Free Motion for Reconsideration - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS GRAPEVINE IMPORTS, LTD., a Texas Limited Partnership, and T-TECH, INC., a Texas Corporation as Tax Matters Partner, Plaintiffs, v. United States of America, Defendant. § § § § § § § § § §

Case No. 05-296T Judge Francis M. Allegra

PLAINTIFFS' MOTION FOR RECONSIDERATION OF ITS MOTION TO COMPEL PRODUCTION RELATED TO CHERYL KIGER'S EXPERT REPORT COME NOW Plaintiffs, Grapevine Imports, Ltd. and T-Tech, Inc. ("Plaintiffs") and file this Motion for Reconsideration of Its Motion to Compel Production Related to Cheryl Kiger's Expert Report filed on December 20, 2006 (Rec. Doc. No. 62). On December 22, 2006, counsel for the Government responded to Plaintiffs' Second Request for Production which sought all materials, drafts and correspondence related to Cheryl Kiger's expert report. Essentially

conceding Plaintiffs' argument in the Motion to Compel that the Government's initial discovery response was inadequate, the Government produced a privilege log detailing which documents were being withheld and what privilege is alleged to apply to those documents. (Privilege Log, Government's Exhibit B to Response to Plaintiffs' Motion to Compel). In addition, on

December 20, 2006, the Government filed its pre-hearing memorandum and confirmed what Plaintiffs suspected would occur, that the Government intends to merely "argue" the points made by Ms. Kiger in her expert report rather than subjecting their expert to potentially damaging cross-examination. However, the Court denied Plaintiffs' Motion to Compel on January 3, 2006, holding that the "exceptional circumstances" test of Rule 26(b)(4)(B) applies to this dispute, and

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holding further that Ms. Kiger's report and deposition are irrelevant to and inadmissible during the upcoming hearing. (Rec. Doc. No. 69). Plaintiffs file the instant Motion for Reconsideration and seek the following relief from the Court's January 3 Order: 1) reconsideration of the Court's finding that the "exceptional circumstances" test applies when a party voluntarily produces the expert's report, submits the expert to deposition, and relies upon the substance of the expert's opinion in the party's arguments on the merits; 2) a finding that Ms. Kiger's report and deposition are relevant and may be used as necessary at the upcoming hearing to rebut the Government's use of the substance of her report as evidence; and 3) evaluation in camera of the Government's claim of privilege as to the documents listed in the privilege log, or, alternatively, submission of the documents into the record of this proceeding for purposes of appeal. In summary, the documents at issue should be produced because the Government has not met its burden of proof to demonstrate that these materials are privileged and that no waiver of any alleged privilege has occurred. Additionally, Plaintiffs should be permitted to use Ms. Kiger's report and deposition as rebuttal evidence at the upcoming hearing because the Government apparently intends to use the substance of Ms. Kiger's report in its arguments to the Court. I. Standard of Review of Plaintiffs' Motion to Compel Plaintiffs respectfully request that the Court reconsider its finding that the "exceptional circumstances" test of Rule 26(b)(4)(B) applies to Plaintiffs' motion. Although the Court

characterizes the "exceptional circumstances" test as the "prevailing" rule, cases applying this test to a withdrawn testifying expert are by no means a majority and do not represent a groundswell of authority. To the contrary, the Rule 403 balancing test used in Rubel v. Eli Lilly

