Court Opinion

ID: 4336716
Source: CourtListenerOpinion
Date Created: 2018-11-14 02:58:33.452118+00
Date Added: 2024-06-11T09:36:52.927831
License: Public Domain

129 T.C. No. 6

                     UNITED STATES TAX COURT

          THOMAS J. AND BONNIE F. RATKE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*

     Docket No. 9641-01L.                Filed September 5, 2007.

          After this Court ruled for Ps in the instant
     collection case, Ps moved for an award of costs under
     sec. 7430, I.R.C. 1986, and then for sanctions under
     sec. 6673(a)(2), I.R.C. 1986. In connection with these
     motions, Ps seek discovery of (1) a memorandum sent by
     R’s initial trial counsel to R’s national office at the
     time R’s answer was filed in the instant case and (2)
     the unredacted version of the responding memorandum
     sent a few months later by R’s national office. R
     provided to Ps a redacted version of the latter
     memorandum. R resists discovery of the unredacted
     memoranda, claiming work product doctrine privilege.

     *
      This opinion supplements Ratke v. Commissioner, T.C. Memo.
2004-86.
                               - 2 -

          Ps contend (1) the memoranda are not work product
     at the current stage of the litigation; (2) Ps are
     entitled to discovery even if the memoranda are work
     product; and (3) R waived the privilege.

          1. Held: Both memoranda were work product when
     prepared for the case in chief and continue to be work
     product in the current stage of the litigation.

          2. Held, further, having examined both memoranda
     in camera, we conclude that neither memorandum contains
     information sufficiently important to outweigh the
     privacy and other concerns underlying the work product
     doctrine.

          3. Held, further, R’s brief reference in the
     motion papers to the memoranda, but not to either
     memorandum’s contents, does not amount to a
     “testimonial” use of either memorandum that would
     constitute an implied waiver of the work product
     doctrine privilege.

     Jack B. Schiffman, for petitioners.

     Robert M. Fowler, for respondent.

                              OPINION

     CHABOT, Judge:   This matter is before us on petitioners’

Motion for Award of Reasonable Litigation and Administrative

Costs Under Section 74301 as well as petitioners’ Motion for

Sanctions Under Section 6673(a)(2) in the instant collection

proceeding.   The issue for decision is whether two memoranda

     1
       Unless indicated otherwise, all section references are to
sections of the Internal Revenue Code of 1986 as in effect for
proceedings commenced on the day the petition in the instant case
was filed.
                                - 3 -

prepared in connection with the case in chief are protected from

discovery under the work product doctrine privilege in connection

with these motions.

                            Background

     When the petition was filed in the instant case, petitioners

resided in Glendale, Arizona.

     Petitioners timely filed their 1993 Federal income tax

return.   Petitioners showed a $9,238 tax liability for 1993.    On

January 9, 1996, respondent sent to petitioners a notice of

deficiency that determined a $20,710 deficiency (liability of

$29,948, minus the $9,238 liability shown on petitioners’ tax

return) and a $4,142 penalty under section 6662(a).   On March 29,

1996, petitioners sent a petition to the Court (docket No. 5931-

96, hereinafter sometimes referred to as the 1996 case) disputing

the entire amounts of the deficiency and penalty so determined.

     Also on March 29, 1996, petitioners sent to respondent a

second amended 1993 tax return (Form 1040X, Amended U.S.

Individual Income Tax Return) showing a tax liability of $21,893,

and showing that this was $12,655 greater than the liability they

had previously reported.   On May 27, 1996, respondent made an

additional assessment of the $12,655 shown on this Form 1040X,

along with interest, and notified petitioners of this additional

assessment.
                                 - 4 -

     The parties settled the 1996 case and, on March 13, 1997,

the Court entered a decision pursuant to the parties’ stipulated

agreement that petitioners had a $2,931 deficiency and no

“addition to tax” under section 6662(a).   On May 19, 1997,

respondent assessed this $2,931 deficiency and sent to

petitioners a notice and demand for $21,164.

     On September 20, 2000, respondent sent to petitioners a

Final Notice - Notice of Intent to Levy and Notice of Your Right

to a Hearing relating to 1993.    On October 17, 2000, petitioners

filed Form 12153, Request for a Collection Due Process Hearing.

