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United States v. Randall

United States District Court, S.D. Mississippi, Northern Division

March 22, 2017




         This tax-fraud matter is before the Court on Defendant Jeffrey C. Randall's Motion to Dismiss or, Alternatively, in Limine to Exclude Evidence and Testimony [34]. Because he fails to show both the Government's control over specific evidence and bad faith, the motion is denied.

         I. Background

         The Court previously set forth the events leading up to this point. As such, the facts described in the Orders denying Randall's request for interrogatories [42] and an evidentiary hearing [48] are fully incorporated herein. But the Court does offer the following brief summary.

         Randall was indicted on September 1, 2015, for two counts of income-tax fraud and one count of conspiring to defraud the United States. Indictment [1] ¶¶ 6(F), 7, 8. On April 18, 2016, Randall moved to dismiss the indictment, or in the alternative, exclude testimony by IRS agents and his now convicted tax preparer Lynn Allen Floyd [34]. He styled these requests as spoliation sanctions, contending that the IRS failed to obtain and/or preserve evidence related to the tax returns at issue. Randall timely filed his Memorandum of Authorities [51] in support of his motion on December 29, 2016; the Government responded [52], and Randall replied [54]. The Court, being fully advised in the premises, is prepared to rule.

         II. Analysis

         “A party's duty to preserve evidence comes into being when the party has notice that the evidence is relevant . . . or should have known that the evidence may be relevant.” Guzman v. Jones, 804 F.3d 707, 713 (5th Cir. 2015). The “destruction or the significant and meaningful alteration of such evidence” is termed “spoliation.” Id. (quoting Rimkus Consulting Grp., Inc. v. Cammarata, 688 F.Supp.2d 598, 612 (S.D. Tex. 2010)); see generally Rimkus, 688 F.Supp.2d at 607 (Rosenthal, J) (setting out the analytical issues of spoliation sanctions); Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., 685 F.Supp.2d 456, 468 (S.D.N.Y. 2010), abrogated on other grounds by Chin v. Port Auth. of N.Y. & N.J., 685 F.3d 135 (2d Cir. 2012). Here, Randall moves the Court to sanction the Government for alleged spoliation by either dismissing the indictment or excluding certain evidence and testimony from trial.[1]

         The Fifth Circuit has examined the issue in a handful of criminal cases. Most notably, United States v. Wise holds that a showing of bad faith is required to establish spoliation. 221 F.3d 140, 156 (5th Cir. 2000); see also United States v. Valas, 822 F.3d 228, 239 (5th Cir. 2016) (holding that spoliation requires proof of “bad faith or bad conduct by the other party”). Among the cases Wise cites, Eaton Corp. v. Appliance Valves Corp. recognized two elements for a spoliation claim-destruction of evidence and bad faith. 790 F.2d 874, 878 (Fed. Cir. 1986), cited in Wise, 221 F.3d at 156. Of course, destruction of evidence assumes that the evidence “existed and w[as] within the control of the opposing party.” Jobe v. ATR Mktg., Inc., No. 98-31366, 1999 WL 511380, at *6 n.3 (5th Cir. June 23, 1999).

         These standards have been consistently applied in this circuit, but not in the context of a motion to dismiss. Instead, the Fifth Circuit criminal cases addressing spoliation have examined whether the defendants proved bad faith and were therefore entitled to an adverse-inference instruction. See Valas, 822 F.3d at 239; United States v. Livingston, 243 F. App'x 37, 38 (5th Cir. 2007); United States v. Fasono, No. 06-60406, 2007 WL 505265, at *1 (5th Cir. Feb. 13, 2007); United States v. Ochoa, 88 F. App'x 40, 42 (5th Cir. 2004); Wise, 221 F.3d at 156-57. It is conceivable that Randall might develop enough evidence at trial to show that the Government destroyed evidence in bad faith. If so, he can seek an adverse-inference instruction. But for the reasons that follow, he has not yet made that showing and is not now entitled to sanctions- including dismissal.

         A. Whether Government Controlled and Destroyed Evidence

         Randall's spoliation allegations may be split into two broad categories: evidence that the IRS failed to obtain and evidence that he says was known to have existed but was not turned over. Notably, there is no evidence that the Government actually obtained and then destroyed evidence in bad faith.

         The Court first turns to evidence the IRS allegedly should have collected, as that consumes most of Randall's briefing. Randall says that, upon summoning, interviewing, and investigating his tax preparer Lynn Floyd, IRS “agents should have found six months of communications, emails, and work papers” concerning Randall's tax returns on her computer but that the Government has not produced any such evidence. Def.'s Mem. [51] ¶ 8 (emphasis added). He premises the purported existence of this evidence “upon documents produced by the government, documents that Defendant Randall and his tax counsel have been able to find or reconstruct, and reasonable inference arising from the information available in documents, pleadings, and attendant circumstances.” Id. ¶ 3 n.1.

         But even accepting this speculative assertion that evidence existed, Randall's argument is of no moment without proof that the Government or IRS ever obtained and then destroyed it. Randall simply avers the IRS should have collected it under IRS regulations, not that it did. And the Government says it has “never received the computer or otherwise possessed the information in question.” Gov't's Resp. [52] at 6. In fact, the Government claims that once it requested Floyd's computer, it learned that the computer had crashed, id. at 4, but it nevertheless produced a forensic image of the hard drive Floyd eventually turned over, id. at 2.

         Further, Randall provides no basis for the Court to hold that the failure to obtain certain evidence during an investigation is spoliation. Indeed, the opposite is true. In Wise, the court faced a similar issue. Like Randall, the Wise defendant argued that the Government failed in its duty to seize a computer, thus depriving him of necessary evidence when the computer subsequently crashed. 221 F.3d at 156. The Fifth Circuit affirmed the denial of an adverse-inference instruction because “the government did not destroy [the] computer; in fact, the computer was not even in the government's custody.” Id. at 156-57 (noting lack of bad faith). This applies equally to Randall's argument that the IRS failed to conduct certain interviews and inquiries. See ...

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