Court Again Refuses to Request Evidence From Israel in Refund Suit

PERRIGO COMPANY and SUBSIDIARIES,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

 HON. ROBERT J. JONKER

OPINION AND ORDER

 

INTRODUCTION

This is a tax refund lawsuit. The Government denies that Plaintiff Perrigo Company is entitled to a refund and seeks the Court's assistance (via the issuance of a Letter Rogatory) in obtaining certain information from an arm's-length business partner of Perrigo in Israel. It says the requested information will lend support to its argument that Perrigo engaged in sham transactions with sham entities. The Court previously denied an earlier, and more sweeping, request. The Government has now trimmed back the number of witnesses it seeks to depose as well as the subject areas on which it seeks to question those witnesses. It also has pared back its document requests. It contends that the Rule 26 proportionality considerations, and all other relevant factors now weigh in favor of its more targeted request. (ECF No. 116). Perrigo opposes the motion, asserting that nothing in the calculus has changed to disturb the Court's previous decision. (ECF No. 120). The proposed Letter has been narrowed in focus, but the Court continues to believe that it will inevitably add time, expense, and complication to this case with little likelihood of generating probative material. Accordingly, the Court DENIES the motion.

LEGAL STANDARDS AND DISCUSSION

A letter rogatory is “the request by a domestic court to a foreign court to take evidence from a certain witness.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 247 n.1 (2004) (internal citation and quotation marks omitted). Courts have “inherent power to issue and respond to letters rogatory.” In re Letter Rogatory from Justice Court, Dist. of Montreal, Canada, 523 F.2d 562, 564 (6th Cir. 1975). As the Court indicated in its earlier order, courts faced with a motion for issuance of such a letter often apply the proportionality considerations applicable to all discovery under FED. R. CIV. P. 26. See also Naiad Maritime Co v. Pacific Gulf Shipping Co., No. 16-4006, 2017 A.M.C. 362, 366 (D. Md. Feb. 8, 2017) (collecting cases and stating that “United States courts reviewing applications for letters of request and letters rogatory routinely apply the discovery principles contained in Rule 26 of the Federal Rules of Civil Procedure”).

Rule 26(b)(1) of the Federal Rules of Civil Procedure states in relevant part that:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

FED. R. CIV. P. 26(b)(1).

After a review of the Government's renewed motion, the Court continues to believe the relevant factors weigh against even the more limited request. To be sure, there is a large dollar amount at issue. But both in the administrative audit process, and the litigation discovery process, the government has had broad access to Perrigo documents and witnesses, as well as other domestic third parties. It has also had some access to the foreign parties through the tax treaty. All this information combined should provide sufficient basis to defend Perrigo's claims, each of which requires Perrigo — not the government — to carry the burden of proof.

In expanding discovery to request the assistance of foreign sources in Israel, the only certainty would be the burden of time and expense that would be added to this case and on the third-party Dexcel. To be sure a narrower request would likely reduce the burden on Dexcel, but not to the point where the burden is inconsequential. Moreover, even under the most optimistic timing scenarios, there is no way the information would be available before the dispositive motion deadline, just a few months away.

Equally important, it remains hard to see the prospect of much, if any, return on the investment of the time and expense spent to acquire the information. It's possible that Israel and Dexcel will not honor the request at all. Moreover, the requests in the modified letter are still largely duplicative of what has already been requested and produced by Perrigo, or requested and received from Dexcel under the tax treaty. Presumably the Government requested under the treaty what it thought was most necessary. And after receiving it, the agency declared the matter litigation ready on May 5, 2015. (See Gov't Answer, ECF No. 115, Page ID.960). Even the agency's trial attorneys declared as recently as July that this case would be ready for trial in January of 2019 — only a few weeks from now. (ECF No. 72, PageID.692). Moreover, to the extent that the Government desires to use the letters rogatory as a basis for letting this Court observe Israeli witnesses' credibility, the juice isn't worth the squeeze. Video is never as good as live testimony for evaluating credibility, and that is especially true with the added filter of translation between Hebrew and English. Finally, even though what Dexcel has to say might be probative of Dexcel's intent and state of mind, it's hard to see that providing much illumination on Perrigo's intent and state of mind. And in assessing the sham entity and transaction theories, Perrigo's intent is much more important than Dexcel's intent. For these reasons, the Rule 26 proportionality considerations and other factors still weigh against the government's renewed request.

CONCLUSION

ACCORDINGLY, IT IS ORDERED that the Government's renewed Motion for Issuance of Letters Rogatory (ECF No. 116) is DENIED.

Dated: December 6, 2018

ROBERT J. JONKER
CHIEF UNITED STATES DISTRICT JUDGE