On June 28, 2001, respondent mailed to petitioners a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330.   On July 31, 2001, petitioners filed their petition

in the instant case.   On August 7, 2001, petitioners filed an

amended petition.   On September 6, 2001, respondent filed the

answer to this amended petition.    This answer was signed by Ann

M. Welhaf (hereinafter sometimes referred to as Welhaf), Acting

Associate Area Counsel, and dated September 5, 2001.   Welhaf also

prepared a memorandum dated September 5, 2001, addressed to:

Assistant Chief Counsel, Procedure and Administration, Collection

Bankruptcy and Summons, Attn:    Alan Levine, Chief Branch 1, CBS.
                              - 5 -

This memorandum, hereinafter sometimes referred to as the Welhaf

memorandum, is summarized by respondent as follows:2

          This memorandum is a request for advice from Ms.
     Welhaf to the Office of Associate Chief Counsel
     (Procedure & Administration) of respondent’s National
     Office concerning proposed legal arguments to be made
     at trial in the pending litigation. This request was
     made while this case was docketed. The author
     recommends several legal arguments to be made in the
     litigation subject to National Office approval. The
     memorandum also sets forth the factual background
     concerning this case.

     Mitchell S. Hyman, Senior Technical Reviewer, Branch 1,

Collection, Bankruptcy and Summons, sent a memorandum dated

January 16, 2002 (hereinafter sometimes referred to as the Hyman

memorandum), which is summarized by respondent as follows:3

          This memorandum responded to Ms. Welhaf’s
     September 5, 2001 memorandum seeking advice concerning
     the proposed legal arguments to be made at trial in the
     pending litigation. The January 16, 2002 memorandum
     concluded that: (1) the IRS was authorized by section
     6201(a)(1) to make an assessment pursuant to the
     amended return filed by petitioners; (2) petitioners
     were equitably estopped from contesting the validity of
     the assessment; (3) the stipulated settlement was a
     valid contract; (4) the amended return did not

     2
       Pursuant to the Court’s order respondent provided the
Welhaf memorandum to the Court for in camera inspection, together
with a summary; the summary was filed and served on petitioners.
After inspecting the Welhaf memorandum, the Court concludes that
respondent’s summary is a fair description of the Welhaf
memorandum.
     3
       Pursuant to the Court’s order respondent provided the
unredacted Hyman memorandum to the Court for in camera
inspection, together with a summary; the summary was filed and
served on petitioners. After inspecting the unredacted Hyman
memorandum, the Court concludes that respondent’s summary is a
fair description of the unredacted Hyman memorandum.
                                 - 6 -

     constitute a waiver of the restrictions on assessment;
     and (5) that petitioners were not precluded by section
     6330(c)(2)(B) from arguing that the assessment violated
     section 6213(a).

     On June 13, 2002, the Court issued a notice of trial in the

instant case.   In due course:   the instant case was continued,

the instant case was again set for trial, the Court dealt with

motions by both sides, the trial was held, briefs were filed, the

Court issued T.C. Memo. 2004-86 holding for petitioners, and the

Court entered decision “that respondent may collect only $2,931

for taxable year 1993 as set forth in the Court’s March 13, 1997,

decision [the decision that ended the 1996 case].”

     On petitioners’ motion this decision was vacated;

petitioners then moved for an award of costs under section 7430

and later moved for sanctions under section 6673(a)(2).    At some

point, respondent provided to petitioners a redacted version of

the Hyman memorandum.   In connection with the latter motions, the

parties have stipulated the redacted Hyman memorandum.

     Petitioners now seek to discover the unredacted Welhaf

memorandum and the unredacted Hyman memorandum.    Respondent

claims that the memoranda are protected work product and refuses

petitioners’ discovery requests.    We directed respondent to

submit these memoranda for in camera inspection along with an

explanation of why the memoranda should not be disclosed to

petitioners in whole or in part.    (See supra notes 2 and 3.)
                               - 7 -

      Both the Welhaf memorandum and the Hyman memorandum were

prepared as part of respondent’s counsel’s efforts to prepare

legal theories and plan strategy for the instant case.

                            Discussion

A.   Preliminary

      Petitioners want to discover the Welhaf memorandum and the

unredacted Hyman memorandum.   See Rules 70,4 72.   Respondent

objects to discovery of these memoranda on the ground that both

memoranda are privileged.   See Rule 70(b)(1).   A party opposing

discovery on such a ground has the burden of establishing that

the information sought is privileged.    Ames v. Commissioner, 112

T.C. 304, 309 (1999); Bernardo v. Commissioner, 104 T.C. 677, 691

(1995).   The privilege respondent claims is the one resulting

from the work product doctrine.   See Rules Committee Notes, 60

T.C. 1058, 1098.

