Buckelew Farm, LLC v. Comm'r of Internal Revenue

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BUCKELEW FARM, LLC F.K.A. BIG K FARMS LLC, BIG K LLC, TAX MATTERS PARTNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 14273-17

United States Tax Court

September 30, 2022

ORDER

Christian N. Weiler, Judge

On August 30, 2022, respondent filed his Motion to Impose Sanctions, moving pursuant to Rules^[1] 50 and 104, that due to prejudice to respondent caused by petitioner's failure to comply with Rule 81, the Court impose the following sanctions upon petitioner: (1) that petitioner is bound by the testimony of its Rule 81(c) designee, James Adams (Mr Adams), and that petitioner not be permitted to deviate from the answers provided at the deposition; and (2) any other remedies that the Court deems just. On September 16, 2022 petitioner filed its Opposition to Motion to Impose Sanctions.

On December 3, 2021, respondent moved, pursuant to Rule 74(c)(2)(B), that the Court enter an order compelling Buckelew Farm, LLC (Partnership), through designated witness(es), to appear and testify at a virtual deposition to be conducted on a date and time convenient to both sides for discovery purposes. Big K, LLC (petitioner) is the tax matters partner. On April 28, 2022, we granted respondent's motion to compel the deposition of the Partnership and ordered that the Partnership appear at the deposition.^[2] The Partnership designated Mr. Adams, who is the Managing Director of Big K Management, LLC, which is the manager of petitioner to appear and testify at the deposition. The deposition was held on June 24, 2022, and it covered a broad range of topics listed in the notice of deposition.

In his Motion to Impose Sanctions, respondent argues that he is prejudiced by Mr. Adams' evasive deposition testimony because he was not able to learn the important information sought from the deposition of the Partnership. Respondent notes that Mr. Adams was the Partnership's designee for the FRCP 30(b)(6) deposition. Respondent further notes that Mr. Adams asserted that he was in the best position to know about the topics listed in the subpoena and that he spent two days preparing for the deposition with his attorneys. Respondent highlights that petitioner responded "I don't recall" to over 100 questions. Moreover, respondent argues that Mr. Adams' testimony did not comply with FRCP 30(b)(6), that his testimony is tantamount to "not having a witness appear at all," and that respondent would be prejudiced if petitioner is not bound to Mr. Adams' "I don't recall" answers given during his deposition.

Respondent argues that "[p]etitioner had ample time to prepare its designee [Mr. Adams] to testify about subjects described with particularity in the subpoena" and that the "[P]artnership was aware of its duty to designate a knowledgeable individual to respond to the topics described with particularity in the subpoena." In support of his contention that sanctions are warranted in this instance, respondent seems to put heavy weight on the number of times the phrase "I don't recall" appears in the deposition transcript. Respondent brings our attention to United States v. Taylor, 166 F.R.D. 356 (M.D. N.C. 1996) in support of his contention that "[p]roducing an unprepared witness is tantamount to a failure to appear" and that FRCP 37(d)^[3]allows a court to impose sanctions where a party or person designated under FRCP 30(b)(6) fails "to appear before the officer who is to take the deposition, after being served with proper notice." Furthermore, respondent argues that if the organization's "designee is unable to answer questions described with particularity in the subpoena, then the organization has failed to satisfy its obligation to prepare the designee and may be subject to sanctions." See Black Horse Lane Assoc., L.P. v. Dow Chem. Corp., 228 F.3d 275, 304 (3d Cir. 2000).

In its Opposition to Motion to Impose Sanctions petitioner acknowledges that Mr. Adams "could not remember certain granular details, dates, conversations, or documents from 2012 and 2013." However, petitioner forcefully disagrees with respondent's characterization that Mr. Adams was being "evasive" and draws our attention to the fact that Mr. Adams provided over 8 hours of testimony during the deposition. Furthermore, petitioner takes issue with respondent's excerpts from the deposition transcript that purport to illustrate "notable" instances "where the Partnership was not prepared because Mr. Adams did not 'recall' specific details."

While we agree with respondent that Mr. Adams had a duty to prepare for the deposition and to respond to questions on all relevant areas of inquiry listed in the notice of subpoena, see QBE Ins. Corp. v. Jorda Enters., Inc., 277 F.R.D. 676, 688 (S.D. Fla. 2012), FRCP 30(b)(6) does not "expressly or implicitly require the corporation or entity to produce the 'person most knowledgeable' for the corporate deposition." Id. It is important to note that a FRCP "30(b)(6) deposition is not a memory test, and '[a]bsolute perfection is not required of a . . . witness.'" Fuentes v. Classica Cruise Operator Ltd, Inc., 32 F.4th 1311, 1322 (11th Cir. 2022). Moreover, the "fact that a designee [cannot] answer every question on a certain topic does not necessarily mean that the [Part...