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United States v. Smith

June 22, 2006

UNITED STATES, PLAINTIFF
v.
RONALD E. SMITH, ET. AL., DEFENDANTS



The opinion of the court was delivered by: Hogan, M. J.

ORDER

This matter is before the Court on defendants' motion to determine unavailability of witness (Doc. 69), and plaintiff's memorandum in opposition. (Doc. 72). The parties have consented to the entry of final judgment by the undersigned United States Magistrate Judge. (Doc. 45). For the reasons set forth more fully below, the Court denies defendants' motion.

A short summary of this case's long and increasingly tortured procedural history is warranted as a backdrop to the Court's evidentiary ruling. This case was initiated in November 1999, with the filing of a complaint by the United States Government under 26 U.S.C. §§ 7401, 7403 seeking to reduce to judgment unpaid federal tax assessments against defendant Ronald E. Smith ("Smith") and to foreclose on federal tax liens on two parcels of real property located at 4311 Tylersville Road, Hamilton, Butler County, Ohio. (Doc. 1). The government also sought to set aside an allegedly fraudulent conveyance of an interest in the property made by Smith to his parents, Barney Smith (now deceased) and Naoma Smith, and to declare that Naoma Smith and Gregory Smith, Smith's brother, hold interests in the property as nominees of Smith. The government also named Smith's alleged common law wife, Donna Schaller (now deceased, see doc. 67, Notice by defendant, Suggestion of Death), as a party defendant on the ground that she may seek to claim an interest in the property in her own right. In March 2001, the parties filed cross-motions for summary judgment. (Docs. 13, 14).

As this matter was still on referral to the undersigned by the District Court pursuant to 28 U.S.C. § 636, this Court issued a Report and Recommendation finding that defendants' summary judgment motion should be denied and plaintiff's motion for partial summary judgment should be granted in part and denied in part. The Court recommended that judgment be granted in favor of the Government against Ronald Smith for the taxes, interest, and penalties claimed in the complaint. However, the Court recommended denying the parties' summary judgment motions with respect to the Government's claims of fraudulent conveyance, actual fraud, constructive fraud, and the Government's prayer for relief with respect to tax liens on the Tylersville Road property by means of a forced judicial sale. The Court concluded that genuine issues of material fact existed to preclude summary judgment and that trial was warranted on the questions of (1) whether sufficient"badges of fraud" demonstrate that defendant Ronald Smith's conveyance of a one-half interest in the property to Barney and Naoma Smith was fraudulent; (2) whether the purchase price for Barney and Naoma Smith's one-half interest was reasonably equivalent to the value of the property at the time of the transfer, and whether the payment actually changed hands; and (3) whether the Government is entitled to a forced sale of the entire Tylersville Road property to satisfy its tax lien, or whether equitable discretion counsels in favor of a sale limited to defendant Ronald Smith's alleged partial interest in the property. (Doc. 21).

Following a de novo review of the case in light of the parties' objections to this Court's recommendations, the District Court adopted the undersigned's Report and Recommendations by Order dated March 13, 2003. (Doc. 26). Subsequently, the parties consented to the entry of final judgment by the undersigned, and the case was referred for final disposition in August 2004. (Doc. 55). The case was originally scheduled for bench trial commencing in January 2005. (Doc. 46). However, following the December 3, 2004 final pretrial conference (Doc. 49), and at the behest of counsel, the Court signed an Agreed Order resetting the bench trial to July 18, 2005. (Doc. 52). Trial commenced on July 18, 2005, as scheduled, and proceeded for two days. The trial was continued until September 1, 2005 for purposes of testimony by defendants' expert witness, Thomas Devitt.

Following testimony by defendants' expert witness on September 1, 2005, including cross-examination by plaintiff's counsel, the court determined that defendants' expert witness would be permitted to submit an additional "comparables" report reflecting the 1991 valuation of defendants' Tylersville Road property. (Doc. 60). The report was to be submitted to counsel for defendant by September 6, 2005, and trial testimony regarding the report was scheduled for September 19, 2005. (Id.). On September 9, 2005, following an informal telephonic conference with counsel, and upon an agreed request of the parties, the Court reset the continued bench trial to November 9, 2005. (Doc. 61). This agreement, was based in part, on representations by counsel for defendants that Mr. Devitt was ill and therefore unable to participate in the trial of this matter on the scheduled date. In October 2005, the Court issued a Notice resetting the continued bench trial to January 4, 2006, presumably based on the Court's own conflict with its January 2006 docket. (Doc. 62). On January 4, 2006, the Court conducted a telephonic status conference, and the case was once again rescheduled for continued bench trial on March 28, 2006. (Docs. 63, 64). The Court made clear in its Order issued following this conference that, "[n]o further extensions of time or delays of the trial shall be permitted based on Mr. Devitt's health issues absent a showing of the most exigent circumstances and proof of impaired medical condition by a licensed physician treating Mr. Devitt." (Doc. 64). The Court also directed defendants to produce certain University of Cincinnati survey documents referred to during Mr. Devitt's deposition to counsel for plaintiff no later than January 31, 2006, and warned defendants that, [f]ailure to produce these documents in accordance with this Order may result in sanctions pursuant to Fed. R. Civ. P. 37, up to and including the striking of all or portions of Mr. Devitt's testimony." (Id.).

