Free Motion for Miscellaneous Relief - District Court of Federal Claims - federal

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 1 of 17

IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________ No. 95-758T (Judge Nancy B. Firestone) ____________ NATIONAL WESTMINSTER BANK PLC, Plaintiff v. THE UNITED STATES, Defendant ____________ PLAINTIFF'S MOTION FOR AN ORDER DEEMING ADMITTED PLAINTIFF'S REQUESTS FOR ADMISSIONS UNDER RCFC 36(a) ____________ Plaintiff hereby moves under RCFC 36(a) for an Order striking certain of Defendant's Responses to Plaintiff's Second Set of Requests for Admissions, and deeming admitted those Requests.1 In an effort to prepare this case for efficient trial of any triable issues, Plaintiff served Defendant with a comprehensive set of Requests for Admissions on December 8, 2004. Defendant's Responses to those Requests, dated January 7, 2005, consist almost entirely of baseless claims of lack of information and unfounded objections. From them, Plaintiff is unable

Specifically, Plaintiff moves that Requests 2.05, 2.06, 2.09, 2.11, 2.14, 2.17, 2.18, 2.20, 2.22, 2.24, 2.25, 2.30, 2.33 through 2.42, 2.44 through 2.47, 2.50 through 2.52, 2.54, 2.56 through 2.94, 2.96 through 2.103, 2.105, 2.106, 2.108 through 2.116, 2.119 and 2.124 be deemed admitted. A proposed form of Order is included as an attachment to this Motion. Plaintiff has been unsuccessful in its attempt to meet and confer with Defendant regarding this matter.

1

-1-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 2 of 17

to understand what facts and issues are contested or uncontested and is unable to prepare efficiently for trial. Defendant's obstructive Responses would make it necessary for Plaintiff to introduce evidence at trial to prove the most basic and indisputable facts, imposing significant additional burdens and time requirements on Plaintiff and the Court. Moreover, Defendant's Responses seem to envision the July trial of this case as yet another interim proceeding, with further proceedings before the Court to follow thereafter.2 This subsequent proceeding would extend to matters as fundamental as the question whether the interest expense set forth in Plaintiff's profit and loss statements ties out to the interest expense deducted in its U.S. tax returns.3 Plaintiff submits that Defendant's Responses violate the letter and spirit of RCFC 36(a). Accordingly, Plaintiff seeks an Order finding Defendant's Responses to the Requests set forth in footnote 1 above deficient as a matter of law and deemed admitted under RCFC 36(a).4 Over the decade in which this case has been pending before this Court, Defendant has conducted extensive discovery. It has served and received responses to 179 interrogatories and 84 document requests, conducted 19 depositions, and has had open access since August 2004 to a comprehensive repository of Plaintiff's business records. Defendant also has been provided with a detailed report from Plaintiff assembling and analyzing those records insofar as they relate to the capital issue. Defendant has not yet proposed an adjustment or articulated a position on the issues remaining before the Court, other than to voice vague assertions at the July 13, 2004

2

See Defendant's Response to Plaintiff's Request for Admissions 2.44, discussed at II Id.

below.
3

A copy of Defendant's Responses to Plaintiff's Second Set of Requests for Admissions is attached as Exhibit A.

