United States v. Ayyad

United States v. Abdelrahman Ayyad

Counsel: 2021 U.S. Dist. LEXIS 114538 at 1For Abdelrahman Ayyad, Defendant: Gerald Warren Kelly Jr, LEAD ATTORNEY, Kelly Dorsey P.C., Columbia MD; Daniel Scott Heller, Kelly Dorsey P.C., Columbia MD.

For United States of America, Plaintiff: Beatriz Teresa Saiz, United States Department of Justice, Washington DC; Joycelyn S Peyton, US Dept of Justice Tax Division, Washington DC.

Judges: Timothy J. Sullivan, United States Magistrate Judge.

Opinion by: Timothy J. Sullivan

Opinion

LETTER TO COUNSEL:

Dear Counsel:

Two motions are pending before this Court: the Government's Motion for Protective Order (ECF No. 59) and Defendant Abdelrahman Ayyad's Cross-Motion to Compel (ECF No. 60).

Judge Xinis referred this case to me for all discovery and related scheduling matters. ECF No. 37.

Having considered the submissions of the parties (ECF Nos. 59, 60, 61 & 62), I find that a hearing is unnecessary. See Loc. R. 105.6. For the following reasons, the Government's motion will be granted and Ayyad's cross-motion will be denied.

I. Background

The Government filed this lawsuit against Ayyad to collect outstanding civil penalties assessed against Ayyad under 31 U.S.C. § 5321 for Ayyad's willful failure to report his interest in two foreign bank accounts during tax years 2009, 2010, 2011, and 2012 (the "tax years"). ECF No. 1. The Government alleges that during the tax years, Ayyad had interests in two bank2021 U.S. Dist. LEXIS 114538 at 2 accounts in Jordan (one in his own name and one in the name of the furniture business he owned). Id. ¶¶ 4-6. The aggregate amount in the accounts exceeded $10,000 in U.S. currency. Id.¶ 10.

Under 31 U.S.C. § 5314 and its implementing regulations, a person is required to keep records and file reports when they have a financial interest in or signature authority over a foreign account that exceeds $10,000 in value at any time during the tax year. The IRS requires that such reports be filed on Treasury Form TD 90-22.1, Report of Financial Bank and Financial Accounts ("FBAR"). The Government alleges that Ayyad willfully failed to file FBARs that listed the bank accounts in Jordan for the tax years. ECF No. 1 ¶¶ 11-15. The Government seeks FBAR penalties against Ayyad in the amount of $1,448,432 plus interest and penalties. Id. ¶ 25. Ayyad generally denies the Government's allegations. ECF No. 5.

Discovery in this case has been prolonged. The initial scheduling order entered in October 2018 established a discovery deadline in March 2019. ECF Nos. 7 & 10. Since that time, the discovery deadline has been extended at least five times. ECF Nos. 16, 30, 32, 34 & 42. Discovery finally closed in March 2021, although2021 U.S. Dist. LEXIS 114538 at 3 the Court held discovery open for the parties to resolve a dispute regarding Internal Revenue Agent Kenneth Feldman's ("Feldman") emails. See ECF Nos. 40 & 42.

The parties' motions concern the Government's refusal to produce written correspondence involving three IRS employees: Bisamber Misir ("Misir"), Karen Graham ("Graham"), and Larry Timms ("Timms"). ECF Nos. 59 at 4 & 60-1 at 1 n.1. The Government argues that the production of the requested communications would be unduly burdensome and disproportional to the needs of the case. Ayyad argues that the requested communications could be useful to his defense.

II. Analysis

A. Scope of Discovery

The scope of discovery under Rule 26 is broad. See Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 64 (4th Cir. 1993). "Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit." Fed. R. Civ. P. 26(b)(1). A "court may, for good cause, 2021 U.S. Dist. LEXIS 114538 at 4 issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense." Fed. R. Civ. P. 26(c)(1) (emphasis added). A court "must limit the frequency or extent of discovery" if it finds that:

(i) the discovery sought is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive;

(ii) the party seeking discovery has had ample opportunity to obtain the information by discovery in the action; or

(iii) the burden or expense of the proposed discovery outweighs its likely benefit, considering the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the action, and the importance of the discovery in resolving the issues.

