Bishop Hill Energy LLC v. United States ( 2016 )

In the United States Court of Federal Claims
No. 14-251 C
(Filed December 20, 2016)
UNPUBLISHED
**********************
BISHOP HILL ENERGY LLC *
and INVENERGY WIND LLC, * Motion to Compel Responses to
* Interrogatories; Motion to Quash
Plaintiffs, * RCFC 30(b)(6) Deposition Topics;
* Expert Discovery Appropriate to
v. * Explore Government’s Contentions
* of Fact and Law Regarding Fair
THE UNITED STATES, * Market Value of Wind Energy
* Facility Development Fee.
Defendant. *
**********************
John C. Hayes, Jr., Washington, DC, for plaintiffs. Alycia A. Ziarno, Brian
P. Donnelly and Brian J. Whittaker, Washington, DC, of counsel.
Miranda Bureau, United States Department of Justice Tax Division, with
whom were Caroline D. Ciraolo, Principal Deputy Assistant Attorney General,
David I. Pincus, Chief, G. Robson Stewart, Assistant Chief, S. Starling Marshall,
Blaine G. Saito and Jennifer McCollough, Trial Attorneys, Washington, DC, for
defendant.
________________________
OPINION
________________________
Bush, Senior Judge.
The court has before it Plaintiffs’ Motion to Compel Discovery Responses,
filed July 21, 2016, as well as Defendant’s Motion for a Protective Order
Quashing Bishop Hill Energy LLC’s Notice of RCFC 30(b)(6) Deposition, filed
September 14, 2016. Oral argument on the motions was held on November 29,
2016. During the briefing of plaintiffs’ motion the parties were able to resolve
some of their disputes, and just before oral argument the government
supplemented its response to two of plaintiffs’ contention interrogatories. Thus, in
the court’s view, the outstanding controversy for plaintiffs’ motion concerns five
of the government’s responses to plaintiffs’ contention interrogatories. According
to plaintiffs’ reply brief, plaintiffs seek “an order compelling Defendant to provide
timely amendments to its responses to Invenergy’s contention interrogatories.”
Pls.’ Reply at 10.
As for defendant’s motion, at issue are two deposition topics noticed by
plaintiffs for the deposition of the government’s Rule 30(b)(6) witness. These
deposition topics largely track the topics of the five contention interrogatories that
are the subject of the remaining dispute addressed by plaintiffs’ motion. The court
therefore resolves both motions in a single opinion. Plaintiffs’ motion requesting
amended responses to the disputed contention interrogatories is denied, and the
government’s motion to quash two Rule 30(b)(6) deposition topics is granted, for
the reasons stated below.
I. Contention Interrogatories in General
The court need not dwell overlong on the caselaw cited by the parties which
states and restates various perspectives regarding the appropriateness and timing
of contention interrogatories. Much of the caselaw cited by plaintiffs, see id. at
6-7, is focused specifically on patent litigation discovery, a type of discovery not
at issue in this case. The government, for its part, relies on a number of cases that
are not binding on this court, and which are not sufficiently analogous to this case
to provide much useful guidance. See Def.’s Opp. at 7-8, 14-15. Defendant does
cite to one case, however, which has a great number of parallels to the current
dispute, and which evinces a well-reasoned analysis of the proper use and timing
of contention interrogatories in circumstances similar to those present in this case.
Id. at 16. The case cited by defendant, BB & T Corp. v. United States, 233 F.R.D.
447 (M.D.N.C. 2006), provides a persuasive analysis that guides this court in
resolving the parties’ discovery dispute. The court notes, too, that it enjoys wide
discretion in resolving discovery disputes and scheduling discovery so that cases
before it may proceed justly and efficiently. See, e.g., Schism v. United States, 316
F.3d 1259, 1300 (Fed. Cir. 2002) (en banc) (“A trial court ‘has wide discretion in
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setting the limits of discovery.’” (quoting Moore v. Armour Pharm. Co., 927 F.2d
1194, 1197 (11th Cir. 1991))).
BB & T provides an explanation of the use of contention interrogatories:
[When a] plaintiff seeks to discover [a] defendant’s
factual and legal bases for its defense[,] [t]his type of
discovery is termed “contention discovery” and is
usually conducted by serving “contention
interrogatories” as opposed to taking a deposition of a
party or its attorneys.
