In Uncategorized on 07/12/2019 at 14:42

Tribune Media Company f.k.a. Tribune Company & Affiliates, et al., Docket No. 20940-16, filed 7/12/19, are back again, with more good material for discovery geeks and penalty avoiders.

The Tribuners favored us with “Privilege – A Graev Matter,” 9/13/18, and “Here Comes the Silt,” 4/25/19.

Now the joust is over what the Tribuners told their expert advisers. Everyone agrees that Section 7525 privilege, client-attorney and attorney work product are all waived; but how far waived? The Tribuners only want to dish what they told their advisers that found its way into the tax opinion and related advice they got.

But IRS echoes Robert Frost, that “knowing how way leads on to way,” everything that the Tribuners told their experts would enable FRCP Rule 70(b) by providing stuff “reasonably calculated to lead to discovery of admissible evidence.”

Judge Buch buys it.

“Because Tribune raised the defense of reasonable cause and good faith, any information or responses relevant to that defense is discoverable. This includes discovery regarding whether Tribune disclosed all relevant facts to its advisors and whether it acted in good faith by relying on those advisors. Anything that could help the Commissioner understand these facts and circumstances is potentially discoverable.” Order, at p. 5.

For the Tribuners to establish they leveled with the experts, they must put in whatever they told said experts.

But the Tribuners get one saver.

“We agree with Tribune, however, that the information must have been known to Tribune for it to be relevant to its defense. Communications internal to Tribune’s advisors but unknown to Tribune would not shed light on Tribune’s knowledge at the time of filing its return. Thus, if the information was not exchanged between Tribune and its advisors, it is not relevant for establishing whether Tribune’s reliance on their opinion was in good faith.

“Further, the documents must have existed and known to Tribune before it filed its …tax return. It is axiomatic that Tribune could not have had knowledge at the time it filed its return of documents that had not yet been created or communicated to it.” Order, at p. 9.

So when the Tribuners told IRS they’d given everything, Judge Buch goes no farther.

IRS wants all documents that the Tribuners relied upon. “…Tribune asserts that it has produced the only documents it relied on in raising its affirmative defense to the penalties. We take Tribune’s statement as true and thus there is nothing for us to compel.” Order, at p. 9.

But hasn’t Judge Buch forgotten that Graev and Clay are in play here?

No, although he relegates it to a footnote.

“¹Weacknowledge that the parties have filed cross motions for partial summary judgment on the issue of whether the Commissioner complied with section 6751(b) when he determined penalties. Those motions remain under consideration by the Court. If petitioners prevail in full, then no penalties will remain at issue. But if any of the asserted penalties remain at issue, then the reasonable cause and good faith defense will also remain at issue. Tribune suggests that the Court defer resolving this discovery dispute until after it has decided the motions for summary judgment. But unless and until petitioners’ motion is granted in full, the reasonable cause and good faith defense is at issue.” Order, at p. 3, footnote 1.

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