Captive Alternatives LLC (Captive) has had its request to include a “claw back” option for materials it has been asked to provide to the Internal Revenue Service (IRS) as part of an investigation over a potential tax shelter denied by a Florida district court.
“In the end, the decision of whether to enter a Rule 502(d) order is left to a court’s sound discretion,” the Florida Judge said. “Against this backdrop, Captive’s motion fails.”
A “claw back” arrangement, like the one sought by Respondent Captive Alternatives “allow[s] the return of documents that a party belatedly determines are protected by the attorney- client privilege or [the] work product” doctrine.
Such arrangements are governed by Rule 502, which authorises a court to enter an order directing that attorney client or work product protections are not waived “by disclosure connected with the [pending] litigation.”
In October 2021, the IRS originally served Captive Alternatives with an administrative summons (Summons) seeking the disclosure of twenty-nine categories of records, plus subparts, for the period beginning January 1, 2011.
When Captive Alternatives failed to respond, the IRS filed a petition in February 2022 to enforce the Summons.
The presiding District Judge directed that Respondent disclose the requested items and a privilege log by 1 October 2023.
Captive Alternatives then asked the Court to enter an order providing for the non-waiver and “claw back” of any privileged materials that it turns over to the IRS.
Captive Alternatives said in its defence that the items it must deliver to the IRS “total over 1.1 million” and that the protections it seeks are necessary given the “costs associated with reviewing and producing such a significant volume of documents and the near inevitability of making mistakes in doing so”.