Confidential Informant 59-05071 v. United States
121 Fed. Cl. 36
| Fed. Cl. | 2015Background
- The plaintiff (confidential informant) alleges the IRS entered a Reward Agreement (2002, amended 2005) promising identity protection and a percentage of collected proceeds if its information led to tax recoveries; plaintiff supplied significant information in 2002 and 2005.
- Plaintiff contends IRS Special Agent Tyska (and superiors) pressured it in 2005–2006 to sign Form 211 or a new amendment and threatened not to pursue investigations unless the agreement was modified, and that IRS thereafter failed to provide reassurances or proceed.
- Plaintiff sued for anticipatory repudiation, breach of the covenant of good faith and fair dealing, and accounting; the government moved to dismiss but many claims survived earlier review.
- Extensive discovery disputes followed: the government initially withheld or failed to search certain ESI and audio files; the Court ordered additional searches and productions and previously granted plaintiff’s first motion to compel in part.
- Plaintiff filed a second motion to compel and for sanctions challenging government privilege assertions (including crime-fraud and “compelling need” arguments), seeking more searches (65 custodians reduced to three), specific documents, and reimbursement for deposition costs.
- The Court (Judge Kaplan) reviewed in camera materials, limited additional searches to three named custodians, denied most document-compulsion requests, rejected crime-fraud and “compelling need” challenges to attorney-client privilege, and awarded plaintiff limited deposition expenses ($12,517.75).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of attorney-client privilege assertions | Privilege should be pierced: (a) some redactions not between lawyers; (b) "compelling need" for post-June 2005 communications; (c) crime-fraud exception because documents were created during alleged misconduct | Documents contain counsel advice even when circulated by non-attorneys; no legal basis to override attorney-client privilege for relevance/importance; plaintiff failed to make prima facie showing of crime/fraud | Court upheld most privilege claims: redactions proper, no "compelling need" exception to pierce attorney-client privilege, and crime-fraud exception not shown |
| Additional custodian searches (65 names) | Need wider searches to find higher-level involvement in alleged effort to scrap the Agreement | Government already searched appropriate files and exhausted paper trail; additional searches burdensome and unlikely to yield new material | Court allowed limited compromise: plaintiff may identify up to 3 additional custodians for search; broader request denied |
| Production of specific documents (franchisee returns/analyses; three items from audio; deactivation letter; records re: second target) | These documents exist or are referenced and are relevant to proving IRS actions and investigations | Government searched files/agents and found no responsive documents or already produced available material | Court denied production requests for franchisee analyses, the three audio-referenced items, and the deactivation letter (no responsive materials found); denied additional searches re: second target based on government representations |
| Sanctions / costs for discovery failures | Plaintiff seeks fees/costs for depositions and attorney time due to delayed/late productions | Government acknowledges some re-take costs may be recoverable but disputes linkage and extent; argues many productions were mandated by court orders | Under RCFC 37(a)(5)(C) court awarded limited expenses ($12,517.75) for depositions of two undercover agents and certain IRS witnesses; denied broader attorney-fee award and left other costs to parties |
Key Cases Cited
- Genentech, Inc. v. United States Int’l Trade Comm’n, 122 F.3d 1409 (Fed. Cir.) (attorney-client privilege protects confidentiality of communications for legal advice)
- Upjohn Co. v. United States, 449 U.S. 383 (U.S.) (privilege depends on factual circumstances; corporate communications reflecting counsel advice remain privileged)
- Zolin v. United States, 491 U.S. 554 (U.S.) (crime-fraud exception requires prima facie showing that communication was in furtherance of crime or fraud)
- Marriott Int’l Resorts, L.P. v. United States, 437 F.3d 1302 (Fed. Cir.) (compelling need can overcome deliberative process privilege; distinct from attorney-client privilege)
- In re Spalding Sports Worldwide, Inc., 203 F.3d 800 (Fed. Cir.) (standards for overcoming privilege; crime-fraud exception requires prima facie showing)