Extending Time for Informal Discovery

A perception among some private practitioners is that IRS Area Counsel Attorneys feel compelled to commence formal discovery early on to protect the government's interests resulting in legal fees to the taxpayer. In the end, the spirit of the "informal consultation" phase is violated and the Court is unnecessarily drawn into conference calls and requests for protective orders. Some judges are less inclined to grant continuances than others.

Prior to the automation of the Tax Court docket, the Court used a "trial status request" procedure under which the parties advised the Court as to the trial readiness status of a case before a case appeared on a trial calendar. Under that procedure, cases were generally not calendared where the parties reported "not ready" for trial.

This proposal is to either (1) reinstitute the "trial status request procedure," (2) expand the time before cases appear on a calendar after they are "at issue" (3) request Tax Court judges to be more amenable to a first joint request for a continuance or (4) schedule trial calendars less frequently.

The principle behind the "informal consultation" requirement is clearly articulated in Branerton Corp. v. Comm., 61 T.C. 691, (1974) which explains that "for many years the bedrock of Tax Court practice has been the stipulation process . . . embodied in Rule 91" and "essential to that process is the voluntary exchange of necessary facts, documents, and other data between the parties to promote the more expeditious trial of cases as well as for settlement purposes."⁴ In Branerton, the Court granted the Commissioner's request for a protective order when the petitioner served detailed and extensive interrogatories without first engaging in informal consultation.⁵ The Court explained that "discovery procedures should only be used after the parties have made reasonable informal efforts to obtain needed information voluntarily." Use of formal discovery in the Tax Court is "not intended in any way to weaken the stipulation process."⁶ Where parties fail to comply with this informal consultation requirement before commencing formal discovery, the parties violate "the letter and the spirit of the discovery rules" and engage in "an abuse of the Court's procedures."⁷

B. Discovery Timing Limitations

According to Tax Court Rule 70(a)(2), formal discovery must be completed no later than 45 days before the date set for the call of the case on a trial calendar. The rule states specifically that a motion to compel discovery must be filed no later than 45 days prior to the trial calendar. The rule's explanatory note states that the Court intends that a formal discovery request should be served more than 75 days prior to the calendar call to allow 30 days for a response so that any necessary motion to compel can be filed within the 45-day period prior to the calendar call. Therefore, parties must conclude informal consultation and begin formal discovery, at the latest, 75 days prior to calendar call. Clearly given this time frame, a good faith attempt at informal consultation must be commenced well in advance of the 75 day rule.

C. Calendaring System

Cases are calendared for trial as soon as practicable on a first in/first out basis. After a case is "at issue", the Court's docket section will list the case on a trial calendar for the place of trial designated by the petitioner.⁸ Prior to 1986, the Court would issue a Trial Status Request ("TSR") to learn the trial readiness of cases which were at issue. The Court would then consider this information and calendar cases as appropriate. In 1986, the Court discontinued the use of the TSR when the docket was computerized. Since that time, an automated system requests, by place of trial, a FIFO group of cases at issue and those cases are placed on a calendar.

"S" calendars are issued three months in advance of the calendar call. For one week calendars 100 cases are calendared; 200 are calendared for two week sessions.

Regular calendars are issued five months in advance. For one week calendars 75 cases are selected; 150 are calendared for two week calendars.

Our contacts at the Court advised that the average length of time from the date a case is at issue to the date of the Notice of Trial for all of the most recent San Diego, San Francisco and Los Angeles calendars is four months.

Each party will receive notice from the Clerk of the place and time of the trial calendar setting.⁹

II. POSSIBLE SOLUTIONS

There are three possible solutions to the inadequate time for informal discovery: (1) reinstitute the "trial status request procedure", (2) expand the time before cases appear on a calendar after they are "at issue," (3) request Tax Court judges to be more amenable to a first request for a continuance or schedule calendars less frequently.

A. Reinstitute the Trial Status Request Procedure

As noted above, prior to the computerized calendar system started in 1986, the Tax Court used a Trial Status Request system. In advance of an upcoming session of the Tax Court, the Clerk would issue a Trial Status Request simultaneously to the government and to petitioners. The parties were required to indicate on the Trial Status Request whether the status was (1) "basis [of settlement] reached" in which case the matter was calendared if settlement documents were not received in Washington, D.C. before the time for issuing the calendar; (2) "probable settlement" in which case the matter was calendared in order to keep the attention of the parties focused on finalizing the settlement; (3) "probable trial" (and estimated trial time); (4) "definite trial" and estimated trial time; or (5) case "not ready" for trial, stating the reasons therefore. A calendar would be prepared based on the responses made in the Trial Status Reports.

