Ex-Ch J L. Paige (“Iron Fist”) Marvel wields the sculptor’s chisel, as she sculpts a Rule 104(c)(2) sanctions order preventing Cindat Manhattan Hotel Portfolio LLC, Docket No. 20935-20, filed 7/6/23 from putting in some documents they failed to produce as ordered.

Of course, the terms of the order are extensively fact-driven, so I’ll skip a lot of them. Briefly, IRS got a third document demand approved, but Cindat came up short.

Cindat had been dilatory leading up to IRS’ motion for sanctions, and hadn’t objected to the scope of the demand (which included such items as “all documents describing how petitioner qualifies as a real property trade or business under IRC § 163(j) and related Regulations,” Order, at p. 4). I should have thought that was worthy of at least an “overbroad” myself, although Judge Marvel says it “initially appears narrow, specifies that the request includes documents describing ‘petitioner’s day-to-day operations with respect to such real property.’” (Idem, as my expensive colleagues would say).

Howbeit, a voluminous response to such a demand isn’t sanctionable as an attempt to bury one’s opponent with paper (or electrons).

“Although we take issue with some of petitioner’s conduct in discovery, we are mindful that we should chart a course that does not result in undue prejudice to petitioner after accounting for the prejudice to respondent and that is consistent with the just, speedy, and inexpensive determination of this case. Cf. Rule 1(d). Rule 104(c)(2) permits us, upon a party’s failure to comply with an order of the Court with respect to Rule 72, to ‘prohibit[] such party from introducing designated matters in evidence.’ We think that it is appropriate to restrict petitioner’s ability to introduce into evidence documents and materials that would have been responsive to paragraphs 23, 33–38, and 40–41 of respondent’s third request for production of documents that have not already been submitted to respondent as of the date of this Order. Petitioner is not entitled to benefit from the late fulfillment of its discovery obligations by choosing which of its late-discovered documents to introduce into evidence, especially since it already had adequate time to undertake discovery.” Order, at p. 5. (Citations omitted).

Note also that during the period within which Cindat was to comply, they changed attorneys, and the incoming attorneys seemed to onboard and work fast. The outgoing are told in a separate order under even date to comply with Rule 24, with which they have not.

Takeaways: (1) Consider change of counsel can soften sanctions, if new crew jump to it.

(2) Maybe not objecting to overbroad demands but using them as cover to do what otherwise would be sanctionable as a document dump.