“Baby, Let Your Hair Hang Down”

The words of Gus Cannon, songwriter and eponymous chief of the Cannon Jug Stompers, from back in 1929, echo in the order of Judge Kerrigan to the IRS’ obstructionist counsel in Eaton Corporation and Subsidiaries, Docket No. 5576-12, filed 10/15/14.

And the person directed to “walk right in and set right down” etc., is Patricia M. Lacey, the “primary author” of the 134-page document that IRS used to blow off the APA that Eaton had with IRS concerning its DomRep breaker-buddies.

Breaker breaker, good buddies. Do you remember Judge Kroupa’s opinion relegating Eaton to the burden of proof to show that IRS was arbitrary, capricious and acted without sound basis in fact or law? No? Well, click on my blogpost “Advance and Retreat”, 6/26/13, and refresh your recollections.

Thereafter, Judge Kroupa joined the ranks of the Retired Persons, so Judge Kerrigan came in from the bullpen.

Judge Kroupa had ordered IRS to produce for depositions one or more of their personnel with “firsthand, substantive knowledge of the specific ground(s) that respondent relied on in canceling the APAs and the specific facts supporting each ground.” Order, at p. 1.

IRS did, but IRS’ counsel interposed numerous objections, told witnesses not to answer questions, and prevented witnesses from testifying.

If you ever did a depo in the bad old days here in the Big Apple before Uniform Rule 221 was adopted, you’ll remember the speaking objections, the direction of witnesses not to answer based on flimsy excuses, the barely-surreptitious prompting of witnesses, and enough other maneuvers to give the late great Dr. Eric Berne material for a second volume of “Games People Play”. Well, the Uniform Rule put paid to most of that (although given we lawyers’ propensity for pushing the envelope, gameplaying still happens, albeit it less blatantly).

But Tax Court has no such rule  (and I hereby respectfully suggest the Tax Court adopt same).  Rule 85(d) with its “unless reasonable objection thereto is made at the taking of the deposition” is a featherduster where something stronger is wanted.

Eaton claims that, when they deposed Steve Musher, Associate Chief Counsel (International) and Chief APA Canceller, he didn’t know who said what or did what when Eaton’s APA was shot down at his deposition, except there was a lot of communicating. And IRS hands over Ms. Lacey’s 134-page megillah (I need not, of course, translate), which Eaton can read and weep.

“Petitioner [Eaton] contends that this document is not comprehensive. Petitioner further contends that Ms. Lacey, the primary author of the April 4th document, was not allowed to describe the specific justification for, and the factual support underlying, the cancellation of the APAs.” Order, at p. 2.

So Judge Kerrigan has had it with IRS counsel’s tactics, although they did bring back nostalgic recollections, like when I stormed out of a depo to find a judge for a ruling, watched hours of posturing, muttered imprecations, and grinned at wannabes slamming papers on tables.

“…petitioner’s motion to compel discovery is granted in that respondent [IRS] shall make available for deposition Ms. Lacey to provide substantial knowledge of the specific ground(s) that respondent relied on in canceling the APAs and the factual bases underlying the justifications therefor, including information from her December 5, 2011 memorandum on that addresses reasons for canceling the APAs on a date agreeable to both parties no later than November 5, 2014.” Order, at p. 2.

So Eaton’s counsel will be “listenin’ to Lacey”.

Oh yes, and report, guys.

Takeaway–This post is more for lawyers than preparer types, obviously, but if any preparers get caught in one of these, take this as a heads-up.

Reflection on the Foregoing

Perhaps I was a wee bit hard on IRS’s counsel. Now I’m not currying favor; if we get in a fight, we go at it, mindful always of the rules but hitting as hard as we can.

That said, there’s a difference between a singed earth defense and a scorched earth defense. Eaton’s counsel, having an uphill fight, as I pointed out in my blogpost abovecited, while carrying the burden of proof, must perforce prove their case out of their adversary’s mouth.

So Musher and Lacey are fair game. And Eaton’s counsel have to hit them hard. From Judge Kerrigan’s order, all I can gather is that Musher bobbed and weaved, while IRS’s counsel pulled what we called in my youth Court Street tactics. And it might be that Musher just signed off on whatever Lacey put before him.

But having bailed out Musher, apparently, IRS’s counsel went the one step beyond.

Lacey was clearly the point person in blowing off Eaton’s APAs; she has a tale to tell that’s harder to obscure, but obscure it they must.

So Lacey needs artillery, and IRS’s counsel opens up.

I’d have done the same. But it’s as well to remember that counterbattery fire comes quickly. And the line between singed and scorched is mighty fine.