4

-2-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 3 of 17

hearing in response to the Court's inquiries. After all this time has passed, Plaintiff still does not know whether Defendant asserts that any amounts on which it deducted interest should be recharacterized as capital in nature, including the "capital loan charges" Plaintiff long ago identified and conceded, or, for that matter, whether Defendant has identified any evidence whatsoever suggesting that Plaintiff's U.S. branch did not pay interest at arm's length rates. In an effort finally to force Defendant to clarify its position and to create an efficient mechanism for trial of any remaining triable issues, Plaintiff served Defendant with comprehensive requests for admissions covering the facts underlying all issues that ultimately need to be addressed to resolve this case ­ facts as set forth in Plaintiff's books and records with respect to amounts deducted on Plaintiff's U.S. tax returns, facts identifying the existence of any deductions claimed as interest but in reality reflecting payments on capital, facts identifying the absence of any deductions of interest at non-arm's length rates, and facts that must be determined in order to compute Plaintiff's tax liability under the Court's 2001 and 2003 Opinions. See Plaintiff's Second Request for Admissions, attached as Exhibit B. Defendant's responses are not really "responses" at all ­ they profess an inability to admit or deny most of the facts relating to the core issues in this case. Plaintiff submits that after ten years of litigation, Defendant's Responses are so inexcusably deficient that at least certain of the most basic Requests should be deemed admitted. I. The Legal Standard The purpose of Requests for Admissions under RCFC 36, which is identical to Rule 36 of the Federal Rules of Civil Procedure,5 is to reduce trial time by "`eliminating the necessity of

5

See RCFC 36, Rules Committee Note; Wheeler v. United States, 11 F.3d 156, 157 n.1 (continued...)

-3-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 4 of 17

proving facts that are not in substantial dispute, to narrow the scope of disputed issues, and to facilitate the presentation of cases to the trier of fact.'" Concerned Citizens v. Belle Haven Club, 223 F.R.D. 39, 44 (D. Conn. 2004) (citation omitted). See also Fed. R. of Civ. P. 36, Advisory Committee Notes to 1970 Amendments. Defendant's responses flout these purposes. In 81 instances, often after expressing objections, Defendant responded to Plaintiff's Requests as follows: "Defendant states that it has made reasonable inquiry and the information known or reasonably obtainable by defendant is insufficient to enable it to admit or deny" the request.6 The Ninth Circuit Court of Appeals has concluded that merely reciting that one has made a reasonable inquiry without actually undertaking such an inquiry is insufficient under Rule 36(a): We are not persuaded that an answer to a Request for Admissions necessarily complies with Rule 36(a) merely because it includes a statement that the party has made reasonable inquiry and that the information necessary to admit or deny the matter is not readily obtainable by him. The discovery process is subject to the overriding limitation of good faith. Callous disregard of discovery responsibilities cannot be condoned. *** The abuses of the current discovery rules are well documented. In our view, permitting a party to avoid admitting or denying a proper request for admission simply by tracking the language of Rule 36(a) would encourage additional abuse of the discovery process. Instead of making an evasive or meritless denial, which clearly would result in the matter being deemed admitted, a party could comply with the Rule merely by having his attorney submit the language of the Rule in response to the request. Since a district court may order that a matter is admitted only if an answer does not "comply" with the requirements of the Rule, it could be

(...continued) (Fed. Cir. 1993) ("This court . . . examines the general federal law interpreting the corresponding Federal Rule of Civil Procedure as persuasive."). See Defendant's Responses to Requests 2.11, 2.17, 2.30, 2.33, 2.34, 2.35, 2.36, 2.37, 2.38, 2.39, 2.40, 2.41, 2.42, 2.44, 2.45, 2.46, 2.47, 2.50, 2.51, 2.52, 2.54, 2.56, 2.57, 2.58, 2.59, 2.60, 2.61, 2.62, 2.63, 2.64, 2.65, 2.66, 2.67, 2.68, 2.69, 2.70, 2.71, 2.72, 2.73, 2.74, 2.75, 2.76, 2.77, 2.78, 2.79, 2.80, 2.81, 2.82, 2.83, 2.84, 2.85, 2.86, 2.87, 2.88, 2.89, 2.90, 2.91, 2.92, 2.93, 2.94, 2.96, 2.97, 2.98, 2.99, 2.100, 2.101, 2.102, 2.103, 2.105, 2.106, 2.108, 2.109, 2.110, 2.111, 2.112, 2.113, 2.114, 2.115, 2.116, 2.119 and 2.124.
6