233 F.R.D. at 447. It is important to note that in BB & T, the contention discovery
targeted the government’s rejection of certain deductions on the plaintiff’s tax
return. Id. Similarly, in this case, plaintiffs’ contention discovery targets
Treasury’s rejection of the amount of plaintiffs’ claimed cost basis for a wind
power facility, an amount which is determinative of the size of a grant award by
Treasury to plaintiffs. See Pls.’ Reply at 7 (noting that plaintiffs’ contention
discovery focuses on the “central issue to Plaintiffs’ claim,” i.e., “the very
justification given by Treasury for reducing Bishop Hill’s grant award”). Thus,
the contention discovery disputes in BB & T and in this case are quite similar in
focus.1
The basic framework of the contention discovery dispute in BB & T
involved both contention interrogatories and contention depositions, as does the
litigation in the present case and its companion case, California Ridge Wind
Energy LLC v. United States, No. 14-250C. Just as in this case and California
Ridge, the plaintiff in BB & T began with contention interrogatories and later
turned to contention depositions when the contention interrogatories were not
fruitful:
Plaintiff did first attempt to use contention
interrogatories. Seven months [before noticing
1
/ The taxpayer in BB & T also engaged in complicated business transactions, 233 F.R.D.
at 448, analogous to the complex business transactions that underlie the wind power facility
investments of plaintiffs.
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contention depositions], BB & T served eleven
interrogatories seeking contention information. It
complains that the response by the United States fails to
identify any relevant facts and provides only a superficial
discussion of the United States’ legal basis for its
defense. . . . The Court agrees that th[e] answer given by
the United States is rather cursory.
233 F.R.D. at 448-49. In the subject matter, plaintiffs have similar complaints
regarding the government’s responses to their contention interrogatories. See Pls.’
Mot. at 16-19.
Although the BB & T court agreed with the plaintiff that the government’s
response to the contention interrogatories was “rather cursory and unhelpful,” the
court nonetheless quashed the contention depositions sought by the plaintiff. Id.
at 449. The court offered several reasons why the plaintiff would be denied
contention discovery at that stage of the litigation. Of most interest here, the
timing of the contention discovery was held to be premature. The following
excerpts of the court’s decision explain that ruling:
A third reason for granting the protective order [in favor
of the government] concerns the element of timing. And,
the timing issue implicates the much larger and more
general issue of whether contention discovery should be
allowed at all. Contention discovery, whether in the
form of contention interrogatories or contention
depositions, can be disruptive mainly because the very
nature of such questions will normally require the help of
an attorney to assist the client in providing answers.
This type of discovery can add considerable expense to
any lawsuit. In addition to the extra cost, when lawyers
craft responses they will necessarily do so in a way that
most minimizes jeopardy to their client and, therefore,
contention discovery may yield little additional useful
information. Consequently, when the facts, evidence,
and law are relatively straightforward such as in a simple
traffic accident case, the need for contention discovery
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may be outweighed by the burdens of contention
interrogatories, much less contention depositions of
attorneys. On the other hand, when a case involves
complicated technical issues such as may arise in patent
litigation, contention interrogatories may be useful.
The instant case lies somewhere between the two. The
necessity for contention interrogatories seemingly arises
in government litigation because the government is often
making policy through an enforcement action and not
just relying on past decisions. Thus, in the instant case,
plaintiff perceives that the government, for policy
reasons, altered its position when it decided to go after
[complex business transactions] such as plaintiff’s.
From plaintiff BB & T’s viewpoint, the government’s
defense seems like a moving target and it would like to
have the government commit itself to a particular
position and explain its reasons.
With this last proposition, the government does not
disagree, but argues that the real issue concerns the
appropriate time and manner for such revelations. The
government asserts that it has been busy during
discovery trying to learn facts and until it has a
sufficient, comprehensive view of the facts, it will not be
able to provide a final opinion concerning its
contentions. It continues that its earlier answers to the
contention interrogatories at least provided the broad
outlines of its defense. However, the Fed. R. Civ. P.
