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United States v. Quebe

United States District Court, S.D. Ohio, Western Division

May 16, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
DENNIS QUEBE, et al., Defendants.

          Thomas M. Rose District Judge

          DECISION AND ENTRY

          Sharon L. Ovington United States Magistrate Judge

         I. INTRODUCTION

         Believing that Defendants failed to adequately respond to its interrogatories, Plaintiff first moved to compel their responses in June 2016. (Doc. #s 22-23). The parties subsequently agreed to narrow the scope of discovery, and the Court denied Plaintiff's motion without prejudice to renewal. (Doc. #30). Regrettably, this temporary truce between the parties quickly deteriorated, hope for cooperative discovery dissolved, and Plaintiff renewed its Motion to Compel. (Doc. #42).

         In January 2017, the Court partially granted and partially denied Plaintiff's Motion to Compel. (Doc. #59). Doing so, the Court ordered (in part) Defendants to provide additional responses to Plaintiff's Interrogatories 2 and 11. Defendants' additional responses to these Interrogatories are presently at issue by way of Plaintiff's Motion for Sanctions under Rule 37(b) (Doc. #61), Defendants' Memorandum in Opposition (Doc. #62), Plaintiff's Reply (Doc. #64), Defendants' Sur-Reply (Doc. #65), and Plaintiff's Brief in Response (Doc. #66). The Court also views the parties' arguments in light of the record as a whole.

         This Decision and Entry incorporates by reference the background and substantive law surrounding the research tax credit set forth in the previously filed Decision and Entry. (Doc. #59).

         II. DISCUSSION

         Plaintiff contends that sanctions are warranted against Defendants due to their failure to sufficiently answer Interrogatories 2 and 11 and due to their failure to comply with the Court's Order. Plaintiff's requested sanctions include either default judgment against Defendants or an order barring Defendants from presenting evidence or contentions absent from their answers to these Interrogatories.

         Defendants assert that they have, to the best of their ability, answered Plaintiff's discovery requests and complied with the Court's Order. Additionally, they argue, “Plaintiff's requested sanctions are extreme and unwarranted.” (Doc. #62, PageID #1837).

         Before addressing sanctions, the Court must first determine whether Defendants complied with the Order docketed on January 23, 2017. (Doc. #59).

         A. Plaintiff's Interrogatory 2

         Plaintiff seeks details about the foundation of Defendants' assertion that they are entitled to the research tax credit. This is seen in Interrogatory 2's request for, among other information, “a detailed description of the specific work [the identified employees] performed … for which QHI reported or claimed [research tax] credits ….” (Doc. #61-2, PageID #1750).

         The Court's Order examined Defendants' answer to Interrogatory 2 and determined that they did not need to provide certain information (birthdates, Social Security numbers, etc.) to Plaintiff. The Order then required Defendants to “identify which project each employee worked on and what their jobs entailed.” (Doc. #59, PageID #1710).

         Plaintiff contends that Defendants failed to adequately respond to Interrogatory 2 and failed to comply with the Court's Order by simply reformatting material they previously had provided. Plaintiff is correct.

         Defendants responded to the Court's Order by adding information and providing a table in their answer to Plaintiff's Interrogatory 2. (Doc. #61-2, PageID #s 1750-55). However, the Defendants' answer falls far short of providing the information the Court's Order required and fails to constitute a good-faith effort to either comply with the Court's Order or respond to Plaintiff's Interrogatory 2. Defendants' table contains employees' names and job titles, general descriptions of their work, and their 2009 and 2010 allocation wages. Id. at 1751-55. Representative samples show the following:

Employee Name

Company

2009 Allocation wages

2010 Allocation wages

Apprentice- James E. Meyers II directly supported the implementation and testing of electrical systems, providing feedback on testing results and coordination challenges to Foremen and Project Managers for analysis and revaluation.

James E. Meyers II

Chapel

-

50% $5712

CAD Operator- Zachary Davis drafted alternative conduit and wire routes and layouts for analysis by Project Managers and Estimators. Mr. Davis aided the evaluation and selection of different route and equipment alternatives, providing documentation of each alternative's advantages and disadvantages.

