Smart-Tek Automated Services Inc. v. United States Internal Revenue Service

Filing 36

ORDER Granting in part and Denying in part Without Prejudice Defendant's 26 Motion for Summary Judgment. Signed by Judge Barry Ted Moskowitz on 7/20/2017. (mxn)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 SMART-TEK AUTOMATED SERVICES INC., 10 Plaintiff, 11 v. 12 UNITED STATES INTERNAL REVENUE SERVICE, 13 14 Case No.: 15-cv-0453-BTM-JMA ORDER GRANTING IN PART AND DENYING WITHOUT PREJUDICE IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [ECF NO. 26] Defendant. 15 16 The United States Internal Revenue Service (“IRS”) has filed a motion for 17 summary judgment as to Plaintiff’s claims under the Freedom of Information Act 18 (“FOIA”), 5 U.S.C. § 552, et seq. (ECF No. 26.) For the reasons discussed below, 19 the IRS’s motion will be granted in part and denied without prejudice in part. 20 I. BACKGROUND 21 This is one of five actions filed by related entities against the IRS.1 Each 22 case is based on the claim that the IRS failed to comply with its obligations under 23 5 U.S.C. § 552 to respond to FOIA requests submitted by the plaintiffs. Plaintiffs 24 25 26 27 28 1 The five actions (including this one) are: Trucept, Inc., fka Smart Tek Solutions Inc. v. United States Internal Revenue Service, Case No. 15-cv-0447-BTM-JMA; Smart-Tek Services, Inc. v. United States Internal Revenue Service, Case No. 15-cv-0449-BTM-JMA; Smart-Tek Service Solutions Corp. v. United States Internal Revenue Service, Case No. 15-cv-0452-BTM-JMA; Smart-Tek Automated Services Inc. v. United States Internal Revenue Service, Case No. 15-cv-0453-BTM-JMA; and American Marine LLC v. United States Internal Revenue Service, Case No. 15-cv-0455-BTM-JMA. 1 15-cv-0453-BTM-JMA 1 contend they submitted their requests after the IRS filed a series of liens against 2 them between 2011 and 2013 holding them liable for payroll tax liabilities of other 3 corporations under alter ego and/or successor liability theories. 4 Plaintiff Smart-Tek Automated Services Inc. (“Plaintiff”) alleges it sent a 5 written FOIA request to the IRS on May 12, 2014. Compl. (ECF No. 1) ¶ 10. Under 6 5 U.S.C. § 552(a)(6)(A)(i), an agency has 20 business days following receipt of a 7 FOIA request to determine whether to comply with the request and must 8 “immediately” notify the requester of its determination. 5 U.S.C. § 552(a)(6)(A)(i). 9 On June 26, 2014, the IRS allegedly sent a response to Plaintiff in which it 10 acknowledged receipt of the request but “failed to make any determination about 11 the request.” Compl. ¶ 11. On February 27, 2015, having received no further 12 response from the IRS, Plaintiff initiated this action. 13 On October 7, 2016, the IRS filed the instant motion. It indicates it has now 14 completed its search for records and released 14,544 pages in full, and 3,479 15 pages in part, of non-exempt documents responsive to Plaintiff’s FOIA request. It 16 seeks summary judgment on the ground that it has fully discharged its obligations 17 under 5 U.S.C. § 552. Plaintiff opposes the motion. (ECF No. 31.) 18 II. DISCUSSION 19 A. FOIA Summary Judgment Standard 20 Summary judgment is appropriate if the evidence, when viewed in the light 21 most favorable to the non-moving party, demonstrates “there is no genuine dispute 22 as to any material fact.” Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 23 U.S. 317, 322 (1986). The moving party bears the initial burden of showing there 24 is no material factual dispute and he or she is entitled to prevail as a matter of law. 25 Celotex, 477 U.S. at 323. If the moving party meets its burden, the nonmoving 26 party must go beyond the pleadings and identify specific facts which show a 27 genuine issue for trial. Id. at 324. 28 District courts are directed to conduct a de novo review of the adequacy of 2 15-cv-0453-BTM-JMA 1 an agency’s response to a FOIA request. 5 U.S.C. § 552(a)(4)(B); U.S. Dep’t of 2 Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749, 755 (1989). 3 Because FOIA cases rarely involve material factual disputes, they “are typically 4 and appropriately decided on motions for summary judgment.” Defenders of 5 Wildlife v. U.S. Border Patrol, 623 F. Supp. 2d 83, 97 (D.D.C. 2009); see 6 Shannahan v. Internal Revenue Serv., 637 F. Supp. 2d 902, 912 (W.D. Wash. 7 2009). 