      If the party opposing discovery establishes that the

information sought is work product, then discovery will not be

required unless the Court determines that, in the situation

before it, the information sought should nevertheless be

disclosed.   Hickman v. Taylor, 329 U.S. 495, 512 (1947); Ames v.

Commissioner, 112 T.C. at 310-311.

      4
       Unless indicated otherwise, all Rule references are to the
Tax Court Rules of Practice and Procedure.
                                - 8 -

B.   Parties’ Contentions

      Respondent contends that both (1) the entire Welhaf

memorandum and (2) the redacted portions of the Hyman memorandum

are protected from discovery pursuant to the work product

doctrine.    Respondent maintains that (a) both memoranda are work

product, (b) to the extent the memoranda include “fact” work

product, petitioners cannot show a substantial need or undue

hardship because “they are well aware of all the facts in this

case”, and (c) to the extent the memoranda include “opinion” work

product the memoranda are “absolutely protected from disclosure”

or in any event are not disclosable because petitioners “have not

made a far stronger showing than the ‘substantial need’ and

‘without undue hardship’ standard”.

      Petitioners assert that the work product doctrine is not

absolute, relying on rule 26(b)(3) of the Federal Rules of Civil

Procedure.   They contend that (1) they need to have access to the

Welhaf memorandum in order to determine whether “Welhaf ‘cherry

picked’ the facts favorable to her position, and did not include

facts unfavorable to her position”, (2) this information would be

relevant to (a) “substantial authority under I.R.C.

§7430(c)(4)(B)” and (b) “sanctionable misconduct under I.R.C.

§6673(a)(2)”, and (3) Rule 91(a)(1) has the effect of requiring

disclosure so that the parties can stipulate to the matters

relevant to the motions before the Court.   Petitioners contend
                                 - 9 -

that the same considerations apply to the unredacted Hyman

memorandum.     Petitioners also maintain that the memoranda were

prepared for “the case in chief” and are not work product with

respect to “the post-decision application for litigation costs

and sanctions”.    Finally, petitioners maintain that respondent’s

efforts to use the redacted version of the Hyman memorandum “as

support for its claim of substantial justification under I.R.C.

§7430(c)(4)(B)” should be treated as a waiver of the work product

doctrine privilege for the entire Hyman memorandum.

C.   Summary and Conclusions

      Both the Welhaf memorandum and the Hyman memorandum are work

product and so are privileged.     The privilege is qualified.   We

examined both memoranda in camera and conclude that (1)

exceptions to this privilege do not apply and (2) this privilege

has not been waived.     Accordingly, neither memorandum is required

to be disclosed in the present proceeding.

D.   Analysis

     1.   In General

      We set forth this Court’s general view of the work product

doctrine in P.T. & L. Construction Co. v. Commissioner, 63 T.C.

404, 407-408 (1974), as follows:

      The work product doctrine was given its first thorough
      exposition in the Federal courts in Hickman v. Taylor,
                              - 10 -

     329 U.S. 495 (1947).[5] In that case the Supreme Court
     held that materials prepared in anticipation of
     litigation, including witness’ statements, were not
     subject to discovery as a matter of right because such
     discovery would be harmful to the orderly prosecution
     and defense of legal claims in adversary proceedings.
     “Work product,” as a term of art, is used to describe
     such protected materials. See Hickman v. Taylor, supra
     at 510.

          The holding in Hickman v. Taylor, supra, has been
     specifically incorporated in the Federal Rules of Civil
     Procedure as rule 26(b)(3). Further, the work product
     doctrine is given negative recognition in the Tax Court
     Rules of Practice and Procedure in that, even though it
     is not mentioned in the body of the Rules, it is dealt
     with in the notes of our Rules Committee to Rule 70(b).
     These notes state, in pertinent part, as follows:

           The other areas, i.e., the “work product” of
           counsel and material prepared in anticipation
           of litigation or for trial, are generally
           intended to be outside the scope of allowable
           discovery under these Rules, and therefore
           the specific provisions for disclosure of
           such materials in FRCP 26(b)(3) have not been
           adopted. Cf. Hickman v. Taylor, 329 U.S. 495
           (1947). [60 T.C. 1098.]