5

-4-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 5 of 17

argued that the only sanction for a party's willful disregard of its obligation to make reasonable inquiry would be an award of the expenses of proving the matter at trial pursuant to Rule 37(c). Without disparaging the deterrent effect of such a sanction, we believe that restricting the district court's discretion in this manner would reduce a litigant's obligation to make "reasonable inquiry" into a mere semantic exercise, and thus severely undermine the policy embodied in Rule 36(a) of limiting the issues before trial. Asea, Inc. v. Southern Pacific Transp. Co., 669 F.2d 1242, 1246-47 (9th Cir. 1981) (citation omitted). The Asea Court held that a response which fails to admit or deny a proper request for admission does not comply with the requirements of Rule 36(a) "if the answering party has not, in fact, made `reasonable inquiry,' or if information `readily obtainable' is sufficient to enable him to admit or deny the matter." Id. at 1247. A number of other courts have adopted the Asea Court's reasoning.7 The case law clearly indicates that the Court should evaluate the reasonableness of Defendant's contention that it lacks information sufficient to express a position on these matters. That evaluation can lead to only one conclusion: Defendant cannot assert in good faith that after

See, e.g., Harris v. Oil Reclaiming Co., 190 F.R.D. 674, 679 (D. Kan. 1999) ("Intonation of the words of the Rule that the party has made a `reasonable inquiry' is not determinative whether the answer is sufficient"); SEC v. Thrasher, 1996 U.S. Dist. LEXIS 13016, *9 (S.D.N.Y. 1996) ("if the information is held by the responding party or by an individual or entity with which the responding party maintains a relationship that enables it readily to procure the required information, then that party may be expected to seek out the information and respond substantively to the request for an admission"); Kuttner Buick, Inc. v. Crum & Foster Corp., 1995 U.S. Dist. LEXIS 12524 *6 (E.D.Pa. 1995) ("Contrary to what defendant seems to believe, the words of Rule 36(a) are not to be simply repeated in order to avoid responding to requests"); Reliance Ins. Co. v. Marathon LeTourneau Co., 152 F.R.D. 524, 525 n.4 (D.W.Va. 1994) ("the affirmation of reasonable inquiry is subject to `the overriding limitation of good faith'") (citing Asea, 669 F.2d at 1246); Barbosa v. Cincinnati Milacron Inc, 1984 U.S. Dist. LEXIS 16923 *6-7 (D. Mass. 1984) ("defendant has merely tracked the language of Rule 36(a) ... by including the statement that the party has made reasonable inquiry and that the information necessary to admit or deny the matter is not readily obtainable to it. This does not comply with the Rule. The defendant shall be required either to admit or deny the requests or state with specificity the reasons why it cannot truthfully admit or deny the requests, including detailed statement as to the `reasonable inquiry' which it has made and the results thereof.")

7

-5-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 6 of 17

reasonable inquiry it lacks information sufficient to respond. In fact, uncontradicted evidence Plaintiff has submitted to Defendant through interrogatory responses, through deposition testimony, in documents in the repository, and in Plaintiff's October 29, 2004 Report on the Capital Issue, are more than sufficient to enable Defendant to admit the matters set forth in the requests. RCFC 36(a) provides that "[i]f the Court determines that an answer does not comply with the requirements of this rule, it may order either that the matter is admitted or that an amended answer be served." Although deeming matters admitted is a "severe sanction," it is within the trial court's discretion to do so when circumstances warrant such action. See Asea Inc. v. Southern Pacific Transp. Co., 669 F.2d 1242, 1247 (9th Cir. 1981) ("The general power of the district court to control the discovery process allows for the severe sanction of ordering a matter admitted when it has been demonstrated that a party has intentionally disregarded the obligations imposed by Rule 36(a)"); United States v. Kenealy, 646 F.2d 699, 703 (1st Cir. 1981) ("deeming matters admitted is a proper remedy under appropriate circumstances for intransigence during discovery"). See also S.A. Healy Co./Lodigiani USA v. United States, 37 Fed. Cl. 204, 207 (1997) (requests were not deemed admitted where "no real prejudice in litigating the action on the merits has accrued as the result of the delay"). Plaintiff submits that in light of the history of this case, the Court should exercise its discretion to determine that Defendant's deficient responses are deemed admitted. For the Court's convenience, Plaintiff has organized Defendant's objections and responses by category and has addressed each category below.