Despite, the Court's warnings in its January 4, 2006 Order, the parties contacted the Court on February 7, 2006, for an informal telephonic conference concerning Mr. Devitt's additional report and trial testimony to be offered thereon. (Doc. 65). Counsel for Defendants advised the Court that Mr. Devitt was unavailable for trial and orally moved for permission to submit into evidence the discovery deposition taken after Mr. Devitt gave his initial trial testimony, and in conjunction with his revised "comparables" report. Plaintiff opposed the admission of the discovery deposition on various grounds, including the contention that it was unable to fully cross-examine Mr. Devitt, and that while Mr. Devitt might be "unwilling" to testify, he is not "unavailable." In an order issued on that same date, the Court declined to grant defendants' motion based solely on representations by defendants' counsel that Mr. Devitt is "unavailable" for trial. (Doc. 66). The Court directed defendants to either secure Mr. Devitt's attendance at trial by subpoena, if necessary or provide record evidence from which it could be determined that Mr. Devitt is otherwise "unavailable," pursuant to Fed. R. Evid. 804. (Id.).

On March 14, 2006, defendants filed the motion which is presently at issue before this Court. Defendants assert that Mr. Devitt is unavailable to testify at the continued bench trial of this matter due to physical illness and therefore move the Court to admit into evidence Mr. Devitt's deposition testimony which was obtained following the issuance of his additional "comparables" report. Defendants contend that such deposition testimony of an unavailable witness is permissible pursuant to Fed. R. Evid. 804. The Government steadfastly opposes submission of the deposition testimony as evidence in this case. Plaintiff contends that the deposition testimony is not admissible as an exception to the hearsay rule under Fed. R. Evid. 804 for multiple reasons: (1) defendants have failed to demonstrate that Mr. Devitt is "unavailable" pursuant to Fed. R. Evid. 804(a)(4); (2) the deposition taken following Mr. Devitt's issuance of the additional "comparables" report did not afford plaintiff an opportunity to fully develop Mr. Devitt's testimony as required by Fed. R. Evid. 804(b)(1); and (3) Mr. Devitt's deposition testimony fails to satisfy the requirements for expert witness testimony set forth in Fed. R. Evid. 702.

The Court finds plaintiff's arguments to be well-taken. The only evidentiary material proffered in support of the contention that Mr. Devitt is unavailable, as opposed to unwilling, to testify as an expert witness at the continued bench trial of this matter, is a letter from Dr. Pierson, Mr. Devitt's personal physician. (Doc. 69, Att. 1, Ex. A). Dr. Pierson's letter, while evincing the author's apparent personal dislike for the legal system in general, and attorneys in particular, does not support the conclusion that Mr. Devitt is medically unavailable to testify as defined by Fed. R. Evid. 804(a)(4). The letter offers information concerning Mr. Devitt's family's medical history and his hereditary predisposition to heart disease but fails to set forth how long Dr. Pierson has been treating Mr. Devitt, when he last examined him, and whether Dr. Pierson has discussed the impact of the proposed court appearance with his patient. Furthermore, plaintiff asserts, and defendants do not dispute, that Mr. Devitt continues to work, despite his alleged physical illness which purports to preclude his appearance at trial.

Assuming arguendo, that Mr. Devitt does suffer from a physical illness which would preclude his continued testimony at trial, defendants have not demonstrated that Mr. Devitt's deposition testimony should be admitted as an exception to the hearsay rule under Fed. R. Evid. 804(b)(1). The Government argues that it was not afforded an opportunity to thoroughly develop Mr. Devitt's deposition testimony following issuance of the additional "comparables" report because Mr. Devitt failed to provide a complete file in conjunction with the submission of his revised expert report. The Government contends that documents were missing from Mr. Devitt's work product file which made it impossible to adequately prepare for Mr. Devitt's deposition. Plaintiff further contends that once it finally obtained the documents, following a court order compelling their production, the information contained in the documents was inconsistent with Mr. Devitt's deposition testimony. Consequently, the Government never had an opportunity to fully and fairly cross-examine Mr. Devitt on his valuation conclusions and the methodology underlying his revised report. The Court agrees that the Government was effectively precluded from conducting a meaningful cross-examination of Mr. Devitt, and therefore his deposition testimony should not be admitted under Fed. R. Evid. 804(b)(1). It is worth noting that defendants did not file a reply memorandum in support of their motion and thereby tacitly conceded that the Government's claims of insufficiency are well-founded.

Finally, as plaintiff notes, even if the deposition testimony were admissible pursuant to Fed. R. Evid. 804, it fails to satisfy the requirements for expert opinion evidence set forth in Fed. R. Evid. 702. Mr. Devitt's failure to provide the data and materials underlying his revised report using additional comparables calls to question to reliability of his expert opinion. See Greenwell v. Boatwright, 184 F.3d 492 (6th Cir. 1999). Defendants do not dispute plaintiff's assertion that the data allegedly used by Mr. Devitt to support his revised valuation report does not substantiate the methodology Mr. Devitt testified that he employed.

For all these reasons, the Court DENIES defendants' motion to determine that Mr. Devitt is unavailable for trial.

There being no further testimony to be offered in this case, the Court ORDERS that the parties file their closing arguments in writing and within forty-five days of the filing date of this Order. If significant portions of the trial testimony are to be referred to in support of a party's closing arguments, ...


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