Is the IRS’s Inability to Find Emails the Result of Unethical Behavior? New Opinion by U.S. Tax Court Provides Some Clues – Part One

Lois-Lerner-invokes-5th-AmendmentThe IRS seems inherently incapable of finding emails. The most famous incident that everyone has heard about, and many have complained about, is the loss of emails of key witnesses in a Congressional investigation of the IRS tea party targeting scandal. In June 2014 the IRS admitted that it could not find many of the emails of the key witness, Lois Lerner. Lerner is the first IRS official to admit that agents had improperly scrutinized tax exempt applications. When she was subpoenaed to testify before Congress, she plead the Fifth Amendment and refused to answer any questions. She is not the only IRS official under investigation whose email has gone missing. As of September 5, 2014, eighteen of the 82 people questioned “had some type of technical computer issue” and at least five have lost all emails.

An opinion in the United Stated Tax Court by Judge Ronald L. Buch shows that email search incompetence continues at the IRS. Dynamo Holdings, Ltd. vs. Commissioner, 143 T.C. No. 9 (Sept. 17, 2014). In Dynamo IRS lawyers wanted to force linear review of millions of emails stored on backup disks covering hundreds of custodians. Everyone knows that this outdated approach is the least likely way to find relevant evidence in big data searches.

irs_scandalThe IRS lawyers’ position in Dynamo shows a complete lack of understanding of legal search. It is almost like they are hard wired not to find emails, or any other ESI for that matter. The real scandal at the IRS goes beyond targeting political groups fir special treatment, it includes the general lack of technical competence of the whole agency. I dare say this Nineteenth Century paper mentality is not unique to the IRS. In infects many federal agencies, most of who still file emails by printing to paper.

Judge_Ronald_BuchFortunately Tax Court Judge Buch is a lot more savvy than the IRS lawyers who practice before him. He forcefully rejected the attempts of IRS lawyers to prevent the defendant from using predictive coding. His well written opinion now stands as a significant contribution to the growing jurisprudence of legal search.

Even though it is clear to most everyone in the field of e-discovery that predictive coding technology is the best way to find needles with probative value in an otherwise haystack of emails, the IRS lawyers opposed the defendants use of predictive coding. Instead, the IRS wanted to have individual all too human reviewers look at everything to determine relevance and privilege. Of course, the IRS also argued, quite disingenuously I think, that the defendant could, if it wanted, simply turn over all the contents of backup tapes without any review at all. The IRS would do that for them. How nice. Reminds me of that famous phrase: “Hello. I’m from the Federal Government and I’m here to help.”

Of course, the defendant would have none of that phony cooperation approach of just give me everything and we’ll protect you with a clawback. Instead, the defendant moved the Tax Court for permission to use predictive coding over the objection of the IRS.

Although I am sure the motion practice and hearing, which included testimony of experts on predictive coding, was an expensive exercise, the results are fortuitous. The opinion by Judge Buch should be of great value to other litigants and judges when faced with dinosaurs like the IRS.

Insights Into Unethical Behavior of the IRS

The kind of incompetence we see here by IRS lawyers is also revealing as to what kind of evil may lay behind the IRS’s destruction of emails in the Tea Party Targeting scandal. Many do not believe the IRS claim that the destruction of key email was an accident. They believe it was intentional; a criminal act of destruction of evidence. They argue that the emails were destroyed to protect a powerful government agency and many of its high ranking officials, bureaucrats all. They call this email loss an egregious abuse of power. I used to think that was possible, as I have had some personal experiences with the non-profit group at the IRS myself, and I know just how arrogant and abusive they can be. Power often corrupts. But I am not so sure this is what happened here. There may be an unintentional form of unethical behavior at work here.

To explain, I must harken back to the typology of unethical lawyers set forth in my last blog, What Can Happen When Lawyers Over Delegate e-Discovery Preservation and Search to a Client, and Three Kinds of “Ethically Challenged” Lawyers: “Slimy Weasels,” “Gutless,” and “Clueless”.  There I outlined three basic types of ethically challenged lawyers, and added three subcategories for one of those types, the Clueless, for a total of five kinds of unethical lawyers. As to why lawyers are often ethically challenged, another subject I have tried to understand for years, see my article: Lawyers Behaving Badly, 60 Mercer L. Rev. 983 (Spring 2009).

Under my typology the theory that the IRS destroyed the emails on purpose would make the IRS officials involved Slimy Weasel types. They did bad, they knew it, and they did not care. They wanted to cover up the truth and they did not care how many laws they broke in the process.

This could well be true, but the Dynamo Holdings, Ltd. vs. Commissioner case suggests that the IRS are not actually a bunch of Slimy Weasel types, at least when it comes to emails. It instead suggests that we are dealing with the Clueless, whom, as my last blog spells out, come in three types:

  1. Egomaniac Clueless. People who are so full of themselves that they have no idea they are clueless; they think they know it all.
  2. Open Clueless. People who have some slight idea that they might possibly be clueless and so might be open to learning some new things.
  3. Arrogant Clueless. These are the people who actually brag about how clueless they are. You know the lawyers who bash all things technological. They still think (pray) that email and this whole ESI discovery thing may be a fad. They brag about sticking to good old paper discovery

Lerner_arroganceThe positions the IRS lawyers took in Dynamo Holdings suggest they are among the Egomaniac Clueless, which are, as everyone knows, among the most obnoxious kind of ethically challenged lawyers. Some might say it is a bit harsh to refer to clueless lawyers as unethical, after all, they have done nothing wrong on purpose, they just did not know any better. Being clueless is not unethical they may say, but taking on a case, and serving a client incompetently, certainly is unethical. The duty of competence is spelled out in the Rules of Professional Conduct of every Bar Association in the country. They all require competence of their lawyer members as an Ethical Duty, not just as good advice on how to avoid malpractice. In fact, under the model ABA Model Rules of Professional Conduct that most states follow, it is Rule 1.1:

A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.

As the ABA saysCompetence: Acquire it or Hire it. It cannot and should not be ignored, much less faked. It is not ok to handle e-discovery and be clueless about it at the same time. It is unethical. Either spend the time to learn, which is a good idea for any litigator under fifty, or bring in another attorney who knows how in order to help you. I might add it also helps to listen to what they say and actually follow his or her advice!

In Part Two of this blog I will go into the actual holdings of Dynamo Holdings, Ltd. vs. Commissioner, 143 T.C. No. 9 (Sept. 17, 2014) by providing extensive quotations and my commentary. Yes, you can rest assured, I will tell you what I really think, even if this does trigger yet another audit.

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