Resolution Through the Courts TEI Audits & Appeals Seminar

Transcription

1 Resolution Through the Courts TEI Audits & Appeals Seminar May 3, 2018 Carley Roberts Partner Tim Gustafson Counsel 2018 (US) LLP All Rights Reserved. This communication is for general informational purposes only and is not intended to constitute legal advice or a recommended course of action in any given situation. This communication is not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent counsel before making any decisions or taking any action concerning the matters in this communication. This communication does not create an attorney-client relationship between (US) LLP and the recipient. (US) LLP is part of a global legal practice, operating through various separate and distinct legal entities, under. For a full description of the structure and a list of offices, please visit

2 Agenda Reasons to Litigate Litigation: Pros / Cons Getting into Court Framework of a Case Pleadings Pretrial Issues Discovery Other Considerations Trial Appeal 2

3 Audience Participation (Surprise!)

4 Audience Participation Your Experience How many trials have you experienced? A. 1-5 B. 6+ C. None D. Only these tax conferences 4

5 Audience Participation Your Experience Results How many trials have you experienced? A. 1-5 [RESULTS] B. 6+ [RESULTS] C. None [RESULTS] D. Only these tax conferences [RESULTS] 5

6 Audience Participation Your Experience What has been / do you expect to be the most difficult part of a trial? A. Controlling witnesses B. Controlling attorneys C. Keeping the Judge awake D. Controlling costs 6

7 Audience Participation Your Experience Results What has been / do you expect to be the most difficult part of a trial? A. Controlling witnesses [RESULTS] B. Controlling attorneys [RESULTS] C. Keeping the Judge awake [RESULTS] D. Controlling costs [RESULTS] 7

8 Audience Participation Your Experience What do you / would you fear most about going to trial? A. Discovery B. Losing C. Nothing we always settle D. Spending weeks on end with the likes of us 8

9 Audience Participation Your Experience Results What do you / would you fear most about going to trial? A. Discovery [RESULTS] B. Losing [RESULTS] C. Nothing we always settle [RESULTS] D. Spending weeks on end with the likes of us [RESULTS] 9

10 Litigation: Pros / Cons

11 Litigation: Pros / Cons Reasons to Litigate Another opportunity to win Likely first independent review by legal professionals Likely first opportunity to put on a full case, complete with witnesses and experts Opportunity to test and resolve recurring issue with a small-dollar year or year with strongest facts Leverage court case for other disputed years and in other jurisdictions (good domino effect) 11

12 Litigation: Pros / Cons Considerations Against Going to Court Cost Money Time Resources Unpredictability Setting a bad precedent in one, if not multiple, jurisdictions (bad domino effect) 12

13 Getting into Court

14 Getting into Court Exhaustion of Administrative Remedies Did you exhaust your administrative remedies? In Illinois, if you initiate an administrative protest, you must obtain a final administrative decision before bringing an action in court, even if there is an exception to the exhaustion of remedies doctrine (Magicjack Vocaltec, Ltd., et al. v. City of Chicago Dept. of Finance (Ill. App. Ct. 2018) 2018 IL App (1st) U) In Texas, you must file a motion for rehearing of denied tax refund claim before filing lawsuit (Tex. Tax Code (a)(2)) 14

15 Getting into Court Exhaustion of Administrative Remedies (con t.) Are you exhausted yet? In California, you must use all available agency administrative procedures for relief and proceed to a final decision on the merits by that agency before going to court (Barnes v. State Bd. of Equalization (Cal. Ct. App. 1981) 118 Cal. App. 3d 994) What does this mean? Consequences of failure to exhaust Jurisdictional bar case dismissed! Evidentiary bar documents not produced in administrative proceedings may be precluded at trial 15

16 Framework of a Case

17 Framework of a Case The Path Taxpayer Files Complaint / Petition State Files Responsive Pleading (e.g., answer, demurrer) Discovery Pretrial Conferences Settlement Proceedings / Conferences Motions Practice (e.g., Summary Judgment) Trial Decision Appeal 17

18 Framework of a Case Create a Trial Plan What? Lays out the legal test Elements to satisfy Burdens to overcome What you must prove and how you will prove it Why? Consolidates work done Reveals gaps where factual support needed (fill with witness testimony / additional documentation) Reveals potential weak spots When? Yesterday! 18

19 Pleadings

20 Pleadings Complaint Generally does not require much detail Notice pleading compared to fact pleading depending on the cause of action Plead causes of action broadly Arguments may be limited on appeal based on the contents of the complaint In CA, arguments at trial limited to those set forth in administrative refund claim May require verification by client and check local rules regarding signature 20

21 Pleadings Responsive Pleadings Answer Admits / denies (specifically or generally) the allegations in the Complaint Demurrer Legal challenge to sufficiency of Complaint Question: does Complaint on its face state a cause of action? All facts pleaded assumed to be true Burden on Defendant to show no cause of action Typically, leave to amend Complaint if demurrer granted Resolves case without discovery (but you lose) 21

22 Pretrial Issues Discovery

23 Pretrial Issues Discovery Overview Timing issues When can you start discovery? When does discovery end (i.e., cut-off date)? Broad scope Relevance test (e.g., to a claim or defense), not admissibility test Protections against disclosure Privileges apply What about protective orders? 23

24 Pretrial Issues Discovery Addressing Discovery Issues Generally Watch deadlines Sequencing your discovery Use your trial plan to determine what evidence you need from opposing party and how to get it Anticipate your weak spots involving opponent s discovery Objecting to discovery requests Compelling discovery Note: Failing to produce documents that should have been produced could result in preclusion from trial (or sanctions) 24