    2.   Are the Memoranda Work Product?

     The Welhaf memorandum describes Welhaf’s intended arguments

in defending the instant case and asks for concurrences or

opinions regarding these intended arguments.   The Hyman

memorandum responds to the elements of the Welhaf memorandum.

The Welhaf memorandum was sent about the time respondent filed

     5
       For a summary of the discovery evolution that led to
Hickman v. Taylor, 329 U.S. 495 (1947), and interpretations of
the law since 1947, see 8 Wright, Miller & Marcus, Federal
Practice and Procedure: Civil 2d secs. 2021-2028; that treatise
and its most recent pocket part are hereinafter sometimes
referred to as Wright, Miller & Marcus.
                               - 11 -

the answer in the instant case.     The Hyman memorandum was sent

before the instant case was first noticed for trial.     Thus, both

memoranda were prepared as part of respondent’s counsels’ efforts

to “prepare * * * legal theories and plan * * * strategy” for the

instant case.   Hickman v. Taylor, 329 U.S. at 511.    It follows

that both memoranda are work product for the instant case.

     Petitioners contend that both memoranda were prepared for

“the case in chief” and are not work product with respect to “the

post-decision application for costs and sanctions”.     We disagree.

     Firstly, the instant case is the same litigation for which

the memoranda were prepared.   The litigation for which the

memoranda were prepared will not be concluded, by entry of

decision, until petitioners’ motions under sections 7430 and

6673(a)(2) have been dealt with.6    We have not found, and

petitioners have not directed our attention to, any case law

indicating that one lawsuit should be segmented for purposes of

determining whether a document is work product.

     Secondly, in Ames v. Commissioner, supra, we dealt with a

document prepared by the Commissioner’s counsel in anticipation

of criminal tax prosecution.   The taxpayer sought production of

     6
       Rule 232(f) provides that the disposition of the sec. 7430
motion “shall be included in the decision entered in the case.”
Indeed, when the Court entered decision for petitioners in the
instant case after issuing T.C. Memo. 2004-86, petitioners moved
to vacate the decision so that they would be permitted to file
their sec. 7430 motion.
                               - 12 -

that document in the civil tax proceeding that followed the

criminal tax case.    We concluded in Ames that there was

sufficient nexus between the criminal litigation for which the

document had originally been prepared, and the civil litigation

before this Court, so that the document qualified as work product

in the civil litigation.    Ames v. Commissioner, 112 T.C. at 309-

310.

       Additionally, the Court of Appeals for the Tenth Circuit

noted that “it appears every circuit to address the issue has

concluded that, at least to some degree, the work product

doctrine does extend to subsequent litigation.”    Frontier

Refining Inc. v. Gorman-Rupp Co., 136 F.3d 695, 703 (10th Cir.

1998 (and cases cited therein).    Compare the foregoing with Hartz

Mountain Industries v. Commissioner, 93 T.C. 521, 527-528 (1989),

in which we concluded that the fact that “the work product at

issue was prepared approximately a decade ago in distinctly

different litigation” was one of three factors that collectively

led us to rule that the work product doctrine privilege did not

protect against disclosure in that case.    In this respect, the

instant case is clearly distinguishable from Hartz Mountain

Industries.    A fortiori, a document prepared for the same

litigation, as in the instant case, qualifies as work product.

See discussion in Ames v. Commissioner, 112 T.C. at 310 & n.4;
                               - 13 -

see also Bernardo v. Commissioner, 104 T.C. at 688 n.14.       See

generally Wright, Miller & Marcus, sec. 2024 nn. 12-15.

     We hold that both memoranda are work product for purposes of

the litigation as to petitioners’ motions under sections 7430 and

6673.

    3.    Extent of the Privilege

     The privilege resulting from the work product doctrine7 is

qualified; it may be overcome by an appropriate showing.       Ames v.

Commissioner, 112 T.C. at 310; Hartz Mountain Industries v.

Commissioner, 93 T.C. at 527 (1989).    Rule 26(b)(3) of the

Federal Rules of Civil Procedure requires a showing of

“substantial need” and an inability to otherwise obtain the

substantial equivalent “without undue hardship”; that rule sets

aside “disclosure of the mental impressions, conclusions,

opinions, or legal theories of an attorney or other

representative of a party concerning the litigation.”

