Judgment summary
This is a procedural order in a deficiency case concerning section 482. The Commissioner determined to increase Airbnb's income by $4,195,858,428 with respect to resources, capabilities, and rights that Airbnb made available on December 31, 2013, to an affiliate registered under Irish law and tax resident in Jersey (para 1 introduction).
The dispute before the court did not concern the merits of the transfer pricing adjustment. It concerned competing Motions for Discovery Protective Order Pursuant to Rule 103, filed by both parties, and two Motions to Strike filed by Airbnb against Declarations submitted by the Commissioner's software expert, Monty G. Myers.
The court held that Rule 143(g), which governs expert witness reports at trial, does not apply to declarations submitted in support of a pretrial discovery motion. The court denied Airbnb's Motions to Strike but indicated it will disregard portions of the Declarations that offer legal opinions when it later resolves the competing discovery protective order motions.
Background
Airbnb operates an online marketplace connecting users offering travel accommodation with users seeking to book it. Airbnb, Inc. is a Delaware corporation with its principal place of business in San Francisco, California. Absent stipulation, appeal of the case would lie to the US Court of Appeals for the Ninth Circuit.
The software Airbnb uses to run its business is a key aspect of the underlying transfer pricing dispute. On April 10, 2026, Airbnb filed a Motion for Discovery Protective Order Pursuant to Rule 103, later amended, proposing that the Commissioner access Airbnb's source code and other technical materials only through a 'clean room' established at Airbnb's offices or its counsel's offices.
The Commissioner filed his own Motion for Discovery Protective Order on the same day, also later amended, proposing that the clean room be located in Austin, Texas, where his expert Mr Myers is based, and that the category of information subject to clean room procedures be narrower than Airbnb proposed.
In support of his motion, and in response to Airbnb's motion, the Commissioner attached two Declarations from Monty G. Myers, who has 48 years of software development experience and is founder and CEO of a software solution delivery company in Austin, Texas. The Commissioner engaged Mr Myers to provide 'independent expert consulting and analysis' in the dispute. The Declarations set out Mr Myers's views on how the clean room should operate, criticised Airbnb's proposed terms as 'unreasonable', 'onerous and inefficient', and stated his opinion that protective orders have been 'generally weaponized' in software litigation.
Core dispute
Airbnb filed two Motions to Strike, one on April 20, 2026 targeting the First Declaration and one on May 20, 2026 targeting the Second Declaration, asking the court to strike them from the record.
Airbnb argued that the Declarations (1) function as improper expert witness reports, (2) fail to comply with the requirements of Tax Ct. R. Prac. & Proc. 143(g), (3) offer impermissible legal opinions and advocacy contrary to Rule 702 of the Federal Rules of Evidence, and (4) rely on protective orders from cases that bear no resemblance to this case.
The Commissioner argued that Rule 143 and Federal Rule of Evidence 702 do not apply to the Declarations, which were submitted in a pretrial discovery context, and that the Declarations do not offer improper legal opinions.
Court findings
The court found that Rule 143(g) does not apply to the Declarations. Rule 143 is titled 'Evidence' and sits within Title XIV of the Tax Court Rules, titled 'Trials', and Rule 143(a) governs how trials before the court will be conducted. Rule 143(g) by its terms applies to 'any party who calls an expert witness'. There had been no trial in this case, the Commissioner had not yet firmly identified trial expert witnesses, and the Declarations focused on pretrial procedural matters rather than the substantive issues in the case.
The court also noted that even if Rule 143(g) applied, it might still accept the Declarations, since Rule 143(g)(1) applies 'unless otherwise permitted by the Court upon timely request', and Rule 143(g)(3) permits an expert to testify without a written report where testimony concerns industry practice, which described much of Mr Myers's statements.
On the argument that the Declarations offered impermissible legal conclusions, the court found it was not evident the Declarations should be read that way, given they related only to the proper scope of a discovery protective order and did not appear to resolve any ultimate issue of law in the case. Even if portions could be viewed as legal conclusions, the court held it could decline to rely on those portions without striking them.
The court found that motions to strike are generally disfavoured and should be granted only when allegations have no possible relation to the controversy, and usually only on a showing of prejudice to the moving party. Airbnb had not demonstrated the type of prejudice necessary to justify striking. The court also found that Mr Myers's reliance on protective orders from other, possibly dissimilar, cases went to the weight of his statements rather than justifying striking under Rule 52.
The court noted that a decision not to strike does not leave Airbnb without a remedy, since Airbnb remains free to submit its own declarations or request an evidentiary hearing at which Mr Myers could be cross-examined.
Outcome
The court denied Airbnb's Motions to Strike. It held that the requirements of Tax Ct. R. Prac. & Proc. 143(g) do not apply to declarations submitted in support of a pretrial discovery motion.
The court stated it will disregard Mr Myers's statements to the extent they offer legal opinions or advocacy when it ultimately decides the competing Motions for Discovery Protective Order, which remain pending. An appropriate order was to be issued.
Major issues / areas of contention
- Whether Rule 143(g) expert witness report requirements apply to declarations filed in support of pretrial discovery motions.
- Whether the Commissioner's Declarations from Monty G. Myers should be struck as improper expert reports.
- Whether the Declarations offer impermissible legal conclusions or advocacy under Federal Rule of Evidence 702.
- Whether reliance in the Declarations on protective orders from other, allegedly dissimilar, cases justified striking them.
- The proper location and scope of a 'clean room' for discovery of Airbnb's source code and technical materials under competing Rule 103 protective order motions.