8 summary judgment in a FOIA case.” Shannahan, 637 F. Supp. 2d at 912. Courts “follow a two-step inquiry when presented with a motion for 9 First, the district court must determine whether the agency has established 10 that it fully discharged its obligation under FOIA to conduct an adequate search for 11 responsive records. Zemansky v. U.S. Envtl. Prot. Agency, 767 F.2d 569, 571 (9th 12 Cir. 1985). To meet this burden, the agency must: 13 14 15 16 17 18 demonstrate that it has conducted a “search reasonably calculated to uncover all relevant documents.” Further, the issue to be resolved is not whether there might exist any other documents possibly responsive to the request, but rather whether the search for those documents was adequate. The adequacy of the search, in turn, is judged by a standard of reasonableness and depends, not surprisingly, upon the facts of each case. In demonstrating the adequacy of the search, the agency may rely upon reasonably detailed, nonconclusory affidavits submitted in good faith. 19 20 21 22 23 24 25 26 27 28 Id. (quoting Weisberg v. U.S. Dep’t of Justice (“Weisberg II”), 745 F.2d 1476, 1485 (D.C. Cir. 1984)). If the agency satisfies its initial burden, the court proceeds to the second step and considers “‘whether the agency has proven that the information that it did not disclose falls within one of nine FOIA exemptions.’” Shannahan, 637 F. Supp. 2d at 912 (quoting Los Angeles Times Commc’ns, LLC v. Dep’t of the Army, 442 F. Supp. 2d 880, 894 (C.D. Cal. 2006)). Agencies seeking to withhold documents pursuant to a FOIA exemption “have been required to supply the opposing party and the court with a ‘Vaughn index,’ identifying each document withheld, the 3 15-cv-0453-BTM-JMA 1 statutory exemption claimed, and a particularized explanation of how disclosure of 2 the particular document would damage the interest protected by the claimed 3 exemption.” Wiener v. Fed. Bureau of Investigation, 943 F.2d 972, 977 (9th Cir. 4 1991); see Vaughn v. Rosen, 484 F.2d 820, 823-25 (D.C. Cir. 1973). “The purpose 5 of a Vaughn index ‘is … to afford the requester an opportunity to intelligently 6 advocate release of the withheld documents and to afford the court the opportunity 7 to intelligently judge the contest.’” Shannahan, 637 F. Supp. 2d at 912 (quoting 8 Wiener, 943 F.2d at 979). 9 Finally, “even if the agency satisfies the two-part test, it generally must still 10 disclose any reasonably segregable portions of the withheld documents.” Id.; 5 11 U.S.C. § 552(b) (“Any reasonably segregable portion of a record shall be provided 12 to any person requesting such record after deletion of the portions which are 13 exempt under this subsection.”). “‘The burden is on the agency to establish that 14 all reasonably segregable portions of a document have been segregated and 15 disclosed.’” Id. (quoting Pac. Fisheries Inc. v. United States, 539 F.3d 1143, 1148 16 (9th Cir. 2008). 17 B. Reasonableness of Search 18 The IRS contends it has conducted an adequate search for records 19 responsive to Plaintiff’s FOIA request. To fulfill its obligations under FOIA, “the 20 agency must show that it made a good faith effort to conduct a search for the 21 requested records, using methods which can be reasonably expected to produce 22 the information requested.” Oglesby v. U.S. Dep’t of the Army, 920 F.2d 57, 68 23 (D.C. Cir. 1990). The agency must show “[w]hat records were searched, by whom, 24 and through what process.” Steinberg v. U.S. Dep’t of Justice, 23 F.3d 548, 552 25 (D.C. Cir. 1994). An agency can meet its burden by submitting a “reasonably 26 detailed, nonconclusory” affidavit “in good faith.” Id. at 551 (quoting Weisberg II, 27 745 F.2d at 1485). Agency affidavits that “do not denote which files were searched 28 or by whom, do not reflect any systematic approach to document location, and do 4 15-cv-0453-BTM-JMA 1 not provide information specific enough to allow the plaintiff to challenge the 2 procedures utilized” are insufficient to fulfill the agency’s burden. Weisberg v. U.S. 3 Dep’t of Justice, 627 F.2d 365, 371 (D.C. Cir. 1980). In determining whether an 4 agency has met its burden to prove an adequate search, “the facts must be viewed 5 in the light most favorable to the requestor.” Zemansky, 767 F.2d at 571 (citing 6 Weisberg II, 745 F.2d at 1485). 7 Here, the IRS submits the declaration of Delphine Thomas to support its 8 contention that it conducted an adequate search for records in response to 9 Plaintiff’s FOIA request. (ECF No. 26-5.) Thomas is a Senior Disclosure Specialist 10 whose duties include responding to FOIA requests for IRS records, which requires 11 her to “have knowledge of the types of documents created and maintained by the 12 various divisions and functions of the Service and an understanding of the 13 provisions of the FOIA.” Thomas Decl. ¶ 1. 