That’s Special Trial Judge Daniel A. (“Yuda”) Guy. Back on 4/24/12, when STJ Guy was appointed to the Tax Court bench, I greeted his appointment with the following comment: “We look forward to many interesting opinions from STJ Guy.” See my blogpost “Welcome, Judge Guy”, 4/24/12.

Well, it’s only a designated order, but it is interesting. It’s Diamond Packaging Corporation, Docket No. 27463-10, filed 9/13/12, and it deals with playing nice during informal discovery. The basic documents are Rule 70(a) and Branerton Corp. v. Commissioner, 61 T.C. 691, 692 (1974).

IRS made informal document requests from six of Diamond’s corporate clients, trying to track down the increasing research activities for which Diamond had claimed Section 41 tax credit for the years at issue.

Diamond replies with a motion for a protective order, claiming “…respondent’s actions circumvent the Court’s rules and procedures governing discovery, are unduly burdensome, and have unnecessarily tarnished petitioner’s reputation.” Order, p. 1.

Nope, says STJ Guy. “In the light of the record presented, we reject petitioner’s argument that respondent’s informal requests for documents circumvent the Court’s rules governing discovery. To the contrary, the Court has not prescribed rules specifically relating to informal pretrial discovery of potential witnesses. Moreover, it has been the Court’s longstanding policy to encourage the parties to attempt to attain the objectives of discovery through informal consultation and communications. There has been no showing that respondent’s requests are tantamount to the more formal administrative summons…. Although petitioner complains that respondent did not consult with petitioner before issuing the informal requests, the Court is not persuaded that this factor provides justification for a protective order.” Order, p. 2 (citations omitted).

Besides, four of the six clients Diamond wanted to protect are ready, willing and able to comply with IRS’ request, and raised no objection. The other two said they had nothing of the kind IRS sought, and IRS said they’re down with that.

“Petitioner’s final argument, that respondent’s informal document requests create ‘a stigma against petitioner that has already harmed its business interests’, is also unavailing. We agree with respondent that alleged harm to a party’s reputation generally is not sufficient to show good cause for the issuance of a protective order under Rule 103. See Willie Nelson Music Co. v. Commissioner, 85 T.C. 914, 921 (1985) (a showing that information in the public record would harm a party’s reputation is generally not sufficient to support the issuance of a protective order under Rule 103). Moreover, petitioner has failed to demonstrate any harm (financial or otherwise) that it has suffered or will suffer if its motion for protective order is denied. Id. at 925. Petitioner’s mere allegations of harm are insufficient to demonstrate good cause.” Order, at p. 2.

Note that Diamond doesn’t claim the clients don’t have relevant information or that IRS is on a fishing expedition, digging for irrelevant information.

So no dice, Diamond. No protective order. Play nice. Welcome, Judge Guy.