Opinion ID: 461000
Heading Depth: 2
Heading Rank: 2

Heading: The History of Discovery

Text: 4 Since this case has taken such a tortuous path of delays, and those delays form the basis for the orders under review here, it is best to summarize the facts by year. 1979-1980 5 On April 16, 1979, ABC filed petitions with the Tax Court for review of the Commissioner's determination with respect to each trust. By April 1, 1980, the parties in the case were ready to prepare for trial. On that date, the Commissioner informally requested the production of several relevant documents. On April 11, 1980, ABC responded with all of the material we have in these matters. Joint Appendix (J.A.) at 26. Apparently, these materials were produced in the California litigation. Dissatisfied with ABC's response, the Commissioner proceeded on more formal lines. On May 16, 1980, the Commissioner filed a motion to produce the requested documents pursuant to I.R.C. Sec. 7456(b) (1982). 1 6 After one continuance requested by ABC, the Tax Court held a hearing on October 16, 1980. At that hearing, the Tax Court judge ordered the appellants to respond to the government's points and authorities submitted in support of the motion to produce. The appellants never filed a written reply because counsel for the appellant, Mr. Harry Margolis, represented that he was making progress obtaining the documents requested by the Commissioner. 1981 7 In response to this development, the Tax Court ordered Mr. Margolis to submit a status report to the court on March 24, 1981. J.A. at 40. On May 6, 1981, the Tax Court ordered Mr. Margolis to: 8 submit a detailed, written report containing the following information: (1) the whereabouts of the records and documents requested by respondent [the Commissioner], (2) a description of what actions petitioner's counsel is presently taking to secure such records and documents, and (3) a specific timetable as to when the Court may expect such records and documents to be produced. This report shall be filed with the Court no later than June 1, 1981. 9 J.A. at 41. 10 On June 2, 1981, Mr. Margolis filed his status report, representing that the original trustee, now located in Panama, had agreed to reconstruct the requested records. The individual apparently able to do so, however, was ill and could not presently perform the task. Since no immediate timetable was discernible, Mr. Margolis moved for an indefinite postponement. Mr. Margolis' report, however, for the first time implied that the original records were no longer available. This was inconsistent with his representation at the October 1980 hearing. The court ordered a postponement for a reasonable length of time to enable petitioners to secure the necessary trust records. J.A. at 42. The court also ordered another status report, due by August 14, 1981. 11 Mr. Margolis filed his next status report on August 17, 1981. In this report, Mr. Margolis informed the Commissioner and the court that the individual in Panama who was to reconstruct the records had been in the hospital for an extended period. Moreover, there were new difficulties in securing the trust records. The trust company had been totally inactive for some time and did not have any employees who had any connection with events prior to 1978. Thus, Mr. Margolis moved for a further extension, which was granted.1982 12 On February 11, 1982, Mr. Margolis moved for leave to withdraw as counsel, substituting Mr. Robert Coffin. On March 22, 1982, the Commissioner moved the Tax Court to set May 21, 1982 as the final date for production of the documents, pursuant to I.R.C. Sec. 7456(b). The Commissioner asserted that a reasonable time had passed since its original motion (one year, ten months). J.A. at 50. 13 On October 4, 1982, the Tax Court held a hearing on this motion. The court ordered ABC to produce the documents by October 18, 1982. Moreover, the court set the case for trial on May 16, 1983. J.A. at 61. 14 On October 20, 1982, two days after expiration of the allotted time to produce the documents, the Commissioner received several documents from Mr. Margolis, who was no longer counsel in the case. The Commissioner found none of these documents responsive, and moved for the sanction of dismissal pursuant to I.R.C. Sec. 7456(b) on November 2, 1982. J.A. at 62. 1983 15 On March 16, 1983, the Tax Court held a hearing on the Commissioner's motion. The court allowed the appellants to move for an evidentiary hearing to respond to the government's allegations. The appellants so moved, representing that they proposed to bring many witnesses to the court to prove that the requested documents were lost, thus excusing noncompliance with the motion to produce. Among the witnesses counsel planned to call (if available) were representatives of ABC from Panama, former officers of ABC (including eight named former employees), accountants (including six named individuals), a former custodian of the records, the plaintiff in the California litigation, attorneys in that litigation, Mr. Margolis, and an expert witness (all named). All told, ABC's attorneys listed nineteen potential witnesses. As this motion indicated, many identifiable individuals could have testified regarding the records the government sought. In light of this representation, the Tax Court postponed trial and set an evidentiary hearing for June 6, 1983. 16 As far as we can tell from the record, that evidentiary hearing did not occur in June of 1983. On June 6, the hearing was continued; on July 18, it was continued again. It was continued yet a third time on October 31, 1983. 2 1984 17 Finally on February 21, 1984, the Commissioner moved to set a date for the hearing. 3 ABC did not object to this, and the hearing was set for May 7, 1984 in Washington. On May 7, four years after the Commissioner filed the original motion to produce, ABC was not prepared to go forward. It is the outcome of that hearing that is before us in this case. 18