Privilege and Non-Disclosure

This week, a French court announced an indictment against UBS related to its alleged treatment of Nicholas Forissier, a former audit manager who provided information to French authorities a decade ago in a tax evasion investigation of UBS.  According to at least one press account, the indictment alleges that Forissier was “forced to work

In its Annual Report to Congress, the Taxpayer Advocate Service (TAS) recently reported summons enforcement actions under Internal Revenue Code (Code) Sections 7602, 7604, and 7609 as one of the “Most Litigated Issues” this year. Below, we summarize the general law related to summons enforcements actions and the findings set forth in the Annual Report.
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On November 17, 2016, John Woodruff and Laura Gavioli gave a presentation to the Houston Chapter of the Tax Executives Institute (TEI) regarding the contours of privilege and work-product protection for in-house tax practitioners. Joining them on the panel were Paul Broman of BP and Susan Musch of Sasol. The group addressed potential waiver concerns

On November 2, 2016, we participated in a panel discussion at TEI’s Houston Global Tax Symposium regarding the effects of the newly-finalized section 385 regulations. Of interest from a controversy perspective, we discussed the potential compliance burdens and privilege concerns raised by the new documentation requirements in the rules, and the potential problems with the

In today’s tax environment and with the potential monetary awards to whistleblowers under Internal Revenue Code (Code) Section 7623, taxpayers are facing the increased possibility that their confidential and privileged materials may be provided to the Internal Revenue Service (IRS) without the taxpayer’s consent. This raises serious privilege and ethical issues related to the attorney-client,

Facebook is in a protracted battle with the IRS related to its off-shoring of IP to an Irish affiliate. Read more here. The IRS issued an administrative summons for the documents, and Facebook has refused to comply with the summons. The IRS is asking the court to enforce the summons and force Facebook to

Taxpayers value confidentiality, particularly if there is a dispute with the IRS that involves highly-sensitive trade secrets or other confidential information. Not surprisingly, complex tax litigation often raises the question of what confidential information has to be “made public”—through discovery responses or the introduction of exhibits or testimony in a deposition or at trial—so that a taxpayer can dispute IRS adjustments in court if administrative efforts to resolve the case are not successful. Fortunately, the Tax Court tends to protect highly-sensitive trade secrets or other confidential information from public disclosure even when the judge must review the information to decide the case.

In the Tax Court, the general rule is that all evidence received by the Tax Court, including transcripts of hearings, are public records and available for public inspection. See Internal Revenue Code (Code) Section 7461(a). Code Section 7458 also provides that “[h]earings before the Tax Court . . . shall be open to the public.” Code Section 7461(b), however, provides several important exceptions. First, the court is afforded the flexibility to take any action “which is necessary to prevent the disclosure of trade secrets or other confidential information, including [placing items] under seal to be opened only as directed by the court.” Second, after a decision of the court becomes final, the court may, upon a party’s motion, allow a party to withdraw the original records and other materials introduced into evidence. In our experience, the trend appears to be erring on the side of protecting information from disclosure.


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On July 13, 2016, Judge Buch of the US Tax Court denied an Internal Revenue Service (IRS) motion to compel the production of electronically stored information (ESI) by Dynamo Holdings Limited Partnership and Beekman Vista, Inc., which was not delivered as part of a discovery response based on the mutually agreed-upon use of “predictive coding.”

Due to the enormous amount of electronic data stored by companies in the modern era, discovery requests can involve millions of documents which need to be reviewed prior to being turned over to the opposing party.  In conducting their analysis of this overwhelming quantity of information, litigants must, amongst other things, detect and exclude any privileged material.  Should a party inadvertently fail to do so before such records reach the hands of the opposing counsel, he/she will be deemed to waive privilege in many jurisdictions.  Given the massive quantity of data, however, such mistakes are practically unavoidable.

Federal Rule of Evidence (FRE) 502 was enacted in 2008 in an attempt to combat the issue of inevitable human error and the costs associated with parties’ efforts to avoid it.  FRE 502(d) allows parties to request the court to grant an order stipulating that a disclosure of privileged material does not waive any claims of privilege with respect to those documents.  If the court agrees to enter the order, it is controlling on third parties and in any other federal or state proceeding.

FRE 502(d) has led to the possibility of “quick peek” agreements where the parties give over all or a portion of their documents to opposing counsel without any privilege review whatsoever so that the recipient can identify which material he would like to retain.  The recipient, in turn, agrees not to assert a waiver claim on any document that the producing party intends to withhold from the requested documents as privileged.  These arrangements can dramatically ease the temporal and financial burdens of conducting a privilege review because they allow the producing party to focus only on those documents desired by the recipient while at the same time preserving their right to claim privilege on such documents.
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