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and Company, 160 F.R.D. 458, 460 (S.D.N.Y. 1995) recognizes the important distinction between an expert like Cheryl Kiger and a purely consultative expert. The Rule 403 test carries the dispute over the withdrawn testifying expert's testimony into the realm where it belongs ­ the courtroom. The Rule 403 test evaluates the need for the documents at issue as an evidentiary dispute, not a discovery dispute. This is appropriate because the party who designated the expert as a testifying expert has waived the necessity of "free consultation" that consulting expert status provides. See Rubel, 160 F.R.D. at 460. A number of cases have recognized the usefulness of this test as applied to expert witnesses previously designated and withdrawn as testifying witnesses. Ferguson v. Michael Foods, Inc., 189 F.R.D. 408 (D. Minn. 1999); Agron v. Trustees of Columbia Univ., 176 F.R.D. 445 (S.D.N.Y. 1997); House v. Combined Ins. Co., 168 F.R.D. 236 (N.D. Iowa 1996). The Rule 403 test is particularly applicable after the expert has been voluntarily submitted to deposition. As the Advisory Notes to Rule 26 of the Federal Rules of Procedure make clear, there is no claim of privilege regarding an expert after deposition. Rule 26, 1993 Amendments, Comment to Paragraph (2) (stating that no party may claim that expert materials are "privileged or otherwise protected from disclosure when such persons are testifying or being deposed") (emphasis added). Under this standard, or for that matter, under the exceptional circumstances standard of Rule 26(b)(4)(B), Plaintiffs' request for production of Ms. Kiger's expert materials should be granted. As shown in the Government's pretrial submissions, the Government intends to offer Ms. Kiger's expert opinion as substantive proof in the upcoming hearing: the pretrial brief is replete with references to points originally made in Ms. Kiger's expert report. Although the Government has not labeled the expert opinion as such, Ms. Kiger's opinion forms the basis of

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the Government's arguments in its pretrial briefs. The Government essentially is "having its cake and eating it too," obtaining the benefits of Ms. Kiger's expert testimony without submitting her opinion to potentially damaging cross-examination. As the Court points out, expert testimony was not strictly required for the upcoming hearing, but throughout pretrial preparation the Government gave every indication that it would use expert testimony. Plaintiffs relied upon those representations and expended significant time and resources related to that expert. Given that Ms. Kiger's expert opinion forms the basis of the Government's central arguments under 26 U.S.C. § 6501(e)(1)(A), the documents reviewed by her in forming that opinion are highly relevant. Also, any prejudice to the Government in producing these materials is miniscule, in that the Government's obligation under Rule 26 was to produce these materials and in that the Government had ample time to do so. Accordingly, the Court should reconsider its ruling and hold that the materials at issue should be produced to Plaintiffs. II. Standards for Privileges Claimed by the Government and Burden of Proof The documents at issue should also be produced because the Government has failed to establish the existence of any privilege related to these documents. The Government, the

proponent of the privileges at issue, bears the burden of proof to demonstrate that the alleged privileges apply and that the privileges have not been waived.1 In re Keeper of Records, 348 F.3d 16, 22 (1st Cir. 2003); In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 802 (Fed. Cir. 2000). A brief review of the legal standards for invoking the privileges claimed by the

Government will demonstrate that the privilege log falls far short of meeting the Government's burden to establish that privilege attaches to these materials and that waiver has not occurred.

Because this case involves substantive issues arising under federal law (i.e., the Internal Revenue Code), the Court should apply the federal law of privilege to the instant motion. Fed. R. Evid. 501. See also In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 803 (Fed. Cir. 2000) (applying federal privilege law to patent case). PLAINTIFFS' MOTION FOR RECONSIDERATION OF MOTION TO COMPEL

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The attorney-client privilege protects confidential communications between an attorney and a client made for the purposes of obtaining legal advice. In re Echostar Commc'n Corp., 448 F.3d 1294, 1300 (Fed. Cir. 2006) (citing Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). Attorney-client privilege does not attach to an expert's testimony, regardless of whether that expert is designated as consultative or testifying. See Fed. R. Civ. P. 26, Advisory

Committee Notes (1970) (stating that the 1970 amendments "repudiate the few decisions that have held an expert's information privileged simply because of his status as an expert . . . . [and] reject as ill-considered the decisions which have sought to bring expert information within the work-product doctrine"). Cheryl Kiger is not an attorney and is functionally a third party to these proceedings. Ms. Kiger is not necessary to facilitate confidential attorney-client conversations, so there is no claim of privilege on this basis. Any claim by the Government of attorney-client privilege regarding materials reviewed or authored by Ms. Kiger is simply bogus. And, even if the attorney-client privilege would apply to the materials at issue, this privilege has been waived by counsel's disclosure of the materials to Cheryl Kiger. The Federal Circuit has held that disclosure of confidential communications to an expert witness in connection with his or her testimony waives any claim of attorney-client privilege as to those materials. In re Pioneer Hi-Bred Int'l, Inc., 238 F.3d 1370, 1375-76 (Fed. Cir. 2001). Work-product privilege protects documents and tangible things prepared in anticipation of litigation that are both non-privileged and relevant. Fed. R. Civ. P. 26(b)(3); Echostar, 448 F.3d 1294, 1301 (Fed. Cir. 2006). Work-product privilege also does not attach to expert

testimony, including consultative expert testimony. See Fed. R. Civ. P. 26, Advisory Committee Notes (1970) and (1993). The rule is intended to protect an attorney's thought processes and does not protect documents created through the effort of a third party who is not an attorney.