Zachary Davis

Chapel

-

100% $19, 205

Project Managers- The Project Managers utilized their construction expertise to develop constructability analyses and value engineering solutions before and during the construction of designs. Furthermore, the Project Managers were the on-site representative of the Company during construction addressing immediate uncertainties encountered during implementation and coordination between electrical and other trades.

For example, these individuals evaluated design plans in terms of functionality and construction feasibility while considering the intended project purpose and potential restrictions.

L Ro'bert Shaffer

Chapel

30% $124, 274

30% $ 109.838

William T. Wood

Chapel

100% 368, 282

100% $68, 427

Stanley T. Arnold, Jr.

Chapel

30% $31, 397

30% $72, 328

Robert A, Galpin

Chapel

35% $99, 378

35% $86, 166

Jeffrey L. Carr

Chapel

20% $69, 451

20% $63, 560

Gene O. Speight

Chapel

100% $85, 501

25% $111, 236

Steven F. Hurst

Chapel

100% $65, 824

-

Id. at 1751, 1754.

         The bare-bone, generalized information Defendants provided in their answer and table does not specifically describe the alleged research that was performed by each identified employee. Instead, Defendants have, as Plaintiff accurately describes, “recycled generic title descriptions from the [a]lliantgroup study-descriptions that the Court has already ruled insufficient.” (Doc. #61, PageID #1724). Defendants' generic descriptions, moreover, read more like advertisements for job openings. The descriptions alert the reader to work performed-Project Managers, for instance, “utilized their construction expertise to develop constructability analyses and value engineering solutions ….” id. at 1754-but shed no light on the specific work the employee did “for which QHI reported or claimed [research tax] credits under 26 U.S.C. [§] 641.” Id. at 1750.

         Defendants contend that “interrogatories are an inappropriate vehicle to explain hundreds of thousands of pages of information, describe weeks and months worth of work, and dissect complicated designs.” (Doc. #62, PageID #1837). They maintain that they “have complied with the discovery requests and with the discovery order to the best of their ability.” Id. In addition to providing a table, they allege that they have produced contemporaneous business records that substantiate their interrogatory responses. Id. at 1848. Specifically, “All the project documents produced (QHI 001-QHI 345417) directly tie to employee activities.” (Doc. #62-38, PageID #4060). Note well that this refers to Defendants' production of over 340, 000 pages of documents.

         Defendants advanced this same line of argument in response to Plaintiff's Motion to Compel. It lacked merit then and does so now. Defendants have repeatedly relied on their production of over 340, 000 pages to Plaintiff in this case. See Doc. #62, PageID #1837; Doc. #62-1, PageID #1856; Doc. #62-38, PageID #4060. Perhaps Defendants have been seduced by the magnitude of their own document production. Perhaps they are attempting to camouflage behind their document dump a barren evidentiary landscape- one bereft of pertinent, responsive evidence. Whatever their reasons for insisting their production of over 340, 000 pages is sufficient, their document dump does not help them today anymore than it did yesterday. See Scott Hutchison Enter., Inc. v. Cranberry Pipeline Corp., 318 F.R.D. 44, 54 (S.D. W.Va. 2016) (“The term ‘document dump' is often used to refer to the production of voluminous and mostly unresponsive documents without identification of specific pages or portions of documents which are responsive to the discovery requests.”) (citation omitted); cf. Stooksbury v. Ross, 528 F. App'x 547, 550 (6th Cir. 2013) (“near 40, 000-page discovery submission … was merely a document dump of mostly unresponsive information ….”).

         Accordingly, Plaintiff's contentions regarding Defendants' failure to comply with the Court's Order and failure to sufficiently answer Interrogatory 2 are well taken.

         B. Plaintiff's Interrogatory 11

         Plaintiff's Interrogatory 11 asks that, for each of the twelve sample projects, Defendants, “identify the business component(s) … involved in it, state with specificity what uncertainty concerning the development or improvement of the business component(s) existed ….” (Doc. #43-5, PageID #s 1187-88). When granting Plaintiff's Motion to Compel additional responses to Interrogatory 11, the Court mandated, ‚ÄúDefendants must ...


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