The IRS Collections Division Takes a Fresh Look at eDiscovery
Discovery Management Digest - Q1 2013
The Collections Division of the Internal Revenue Service is taking another look at its eDiscovery obligations and processes.The memo, “Reissuance of Guidance for Complying with eDiscovery Rules” , number SBSE-05-0912-075 clarifies eDiscovery procedures to help agency attorneys in the Collections Division manage the enormous amounts of data generated during tax disputes with individuals and corporations.
The memo, issued by Scott D. Reisher, Director of Collection Policy, continues the federal government’s push to move discovery procedures and practices into the 21st century. The new memo also updates a notice from the IRS Office of Chief Counsel, “Update to Procedures for Complying with eDiscovery Obligations,” which raised issues regarding the agency’s ability to conduct eDiscovery in every case.
The latest memo, outlines the types of potentially relevant information that may be subject to discovery, provides some clarity to Collections staff about their responsibilities around ESI and provides instruction about how to execute a litigation hold. It also stresses the responsibility that Agency Counsel, along with Collection Advisors, bear in preserving potentially responsive ESI and highlights the importance the agency places on data preservation.
Defining the duty to preserve and ESI
The memo clarifies when the duty to preserve begins. “The duty to preserve ESI arises in suits filed against the Government when the lawsuit is filed or when litigation can be reasonably anticipated,” the memo explains. “When such litigation can be reasonably anticipated depends upon the facts of the case. In suits brought by the Government, the duty to preserve ESI begins no later than when a decision is made by Chief Counsel to refer a suit to the Department of Justice.”
According to the memo, “All ESI relating to a particular taxpayer’s case must be preserved when litigation is initiated or can be reasonably anticipated[…]This eliminates the possibility of losing ESI that is later determined to be relevant to a discovery request. Whether ESI is relevant to the case is a determination to be made by the attorney assigned to the case.”
ESI can include, but is not limited to:
E-mail and other electronic communications
- Word processing documents
- Electronic calendars
- Telephone logs
- Internet usage files
- Text messages
- Network access information
For a collections case, ESI would include ICS histories, results of electronic research and any other information regarding the case that is either obtained, recorded or sent electronically.
The memo offers several hypothetical examples of when litigation may be “reasonably anticipated.” One example is a taxpayer who files an administrative claim for damages for an unauthorized collection action and indicates that he plans to pursue legal action if his claim is denied. This case would trigger the duty to preserve, since the agency can assume litigation may follow based on the taxpayer’s statements.
Another example is of a quiet title action brought under 28 U.S.C. § 2410 in state court. According to the memo, the duty to preserve ESI generally would not arise until the IRS receives notice of the litigation, since the IRS can’t reasonably anticipate a lawsuit every time a Notice of Federal Tax Lien is filed.
The litigation hold process
When litigation begins or is reasonably anticipated, it is up to Agency Counsel to issue the litigation hold, according to the memo. Agency Counsel can include Area Counsel Attorneys, National Office Attorneys, Assistant U.S. Attorneys or Tax Division Attorneys. Once the litigation hold is issued, all IRS and Chief Counsel employees involved in a case must preserve all of their paper and electronic files relating to the matter.
In order to launch the litigation hold process, the Area Counsel sends an email to the Service point of contact. The Service point of contact is the employee that Counsel identify as the one most familiar with and involved in the case who would know which other employees may have relevant ESI. Generally speaking, when the United States brings the lawsuit, the Service point of contact will be the Collection Advisor responsible for the case. Area Records Managers will also be notified so they can suspend applicable record retention schedules.
Once a litigation hold is issued, Collections employees need to identify the types of ESI that have been created while working the case, search the ESI they have access to and preserve it. Counsel will send an e-mail message to the Service point of contact with instructions for how to comply. When IRS employees can’t follow the instructions, they are instructed to contact the Counsel attorney responsible for issuing the litigation hold notice.
Counsel will decide whether to isolate ESI in every case, and then coordinate with IT staff to isolate and preserve the ESI that employees have identified.
The memo also stresses the serious consequences that can follow when ESI Is not preserved. “Failure to preserve documents and ESI could result in unfavorable discovery orders, sanctions against the Government, disadvantage to the Government’s position in litigation, or preclusion of any and all evidence in favor of the Government’s position,” according to the memo. “Also, individuals who fail to take appropriate steps to locate and segregate information subject to a litigation hold could be subject to monetary or contempt sanctions.”
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While the information in this article may deal with legal issues, it does not constitute legal advice. If you have specific questions related to information discussed in this article, you are encouraged to consult an attorney who can investigate the particular circumstances of your situation.