26(a)(2) report of its expert witness to be served on
February 15, 2006 will allegedly contain a complete
statement of the expert’s opinion concerning the defense,
the basis and reasons for that opinion, and the data and
information on which the expert relied. At that time,
defendant contends BB & T will have full knowledge of
the facts and legal theory of the government’s defense.
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The Court agrees with defendant that when there is an
expert report which will touch on the very contentions at
issue, the Court should normally delay contention
discovery until after the expert reports have been served,
which may then render moot any further contention
discovery. Even in a case not involving expert
witnesses, contention interrogatories should normally be
conducted at the end of discovery. Thus, an additional
reason to quash the deposition[] notices is that they are
premature.
The final reason for quashing the “contention
depositions” is that it is not clear that they are necessary.
A court may be well advised to examine whether
contention discovery is truly necessary in any particular
case. As the United States points out, contention
discovery often requires a party to, in essence, prepare a
trial brief at an earlier time in the litigation process than
normally occurs. Without some specific reason to
require such an acceleration, the Court may well deem
the burden to outweigh the benefit. In the ordinary case,
the complaint, answer, disclosures, and discovery will
provide sufficient information about a party’s position
until such time as the filing of the dispositive motions or
trial briefs. In other cases, contention discovery may be
necessary to avoid surprises at trial. Courts may wish to
confine contention discovery to those cases where there
is a compelling, specific need for the information prior to
the filing of dispositive motions in order to keep
litigation costs down.
Id. at 449-451 (footnote and citations omitted).
Given the parallels between the discovery dispute in BB & T and the
discovery dispute in this case and its companion case California Ridge, the court
views the analysis of the discovery scheduling dispute in BB & T, particularly as to
the timing of contention discovery, to be persuasive. The court also agrees with
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the BB & T court’s general preference for contention interrogatories, rather than
contention depositions. See 233 F.R.D. at 449 (“[U]ntil a party has first shown
that the interrogatory process cannot be used, it may not seek to use depositions
for contention discovery.”). The court turns now to the contention discovery
requested by plaintiffs in this case.
II. Plaintiffs’ Contention Interrogatories
The five contention interrogatories for which defendant’s responses are still
in dispute in this case are as follows:
Interrogatory 1: Do you contend that the development
fee of $60,000,000 included as part of the cost basis in
the Bishop Hill Application exceeded open market
expectations for projects of the size of Bishop Hill and in
the location of Bishop Hill?
Interrogatory 2: If the answer to the foregoing
interrogatory is yes, set forth all facts which you contend
support that contention.
Interrogatory 15: Do you contend that the amount of
the development fees included in the cost basis of other
wind energy facilities similar in size to Bishop Hill’s and
placed in service around the same time as Bishop Hill’s
are not relevant to a determination of the fair market
value of the development fee included in the claimed
qualified cost basis of the Bishop Hill facility?
Interrogatory 16: If the answer to interrogatory number
15 is yes, set forth all facts upon which you rely to
support that contention.
Interrogatory 17: If the answer to interrogatory 15 is
that the amount of the development fees included in the
cost basis of other wind energy facilities similar in size
to Bishop Hill’s and placed in service around the same
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time as Bishop Hill’s are relevant, identify each and
every one of those wind energy projects.
Pls.’ Mot. at 5-6. Broadly, these contention interrogatories seek defendant’s
position on the fair market value of the development fee paid by Bishop Hill
Energy LLC (Bishop Hill), the relevance of the development fees paid by other
wind power facility developers for determining the fair market value of Bishop
Hill’s development fee, and the identification of wind power projects that would
be relevant for making a comparative analysis to determine the fair market value
of Bishop Hill’s development fee. The court agrees with plaintiffs that defendant
has not responded, substantively, to these contention interrogatories.
Defendant argues that these contention interrogatories are premature, and
that the government should not be compelled to respond with information which
would be more appropriately disclosed during expert discovery. According to the
government’s opposition brief:
Defendant’s objection states that if it does submit
evidence regarding the fair market value of the purported
development fee in its defense, it will do so through an
expert. Because expert reports have not been exchanged
yet, Plaintiffs’ request for such information is premature.