     As to such opinion work product, the Court of Appeals for

the Ninth Circuit, to which the instant case is appealable, has

summarized the standards in Holmgren v. State Farm Mut. Auto.

Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992), as follows:

          A party seeking opinion work product must make a
     showing beyond the substantial need/undue hardship test
     required under Rule 26(b)(3) for non-opinion work
     product. Upjohn Co. v. United States, 449 U.S. 383,
     401-02, 101 S.Ct. 677, 688-89, 66 L.Ed.2d 584 (1981).

     7
         See Wright, Miller & Marcus, sec. 2025, nn. 3, 4, and 5.
                                - 14 -

     The Supreme Court, however, has so far declined to
     decide whether opinion work product is absolutely
     protected from discovery. Id. at 401, 101 S.Ct. at
     688.

                *     *     *     *       *   *     *

          We agree with the several courts and commentators
     that have concluded that opinion work product may be
     discovered and admitted when mental impressions are at
     issue in a case and the need for the material is
     compelling. * * *

          Both elements are met here. In a bad faith
     insurance claim settlement case, the “strategy, mental
     impressions and opinion of [the insurer’s] agents
     concerning the handling of the claim are directly at
     issue”. * * * Further, Holmgren’s need for the exhibits
     was compelling. * * *

See generally Wright, Miller & Marcus, sec. 2026.

     Petitioners contend that our Rule 91(a)(1)8 “requires

Respondent to provide Ms. Welhaf’s Memorandum in its entirety so

     8
         Rule 91(a)(1) provides, in pertinent part, as follows:

     RULE 91.    STIPULATIONS FOR TRIAL

          (a) Stipulations Required: (1) General: The
     parties are required to stipulate, to the fullest
     extent to which complete or qualified agreement can or
     fairly should be reached, all matters not privileged
     which are relevant to the pending case, regardless of
     whether such matters involve fact or opinion or the
     application of law to fact. Included in matters
     required to be stipulated are all facts, all documents
     and papers or contents or aspects thereof, and all
     evidence which fairly should not be in dispute. * * *
     The requirement of stipulation applies under this Rule
     without regard to where the burden of proof may lie
     with respect to the matters involved. Documents or
     papers or other exhibits annexed to or filed with the
     stipulation shall be considered to be part of the
     stipulation.
                               - 15 -

that counsel can stipulate as to which facts were set forth and

which facts were not set forth (omitted) in Ms. Welhaf’s

Memorandum to the Chief Counsel’s Office.”    Respondent contends:

8.   As far as Ms. Welhaf’s opinion work product is concerned, it

is respondent’s view that such opinion work product is absolutely

protected from disclosure.    We reject both sides’ contentions

insofar as they would preclude us from conducting an appropriate

balancing of interests in section 7430 and section 6673(a)(2)

disputes.

       We decline to adopt either side’s approach.   In an effort to

give meaningful effect to the relevant public policies in a

practical way in the instant case, we chose to conduct in camera

inspections of the two unredacted memoranda.    We recognize that

other courses of action may be preferable in other circumstances.

  4.    Application to This Case

       Having conducted an in camera review of the Welhaf

memorandum and the unredacted Hyman memorandum, we conclude there

is neither a substantial need to discover any of the fact-based

work product nor compelling need to discover any of the opinion

work product.

       A redacted version of the Hyman memorandum was provided to

petitioners.    The redacted version of the Hyman memorandum

discloses the statements about matters of fact, but not all of

the legal strategies or opinions, set forth in the unredacted
                              - 16 -

Hyman memorandum.   The statements about matters of fact presented

in the redacted memorandum are identical to those presented in

the unredacted Hyman memorandum.   Petitioners have the redacted

version of the Hyman memorandum, and so we conclude that

petitioners are in possession of the fact-based work product.     We

further conclude that, as to the legal strategies and opinions,

the redacted version of the Hyman memorandum and respondent’s

summary of the unredacted version of the Hyman memorandum (supra

notes 2, 3, and 7) taken together provide a fair representation

of the legal strategies and opinions in the unredacted version of

the Hyman memorandum.   Because (1) petitioners were provided with

a fair representation of the unredacted legal strategies and

opinions, and (2) the redacted portions would not impact the

outcome of petitioners’ motions under sections 7430 and 6673 in

the instant case, we conclude that petitioners do not have a

compelling need to discover this opinion work product;

petitioners’ desire to discover the unredacted version of the

Hyman memorandum is outweighed by the protection afforded by the

privacy privilege under the work product doctrine.

