On September 17, 2014, the U.S. Tax Court issued its first
opinion regarding the discovery of electronically stored
information (ESI). In Dynamo Holdings, Ltd. vs.
Commissioner, 143 T.C. No. 9 (Sept. 17, 2014), the Tax Court
permitted a taxpayer to use "predictive coding" as a
first-level review of a large pool of documents. The
court's opinion is important for taxpayers faced with requests
for a substantial amount of ESI, and has the potential to reduce
the burden and cost of complying with such requests.
Background
Most documents today originate in electronic form, and taxpayers
may have a duty to preserve ESI. ESI has traditionally been
subject to discovery requests, but it was only recently that the
judicial system amended its rules to specifically address
ESI. The case law and procedural laws emphasize that
e-discovery should be a cooperative and reciprocal process, and
that parties should not be subject to undue burden or cost.
Failure to comply with