For example, Interrogatory No. 15 asks whether
Defendant contends that certain factors are not relevant
to a determination of the fair market value of Bishop
Hill’s development fee. But the relevant factors in
determining fair market value are, necessarily, part of an
expert’s approach to valuation. For example, an expert
may determine that the amount of development fees
included in the cost basis of wind energy facilities
similar in size to Bishop Hill’s are relevant to the fair
market value of the development fee included in the
claimed qualified cost basis of the Bishop Hill facility,
or, he or she may not consider that information relevant
at all.
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....
Defendant also objected to interrogatories 2, 16,
and 17, which seek the identification of facts or projects
underlying the responses to Interrogatories 1 and 15, as
calling for the disclosure of expert work product and/or
expert discovery prior to the deadlines for providing
such discovery. Because the questions posed by
interrogatories 2, 16, and 17 refer to facts that may
underlie potential arguments that Defendant may make
based on an expert opinion, they also fall within the
realm of expert discovery, and cannot be answered
absent expert opinion. And if an expert chose to analyze
certain wind projects in the context of his or her expert
report, the identity of those projects would be revealed in
the report.
Def.’s Opp. at 15-16. The court agrees with defendant that these particular
contention interrogatories contain requests for information that is more
appropriately obtained during expert discovery. The government’s disclosure of
its expert report, should this case proceed to expert discovery, is the appropriate
time for plaintiffs to obtain the information they seek in these five contention
interrogatories.
Plaintiffs offer a number of unpersuasive arguments contending that
plaintiffs are entitled to contention discovery now, not later in this litigation. The
court examines the most substantive of those arguments here.2 First, plaintiffs
suggest that their contention interrogatories are not early, or premature, according
to caselaw which has resolved analogous disputes over the timing of contention
discovery. Pls.’ Reply at 6-8. To the extent that the cases cited by plaintiffs
address the specific circumstances of contention discovery in patent litigation,
those cases are inapposite. None of plaintiffs’ cases are more on point than
BB & T; the court views BB & T as the most persuasive authority for the resolution
of the parties’ dispute over contention discovery.
2
/ The court has considered each of plaintiffs’ arguments, and finds them insufficient to
invalidate the sound approach taken by the court in BB & T.
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Next, plaintiffs assert that contention discovery is essential before the
parties complete depositions during the fact discovery period. Pls.’ Reply at 8-9.
To the extent that defendant’s deposition witnesses will provide testimony of their
personal knowledge of the contemporaneous review of Bishop Hill’s development
fee, that is a narrower topic than any of the five interrogatories at issue in
plaintiffs’ motion. See Oral Argument Recording, at 2:21-24 PM (plaintiffs’
counsel noting that Interrogatory #1 asks for the government’s current contentions
regarding plaintiffs’ development fee). To the extent that plaintiffs seek
foundational information to support certain topics in their Rule 30(b)(6)
deposition, those contention deposition topics will be addressed in the next section
of this opinion. The court sees no need for substantive responses to these five
contention interrogatories before any fact witness depositions are taken in this
case.
III. The Contention Deposition Dispute
The disputed topics for the deposition of the government’s Rule 30(b)(6)
witness are:
2. Defendant’s contentions about whether the amount of
development fees included in the cost bases of other
wind energy facilities similar in size to Bishop Hill’s and
California Ridge’s and placed in service around the same
time as Bishop Hill’s and California Ridge’s are relevant
to a determination of the fair market values of the
development fees included in the claimed qualified bases
of the Bishop Hill and California Ridge facilities, and the
factual bases of those contentions.
6. Treasury’s factual knowledge of open market
expectations for projects of the sizes and in the locations
of Bishop Hill and California Ridge placed in service
between January 1, 2011 and December 31, 2012,
including Treasury’s knowledge of any such particular
projects and the development fees paid by those projects.
Def.’s Mot. Ex. A, at 2. The court notes that these two deposition topics overlap
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with the interrogatories discussed earlier in this opinion, and which are discussed
in the opinion filed today in California Ridge. Plaintiffs seek information, through
a contention deposition, regarding the relevance of the development fees paid by
other wind power facility developers for determining the fair market value of
Bishop Hill’s development fee and California Ridge’s development fee. They also
seek information regarding other wind power projects and the development fees
paid to develop those wind power plants. Contention deposition topics #2 and #6
are, to a great extent, Interrogatories #15, #16, and #17, rephrased. See Oral
Argument Recording, at 2:35-36 PM (plaintiffs’ counsel noting that the issues
addressed in the contested deposition topics and the contested interrogatories are
the same).
