrial Conference

Special Attorney Conference on or before:

14 days prior to Final
Pretrial Conference

Settlement Conference on or before:

14 days prior to Final
Pretrial Conference

5. TRIAL
Final pre-trial conference:

March 19, 2018 at 2:00 pm
April 2, 2018—April 13,
2018

Trial (10 days):

The court wishes to emphasize that this scheduling order is not set in stone. As the case
progresses, facts may come to light that will justify more or even less discovery. The court is
willing to amend the discovery plan if either party can present concrete evidence why the
discovery plan should be amended. The court strongly encourages the parties to stipulate to
reasonable amendments to the discovery plan as needed. The court should be the forum of last
resort for resolving any future discovery disputes.

8

B. Government’s Motion for Relief from the Court’s Standard Protective Order
In all civil cases, the District of Utah has imposed the automatic entry of a Standard
Protective Order to avoid unnecessary delays in discovery. See DUCivR 26-2(a). Under
DUCivR 26-2(a)(2), “[a]ny party or person who believes that substantive rights are being
impacted by application of the rule [entering a Standard Protective Order] may immediately seek
relief.” As soon as practical, a party seeking relief from the Standard Protective Order must
demonstrate why good cause exists to suspend the application of DUCivR 26-2(a). See United
States v. RaPower-3 LLC, No. 2:15-cv-828-DN, 2016 WL 5121754, at *2 (D. Utah Sept. 20,
2016).
In previous cases, the court has held that the court’s Standard Protective Order may
violate the government’s substantive rights. See id.; Callister Nebeker & McCullough v. United
States, No. 2:14-CV-00919-TC-DBP, 2016 WL 1089242, at *3 (D. Utah Mar. 18, 2016). For
instance, in United States v. RaPower-3 LLC, the government sought relief from court’s Standard
Protective Order. 2016 WL 5121754, at *1. The government argued that the Standard
Protective Order interfered with the government’s reporting and recordkeeping obligations. Id.
The court held that the government had provided the court good cause to suspend the application
of the DUCivR 26-2(a). Id. at *3. However, the court declined to draft a modification and
instead ordered the parties to negotiate a modified protective order to ameliorate the
government’s concerns. Id. at *3; see also Callister Nebeker & McCullough, 2016 WL 1089242,
at *3.
Like RawPower-3 LLC, the United States is seeking to suspend the application of
DUCivR 26-2(a). The government argues that the Standard Protective Order violates the
government’s rights by: (1) prohibiting Department of Justice employees from complying with

9

their obligations to report violations or suspected violations of law; (2) prohibiting Department
of Justice employees from sharing information with other government employees or contractors
assisting with litigation; (3) requiring the parties to unnecessarily disclose consulting experts and
prematurely disclose testifying experts; and (4) interfering with the Department of Justice’s
recordkeeping requirements. 25 Additionally, the government contends that the Western Entities
are abusing the confidentiality protections in the Standard Protective Order. 26 Moreover, the
government argues that because the parties have been unable to negotiate a modified protective
order, the solution is to eliminate the use of a protective order altogether. 27
The Western Entities agree that the Standard Protective Order may violate the
government’s substantive rights. 28 However, the Western Entities argue that the court should
impose a modified protective order. 29 The Western Entities contend that a modified protective
order could address each of the government’s concerns while providing a method for the parties
to conduct discovery efficiently. Prior to filing the instant motions, the parties attempted to
negotiate modifications to the Standard Protective Order to address the government’s concerns.
The court finds that the government has demonstrated good cause why DUCivR 26-2(a)
should be suspended. However, the court declines to completely disregard the use of a
protective order. It would be nonsensical to forgo the efficiency and protections of a protective
order merely because the parties are at an impasse. The court has reviewed the parties’
submissions. The court agrees with the government that a tolling provision is appropriate in this
case. The court has intervened on several disputes regarding confidentiality designations.

25

Id. at 7–11.
Id. at 11–13.
27
Dkt. No. 93 at 5 (“[R]equiring further negotiations would serve no purpose, and complete relief from
the Standard Protective Order is warranted.”).
28
See Dkt. No. 86 at 2–3.
29
Id.
26

10

Against this backdrop, a tolling provision is reasonable and serves as a built-in deterrent to avoid
future abuse of the protective order. Accordingly, the United States’ Motion for Relief from
Standard Protective Order is granted in part and denied in part. The court will file a modified
protective order contemporaneous with this opinion.
CONCLUSION
Based on the forgoing, the Western Entities’ Request for Scheduling Conference and
Protective Order 30 is GRANTED. The United States’ Motion for Relief from Standard
Protective Order 31 is GRANTED IN PART AND DENIED IN PART.
As an aside, in December 2016 the local rules for the District of Utah were amended. As
of December, all civil discovery disputes must follow the short form discovery motion procedure
outlined in DUCivR 37-1. Accordingly, any future discovery motions filed in this case must
comport with DUCivR 37-1.
IT IS SO ORDERED.
DATED this 17th day of March, 2017.
BY THE COURT

___________________________
Paul M. Warner
Chief United States Magistrate Judge

30
31

Dkt. No. 70.
Dkt. No. 79.

11