-6-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 7 of 17

II.

Requests Relating to Amounts at Issue In 41 instances, Defendant submitted that it lacked sufficient information to admit or

deny requests for admission relating to the basic dollar amounts at issue, amounts plainly set forth in Plaintiff's records and tax returns.8 It is beyond dispute that Defendant does not lack information necessary to respond to these requests. For example, in Request for Admissions 2.33, Plaintiff requested the following admission: REQUEST FOR ADMISSIONS 2.33. The aggregate amount of interest income recorded on the profit and loss statements of the U.S. branches for each of the years at issue was as follows: Tax Year 1981 1982 1983 1984 1985 1986 1987

Aggregate Interest Income 701,738,889 635,002,839 486,454,589 635,242,556 529,248,172 498,814,159 584,410,256

(See Interest Income and Expense Details (on an annual basis for 1981-1987) included in June 5, 2001 Amended Refund Claim, and supporting schedules thereto; see also Def.'s Requests for Admissions 1.53 to 1.58 and Pl.'s Responses thereto.)

See Defendant's Responses to Requests for Admissions 2.33 through 2.42, 2.44 through 2.47, 2.50 through 2.52, 2.54, 2.56 through 2.68, 2.108 through 2.110, 2.112 through 2.116, 2.119 and 2.124.

8

-7-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 8 of 17

All Defendant needed to do in order to admit this matter was to add up several numbers ­ numbers Defendant had requested Plaintiff to admit only one month earlier.9 Instead, Defendant's response consisted of the following: RESPONSE TO REQUEST FOR ADMISSIONS 2.33: Plaintiff conducted banking operations in the United States through six separate U.S. branches. The branches engaged in transactions with each other and recorded those transactions, as well as other accounting information, on their separately prepared and maintained books and records. Profit and loss statements for each branch were generated by computer. At the end of each month, each branch was required to make a financial report to plaintiff's head office which included manually prepared profit and loss statements. As a result of the short deadline after the close of a period to submit the reporting package (referred to as a "quick close"), the reports were sent before any detailed analysis could be performed and were not fully corrected and reconciled. A department at PLC's head office was dedicated to making the necessary corrections and the results were used in preparing National Westminster Bank PLC's annual reports. (Tr. Tatz 1/23/2002 at 20: Tr. Samaroo at 41-42, 80; Bandoian Report at 2324.). See Response to Request for Admissions 2.26. Under Article 7(1) of the U.S. ­ U.K. Treaty, plaintiff National Westminster Bank PLC is subject to tax in the United States on the profits attributable to its six U.S. branches. Article 7(2) provides that the profits attributable to a "permanent establishment" (i.e., a branch) are those expected if it were an independent, separate and distinct enterprise. Each of the six branches kept separate books and records and engaged in transactions with each other, and consolidated or combined profit and loss statements of the six U.S. branches were never prepared. Each branch is a permanent establishment for purposes of the Treaty, and, consistent with plaintiff's practice of keeping separate books for each branch, the profits expected on an independent basis must be determined branch by branch. Thus, capital allotted to the branch in accordance with the court's November 14, 2003 Opinion must be determined branch by branch. Likewise, the separate books of each branch, and the transactions between the U.S. branches, require that related party interest income and expense must be tested for arm's length dealing at each branch. While interest income and expense reported on the profit and loss statements of each of the six U.S. branches are relevant, aggregations of those amounts into combined totals is not the basis for applying either the November 14, 2003, Opinion, or the arm's length standard to particular related party transactions. Plaintiff's request is therefore irrelevant, immaterial, and not calculated to lead to the discovery of relevant information and defendant objects to the request on those grounds. The requested admission is an

Those numbers were subject to minor corrections for 1981. See Plaintiff's Responses to Defendant's Requests for Admissions 1.53 through 1.58, attached as Exhibit C.