     The Welhaf memorandum presents statements about matters of

fact that are substantially similar to those presented in the

redacted version of the Hyman memorandum.   Because petitioners

are already in possession of the equivalent fact-based work

product (in the form of the redacted version of the Hyman
                              - 17 -

memorandum), we conclude that petitioners have neither a

substantial need to discover the fact-based work product in the

Welhaf memorandum nor an inability to obtain a substantial

equivalent of this fact-based work product without incurring

undue hardship.

     The Welhaf memorandum suggests and analyzes various

positions respondent might take in the litigation in the instant

case.   There is no “smoking gun” in the Welhaf memorandum

establishing that respondent’s position in the underlying

litigation was not substantially justified and thereby possibly

entitling petitioners to litigation costs under section 7430.

Nor is there a “smoking gun” in the Welhaf memorandum that would

prove respondent’s attorney unreasonably and vexatiously

multiplied the proceedings, and thereby entitle petitioners to

litigation costs under section 6673(a)(2).   Because the Welhaf

memorandum would not impact the outcome of petitioners’ motions

under sections 7430 and 6673 in the instant case, we conclude

there is no compelling need to discover the memorandum;

petitioners’ desire to discover the Welhaf memorandum is

outweighed by the protection afforded by the privacy privilege

under the work product doctrine.

     Accordingly, we sustain respondent’s contention that the

work product doctrine privilege protects both memoranda from

discovery.
                              - 18 -

 5.   Waiver

      Petitioners contend that, even if the memoranda were

privileged under the work product doctrine, respondent should be

treated as having waived the privilege, because:

      To permit Respondent to withhold Ms. Welhaf’s factual
      representation to the Chief Counsel’s Office from the
      Ratkes would allow Respondent to use the work product
      doctrine as both a “sword and shield litigation tactic”
      in this post-decision proceeding for litigation costs
      and sanctions. As opined by the Federal Circuit in
      EchoStar [In re EchoStar Communications Corp., 448 F.3d
      1294 (Fed. Cir. 2006)]:

           We recognize that the line between “factual”
           work product and “opinion” work product is
           not always distinct, especially when, as
           here, an attorney’s opinion may itself be
           “factual” work product. When faced with the
           distinction between where that line lies,
           however, a...court should balance the
           policies to prevent sword-and-shield
           litigation tactics with the policy to protect
           work product.

      Id. at 1302.

                              * * * *

           The overarching goal of waiver in such a case
           is to prevent a party from using the advice
           he received as both a sword, by waiving
           privilege to favorable advice, and a shield,
           by asserting privilege to unfavorable advice.
           See Fort James Corp. [v. Solo Cup Co.], 412
           F.3d [1340] at 1349 [Fed. Cir. 2005]; [In re]
           Martin Marietta Corp., 856 F.2d [619] at 626
           [4th Cir. 1988]; In re Sealed Case, 676 F.2d
           793, 818 (D.C. Cir. 1982) (“[W]hen a party
           seeks greater advantage from its control over
           work product than the law must provide to
           maintain a healthy adversary system[,] then
           the balance of interests recognized in
                              - 19 -

          Hickman...shifts.”). To the extent the work-
          product immunity could have such an effect,
          it is waived.

     Id. at 1303.

     In Hartz Mountain Industries v. Commissioner, 93 T.C. at

527, we summarized the waiver rules as follows:

          Protection derived from the work product doctrine
     is not absolute. United States v. Nobles, 422 U.S.
     225, 239 (1975). Further, the work product doctrine,
     like the attorney-client privilege, may be waived.
     United States v. Nobles, supra. Protection afforded by
     the work product doctrine to “opinion work product” may
     also be waived. See In re Sealed Case, 676 F.2d 793,
     811 (D.C. Cir. 1982); Coleco Industries, Inc. v.
     Universal City Studios, 110 F.R.D. 688, 690-691
     (S.D.N.Y. 1986).

     In Hartz Mountain Industries and each of the three cited

cases therein, the relevant court (1) concluded that the

proponent of the privilege attempted to present a one-sided view

of a critical matter in dispute and (2) refused to sustain the

privilege in that setting.

