University of Phoenix, Inc. v. Indiana Department of State Revenue
2016 Ind. Tax LEXIS 50
| Ind. T.C. | 2016Background
- University of Phoenix (UoPX) appealed Indiana Department of State Revenue’s assessment of additional gross income tax and interest for Aug. 31, 2009–Aug. 31, 2011, arguing Indiana Code § 6-3-2-2 required sourcing online tuition revenue by the costs-of-performance test, not a market/customer-based test.
- During discovery, UoPX sought to depose former Revenue Commissioner Michael Alley regarding the Department’s Tax Competitiveness and Simplification Report (Sept. 2014), Alley’s presentation, House Bill 1349, and the Department’s views on sourcing tests.
- The Department moved for a protective order under Ind. Trial Rule 26(C) to quash the subpoena for Alley’s deposition, arguing the topics were irrelevant, burdensome, and duplicative because UoPX had deposed other Department witnesses.
- The court found the requested deposition topics were relevant to the subject matter of the tax appeal and that Alley, as former Commissioner, could provide nonredundant information not obtained from other witnesses.
- The court declined to apply heightened protection for a high-ranking official because Alley was no longer Commissioner and denied the Department’s motion for a protective order; a hearing on potential discovery expense awards was to be scheduled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a protective order should bar/quash UoPX’s subpoena for former Commissioner Alley’s deposition | Deposition topics (Report, presentation, HB 1349, Department views on sourcing tests) are relevant to UoPX’s claim about proper sourcing of online tuition revenue | Deposition is burdensome, oppressive, and seeks irrelevant or cumulative information already obtained from other witnesses; subpoenas on high-ranking officials are disfavored | Denied — topics are discoverable and Alley may have additional, nonredundant information; protective order not warranted |
| Whether testimony of a former high-ranking official merits special protection | UoPX: Alley’s status as former Commissioner does not bar relevant discovery | Department: High-ranking officials should not ordinarily be compelled absent necessity and unavailability from lower-ranking officers | Denied — Alley is no longer in office, and relevance/necessity shown; heightened protection not applied |
| Whether discovery relevancy standard is met | UoPX: Discovery relevancy is broad; possible relevance suffices | Dept: Relevancy lacking because issues at trial are narrower | Denied — discovery relevancy standard satisfied (possibility of relevance) |
| Whether testimony obtained will be admissible at trial | UoPX: Deposition may yield admissible evidence relevant to sourcing test interpretation | Dept: Even if obtained, testimony may be immaterial at trial | Court: Allowed discovery but noted discovery relevancy differs from trial admissibility; admissibility not decided now |
Key Cases Cited
- Popovich v. Indiana Dep’t of State Revenue, 7 N.E.3d 406 (Ind. Tax Ct. 2014) (discovery relevancy standard is broader than trial relevancy)
- Whitaker v. Becker, 960 N.E.2d 111 (Ind. 2012) (modern discovery aims to disclose basic issues and facts fully)
- Trost-Steffen v. Steffen, 772 N.E.2d 500 (Ind. Ct. App. 2002) (discovery generally self-executing with limited court supervision)
- Hunt v. State, 546 N.E.2d 1249 (Ind. Ct. App. 1989) (high-ranking officials should not ordinarily be compelled to testify unless testimony is necessary and unavailable from lower-ranking officers)