9

-8-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 9 of 17

improper effort to advance plaintiff's argument that the six U.S. branches may be combined in some manner, notwithstanding its own insistence that profits should be determined on the basis of the books and records, and its own practice of keeping separate branch records and not combining them. The requested admission also appears to be an improper effort to use the admission process to substitute for the introduction into evidence and consideration of plaintiff's separately kept branch books and records, which, as defendant will demonstrate at trial, were not pristine and reflect non-arm's length dealing. In addition, plaintiff's request cites as support documents that are not the contemporaneous books and records of the branch. They are a June 5, 2001, submission prepared by plaintiff's counsel for purposes of this litigation. The June 5, 2001, submission is hearsay, and it is not admissible into evidence under any exception to the hearsay rule. Defendant objects to the request, because it relies on inadmissible documents. Plaintiff's request also is unduly burdensome and oppressive. Plaintiff's request would require defendant to perform accounting work as a prerequisite to responding. As indicated above, each of the branches prepared separate profit and loss statements, revised them, and plaintiff never prepared combined statements. Plaintiff request is a repetition of its May 4, 2004, Proposed Stipulation 125, which asked defendant to verify aggregations by making calculations using 35 other proposed stipulations, each one of which contained a chart of financial data. The books and records of the branches speak for themselves regarding interest income and expense, without demanding accounting exercises from defendant. Subject to these objections, defendant states that it has made reasonable inquiry and the information known or readily obtainable by defendant is insufficient to enable it to admit or deny the request. Plaintiff's request merely required determining the sum of the interest figures for the U.S. branches for each year in issue. Defendant has had possession of the profit and loss statements of the U.S. branches since at least 2001, when Plaintiff provided them in response to Defendant's document requests, and each profit and loss statement contains a line providing the aggregate interest income for the branch and year to which it pertains. The admission requested is readily evident from the face of the documents and from information Defendant has demonstrated it possesses.

-9-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 10 of 17

The response that Defendant lacks information sufficient to admit or deny the request is clearly deficient and simply cannot be a good-faith attempt to respond to Plaintiff's requests. Nor do Defendant's objections have any merit. The fact that Defendant might need the assistance of an accountant to perform computations or that a mathematically undeniable computation might support Plaintiff's position in this case is no excuse for denying the Requests. Defendant's contention that it would be too burdensome to add up a few numbers that were included in Defendant's own Request for Admissions is frivolous and would, if upheld with Defendant's other similar objections, impose an unnecessary burden on Plaintiff and the Court during trial. And even if one could seriously entertain the notion that it is burdensome to require the United States to admit or explain its denial of facts underlying computation of the very tax liability it has challenged, this is work that inevitably needs to be performed to bring this case to closure. Waiting until trial to verify the information would unduly impose upon the resources of this Court and would "likely result in the expenditure of needless time and expense that the requests are intended to eliminate." See Concerned Citizens v. Belle Haven Club, 223 F.R.D. 39, 45 (D. Conn. 2004); Lumpkin v. Meskill, 64 F.R.D. 673, 677 (D. Conn. 1974) (Rule 36 facilitates "proof at trial by weeding out facts ... which are often difficult and expensive to prove"). In that regard, Defendant's Responses appear to contemplate that the parties will engage in further proceedings after the case is tried and the Court reaches its conclusions on the capital issue and the interest rate issue. For example, in response to Plaintiff's Request 2.44 that Defendant admit that "the items comprising taxable income reported on NatWest's original U.S. federal income tax return were equal to amounts set forth on the profit and loss statements of the New York, Nassau, Grand Cayman, Chicago and San Francisco branches and the IBF, subject to adjustments explained in Schedule M-1 of each of those returns," Defendant stated the following:

-10-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 11 of 17

RESPONSE TO REQUEST FOR ADMISSIONS 2.44: This request, and those following, would require defendant to trace the preparation of plaintiff's federal income tax return from the books of the six U.S. branches for the purpose of approving the accuracy of plaintiff's computation of its tax liability under a scenario in which plaintiff's interest income and expense are as it now claims (which varies from the amounts claimed on the returns). Of course, the interest income and interest expense to which plaintiff actually is entitled will be determined by the Court after trial of the capital and arm's length issues. There are far too many possible outcomes to anticipate, and each will result in a different tax liability. Plaintiff previously agreed with defendant to follow the standard procedure in tax cases for many years under which the Court first would determine the substantive issue in a case, and then the parties would be given a period of time to reach agreement on the resulting tax liability and any refund. The procedure arose because, once the Court determines the substantive issues in a case, the computation of the plaintiff's tax liability, and possible overpayment, is virtually always agreed to without the Court's intervention. This being the case, there is no need to burden the Court at trial with prolonged testimony from both sides by tax computation specialists, regarding the intricacies of the manner in which income, deductions, credits, carryovers, limitations, past adjustments, payments, etc. determine a taxpayer's ultimate tax liability. There likewise is no need to devote trial time to the introduction of exhibits and testimony, such as certificates of assessments and payments, carryover adjustments, previous audit adjustments, etc. to establish the dates and amounts of tax payments and other facts needed to compute any tax overpayment. Moreover, testimony and exhibits to explain computations based on possible alternative resolutions of the issues is inefficient and wasteful of the Court's and the parties' resources. It is far preferable for the Court first to resolve the substantive issues in the case, and then permit the parties to pursue an agreement on tax computations. The Court will need to become involved in computations only in the unlikely event the parties fail to reach agreement, and, even then, its involvement will be focused on its actual resolution of the issues, rather than scattered among hypothetical, alternative scenarios. [emphasis added.] The requested admissions to which this Motion pertains cover facts on which it will be necessary to reach agreement in order to compute Plaintiff's tax liability, but they do not extend to computation of the liability itself.10 The notion that Defendant hopes to leave a broad category of factual questions open, to be addressed by the Court in some later proceeding after trial, is, we

Plaintiff's Requests for Admission 2.52, 2.120, 2.122, 2.123 and 2.125 pertain to the computation of Plaintiff's tax liability. Those requests are not the subject of this Motion.

10

-11-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 12 of 17

believe, inconsistent with the Court's intention to resolve finally all remaining issues through a trial in July, 2005. In any event, it is certainly not a proper objection to a Request for Admission under RCFC 36(a). III. Requests Relating to the Capital Issue Defendant has refused to admit or deny 37 more requests setting out the core facts relating to the capital issue.11 Most of these requests set forth the amounts of capital loan charges deducted on Plaintiff's tax returns and request admission that Plaintiff's profit and loss statements do not reflect deduction of any additional capital loan charges. Plaintiff's Request for Admissions 2.80, for example, provides that "[f]or the year ended December 31, 1982, the total capital loan charges paid by the U.S. branches to PLC and deducted on the U.S. federal income tax return was $209,433," and Plaintiff's Request for Admissions 2.81 provides that "[a]part from the amount described in Request for Admissions 2.80, during the year ended December 31, 1982, neither the profit and loss statements of the U.S. branches nor the U.S. federal income tax return of NatWest reflected any deduction of interest with respect to any balance in any of the accounts entitled Retained Profits or Accumulated Losses, Profit and Loss, Balance due to HO re Capital Loan, and Balance due to HO re Fixed Assets."

See Defendant's Responses to Requests for Admissions 2.69 through 2.94, 2.96 through 2.103, 2.105, 2.106 and 2.111.