Fed. R. Civ. P. 26(b)(2)(C) (emphasis added).

As the party opposing the production of discovery, the Government bears the burden to show why the discovery that Ayyad seeks should not be allowed. McNulty v. Casero, No. SAG-16-2426, 2019 U.S. Dist. LEXIS 184088, 2019 WL 5454900, at *3 (D. Md. Oct. 24, 2019) ("The party resisting discovery generally carries the burden to 'clarify and explain precisely why its objections are proper given the broad and liberal construction of the federal discovery rules.'") (quoting United Oil Co. v. Parts Ass'n, 227 F.R.D. 404, 411 (D. Md. 2005)); see also Hake v. Carroll County, No. WDQ-13-1312, 2014 U.S. Dist. LEXIS 112572, 2014 WL 3974173, at *5 (D. Md. Aug. 14, 2014) (stating that the party opposing 2021 U.S. Dist. LEXIS 114538 at 5 a motion to compel carries the burden "to establish that the information is not relevant, or that the discovery request should be denied").

B. Ayyad's Request

In April 2019, Ayyad requested that the Government produce:

5. The complete Internal Revenue Service ("IRS") administrative file relating to the assessment and collection of Report of Financial Bank and Financial Accounts ("FBAR") penalties allegedly owed by Defendant for tax years the 2009, 2010, 2011, and 2012, including but not limited to, (1) Information Document Requests ("IDRs"), summonses, and all responses received to such IDRs and summonses; (2) any additional documents regarding the FBAR examination, penalty assessments, and appeals; (3) any written correspondence, electronic or otherwise, among Revenue Agent Kenneth Feldman, Team Manager Bisamber Misir, Appeals Officer Karen Graham and any other IRS employee; (4) the entire case history (i.e., the complete record of all actions and decisions taken on Mr. Ayyad's FBAR case by all IRS employees who had any role in that case).

ECF No. 59 at 4 (emphasis omitted).

The Government responded to Ayyad's request in July 2019. Id. at 4-5. The Government objected on the grounds of 2021 U.S. Dist. LEXIS 114538 at 6 relevance, attorney-client privilege, attorney work product, and the deliberative process privilege. Id. Without waiving its objections, the Government produced "the physical FBAR exam administrative file, including all communications within it." Id. at 5.

In September 2019, at the conclusion of Feldman's deposition, Ayyad requested "all email communications between Mr. Feldman and other employees at the [IRS] related to the FBAR penalty examination" of Ayyad that resulted in the Government's lawsuit." ECF No. 59-3 at 1. The Government restated the objections it had made to Ayyad's July 2019 request and noted that Ayyad's new request was more expansive than his previous one.

Ayyad complains that the Government's interpretation of his July 2019 request was too narrow. ECF No. 601 at 2 n.2. Ayyad's request sought the IRS's administrative file, a term with a special meaning to the IRS, see Internal Revenue Manual 8.11.6.3 (09-27-2018) (describing the contents of an FBAR administrative file), including certain written communications. To the extent that the IRS's administrative file did not include such written communications, the Government had no reason to produce them in response to Ayyad's July 2019 request. The Court agrees with the Government's initial interpretation of Ayyad's request and rejects Ayyad's characterization of that interpretation as overly narrow.

The Government also objected that the September 2019 request was "overly broad, unduly burdensome, and not tailored to the needs" of the case. Id. at 2. The Government stated that the request for "any written correspondence" did not describe with reasonable particularity what communications were sought, that identifying every email related to Ayyad's FBAR penalty examination would be a "costly and time-consuming" undertaking, and that such an endeavor would likely only produce "as much extraneous and secondary information2021 U.S. Dist. LEXIS 114538 at 7 as useful and relevant information." Id. Without waiving its objections, the Government produced Feldman's emails to Ayyad sometime between January 31, 2020, and February 3, 2020. ECF Nos. 59 at 5; 59-3 & 61 at 3.