     In Nobles, a defendant in a criminal case was not permitted

to present testimony of an investigator unless the defendant

turned over to the prosecution those portions of the

investigator’s report that related to the investigator’s expected

testimony.   When the defense called its investigator as a

witness, the trial court ruled that the investigator’s report

(after inspection and editing in camera) would have to be turned

over to the prosecutor.   The defense stated that the report would

not be turned over.   Whereupon the trial court ruled that the
                             - 20 -

investigator would not be permitted to testify.   United States v.

Nobles, 422 U.S. 225, 229 (1975).   The Supreme Court held that

the trial “court’s preclusion sanction was an entirely proper

method of assuring compliance with its [disclosure] order.”     Id.

at 241.

     In Hartz Mountain Industries v. Commissioner, 93 T.C. at

528, we ruled as follows:

          Finally, petitioner has waived the work product
     doctrine by making a “testimonial use” of work product
     materials. See In re Sealed Case, supra at 817-818;
     Coleco Industries, Inc. v. Universal City Studios,
     supra at 691. Petitioner submitted affidavits from its
     in-house counsel to support its internal position with
     respect to the antitrust litigation. By offering this
     selective disclosure of work product to establish its
     intent, petitioner has waived all work product
     protection relevant to the same issue, and fairness
     requires discovery of all work product that pertains to
     petitioner’s antitrust settlement intentions. Coleco
     Industries, Inc. v. Universal City Studios, supra.

Thus, although partial disclosure is not necessarily fatal to a

claim of work product doctrine privilege, a “testimonial use” of

the disclosed material may result in a conclusion that in

fairness the related material must be disclosed even though it

would otherwise be protected from disclosure.9

     9
       This has some similarity to Fed. R. Evid. 106, under which
a party may interrupt another party’s presentation in order to
require “the introduction at that time” of certain evidence
“which ought in fairness to be considered contemporaneously with”
the other party’s evidence.
                              - 21 -

     In In re EchoStar Communications Corp., 448 F.3d 1294 (Fed.

Cir. 2006), defendants to a willful patent infringement suit

asserted the defense of reliance on advice of counsel.     The Court

of Appeals ruled:

     Work-product waiver extends only so far as to inform
     the court of the infringer’s state of mind. * * *

          The overarching goal of waiver in such a case is
     to prevent a party from using the advice he received as
     both a sword, by waiving privilege to favorable advice,
     and a shield, by asserting privilege to unfavorable
     advice.

Id. at 1303.

     We note that, in response to petitioners’ section 7430

motion, respondent refers to the two memoranda and respondent’s

actions under section 6110 resulting in disclosure of the

redacted Hyman memorandum.   As we view it, respondent’s

references to the two memoranda are in the course of a recital of

sequence of events.   The references are not by way of a

contention that the existence of the two memoranda or the text of

the redacted Hyman memorandum is evidence showing that

respondent’s position was substantially justified, within the

meaning of section 7430(c)(4)(B)(i).   Petitioners have not

directed our attention to any attempt by respondent to make a

“testimonial use” of either of the two memoranda (Hartz Mountain

Industries v. Commissioner, 93 T.C. at 528), or to use either of

the two memoranda as “a sword” (In re EchoStar Communications

Corp., 448 F.3d at 1303).
                               - 22 -

       We conclude that respondent has not waived the work product

doctrine privilege with respect to the Hyman memorandum.     We do

not understand petitioners to contend that respondent waived the

privilege with respect to the Welhaf memorandum, except as a

derivative of their contention as to the Hyman memorandum.     We

hold that the privilege has not been waived as to either

memorandum.

  6.    Conclusion

       The unredacted memoranda are privileged from disclosure

under the work product doctrine privilege.     Neither memorandum

includes material such that the need to discover the work product

is compelling.    Finally, respondent has not waived the protection

of the work product doctrine privilege.

                                     An appropriate order will

                                be issued denying petitioners’

                                request to discover the unredacted

                                memoranda.10

       10
       We note that the parties have stipulated the text of the
redacted Hyman memorandum as a joint exhibit relating to
petitioners’ secs. 7430 and 6673 motions. We have concluded that
respondent’s references to the two memoranda in materials filed
with the Court up to now do not constitute a use leading to
waiver of the work product doctrine privilege.