11

-12-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 13 of 17

With one exception,12 Defendant responded to all such requests by referring to its Response to Request for Admissions 2.69, which stated: Discovery has not been completed, and defendant's experts are reviewing Mr. Bandoian's report. Defendant's experts' report has not been prepared and is not yet due under the Court's October 5, 2004 [sic], subject to further modification in accordance with defendant's motion for enlargement of the discovery period. Defendant's position on this request will be expressed in and consistent with its experts' report. The request is oppressive and an abuse of the discovery process. See also defendant's Responses to Plaintiff's Interrogatories 4.01 and 4.06. Subject to its objections, defendant states that it has made reasonable inquiry and the information known or readily obtainable by defendant is insufficient to enable it to admit or deny the request.13 It is impossible for Defendant to assert in good faith that it lacks ready access to information necessary for it to admit or deny these requests. This evidence was provided to Defendant in Plaintiff's June 8, 2001 submission on the capital issue; all corroborating business records have been made available to Defendant in the repository; and the records were organized and explained to Defendant in painstaking detail in Plaintiff's October 29, 2004 Report on the Capital Issue.

Plaintiff's Request for Admissions 2.95 requested Defendant to admit that, apart from amounts Plaintiff has identified, "the U.S. branches did not pay or deduct any interest during the years at issue on amounts allotted to the U.S. branches for capital purposes." Defendant denied the request without explanation or qualification. Moreover, Defendant's Response to Plaintiff's Interrogatory 4.12, which requested a full description of the reasons Defendant did not respond with an unqualified admission to any of the requests set forth in Plaintiff's Second Request for Admissions, was as follows: "See defendant's responses to plaintiff's Second Request for Admissions." This refusal to respond demonstrates the crux of the problem on the capital issue: that Defendant refuses to disclose any facts on which it relies as a basis for its refusal to stipulate (and therefore dispense with) the capital issue in accordance with the Court's November 14, 2003 Opinion. Defendant's responses to Interrogatories 4.01 and 4.06, attached as Exhibit D, express long objections to the request and offer no response, claiming "its experts' report will fully set forth its position ... and will be provided to plaintiff in accordance with its [sic] Order."
13

12

-13-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 14 of 17

Defendant cannot avoid its obligation to admit relevant ascertainable facts under RCFC 36 by deferring to unfinished expert reports. In Shell Petroleum, Inc. v. United States, 46 Fed. Cl. 583 (2000), this Court held that discovery relating to facts undergoing analysis by experts must nevertheless be completed during the period established for fact discovery. Plaintiff's inquiries go to the identification of capital loan charges or any other deductions on capital items reflected in its books ­ facts which Defendant is obliged to admit unless it has identified evidence to the contrary. While its expert reports may offer analysis of those facts, the existence of the facts themselves is properly the subject of fact discovery. The Court made it clear to both parties in the October 5, 2004 status conference that "we need to bring this thing to closure." (Tr 6:6). Defendant seems determined to avoid exactly that. If Defendant is not in a position to admit or deny these facts even now that the period established by the Court for fact discovery has expired, they should be deemed admitted. IV. Other Requests Relating to Basic Facts In twelve instances, Defendant declined to admit or deny basic facts relating to this case, such as whether the operations of the I.B.F. commenced in December 1981 or whether NatWest filed a single U.S. tax return.14 In three such cases, Defendant claimed that it had made reasonable inquiry but lacked information sufficient to admit or deny the requests.15 These responses are deficient for the reasons discussed above. In the remaining nine cases, Defendant failed to state whether it admitted, denied, or was unable to admit or deny matters relating to basic facts. Defendant appears to have objected in

See Defendant's Responses to Requests for Admissions 2.05, 2.06, 2.09, 2.11, 2.14, 2.17, 2.18, 2.20, 2.22, 2.24, 2.25 and 2.30.
15

14

See Defendant's Responses to Requests for Admissions 2.11, 2.17 and 2.30.