In February 2020, Ayyad sent a deficiency letter to the Government in which he disputed the Government's assertion of the deliberative process privilege. ECF No. 61 at 3; see also ECF Nos. 35 & 39. Ayyad did not complain about the lack of any emails from employees besides Feldman.

More than nine months after the Government's production of Feldman's emails, and after Feldman was deposed a second time, Ayyad requested that the Government produce emails from other IRS employees. ECF No. 61 at 3-4. The Government objected and refused to produce any additional emails. Id. at 4.

C. Ayyad's Motion is Untimely

The principal reason that the Court will grant the Government's motion and deny Ayyad's cross-motion is that Ayyad was not diligent in pursuing the discovery he now seeks. Ayyad knew since at least 2016 that communications involving IRS employees besides Feldman, including Misir and Timms, might be relevant to the Government's claims against him. See Ayyad v. Internal Revenue Service, No. PX-2018 U.S. Dist. LEXIS 18143, 2018 WL 704849, at *1 (D. Md. Feb. 2, 2018) (summarizing Ayyad's 2021 U.S. Dist. LEXIS 114538 at 8 FOIA requests, including his request for correspondence "among Agent Feldman, Bisamber Misir, Quinton Ferguson, Larry Timms, and any other IRS employee relating to the examination of plaintiffs' account"). And Ayyad specifically requested communications involving these individuals (substituting Graham for Quinton Ferguson) in his Document Production Request No. 5 (ECF No. 59 at 4). The Government produced its response to Ayyad's request by February 3, 2020. Ayyad did not complain about the lack of emails from Misir, Graham, and Timms until October 30, 2020, nearly nine months later. ECF No. 61 at 3.

Under the Court's Local Rules, a party who has requested discovery and is dissatisfied with the producing party's response "shall serve a motion to compel within thirty (30) days of the party's receipt of the response." Loc. R. 104.8(a). Under Judge Xinis's Letter Order Regarding the Filing of Discovery Motions (ECF No. 8), Ayyad's three-page letter would have been due on or about March 4, 2020. The letter that Ayyad filed on March 2, 2020, did not mention any deficiency regarding the Government's failure to produce communications from Misir, Graham, and Timms. ECF No. 35. Neither did the joint status report 2021 U.S. Dist. LEXIS 114538 at 9 that the parties filed on March 4, 2020. ECF No. 36. Ayyad did not bring the matter up with the Government until October 30, 2020. The Court finds that Ayyad did not comply with Local Rule 104.8(a).

A party's failure to comply with Local Rule 104.8 does not require the denial of the party's motion to compel in all instances. Chavis v. Plumbers & Steamfitters Loc. 486 Pension Plan, No. 17-2729-ELH, 2019 U.S. Dist. LEXIS 171742, 2019 WL 4879015, at *4 (D. Md. Oct. 3, 2019) (citing Tucker v. Ohtsu Tire & Rubber Co., Ltd., 191 F.R.D. 495, 497 (D. Md. 2000) ("[A]n absolute rule requiring [dismissal] without first determining whether the opposing party would suffer any real prejudice if the motion is granted would be too harsh a construction of the local rule.")).

Ayyad's delay in bringing this dispute to the Court's attention is significant. He did not miss the 30-day deadline by a few days or weeks; he missed it by nearly eight months. He provides no justification for his delay. Because he reviewed the Government's February 2020 document production, see ECF No. 35 at 2, Ayyad should have been aware that it did not include emails from Misir, Graham, or Timms.

The Court rejects Ayyad's argument that he was first alerted to the possible existence of the missing emails involving Misir, Graham, and Timms at Feldman's second deposition. ECF No. 60-1 at 2. Feldman only testified that he did not know if there were emails between these individuals that he was not copied on; he did not verify that such emails existed and had not been produced.

In his March 2 letter, Ayyad did not complain about the absence of these emails or the government's objections of burden, overbreadth, and disproportionality; he only complained about the Government's excessive redactions and the Government's assertion of the deliberative process privilege. 2021 U.S. Dist. LEXIS 114538 at 10 Id.

