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United States v. Colliot

United States District Court, W.D. Texas, Austin Division

December 11, 2017

UNITED STATES OF AMERICA,
v.
DOMINIQUE G. COLLIOT, Defendant.

          ORDER

          SAM SPARKS, UNITED STATES DISTRICT JUDGE

         BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically, Defendant Dominique Colliot's Motion to Compel Disclosure and for Declaration the Government Has Fully Waived Attorney-Client Privilege [#31], the Government's Response [#37] in opposition, and Colliot's Reply [#42] in support. Having reviewed the documents, the relevant law, the arguments of counsel, and the case file as a whole, the Court now enters the following opinion and order.

         Background

         In December 2016, the Government initiated this lawsuit against Colliot to reduce to judgment and collect outstanding civil penalties assessed in connection with Colliot's failure to report a financial interest in a foreign bank account. Compl. [#1] at 1. Colliot answered in April 2017, and discovery commenced shortly thereafter. Answer [#22]; Sched. Order [#25].

         On July 17, 2017, the Government sent Colliot its Rule 26 initial disclosures. These disclosures included the unredacted 978-page administrative file on Colliot's case as well as a privilege log. Upon review, Colliot discovered the Government had failed to withhold or redact documents as indicated in its privilege log. Colliot also compared the file with previous forms he had received from the IRS and discovered the IRS agent had, on at least one occasion, copied and pasted portions of an IRS counsel's memoranda into the forms that were sent to Colliot. Colliot subsequently notified the Government of the unintentional disclosure. The Government then provided a revised administrative file and asked Colliot to delete the unredacted version the Government had inadvertently produced.

         Instead of deleting or returning the unredacted administrative file, Colliot retained the documents and filed this motion asking the Court to find the Government has waived attorney-client privilege as to the entirety of the 978-page administrative file. This pending motion is now ripe for review.

         Analysis

         I. Legal Standard-Waiver

         "The application of the attorney-client privilege is a question of fact, to be determined in the light of the purpose of the privilege and guided by judicial precedents." EEOC v. BDO USA, LLP, No. 16-20314, 2017 WL 5494237, at *3 (5th Cir. 2017) (internal quotation marks and citations omitted). Though the party asserting the privilege bears the burden of proving the privilege applies, "[o]nce the privilege has been established, the burden shifts to the other party to prove any applicable exceptions." Id.[1]The Fifth Circuit pursues two inquiries in determining whether a claim of privilege has been waived: (1) whether the person holding the right to claim the privilege intended to waive it and (2) whether it is fair and consistent with the assertion of the claim being made to allow the privilege to be invoked. United States v. Seale, 600 F.3d 473, 492 (5th Cir. 2010).

         II. Application

         In asking the Court to find the Government has waived privilege, Colliot puts forward two arguments. First, Colliot suggests the IRS revenue agent waived attorney-client privilege when he inserted language from IRS counsel memos into the IRS forms sent to Colliot. Second, Colliot argues the Government cannot assert work product privilege over the documents in the administrative file because the Government has waived the right to assert work product privilege and because the documents were not prepared in anticipation of litigation. It is unnecessary to reach Colliot's arguments relating to work product privilege because the Court concludes the Government did not waive attorney-client privilege as to the IRS counsel memos.

         A. Waiver by Disclosure

         Colliot contends IRS Agent Anton Pukhalenko effected a broad waiver of attorney-client privilege by inserting language from IRS counsel memos into several IRS forms provided to Colliot. The IRS form at issue-Form 8 86A-is sometimes provided to taxpayers in order to explain actions taken or penalties imposed by the IRS. In connection with assessments of penalties against Colliot for failure to report his financial interests in foreign bank accounts, the IRS provided several such forms to explain why the IRS had imposed the penalties. In addition to discussing the factual bases for the imposition of penalties, the forms also contain a "Law & Analysis" section which lays out the legal basis for the penalties.

         In filling out the "Law and Analysis" portion of Form 886A, Agent Pukhalenko sometimes borrowed language from communications with IRS counsel in order to explain the assessment of tax penalties imposed upon Colliot. Mot. Compel [#31] at 3. Agent Pukhalenko did not present the language as having come from IRS counsel, but instead presented it as his own attempt to set forth the legal bases underlying the assessment of the penalties. Colliot contends this use of the IRS counsel memos constitutes a "voluntary and substantial disclosure" which "completely ...


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