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United States v. Holland

United States District Court, E.D. Michigan, Southern Division

April 13, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
EDWARD J. HOLLAND, JR., EDWARD HOLLAND, L.P., THE ROYAL BANK OF SCOTLAND, PLC, FREDERICK PATMON, and PEGGY YOUNG, as the personal representative of the Estate of Hallison H. Young, Defendants.

          MARIANNE O. BATTANI DISTRICT JUDGE

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PROTECTIVE ORDER [212]

          MONA K. MAJZOUB UNITED STATES MAGISTRATE JUDGE

         This matter comes before the Court on Plaintiff United States of America's Motion for Protective Order Quashing The Royal Bank of Scotland, plc's Notice of Deposition Pursuant to Fed.R.Civ.P. 30(b)(6). (Docket no. 212.) Defendants Frederick Patmon and The Royal Bank of Scotland (RBS) filed Responses to Plaintiff's Motion (docket nos. 216 and 217); Defendants Edward Holland, L.P. (EHLP) and Edward J. Holland Jr. concur with Defendant RBS's Response (docket no. 222). Plaintiff replied to Defendants' Responses. (Docket no. 220.) The Motion has been referred to the undersigned for consideration. (Docket no. 214.) The Court has reviewed the pleadings and dispenses with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f)(2). The Court is now ready to rule pursuant to 28 U.S.C. § 636(b)(1)(A).

         I. BACKGROUND

         Plaintiff initiated this action on January 9, 2013, in an effort to collect from Defendant Holland alleged unpaid federal income tax liabilities for the tax years 1991-94, 1996-2004, 2006, and 2008-12 totaling more than 19 million dollars. (Docket no. 1; docket no. 30 ¶ 9.) In the Second Amended Complaint, Plaintiff alleges that in 1965 and 1996, Defendant Holland, a songwriter, entered into contracts with Jobete Music Company, Inc. and Broadcast Music, Inc. (BMI), respectively, through which they would pay him royalties in connection with certain musical compositions that he had written or co-written. (Docket no. 30 ¶¶ 11-14.) According to Plaintiff, Defendant Holland created Defendant EHLP in May of 1998, and then in June of 1998, he transferred his rights to receive payments under the royalty contracts to EHLP in exchange for the proceeds of a 15 million dollar loan that EHLP had borrowed from Bankers Trust Company net of approximately 1.6 million dollars in payments made to the United States Treasury for certain unpaid tax liabilities. (Id. ¶¶ 18, 21, 23.) Plaintiff alleges that Defendant Holland's actions were part of a scheme to monetize a substantial portion of the royalty contracts for his own personal benefit to fund his lifestyle while hindering his creditors and avoiding the collection of most of his federal tax obligations. (Id. ¶¶ 20, 26.) It is Plaintiff's position that Defendant EHLP is the alter ego or special nominee of Defendant Holland and therefore the tax liens associated with Defendant Holland's tax liabilities have attached to property held by Defendant EHLP, including the rights under the royalty contracts, and that those liens are superior to any claims or interests that Defendants may have in the property. (Id. ¶¶ 36, 37.)

         Plaintiff named RBS as a defendant in this action “because it has, or may claim, an interest in the subject property to which the United States' tax liens have attached.” (Docket no. 30 ¶ 4.) In fact, Defendant RBS asserts that in 2005, it entered into a loan transaction with Defendant EHLP through which it issued an interest-bearing loan to EHLP in exchange for the rights to royalty payments under contracts with BMI and EMI Music Publishing (EMI). (Docket no. 217 at 6.) Defendant RBS further asserts that Plaintiff attempted to levy BMI and EMI's royalty payments to RBS, which levies BMI and EMI rightfully rejected, but upon the commencement of this action, they were forced to place the royalty payments in escrow. (Id.)

         On September 20, 2016, approximately one month before the close of discovery, Defendant RBS served a Notice of Deposition Pursuant to Fed.R.Civ.P. 30(b)(6) on Plaintiff. (Docket no. 212-1.) The Notice indicates that Plaintiff's designated representative(s) should be prepared to testify regarding the following topics:

1. Any and all factual allegations set forth in the Second Amended Complaint or the Answer.
2. Any and all factual allegations set forth in the Plaintiff's Response to Defendant and Counter/Cross Plaintiff Frederick A. Patmon's First Set of Interrogatories.
3. Mr. Holland's tax assessments, notices, and liens for the tax years 1986 through 2012.
4. The current balance of monies allegedly owed by Mr. Holland and/or EHLP to the Plaintiff for the tax years 1986 through 2012.
5. Any discussions, conversations, communications, or negotiations between the Plaintiff, including without limitation any Assistant United States Attorneys, revenue officers, or revenue agents, and Mr. Holland and/or EHLP, including without limitation any individuals acting upon Mr. Holland and/or EHLP's behalf, concerning Mr. Holland or EHLP's tax liabilities for the tax years 1986 through 2012.
6. The Plaintiff's allegations that several individuals and companies were alter egos, nominees, and/or fraudulent transferees of Mr. Holland, including without limitation EHLP, Craig Holland, Lauren M. Holland, Margaret E. Jones, Shirley Washington, Gardar Enterprises, Inc., Gold Forever Music, Inc., Edward Holland 2005 Irrevocable Trust, and Edward Holland Royalty Venture I SPC, Inc.
7. The July 17, 1998 letter from Revenue Officer Victor B. Jackson to Ted Chung, Bates numbered USA-0019911, including the facts and circumstances surrounding this letter and its content.
8. The Plaintiff's knowledge or awareness of the 1998 securitization transaction by EHLP and Bankers Trust.
9. The Plaintiff's knowledge or awareness of the 2005 and/or 2007 loan transactions by EHLP and RBS.
10. The Plaintiff's allegations that Mr. Holland caused significant delays and failed to cooperate in numerous tax audits.
11. The facts and circumstances surrounding the Plaintiff's issuances of various Certificates of Release of Federal Tax Lien, including without limitation those certificates found at Bates numbers USA-0058706 to USA-0058708.
12. The facts alleged in the various “Edward J. Holland Timelines” found at Bates numbers USA-0027264 to USA-0027371.
13. Any discussions, conversations, communications, or negotiations between the Plaintiff, including without limitation any revenue officers or revenue agents, and EMI and/or BMI, concerning Mr. Holland or EHLP's ...

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