Ordering the Government to produce the communications that Ayyad now requests would lead to further delay in this case (such production would take at least four months, according to the Government's estimate, see ECF No. 59 at 10). This delay would be prejudicial to the Government. It brought this lawsuit to collect the penalties that it believes Ayyad has incurred for his FBAR violations. Like any other litigant, the Government has a right to a speedy resolution of its claim. See Fed. R. Civ. P. 1. The Court also shares this interest. This case has been pending for almost three years. The parties had two years to conduct discovery (and another several months to conduct additional discovery related to Feldman's emails). The Court will not permit any further delay. Ayyad's motion to compel will be denied because he failed to comply with Local Rule 104.8 and he has not demonstrated good cause to excuse his failure. See, e.g., Blind Indus. & Servs. of Maryland v. Route 40 Paintball Park, No. WMN-11-3562, 2012 U.S. Dist. LEXIS 138276, 2012 WL 4470273, at *1 (D. Md. Sept. 26, 2012) (denying motion to compel where the motion was, without justification, filed more than a month beyond Local Rule 104.8's 30-day deadline). For the same reasons, the Government's motion for a protective order will be granted.

D. Ayyad's Request Fails the Proportionality Test

Alternatively, Ayyad's motion to compel 2021 U.S. Dist. LEXIS 114538 at 11 will be denied because it seeks discovery that is not proportional to the needs of this case. See Fed. R. Civ. P. 26(b)(1). The Court will assume, for the sake of argument, that Ayyad's request for communications involving Misir, Graham, and Timms seeks relevant discovery. But the Government states that it would take approximately four months to search for, review, and produce the requested communications. Such an effort would put a burden on the Government in terms of the work required and it would lead to further delay in this case.

Ayyad is already in possession of voluminous discovery. Before the Government even filed this lawsuit, Ayyad obtained nearly 10,000 pages of documents through a FOIA request and related litigation. See Ayyad v. Internal Revenue Service, 2018 U.S. Dist. LEXIS 18143, 2018 WL 704849, at *2-3. It is of no moment that "FBAR-related emails were not specifically requested in the FOIA suit and the legal standard for production of documents in a FOIA suit" is different than the discovery standard of Rule 26. ECF No. 60-1 at 2 n.3. Ayyad is still in possession of a large volume of discovery relevant to this case. In addition to the documents he received in the FOIA case, the Government has produced the IRS's physical FBAR examination file (760 pages) and 1,690 pages of Feldman's 2021 U.S. Dist. LEXIS 114538 at 12 emails about the FBAR examination. ECF No. 61 at 1. Furthermore, Feldman has been deposed on two occasions. Id. The Government has previously noted Feldman's central role in this case, which makes the substantial amount of discovery that Ayyad has received from Feldman even more significant. Ayyad v. Internal Revenue Service, 2018 U.S. Dist. LEXIS 18143, 2018 WL 704849, at *2-3 (quoting a declaration submitted by the IRS that described Feldman as the "sole" revenue agent assigned to Ayyad's tax examination, and explaining that "Feldman would 'typically' have been a sender, recipient or copied on all Ayyad-related correspondence 'due to the centrality of his role in relation to the examination'").

The amount of money at issue in this case is significant. But reopening discovery and requiring the Government to produce the communications involving Misir, Graham, and Timms would not be proportional to the needs of the case, considering the limited subject matter of the issues at stake, the likely unimportance of any emails from these non-central figures, the substantial discovery that Ayyad has already received, the likelihood that Ayyad himself is knowledgeable of issues relating to his ownership of the accounts at issue and his failure to file the required FBARs, and the 2021 U.S. Dist. LEXIS 114538 at 13 delay that would be caused by allowing the discovery.

III. Conclusion

For these reasons, the Government's Motion for Protective Order (ECF No. 59) is GRANTED and Ayyad's Cross-Motion to Compel (ECF No. 60) is DENIED.

Sincerely yours,

/s/ Timothy J. Sullivan

Timothy J. Sullivan

United States Magistrate Judge

End of Document