Defendant resists addressing these two deposition topics just as the
government resists substantively answering the five disputed contention
interrogatories at this time. Defendant argues, most importantly, that the
contention discovery sought in this fashion is premature, in that it is more
appropriately reserved for expert discovery. Def.’s Mot. at 7. The government
also notes that it is impractical and inefficient to prepare a witness for topics that
would be better answered through contention interrogatories. Id. Finally,
defendant argues that deposition topic #6 requests information that, according to a
prior ruling of this court, is overly burdensome to produce during fact discovery.
Id. at 9-10.
The court agrees with defendant that, as a general rule, a contention
deposition is disfavored when a contention interrogatory would suffice. See BB &
T, 233 F.R.D. at 449. Plaintiffs’ counsel, in effect, conceded the point at oral
argument. See Oral Argument Recording, at 2:35-36, 3:03 PM (plaintiffs’ counsel
noting that his preference would be for contention interrogatories over contention
depositions, and acknowledging that contention interrogatories are more suitable
for this type of discovery); see also Pls.’ Opp. at 1, 4-5, 11-12 (noting that
plaintiffs’ disputed Rule 30(b)(6) deposition topics were noticed for the purpose of
obtaining substantive answers that were not provided in the government’s
responses to plaintiffs’ contention interrogatories). The court also agrees with
defendant that these two contention deposition topics are premature, because they
touch on information that will be encompassed in the expert discovery
contemplated by the parties, if this case proceeds to expert discovery. The court
again relies on BB & T for its guidance as to the premature nature of contention
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discovery when expert testimony on that same topic is the most efficient means for
presenting a party’s contentions of fact and law. BB & T, 233 F.R.D. at 450.
Finally, the court agrees with defendant that a general screening of
government data concerning other wind projects and their development fees, along
with an analysis of open market expectations in that regard, is either irrelevant and
burdensome, or a topic for expert discovery. It is not per se “discoverable,” Pls.’
Opp. at 12, because the burden of producing such information and obliging
government counsel to educate its Rule 30(b)(6) witness in that regard, especially
in light of the dubious relevance of this information, is too great. See Order of
Dec. 21, 2015, at 12.
Plaintiffs also allege that they will be handicapped in expert discovery if
their proposed contention discovery is not completed during the fact discovery
period. Pls.’ Opp. at 12. The essence of their argument is two-fold. According to
plaintiffs, their expert will be forced to construct an opinion without the benefit of
all of the data that the government’s expert will be able to access. In addition,
plaintiffs allege that the government will be free to “cherry pick” the data it
presents to both its own expert and to plaintiffs’ expert. As the court has
previously stated, however, expert discovery allows a party access to the data
underlying its opponent’s expert opinions. Order of Dec. 21, 2015, at 12. To the
extent that plaintiffs predict that the government will unfairly manipulate expert
discovery to its advantage, that is a speculative concern with no basis in fact. See
Oral Argument Recording, at 2:53-54 PM (defendant’s counsel stating that she has
no intention of cherry picking data to influence expert opinion). The court expects
both parties to collaborate in discovery in full accordance with the letter and the
spirit of the court’s rules.
IV. Conclusion
For the foregoing reasons, plaintiffs’ request that defendant substantively
respond to its five contention interrogatories at this point in the litigation must be
rejected as premature. Further, for the reasons discussed in this opinion, the
government’s Rule 30(b)(6) witness shall not be required to respond to proposed
topics #2 and #6. Finally, the court notes that expert discovery in this case is
contingent upon plaintiffs’ claim surviving summary judgment proceedings.
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Accordingly, it is hereby ORDERED that
(1) Plaintiffs’ Motion to Compel Discovery Responses, filed July 21,
2016, is DENIED; and
(2) Defendant’s Motion for a Protective Order Quashing Bishop Hill
Energy LLC’s Notice of RCFC 30(b)(6) Deposition, filed September
14, 2016, is GRANTED.
/s/Lynn J. Bush
LYNN J. BUSH
Senior Judge
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