Tax Court grants partial reimbursement on discovery enforcement motions

The Indiana Tax Court has awarded reimbursement fees to both the University of Phoenix Inc. and the Indiana Department of State Revenue after finding that the two entities were entitled to reimbursement on some, though not all, of the discovery enforcement motions filed in their litigation.

After the University of Phoenix served a non-party subpoena to the former commissioner of the Department of Revenue in October 2016, the department moved for a protective order explaining that information in the 2015 House Bill 1349, September 2014 Tax Competitiveness and Simplification Report and a presentation of the report were not relevant and was most likely obtainable from “lesser-ranking officials.” Although Indiana Tax Court Judge Martha Blood Wentworth initially quashed the subpoena, she later allowed the university to depose the former commissioner in November 2016 despite the department’s filing of a second protective order.

However, before the November 2016 decision was handed down, the university had already filed a discovery enforcement motion seeking to compel the department to produce documents regarding the deposition topics. Wentworth granted and denied in part that request earlier this month.

Additionally, in January 2017, the Tax Court conducted an evidentiary hearing on both parties’ requests for expenses under Trial Rule 37(A)(4), and in a Thursday order, Wentworth granted reimbursement expenses to both litigants totaling more than $20,000.

Under Rule 37(A)(4), when a court grants or denies a discovery enforcement motion, the party who necessitated the motion or the party advising such conduct, or both, are required to pay the “reasonable expenses incurred in obtaining the order” to the moving party. Thus, the question in this case was whether both the university and the department were entitled to reimbursement for successfully resisting their opponent’s discovery enforcement motions or prosecuting their own, either in whole or in part, Wentworth wrote Thursday.

A reasonable person could have concluded that there was a genuine issue as to whether the department was bound to comply with the university’s request to depose the former commissioner, the judge wrote, so it was substantially justified in filing its first motion for protective order. However, because that motion was denied and because the department merely re-stated the same legal arguments in its second motion for a protective order, it was not justified in filing for a protective order a second time.

Similarly, Wentworth wrote that the university was not justified in filing its motion to compel because there existed a genuine issue as to whether it was entitled to its requested discovery.

Although the University of Phoenix had requested $159,446.40 in reimbursement expenses, Wentworth opted to award the school $9,850.50 because it was not entitled to reimbursement on the first motion for protective order or its motion to compel. Additionally, she awarded the state Department of Revenue with a reimbursement of $12,900 for resisting the motion to compel.

The case is The University of Phoenix, Inc. v. Indiana Department of State Revenue, 49T10-1411-TA-00065.

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