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State agencies claim information protected by deliberative process privilege

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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.•

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  1. Where may I find an attorney working Pro Bono? Many issues with divorce, my Disability, distribution of IRA's, property, money's and pressured into agreement by my attorney. Leaving me far less than 5% of all after 15 years of marriage. No money to appeal, disabled living on disability income. Attorney's decision brought forward to judge, no evidence ever to finalize divorce. Just 2 weeks ago. Please help.

  2. For the record no one could answer the equal protection / substantive due process challenge I issued in the first post below. The lawless and accountable only to power bureaucrats never did either. All who interface with the Indiana law examiners or JLAP be warned.

  3. Hi there I really need help with getting my old divorce case back into court - I am still paying support on a 24 year old who has not been in school since age 16 - now living independent. My visitation with my 14 year old has never been modified; however, when convenient for her I can have him... I am paying past balance from over due support, yet earn several thousand dollars less. I would contact my original attorney but he basically molest me multiple times in Indy when I would visit.. Todd Woodmansee - I had just came out and had know idea what to do... I have heard he no longer practices. Please help1

  4. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  5. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

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