ILNews

State agencies claim information protected by deliberative process privilege

Back to TopCommentsE-mailPrintBookmark and Share

An acrimonious fight between an Indiana businessman and the Indiana Department of Revenue has not only forced the Indiana Tax Court to take the unusual step of getting involved in the discovery process but also created a case of first impression.

The dispute, Nick Popovich v. Indiana Department of Revenue, 49T10-1010-TA-53, was sparked after the Department of Revenue assessed additional income tax, interest and penalties on Nick Popovich for 2002 through 2004.

Popovich, current owner of Sage-Popovich Inc., claimed he was entitled to deduct certain business expenses because he was a professional gambler. The Department of Revenue disagreed and upheld the proposed assessments after a 2010 hearing.

Next, Popovich appealed to the Tax Court and the contentious discovery process began in June 2011. The businessman filed two motions for discovery requests but the department objected, saying much of the information was protected, in part, by the deliberative process privilege.

The deliberative process privilege is part of the Federal Rules of Civil Procedure and has been raised on the federal level in other cases. However in Indiana state courts, this procedural issue as far as its application and scope has not been addressed.

auberry Auberry

Brent Auberry, partner at Faegre Baker Daniels LLP, said the use of deliberative process privilege could impact other taxpayers.

Every year, tax cases seem to be getting more litigious as taxpayers contest rulings on property taxes and income, he explained. The guidance given by the Tax Court on this privilege is important as plaintiffs determine what information they want in discovery.

Randal Kaltenmark, partner in the Barnes & Thornburg LLP tax department, agreed.

He noted parties involved in tax litigation in the last five to seven years have been doing more discovery than in the past. Taxpayers have the burden of proof so they are engaging in discovery to find out the Department of Revenue’s basis for making the adjustment to their tax liability.

Access to information is important, Kaltenmark said. Using the deliberative process privilege could hamper a taxpayer’s discovery.

The Department of Revenue argued Indiana has deliberative process privilege and that privilege provides a “wide shield” to protect certain documents and communications. It invoked this privilege to prevent the disclosure of all documents and communications regarding the thoughts and decision-making process of hearing officers, auditors and other employees involved in the administrative process.

In support of its contention that the state does have such a privilege, the Department of Revenue pointed to the privilege in Federal Rules and noted Indiana uses those rules as a model for its Trial Rules.

The Tax Court dismissed the department’s privilege claims.

“Accordingly, the Court fails to find that Indiana recognizes a deliberative process privilege applicable to the discovery rules and leaves it to the Legislature to elevate public policy regarding the protection of deliberative process privilege,” Judge Martha Wentworth wrote.

James Gilday, of Gilday & Associates P.C., represents Popovich. Both he and the Office of the Indiana Attorney General, representing the Department of Revenue, declined to comment on the case issues.

The Department of Revenue did not appeal Wentworth’s ruling. However, the agency could still contest the decision after the court issues a final opinion on Popovich’s appeal.

Tax attorneys doubt the court’s finding on the deliberative process privilege will have much impact outside of tax circles. However, one attorney has recently encountered the defense in his litigation against another state agency.

Irwin Levin, managing partner at Cohen & Malad LLP, said the Indiana Bureau of Motor Vehicles is invoking the privilege to bar discovery in a second lawsuit his firm has filed against the agency. Plaintiffs claim the bureau overcharged for certain fees and have been trying to ascertain, through the discovery process, how the bureau found out about the incorrect fees and how it handled the problem.

irwin levin Levin

The BMV, Levin said, maintains that information is protected by the deliberative process privilege.

According to Levin, by using the privilege, the BMV is essentially saying, “We citizens have no right to know how it came to overcharge us and why it continued to overcharge us.”

More broadly, Levin worried the privilege could be used to cloud government transparency and hide wrongdoing. And he hoped the Legislature would not pass any measures that would ultimately prohibit the public’s right to know.

Since the Tax Court specifically noted the decisions regarding privilege are the purview of the General Assembly, Auberry expects the issue will come up in the Statehouse. He said he would not be surprised if the Department of Revenue makes an effort to get statutory language passed to address the issue of deliberative process privilege.

The chair of the Senate Tax and Fiscal Policy Committee, Sen. Brandt Hershman, R-Buck Creek, was unavailable for comment as to whether the Legislature would take up this issue.

The Popovich case is continuing in the Tax Court. A hearing is scheduled for July 31 on a motion filed by Popovich for Trial Rule 37 sanctions.

In May, the attorney general’s office filed a motion to temporarily withdraw appearances as counsel for the Revenue Department. However, the issue became moot when the attorney general rescinded the request and continued its representation without interruption

According to Bryan Corbin, spokesman for the AG’s Office, the Department of Revenue asked the attorney general to withdraw. He did not elaborate why the request was made and later rescinded.

“While docket entries on such housekeeping matters can appear confusing absent context, when government agencies are litigants, it is not uncommon over the duration of a case for an attorney to appear for an agency, serve for a time, then withdraw and a different attorney appear,” Corbin said.•

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Ah yes... Echoes of 1963 as a ghostly George Wallace makes his stand at the Schoolhouse door. We now know about the stand of personal belief over service to all constituents at the Carter County Clerk door. The results are the same, bigotry unable to follow the directions of the courts and the courts win. Interesting to watch the personal belief take a back seat rather than resign from a perception of local power to make the statement.

  2. An oath of office, does it override the conscience? That is the defense of overall soldier who violates higher laws, isnt it? "I was just following orders" and "I swore an oath of loyalty to der Fuhrer" etc. So this is an interesting case of swearing a false oath and then knowing that it was wrong and doing the right thing. Maybe they should chop her head off too like the "king's good servant-- but God's first" like St Thomas More. ...... We wont hold our breath waiting for the aclu or other "civil liberterians" to come to her defense since they are all arrayed on the gay side, to a man or should I say to a man and womyn?

  3. Perhaps we should also convene a panel of independent anthropological experts to study the issues surrounding this little-known branch of human sacrifice?

  4. I'm going to court the beginning of Oct. 2015 to establish visitation and request my daughters visits while she is in jail. I raised my grandchild for the first two and half years. She was born out of wedlock and the father and his adopted mother wantwd her aborted, they went as far as sueing my daughter for abortion money back 5mo. After my grandchild was born. Now because of depression and drug abuse my daughter lost custody 2 and a half years ago. Everyting went wrong in court when i went for custody my lawyer was thrown out and a replacment could only stay 45 min. The judge would not allow a postponement. So the father won. Now he is aleinating me and my daughter. No matter the amount of time spent getting help for my daughter and her doing better he runs her in the ground to the point of suicide because he wants her to be in a relationship with him. It is a sick game of using my grandchild as a pawn to make my daughter suffer for not wanting to be with him. I became the intervener in the case when my daughter first got into trouble. Because of this they gave me her visitation. Im hoping to get it again there is questions of abuse on his part and I want to make sure my grandchild is doing alright. I really dont understand how the parents have rights to walk in and do whatever they want when the refuse to stand up and raise the child at first . Why should it take two and a half years to decide you want to raise your child.The father used me so he could finish college get a job and stop paying support by getting custody. Support he was paying my daughter that I never saw.

  5. Pence said when he ordered the investigation that Indiana residents should be troubled by the allegations after the video went viral. Planned Parenthood has asked the government s top health scientists at the National Institutes of Health to convene a panel of independent experts to study the issues surrounding the little-known branch of medicine.

ADVERTISEMENT