Reinstituting this procedure would provide a vehicle to communicate a case's trial readiness status and give the Court discretion to allow the parties more time if appropriate, to resolve the matter or more adequately prepare for trial through informal consultation. As such, government counsel would not feel compelled to start the formal discovery process prematurely knowing such option exists.

B. Expand the Time Before a Case Appears on the Trial Calendar

Allowing the parties an additional two months after a case is at issue and before the case is calendared would give the parties some breathing room and permit the use of informal discovery until it is clear that the trial preparation objectives of the parties can only be met by using formal discovery. Moreover, allowing more time before a case is calendared may result in the use of more efficient and complete discovery once the government determines that an opposing party is not willing to prepare for trial informally. The common practice today is for government counsel to immediately send a "Branerton letter" to petitioners' counsel or to petitioners who are proceeding pro se. A Branerton letter will briefly advise the petitioner that the Court's standing pre-trial order and Rules require the parties to proceed informally. It will often invite the petitioner to attend a Branerton conference as well as offer the petitioner the opportunity to provide counsel with copies of documents to which the petitioner wishes the government to stipulate. It is not uncommon for government counsel to include a first draft of a Stipulation of Facts with an invitation to add to it or suggest other language. While the government has traditionally avoided formal discovery in pro se cases and almost never uses formal discovery in "S" cases, requests for admissions, which are not considered part of the discovery rules, can be used against pro se litigants.

It is extremely rare for private counsel to complain that government counsel is unwilling to participate in the Branerton process. It is also widely-known by private practitioners that a representative ignores a Branerton letter at his/her peril. Traditionally government counsel has liberally allowed opposing counsel two to four weeks to respond to a Branerton letter. Simply acknowledging a request to attend a conference can be accomplished in a matter of minutes. There is no mystery in knowing whether or not opposing counsel intends to play by the rules and participate in the informal consultation process. Once it is clear that the objectives of trial preparation cannot be met informally, discovery and requests for admissions are fair game in the arsenal of tools available to government counsel to proceed and adequately protect the government's interests. Expanding the time before a case appears on a trial calendar thus furthers the objective of informal discovery and also allows more time for more thorough discovery once it is clear that a party is unwilling to participate informally.

C. Request Tax Court Judges to be More Flexible in Response to the First Request for Continuance

If the Tax Court were to adopt a policy under which judges are requested to be more flexible in response to the first request for a continuance, this will allow the parties more time to fully comply with informal discovery requirements and the spirit of Branerton.

D. Schedule Calendars Less Frequently

Taxpayers are surely well-served to the extent that the Court is able to quickly hear and decide a matter which for many is the culmination of a two to three year dispute with the Internal Revenue Service, if not longer. The frequency of calendars must involve a balancing of the public's right to a speedy resolution of such conflicts and the ability of their representatives as well as government counsel to properly prepare for trial. On the one hand, it may be argued that less frequent calendars means slower resolution of tax disputes. On the other hand, if less frequent calendars means more time for informal as well as formal discovery, it could be argued that settlement is enhanced. More discovery means better development of the facts which in turn should afford the parties a better understanding of their hazards of litigation. Settlement is always a better alternative to litigation.

III. CONCLUSION

As the Tax Court's inventory decreases and cases are calendared more quickly, there is a conflict between the Rules' which require informal consultation under Branerton and the need to timely complete discovery. Government counsel cannot be expected to delay commencement of formal discovery if there is real concern that delay may result in insufficiently developed cases for trial. Formal discovery which is commenced too early results in unnecessary expense for the parties and may prematurely involve the Judge in the case. Expanding the time for informal discovery might be a solution to this problem. This may be accomplished by (1) revising the "Trial Status Request procedure"; (2) expanding the time before cases appear on a calendar after they are "at issue", (3) request Tax Court judges to be more amenable to a first request for a continuance, or (4) scheduling calendars less frequently.

² TC Rule 70(a)(1).

³ TC Rule 91.

⁴Branerton, 692.

⁵Id.

⁶Id.

⁷Id.

⁸See Tax Ct. R. 131(a).

⁹Id.

¹⁰ Tax Ct. R. 133.

¹¹Mid-Continent Supply Co. v. Comm., 67 T.C. 37, 47- 48 (1976), aff'd 571 F.2d. 1371, 1376 (5th Cir.).