Indiana Tax Court declines to bring hammer down on Taxpayer who failed to timely respond to Request for Admissions in Income Tax appeal

Indiana Tax Court declines to bring hammer down on Taxpayer who failed to timely respond to Request for Admissions in Income Tax appeal

The Indiana Tax Court granted a Taxpayer's request to withdraw deemed admissions, concluding the Department of Revenue would not be prejudiced.

The Indiana Tax Court granted a Taxpayer’s request to withdraw deemed admissions, concluding the Department of Revenue would not be prejudiced.

On September 23, 2016, an Indiana taxpayer escaped dismissal of its income tax appeal when the Tax Court allowed it to withdraw harmful deemed admissions.  Thor Industries challenged the 2008 to 2010 adjusted gross income tax assessments by the Indiana Department of Revenue, filing an appeal with the Indiana Tax Court in August 2015.  In June 2016 – approximately one week before settlement negotiations commenced – the Department served Thor with its First Request for Admissions, which required a response in 30 days.  Thor failed to respond timely, and in July 2016 the Department filed a motion for summary judgment, designating as evidence the Request for Admissions.  In response, Thor filed a motion to withdraw the admissions.

The Tax Court reviewed the Indiana Trial Rules as they apply to withdrawing requests for admissions:

Indiana Trial Rule 36(B) governs requests to withdraw admissions. See Ind. Trial Rule 36(B). Specifically, Trial Rule 36(B) provides that “the court may permit withdrawal or amendment [of admissions] when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice him in maintaining his action or defense on the merits.” T.R. 36(B). “The party seeking withdrawal has the burden of demonstrating that the presentation of the merits will be subserved by withdrawal, and the party who has obtained the admissions has the burden of demonstrating that it will be prejudiced if the [] court permits withdrawal.” Cross v. Cross, 891 N.E.2d 635, 640 (Ind. Ct. App. 2008) (citation omitted). Even if both of these conditions are satisfied, however, the Rule does not compel the Court to grant withdrawal or amendment. See General Motors Corp., Chevrolet Motor Div. v. Aetna Cas. & Sur. Co., 573 N.E.2d 885, 889 (Ind. 1991).

Slip op. at 2-3.

The Court next found that granting withdrawal subserves the presentation of the merits in the appeal.  Withdrawing the admissions, Thor argued, would prevent termination of the case before consideration by the Court of the matters that were the basis of the Department’s proposed assessments.  Comparing Thor’s complaint with its deemed admissions supported this claim. Moreover, the Court disagreed with the Department’s contention that Trial Rule 36(A), which establishes the procedures for propounding and responding to requests for admissions, and cases interpreting the rule prohibit blanket requests to withdraw.  The Court explained:  “[W]hen a litigant advances the same rationale for the withdrawal of all of its admissions, like here, the Court neither requires nor expects a continuous repetition of this rationale for the withdrawal of each of the litigant’s admissions.”  Slip op. at 5.

The Court further reasoned that the Department failed to show it would be prejudiced by the withdrawal of the deemed admissions.  The Court observed, “The Department’s hasty motion for summary judgment suggests that its reliance on the deemed admissions was unreasonable.”  Slip op. at 7. Both parties knew that the subject matter of each deemed admission was intended for litigation.  In addition, the Department’s opportunity to conduct discovery was not harmed.  At the time Thor failed to respond, the Court noted, “the deadlines under the [case management plan] allowed for just over one month for written discovery, just over three months for depositions, just over six months for filing dispositive motions, and no trial date had been set.”  Slip op. at  6.  In addition, the Department’s filing of the summary judgment motion automatically vacated all deadlines under the case management plan.

The decision was no marvel.  The Court concluded:  “Trial Rule 36(B) is not intended to provide a windfall to litigants, nor is it to be used as a “gotcha’ device” or as a trap to prevent the presentation of the truth in a full hearing; instead, it is to be used as a tool for the fair disposition of litigation with a minimum of delay.”  Slip op. at 8 (omitting case citation, internal brackets and quotes).

The Court granted Thor’s  motion to withdraw the deemed admissions.  The Court’s decision can be viewed here.

Photo by dhester.

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