Amendments to U.S. Tax Court Rules Address ESI, but not Inadvertent Production
Posted by Joe Baker at 1:27 PM
0 comments - Categories: Tax Court | FRCP | The Courts
Recently, the United States Tax Court adopted amendments to its Rules of Practice and Procedure that address some issues related to electronic discovery. Although many of these amendments mirror their counterparts in the Federal Rules, there are some notable differences between the FRCP and the Tax Court Rules. These differences could raise substantial difficulties for Tax Court litigants if not addressed up-front.
Tax Court Rules Now Address E-Discovery
Effective January 1, 2010, the Tax Court adopted amendments to its Rules of Practice and Procedure. Many of these amendments deal with the discovery of ESI and are substantially similar to corresponding portions of the FRCP. For example, FRCP 26(b)(2)(B) is now reflected in Tax Court Rule 70(b), which provides that a party need not provide discovery of ESI from sources that are not reasonably accessible because of undue burden or cost. FRCP 33(d) contains its counterpart in Tax Court Rule 71(e), which now refers to ESI in discussing the option to produce business records. Tax Court Rule 72 (a) and (b), like FRCP 34(a) and (b), includes mention of ESI when outlining the content of discovery requests. And Tax Court Rule 147, like FRCP 45, discusses the production of ESI in the context of subpoenas.
The fact that the Tax Court, which generally relies upon much more informal discovery procedures than do federal district courts, moved to recognize the importance of ESI in the pretrial process underscores the ubiquitous presence of e-discovery issues in all types of litigation. Despite the fact that the Tax Court permits pretrial orders, initial disclosures, and pretrial conferences to be performed on a discretionary basis, the Tax Court is now likely to expect parties to address ESI as part of this informal discovery process. Furthermore, ESI will now be discoverable through formal discovery procedures should more informal attempts fail.
Inadvertent Disclosure Provision Omitted from Tax Court Rules
One of the trickier issues in e-discovery remains the inadvertent disclosure of privileged information. Indeed, attorneys and judges alike have widely recognized the relative ease with which privileged documents may be mistakenly produced in complex e-discovery cases, and recent amendments to the FRCP have sought to address this issue. Thus, it is significant that the Tax Court has declined to adopt a provision to deal with the relatively frequent situation in which a litigant mistakenly produces privileged information to an opposing party.
FRCP 26(b)(5)(B) provides that “a party must promptly return, sequester, or destroy” information produced in discovery that is subject to a claim of privilege. In declining to adopt an equivalent provision, the Tax Court appears to have determined that voluntary pre-trial agreements provide sufficient protection against the harsh consequences wrought by inadvertent disclosures made during the e-discovery process. In its remarks introducing the amendments to Rule 70, the Tax Court pointedly notes that “the parties may enter into voluntary agreements to avoid inadvertent waivers of claims of privilege or protection,” and further notes that “such agreements reduce delays in discovery and reduce the cost and burden of document reviews by the responding party.”
The amendments to the Tax Court Rules thus suggest that parties litigating in the Tax Court should consider reaching comprehensive agreements before engaging in discovery. Given its preference for informal discovery, the Tax Court is likely to expect parties who use e-discovery to enter into agreements that guard against the consequences of mistakenly producing privileged documents.
Elisa F. Kantor, an associate in the Washington, D.C. office of Mayer Brown LLP, assisted in authoring this post.