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There is no legal basis for a claim of work-product privilege related to materials reviewed or created by Cheryl Kiger. Even if the work product privilege were to apply in theory to the documents at issue, Government counsel's disclosure of the privileged material to Cheryl Kiger waived this privilege. See In re Pioneer, 238 F.3d at 1375-76. Deliberative process privilege applies to documents reflecting "advisory opinions, recommendations and deliberations comprising part of a process by which the governmental decisions and policies are formulated." Vons Co. v. United States, 51 Fed. Cl. 1, 22 (2001) (Allegra, J.) (quoting NLRB v. Sears Roebuck Co., 421 U.S. 132, 150 (1975)). For the privilege to apply, the documents must be "pre-decisional[,]" that is, they must predate the adoption of an agency policy, and "deliberative," reflecting the give-and-take of the consultative process. Vons Co., 51 Fed. Cl. at 22. The Government must assert what deliberative process is involved in the documents withheld and the role of the documents in that deliberative process. Coastal States Gas Corp. v. Dep't of Energy, 617 F.2d 854, 868 (D.C. Cir. 1980). Litigation-related discussions between government counsel do not automatically fall within the deliberative process privilege. Allen v. Chicago Transit Auth., 198 F.R.D. 495, 502 (N.D. Ill. 2001). Documents that support a decision already made by the agency are also unprivileged. Petroleum Info. Corp. v. United States Dep't of Interior, 976 F.2d 1429, 1434 (D.C. Cir. 1992). III. Privilege Log and Documents at Issue The privilege log generally fails on its face to establish that any of the claimed privileges attaches to the documents listed in the log. It lacks the specificity demanded to invoke the privileges at issue. For example, the Government claims that virtually all of the withheld documents are covered by deliberative process privilege. But there is no description of how these documents, created for litigation and after litigation is underway, in any way precede

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legitimate agency decision-making or constitute deliberation about agency policy. On their faces, these litigation documents do not qualify as pre-decisional or deliberative; the privilege log fails to tie them to any legitimate agency policy decision. The Government must do more to establish why the deliberative process privilege applies. Moreover, the descriptions, such as "cover sheet," "discussing section 6501(e)," and "discussing expert assignment" are so vague as to be useless and generally fail to establish any privilege. Some of the documents by their description alone do not fall within any of the claimed privileges. For example, document number KIG-000090 is a copy of notes authored by Cheryl Kiger. The Government alleges that attorney-client privilege and deliberative process privilege apply to this document. But from the face of the description it is apparent that neither of these privileges applies. Cheryl Kiger is not an attorney, she is not the client of Government counsel, and she is not necessary to facilitate attorney-client communications. There is no attorney-client privilege. Moreover, this document in no sense appears to be either pre-decisional or This is true for all

deliberative within the meaning of the deliberative process privilege.

documents authored by Cheryl Kiger, including documents KIG-000175, KIG-000182, KIG000203, KIG-000233, KIG-000280, KIG-000342, KIG-000342 (a draft of the expert report that has already been produced to Plaintiffs), KIG-000471, KIG-000512 (documents that were produced to the Government by Plaintiffs), KIG-000566, KIG-000572, KIG-000574, KIG000578, and KIG-000585. As for documents authored by Government counsel, Government counsel were fully aware when they designated Ms. Kiger as an expert witness in August 2006 that all documents created by, reviewed by, or produced to her would be unprivileged and subject to discovery. Rule 26's guidance on expert discovery should not be a surprise to experienced Government

