In Uncategorized on 04/26/2016 at 15:26

No, not the 1967 hit from the New Jersey-based Parliaments, but rather the responses of would-be expert witnesses Stanley Feldman and James Rech (batting rebuttal) to IRS’ motions in limine (that means to lock out, for you civilians) in the ongoing saga of Caylor Land & Development, Inc., et al., Docket No. 17204-13, filed 4/26/16.

Trial is set for Monday, May 2. Finally; I’ve blogged the Caylor story extensively. See my blogposts “Don’t Suppose You Can Depose – Part Deux,” 9/2/14, “Is You Is Or Is You Ain’t,” 3/27/15, “Seasonable Greetings,” 11/24/15, and “Discovered Check,” 11/30/15. In the last of these, I hoped for more blogfodder from the Caylor evidentiary chicane, and my wish has been granted.

IRS claims Stan is testifying about what my Texan daughters call insurance, but he is not a licensed insurance broker. Stan “…is a specialist in valuation but he’ll be testifying about whether petitioners’ captive-insurance arrangement is ‘insurance’ as that term is commonly understood.” Order, at p. 1.

So what, says The Great Dissenter, a/k/a The Judge Who Writes Like a Human Being, s/a/k/a The Implacable, Indefatigable, Illustrious, Industrious, Irrefrangible, Incontestable, Ineffable and Incontrovertible Foe of the Partitive Genitive, and Old China Hand, Judge Mark V. Holmes.

“…Feldman’s valuation experience includes a focus on the analysis of risk on business. Risk — its identification and management — is relevant to the Court’s analysis of whether what petitioners were buying was insurance. The standard is whether Feldman’s knowledge and testimony ‘will help the trier of fact.’ Fed. R. Evid. 702(a). At least at the threshold of trial, the Court concludes it will. (Or may — cross-examination hasn’t yet occurred, of course.) Daubert‘s  ‘“gatekeeper” function in excluding evidence that is not reliable’ certainly applies in Tax Court proceedings; but it is less urgent in a bench trial.” Order, at pp. 2-3 (Citations omitted).

Daubert is the Federal touchstone for admission of expert testimony, Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993).

Stan is in.

The Caylors aren’t exercised over excluding Jim Rech. They were using him as a consultant. But they were afraid that IRS was playing games with excluding rebuttal testimony. To prevent further motion practice, Judge Holmes got the parties on the horn and said that excluding Jim doesn’t mean the Caylors can’t put on rebuttal witnesses.

IRS isn’t finished; IRS wants to strike part of Stan’s expert report, as it relies on stuff not presented in discovery, and thus the Caylors can smuggle that stuff into evidence, leaving IRS with no chance to review or rebut.

“Our analysis has to begin by noting that not all information on which an expert relies has to be produced in discovery: ‘If experts in the particular field would reasonably rely on those kinds of fact and data in forming an opinion on the subject, they need not be admissible for the opinion to be admitted.’ Fed. R. Evid. 703. And this becomes more obviously true if one thinks of all the course-work, reading, and life experience that go into making a good expert.

“What a court must be sensitive to is the introduction through an expert’s testimony of discoverable evidence that a party has asked for and which his adversary has concealed. But we don’t think that’s a problem here: All the cases tried in our Court are bench trials, and our judges take care to decide them on the basis of evidence in the record, which includes expert’s opinions but not all the possible hearsay and inadmissible evidence which may go into the formation of those opinions. We also note that there seem to be very few discoverable yet unproduced documents — petitioners say that there were a grand total of eight, out of the hundreds and hundreds of documents that they did turn over. We are prepared to think this non-disclosure was inadvertent and cured in reasonably short order; we see little evidence of prejudice to respondent.” Order, at pp. 2-3.

Tax Court trials are all bench trials. There’s no jury to be confused or misled. And it’s the judges’ job to sift the truth from the mass of testimony and piles of paper.

IRS is still worried about rebuttal witnesses, and wants to bar the lot of them.

No, says Judge Holmes. IRS “…naturally wishes to avoid surprise, but our Rules do contemplate the use of rebuttal testimony. Such testimony is by its nature dependent on what respondent’s case in chief looks like, which can’t be predicted with precision before trial. Respondent is substantially protected from surprise by the nature of rebuttal testimony (i.e., it’s limited to attacking the opinions of respondent’s experts, not introducing new opinions in support of petitioners’ own case in chief). That’s a major reason that Rule 143(g)(3) doesn’t require a written rebuttal expert-witness report. The Court’s pretrial order in this case, however, did require the identification of all witnesses, and the Court will require petitioners to supplement their previous identification of witnesses to enable respondent to prepare for cross-examination if petitioners put on a rebuttal expert.” Order, at p. 3.

So the Caylors had to give IRS their list of rebutters last Friday.

I’m glad there’s going to be a trial, so I get more blogfodder. But once it’s over, I’ll have to go back to digging.



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