-14-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 15 of 17

eight of those cases on the ground that Plaintiff had offered similar admissions in response to Defendant's requests.16 Defendant characterized Plaintiff's requests as "unnecessary and an abuse of the discovery process."17 Plaintiff's admissions do not bind Defendant, however, and this inherent lack of mutuality in the admission process requires that parties agree on identical or similar admissions. See Champlin v. Okla. Furniture Mfg. Co., 324 F.2d 74, 76 (10th Cir. 1963) ("The submission of requests for admissions by a litigant does not, in and of itself, bind the litigant to the truth or existence of the facts contained in the answers to the requests"); Brook Village N. Assoc. v. General Elec. Co., 686 F.2d 66, 75 (1st Cir. 1982) (a party who requests admissions may introduce evidence at trial more favorable to it than the admitted facts). The objection is therefore groundless. In the final case,18 Plaintiff requested Defendant's admission that "[f]or each of the years at issue, NatWest was required to and did file a single U.S. federal income tax return." Defendant objected "on the ground that it calls for a legal conclusion and is not relevant to any issue in the case." The matter requested, of course, involves the application of law to facts, and is clearly proper under RCFC 36. See Ransom v. United States, 8 Cl. Ct. 646, 648 (1985) ("Requests for Admissions under RUSCC 36(a) are not objectionable even if they require opinions or conclusions of law, as long as the legal conclusions relate to the facts of the case."). It is also clearly relevant. Defendant's objections are frivolous.

See Defendant's Responses to Requests for Admissions 2.05, 2.06, 2.14, 2.18, 2.20, 2.22, 2.24 and 2.25.
17

16

See, e.g., Defendant's Response to Request for Admissions 2.05. See Request for Admissions 2.09.

18

-15-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 16 of 17

When the Court issued its Opinion on November 14, 2003, Defendant either should have stipulated to the relevant facts Plaintiff identified in its February 27, 2004 proposed stipulation of facts, or it should have asserted some contrary position and proffered evidence in support thereof. It did neither, despite Plaintiff's repeated efforts to engage in dialogue.19 Plaintiff has suffered "real prejudice in litigating the action on the merits," because Defendant's refusal to respond appropriately requires Plaintiff to prepare for trial without knowledge of any specific issues Defendant will raise, if, indeed, there are any issues to raise. See S.A. Healy Co./Lodigiani USA v. United States, 37 Fed. C1. 204, 207 (1997). After all of Plaintiff's efforts to assemble and explain the evidence to Defendant, Defendant has, in essence, refused to participate in the orderly resolution of this case. Plaintiff urges the Court to respond accordingly.

See, e.g., Plaintiff's Motion for Leave to file Proposed Order in Connection with Status Report dated December 18, 2003; Plaintiff's Response to Defendant's Motion for Leave to File Proposed Discovery Requests and Cross-Motion for Order in Accordance with RCFC 16(c)(1), dated July 9, 2004.

19

-16-

Case 1:95-cv-00758-NBF

Document 277

Filed 02/11/2005

Page 17 of 17

For the foregoing reasons, Plaintiff moves the Court to order that the matters set forth in footnote 1 of this Motion be deemed admitted under RCFC 36(a). Dated: February 11, 2005 New York, N.Y. /s/ D. Scott Wise by Mario J. Verdolini, Jr.

Attorney of Record Davis Polk & Wardwell 450 Lexington Avenue New York, N.Y. 10017 (212) 450-4000 Of Counsel: Mario J. Verdolini, Jr. Leslie J. Altus Davis Polk & Wardwell 450 Lexington Avenue New York, N.Y. 10017 (212) 450-4000 John L. Carr, Jr. Michael C. Moetell Thomas M. Buchanan Winston & Strawn LLP 1400 L Street, N.W. Washington, D.C. 20005

-17-