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Group, Inc. and Kristen M. Bowes v. United States of America

January 5, 2011

GROUP, INC. AND KRISTEN M. BOWES
PLAINTIFFS,
v.
UNITED STATES OF AMERICA,
DEFENDANT.



The opinion of the court was delivered by: Lucy H. Koh United States District Judge

SANTA CLARA VALLEY HOUSING

ORDER DENYING RELIEF FROM NON-DISPOSITIVE ORDER OF MAGISTRATE JUDGE

United States District Court For the Northern District of California

I.BACKGROUND

On December 14, 2010, Plaintiffs moved for Relief from an Order by Magistrate Judge

Lloyd denying Plaintiffs' Motion to Compel Third Party Douglas Duncan to testify. See Motion 20 for Relief (Dkt. No. 61); Order of December 14, 2010 (Dkt. No. 59). Judge Lloyd's Order set forth 21 the factual and procedural background of the Plaintiffs' Motion to Compel, and the Court does not 22 re-state this information here. See Order of December 14, 2010 at 1-2. Civ. P. 72(a). The Court has reviewed the December 14, 2010 Order, the Plaintiffs' Motion for Relief, the underlying briefing on Plaintiffs' Motion to Compel, and the cited authorities. Because 27 the Court finds that the conclusions in the December 14, 2010 Order are well-supported, and are 28 not clearly erroneous or contrary to law, the Plaintiffs' Motion for Relief is DENIED.

Pursuant to Federal Rule of Civil Procedure 72, the district judge may set aside a Magistrate

Judge's Nondispositive Pretrial Order only if it is "clearly erroneous or contrary to law." Fed. R. 25 not depend upon the likelihood, but upon the possibility of prosecution.'" Doe v. Glanzer, 232 However, a witness must have "reasonable cause to apprehend danger from a direct answer."

Hoffman v. United States, 341 U.S. 479, 486 (1951). The witness must make a "good faith effort to 7 provide the trial judge with sufficient information from which he can make an intelligent 8 evaluation of the claim." Davis v. Fendler, 650 F.2d 1154, 1160 (9th Cir. 1981).

II.ANALYSIS

As noted in the December 14, 2010 Order, "[T]he 'privilege against self-incrimination does F.3d 1258, 1263 (9th Cir. 2000) (citing In re Seper, 705 F.2d 1499, 1501 (9th Cir. 1983).

As outlined in the December 14, 2010 Order, Duncan provided a number of specific reasons that he fears potential criminal liability based on testimony about the KPMG SC2 strategy.

See December 14, 2010 Order at 5-6. Duncan showed that the SC2 strategy has been criticized as a "sham" and as "abusive" in the context of a 2005 Senate investigation and report on the strategy, and that former KPMG employees and partners had faced indictment based on their alleged 14 participation in other KPMG tax strategies. Id. at 6. Duncan also stated that he asked the Government for assurance that there was no ongoing criminal investigation related to the SC2 16 strategy and that Duncan was not a target of any such investigation, and that the Government was 17 unable to provide such assurances or to offer Duncan immunity, despite the fact that the Government states that "the lack of an ongoing investigation [of SC2] would not foreclose an 20 investigation in the future should circumstances warrant and the statute of limitations remain 21 open." United States Reply Br. (Dkt. No. 55) at 2-3. Finally, the Court found that the statute of 22 limitations relating to a potential criminal indictment based on the SC2 strategy had not yet run.

December 14, 2010 Order at 7. Based on all of these reasons, Duncan justified his refusal to 24 answer questions relating to the SC2 strategy during his deposition based on a fear of future 25 prosecution relating to his participation in the strategy, as set forth in his Opposition to the Plaintiffs' Motion to Compel. See Opp'n. (Dkt. No. 50). The Magistrate Judge's conclusion that 27 these facts presented a "reasonable cause to apprehend ...


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