25 Pretrial Issues Discovery Privilege Issues Always watch for and protect / maintain privileges Will likely first arise in discovery Attorney-client privilege the big one! Work-product doctrine NOT privilege, but still important The work-product rule is not a privilege but a qualified immunity protecting from discovery documents and tangible things under certain specified circumstances (Admiral Ins. Co. v. U.S. Dist. Court for Dist. of Arizona (9th Cir. 1989) 881 F.2d 1486) 25

26 Pretrial Issues Discovery Interrogatories Written questions served on another party to be answered under oath Commonly used to learn a party s contentions, including the facts, witnesses and writings on which a contention is based Are they allowed? (Not in Oregon Oregon Tax Court Rule 36) Are they limited in number? (35 in California Cal. Code Civil Proc ) Are they continuing? (Generally, no) 26

27 Pretrial Issues Discovery Document Requests / Demands Inspect and copy documents and records Must already exist and must be in your possession / control Definition of documents and writings very broad and includes electronic writings and electronically stored information Requests often very broad watch out for fishing expeditions Objections allowed (e.g., overbroad, ambiguous, does not seek relevant information, etc.) Review privilege log carefully 27

28 Pretrial Issues Discovery Requests for Admissions Use to narrow issues at trial Requests can establish existence or nonexistence of facts and/or authenticate documents Asks a party to admit or deny genuineness of document, truth of a fact, or an application of law to fact Admission = matter conclusively established Check for numerical limitations (e.g., limit of 35 in California (except for document genuineness) Cal. Code Civil Proc ) Often combined with interrogatories 28

29 Pretrial Issues Discovery Depositions (Overview) Get to ask questions of a party, answered under oath Very broad in scope of questioning again, seeking discovery of relevant information PMK ( person most knowledgeable ) Depositions What about your CEO, CFO, COO? Any applicable limitations? (e.g., One depo rule? One day rule?) 29

30 Pretrial Issues Discovery Depositions (Use at Trial) In some cases, deposition transcript may be used by any party for any purpose In CA, deposition transcript may be used for any purpose if deponent resides more than 150 miles from where the trial is taking place (Cal. Code Civil Proc ) Portions ultimately may be read into the record at trial, even if the deponent is available to testify live Deposition defense can be used as a sword Opportunities to ask follow-up and clarifying questions during the deposition 30

31 Pretrial Issues Other Considerations

32 Pretrial Issues Other Considerations Conferences Pretrial status conferences Set case timing (e.g., discovery cut-off, briefing deadlines, trial date(s)) How fast do you want to go? Same issue in other jurisdictions? Cost considerations Is it up to you? Settlement discussions / conferences May be court-ordered Better negotiating position / more leverage after discovery? 32

33 Pretrial Issues Other Considerations Summary Judgment (Overview) Question: Based on (1) undisputed material facts, (2) is the moving party entitled to a judgment as a matter of law? Can be on an entire case or a portion of the case (i.e., partial summary judgment) A single disputed material fact defeats the motion Consider stipulation of fact Proper response may be a cross-motion for summary judgment 33

34 Pretrial Issues Other Considerations Summary Judgment (Best Practices) Know the rules In D.C., parties must seek consent before filing any motion (with limited exceptions) (D.C. Super. Ct. Civ. R. 12-I) Establish a theme, just like in a trial Don t just give the judge a legal reason to agree with you, make the judge want to agree with you Rein in evidentiary objections can defeat purpose of summary judgment 34

35 Pretrial Issues Other Considerations Consultants and Experts A major potential danger / problem area What about privilege? Testifying vs. non-testifying experts (consultants) Communicating with experts what to share Keep expert witness testimony consistent Use of expert on legal issue? Worth the cost? 35

36 Trial

37 Trial Motions in Limine Motions on or at the threshold or in the beginning can be a valuable tool to exclude evidence before trial May also distract opposing counsel before trial Of course, turnabout is fair play Caution may draw attention to issues or arguments opposing counsel had not considered Judges typically deny and decide during trial (no jury to worry about) Possible to renew motion at trial (e.g., exclude expert witness testimony) 37

38 Trial Briefing Keep pretrial briefing simple, but use to educate the Judge Use post-trial briefing strategically Bench memos Suggest / offer bench memos on favorable issues to help the Judge Judge may request memo on an issue of law (if asked, then it s important to the Judge) 38

39 Trial Evidence Consistency is critical What did you say in discovery responses? Make the best record you can Know the Rules of Evidence Exhibits Lay witnesses Can / do Judges question witnesses? Expert witnesses Use of joint stipulations Cross examinations Be flexible 39

40 Trial Post-Trial Tentative statement of decision? Opportunity to object Failure to address issue Ambiguous findings Failure to object may constitute waiver Costs / Attorneys fees Did you prevail? Are fees awardable? Can you leverage or minimize result for your benefit? What is binding effect of the decision? 40

41 Appeal

42 Appeal Overview Is this where you wanted to be from the outset? What about Wayfair? Coordinated to get US Supreme Court to weigh in Thinking ahead may involve appellate forum shopping Appeal by right, or is it discretionary? Discretionary / mandatory review by State Supreme Court Discretionary review by US Supreme Court of (only) federal constitutional / statutory issues What is the level of review? De novo review of legal findings Substantial evidence review for factual findings 42

43 Appeal Process Basically a paper exercise with oral argument Monitor relevant developments between trial and appeal Consider request for judicial notice Research appellate panel to identify tendencies Consider using consultants Former Justices are invaluable resources Provide an understanding about the process and players 43

44 Questions? 44

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46 Contact us Carley Roberts Partner (US) LLP Tim Gustafson Counsel (US) LLP stateandlocaltax.com eversheds-sutherland.com 2018 (US) LLP All rights reserved. This communication cannot be used for the purpose of avoiding any penalties that may be imposed under federal, state or local tax law.