Potlatch Corporation v. United States

679 F.2d 153 POTLATCH CORPORATION, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant. No. 81-4201. United States Court of Appeals, Ninth Circuit. Argued and Submitted March 8, 1982. Decided June 8, 1982. Gilbert S. Rothenberg, Washington, D. C., argued, for defendant-appellant; John F. Murray, Richard Farber, Washington, D. C., on brief. Don Paul Badgley, Bogle & Gates, Seattle, Wash., for plaintiff-appellee. Appeal from the United States District Court for the Northern District of California. Before HAYNSWORTH * , MERRILL and WALLACE, Circuit Judges. MERRILL, Circuit Judge: 1 The Government failed by seven weeks to comply with a discovery deadline set by the district court for the exchange of appraisal reports by expert witnesses. As a sanction for this failure, imposed pursuant to Rule 37(b)(2) (B) of the Federal Rules of Civil Procedure 1 , the Government was denied the right to call those experts as trial witnesses or to offer their reports in evidence. Following trial, judgment was rendered against the Government. On this appeal from judgment the question we face is whether imposition of the sanction under the circumstances here presented constituted an…

The Government failed by seven weeks to comply with a discovery deadline set by the district court for the exchange of appraisal reports by expert witnesses. As a sanction for this failure, imposed pursuant to Rule 37(b)(2)(B) of the Federal Rules of Civil Procedure 1 , the Government was denied the right to call those experts as trial witnesses or to offer their reports in evidence. Following trial, judgment was rendered against the Government. On this appeal from judgment the question we face is whether imposition of the sanction under the circumstances here presented constituted an abuse of discretion. We have concluded that it did.

This action was brought by Potlatch Corporation (Taxpayer) to secure a refund of taxes. Taxpayer engages in the manufacture of forest products. In its tax returns for the years 1971 and 1972 it elected to use the provisions of 26 U.S.C. § 631 (a), which section allows computation of gain from sale of timber on the basis of the fair market value of the timber sold as of the first day of the taxable year. The Commissioner disagreed with the valuation placed by Taxpayer upon its timber, and on the basis of his own valuation determined that there was a…

concurring:

The majority finds an abuse of discretion because of its definite and firm conviction that the district judge committed a clear error of judgment in reaching two conclusions: first, that the government never intended to comply with Judge Renfrew’s discovery order and second, that the government’s failure to meet the discovery deadline was due to circumstances within its control. I write separately because after reviewing the record I am not convinced that it was a clear error of judgment for the district judge to arrive at either conclusion. I would still reverse the judgment, however, because I believe that the district court’s order presenting the government with the choice between preclusion of its experts’ reports or paying the taxpayer $10,000 was improper.

The majority finds the district judge’s conclusion that the government never intended to comply with the discovery order inconsistent with the record. Ante at 155-156. However, the majority fails to mention two important facts on which the district judge based this conclusion. First, the district judge found conspicuously lacking in the government’s moving papers any statement of what efforts it made to…