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counsel. They cannot seriously complain that a substantial portion of documents produced to her were "inadvertently" produced. If this were a question of one "inadvertently produced"

document, the Government's claim of privilege would be somewhat more credible. But the Government claims that 32 of the 66 entries in the privilege log, some 48% of the total documents listed, were "inadvertently" produced to Ms. Kiger. There is no "inadvertence" at work here: the Government is merely attempting to cloak potentially damaging, unprivileged materials behind a curtain of privilege. Overall, the Government has failed to make the requisite showing that the documents at issue are privileged and that no waiver of privilege has occurred. In camera review is a highly appropriate means to evaluate the Government's claim of privilege regarding these documents. Kerr v. United States Dist. Ct., 426 U.S. 394, 405-06 (1976); Redland Soccer Club, Inc. v. Dep't of the Army, 55 F.3d 827, 855 (3d Cir. 1995); Vons Co., 51 Fed. Cl. at 22-23. Should the Court decline in camera review, Plaintiffs respectfully request that this Court require the Government to submit the documents at issue into the record of this proceeding for purposes of appeal. In addition, because Ms. Kiger's report and deposition are highly relevant as rebuttal evidence to the Government's anticipated use of the substance of her report at the upcoming hearing, the Court should find that the report and deposition are relevant and admissible. IV. Conclusion As the proponent of the alleged privileges, the Government bears the burden to establish that any privilege applies to documents provided to Ms. Kiger and that no waiver of privilege has occurred. The Government simply cannot do this. Ms. Kiger is not an attorney and was not retained as a consultative expert. The Government voluntarily designated her as a testifying expert, voluntarily produced her report, voluntarily produced her for deposition, and has

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voluntarily relied upon her opinion and expertise in its arguments in its recently pre-trial memorandum. In all functional respects, Ms. Kiger is a testifying expert, and she should be treated as such for discovery purposes. The Government wants the benefit of Ms. Kiger's testimony without the burden of actually producing her as an expert. The Court should not allow the Government to skirt this Court's well-established discovery rules. The Court should evaluate Plaintiffs' Motion to Compel under Rule 403 of the Federal Rules of Evidence and find that the probative value of the materials sought outweigh the Government's bogus claims of privilege and inadvertent disclosure. The Government has failed to establish that any privilege currently attaches to the documents related to Cheryl Kiger's report. No attorney-client or work-product privileges attach to documents voluntarily provided to a third party expert like Ms. Kiger. If any privilege applied, it was waived by the Government's knowing, not inadvertent, disclosure. And the Government has not identified any recognizable "deliberative process" to which the deliberative process privilege would relate in this matter. Government counsel well-understood the breadth of discovery for an expert witness at the time Ms. Kiger was designated; there is no "inadvertence" in their production of documents to Ms. Kiger. Because no privilege applies and because the documents are highly relevant, these documents should be produced under Rule 26(a) of the Federal Rules of Civil Procedure. WHEREFORE, for all these reasons, Plaintiffs respectfully request that their Motion to Compel Production Related to Cheryl Kiger's Expert Report be granted, and that Court grant the following additional relief to Plaintiffs: 1) reconsideration of the Court's finding that the "exceptional circumstances" test applies when a party voluntarily produces the expert's report, submits the expert to deposition, and relies upon the substance of the expert's opinion in the

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party's arguments on the merits; 2) a finding that Ms. Kiger's report and deposition are relevant and may be used as necessary at the upcoming hearing to rebut the Government's use of the substance of her report as evidence; 3) evaluation in camera of the Government's claim of privilege as to the documents listed in the privilege log, or, alternatively, submission of the documents into the record of this proceeding for purposes of appeal; and 4) all such just and equitable relief as the Court may deem appropriate. Respectfully submitted on January 11, 2007, By: /s/ M. Todd Welty________ M. Todd Welty Texas State Bar No. 00788642

MEADOWS, OWENS, COLLIER, REED COUSINS & BLAU, L.L.P. 901 Main Street, Suite 3700 Dallas, TX 75202 (214) 744-3700 Telephone (214) 747-3732 Facsimile [email protected] ATTORNEY-IN-CHARGE FOR PLAINTIFFS

CERTIFICATE OF SERVICE I hereby certify that on January 11, 2007, I electronically filed the foregoing pleading with the Clerk of the Court using the ECF system which will send notification of such filing to the following: Grover Hartt, Esq. U.S. Department of Justice--Tax Division 717 N. Harwood, Suite 400 Dallas, Texas 75201 /s/ M. Todd Welty M. Todd Welty
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