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United States of America v. Nafeesah H. Hines

October 17, 2012


The opinion of the court was delivered by: Kiyo A. Matsumoto, United States District Judge:


Plaintiff United States of America (the "government") objects to the protective order issued by Magistrate Judge Marilyn D. Go on July 20, 2012, which prohibits the government from using any discovery obtained in this civil action against the defendants in another proceeding, including criminal proceedings, other than for impeachment purposes or in connection with a perjury prosecution arising out of defendants' deposition testimony. (See ECF No. 19, Order dated July 20, 2012 at 9-10 (the "Discovery Order")); United States v. Hines, No. CV 2011 5080, 2012 U.S. Dist. LEXIS 101236, at *12 (E.D.N.Y. July 20, 2012). Having reviewed the parties' submissions, the relevant case law, and the record before the court, for the reasons set forth below, the court sustains the government's objections in part and respectfully refers the case back to Magistrate Judge Go for further proceedings and supervision of discovery.


The facts relevant to the present request for review are as follows. On October 19, 2011, the government commenced this action alleging that the pro se defendants implemented and promoted a tax fraud scheme known as "redemption" or "commercial redemption" by helping customers file frivolous tax returns and other bogus forms with the Internal Revenue Service ("IRS") in order to steal from the U.S. Treasury. (See ECF No. 1, Complaint ("Compl.") ¶ 7.)*fn1 Specifically, pursuant to 26 U.S.C. §§ 7407 and 7408, the government seeks to permanently enjoin defendants from, inter alia, (1) organizing, implementing, promoting, or selling any plan or arrangement that advises or assists others to violate the internal revenue laws or unlawfully evade the assessment or collection of their federal tax liabilities; (2) preparing or filing federal tax returns or forms for anyone other than themselves; and (3) advising or assisting others with respect to federal tax matters or forms. (Id. at 1.)

The parties engaged in settlement discussions, and at a conference on February 29, 2012, Magistrate Judge Go ordered that discovery be completed by August 31, 2012 and limited such discovery to be against third parties absent leave to serve discovery on the defendants. (Discovery Order at 2.) On April 11, 2012, the government advised the court that there is an open criminal investigation of both defendants that is related to the allegations at issue in this action. (See ECF No. 11.) On March 5 and May 14, 2012, the government filed motions seeking leave to serve written discovery requests and deposition notices on the defendants. The written discovery sought by the government consisted of document requests and interrogatories concerning copies of tax returns prepared by or submitted by the defendants, correspondence drafted by the defendants to the IRS, and a list of the individuals for whom defendants prepared tax returns. (Discovery Order at 7.)

In the Discovery Order dated July 20, 2012, Magistrate Judge Go granted the government's motion for discovery, denied a stay of the case during the pendency of the related criminal investigation of defendants, and imposed the following protective order pursuant to Federal Rule of Civil Procedure 26(c) (the "Protective Order"):

[T]he discovery obtained in this action may be used solely for purposes of this litigation and may not be shown, distributed or disseminated to any other person or otherwise used for any purpose other than for impeachment purposes in another proceeding or in connection with a perjury prosecution arising out of the defendants' deposition testimony. However, the government may use information derived from this action against other individuals or entities in any other proceeding. (Discovery Order at 9-10). In imposing the Protective Order, Magistrate Judge Go recognized that "the court should make an accommodation to 'further the goal of permitting as much testimony as possible to be presented in the civil litigation, despite the assertion of privilege,'" and further reasoned that "[t]his accommodation will minimize the prejudice to defendants by having to choose between risking an adverse inference being drawn against them in this action and waiving their Fifth Amendment rights." (Id. at 9-10 (quoting U.S. v. Certain Real Property and Premises Known as 4003-4005 5th Ave., 55 F.3d 78, 83-84 (2d Cir. 1995) [hereinafter 4003-4005 5th Ave.]).)

On August 6, 2012, the government filed an objection pursuant to Federal Rule of Civil Procedure 72(a) to only that portion of the July 20, 2012 Discovery Order imposing the Protective Order. (See ECF No. 22, Government's Memorandum Objecting to the July 20, 2012 Magistrate Order ("Gov't Mem.") at 1.) On August 21, 2012, the defendants responded to the government's objection, and did not raise any of their own objections to the Discovery Order. (See ECF No. 23, Defendants' Affidavit of Reply to Plaintiff's Objection ("Defs. Resp.").)*fn2

Because the only portion of the Discovery Order that has been objected to is the Protective Order, the court will not address any other portion of the Discovery Order.


I.Standard of Review

A district court may set aside a magistrate judge's order concerning non-dispositive matters only if the order is "clearly erroneous or contrary to law." Fed. R. Civ. P. 72(a); accord 28 U.S.C. § 636(b)(1)(A). A magistrate judge's pretrial discovery rulings are generally considered non-dispositive and are reviewed under the "clearly erroneous or contrary to law" standard of review. See Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990). An order is clearly erroneous if the reviewing court, based on all the evidence, "'is left with the definite and firm conviction that a mistake has been committed.'" United States v. Isiofia, 370 F.3d 226, 232 (2d Cir. 2004) (quoting Anderson v. Bessemer City, 470 U.S. 564, 573 (1985)). An order is contrary to law "'when it fails to apply or misapplies relevant statutes, case law, or rules of procedure.'" Dorsett v. Cnty. of Nassau, 800 F. Supp. 2d 453, 456 (E.D.N.Y. 2011) (quoting Catskill Dev., L.L.C. v. Park Place Entm't Corp., 206 F.R.D. 78, 86 (S.D.N.Y. 2002)).

"'Pursuant to this highly deferential standard of review, magistrate[] [judges] are afforded broad discretion in resolving discovery disputes and reversal is appropriate only if their discretion is abused.'" Dunkin' Donuts Franchised Rests., LLC v. 1700 Church Ave. Corp., No. 07-CV-2446, 2009 U.S. Dist. LEXIS 24367, at *3 (E.D.N.Y. Mar. 24, 2009) (quoting Botta v. Barnhart, 475 F. Supp. 2d 174, 185 (E.D.N.Y. 2007)). "Thus, a party seeking to overturn a discovery ruling by a magistrate judge generally bears a heavy ...

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