14 Thomas states that Ed Pullman, the disclosure specialist initially assigned to 15 process Plaintiff’s FOIA request, now has a different role with the IRS and is 16 “unavailable to declare in this case.” Id. ¶ 3. She was assigned to respond to 17 Plaintiff’s request on October 17, 2014, and thereafter familiarized herself with the 18 search conducted before she was involved by talking to Pullman and reviewing his 19 case file. Id. ¶ 4. 20 Thomas states that the IRS Disclosure Office received a written FOIA 21 request from Plaintiff on May 29, 2014, seeking “‘a complete copy of the 22 administrative file’” for Plaintiff. Id. ¶ 6.2 Pullman found the request overbroad, so 23 he contacted Plaintiff’s representative and suggested narrowing its scope. Id. ¶ 7. 24 Plaintiff’s representative thereafter left Pullman a voicemail “clarifying that the 25 request was for the administrative files for the tax forms 940, 941, and 1120 for tax 26 27 28 2 Although Thomas indicates a copy of the FOIA request is attached as Exhibit A to her declaration, the exhibit was not actually attached. See Thomas Decl. ¶ 7. 5 15-cv-0453-BTM-JMA 1 years 2007-2014.” Id. ¶ 8. 2 According to Thomas, Pullman thereafter searched for “files” using the IRS’s 3 Integrated Data Retrieval System (“IDRS”), an electronic system that “manages 4 data that has been retrieved from the Master File System” which is “the Service’s 5 nation-wide electronic information system containing permanent taxpayer account 6 information.” Id. ¶¶ 9-12. His IDRS search showed there was collection activity 7 related to Plaintiff, and he thereafter learned from Tax Law Specialist Athena 8 Amparano that the collection matter was assigned to Revenue Officer John Black 9 (“RO Black”) Id. ¶ 13. 10 Thomas indicates that on July 16, 2014, “the Disclosure Office learned from 11 RO Black that documents responsive to [Plaintiff’s] requests would be located 12 within the commingled files maintained by RO Black on these entities and over 13 twenty (20) related entities.” 14 proceeding on one of the entities and, as he progressed, realized that all the 15 entities were related,” had the other entities’ files transferred to him and “started 16 working the case as one large case.” Id. As he received new documents, “he 17 added them to the boxes in chronological order, not based on any particular entity,” 18 so as a result, “the files were all mixed together.” Id. ¶ 16. The commingled files 19 totaled 65 boxes containing “around 141,000 pages.” Id. Id. ¶ 15. RO Black had “started a collection 20 On or about July 25, 2014, “Plaintiff’s representative confirmed via fax that 21 the request was for the entire administrative file maintained by Collection….” Id. ¶ 22 19. Thomas, Pullman, and Amparano, later joined by attorneys and law clerks in 23 the Office of Chief Counsel, thereafter worked from late 2014 through fall 2015 to 24 “search for documents responsive to Plaintiff’s FOIA request within the 25 commingled administrative file of the Smart-Tek entities….” Id. ¶¶ 23, 27. Thomas 26 says that her review consisted of “not[ing] which documents were responsive to 27 Plaintiff’s FOIA request and which documents were responsive to the other related 28 entities’ FOIA requests.” Id. ¶ 27. She concludes, “[t]o my knowledge, there are 6 15-cv-0453-BTM-JMA 1 no other records responsive to Plaintiff’s request.” Id. ¶ 28. 2 Plaintiff argues this evidence is insufficient to demonstrate the adequacy of 3 the IRS’s search, because it fails to explain what documents the commingled files 4 contained, the methodology used to review the 65 boxes of documents, criteria for 5 selecting responsive documents, and because it does not identify the entities 6 whose records were in the commingled file. Pl.’s Opp. at 6-7. 7 The Court agrees with Plaintiff in part. To sustain its burden, the IRS must 8 show “[w]hat records were searched, by whom, and through what process.” 9 Steinberg, 23 F.3d at 552. Although a “reasonably detailed, nonconclusory” 10 affidavit submitted “in good faith” will generally meet this burden, id. at 551 (quoting 11 Weisberg II, 745 F.2d at 1485), in key respects, Thomas’s declaration is too 12 conclusory to suffice. 13 First, the IRS has not explained how it interpreted Plaintiff’s FOIA request 14 (as initially submitted, or as subsequently clarified), nor does it explain what scope 15 of documents it determined were responsive to the request. Federal agencies 16 responding to FOIA requests are required to use search methods that can 17 reasonably be expected to yield the requested information. Lane v. Dep’t of 18 Interior, 523 F.3d 1128, 1139 (9th Cir. 2008). Without knowing what documents 19 the IRS was searching for in response to Plaintiff’s request, the Court has no 20 context for evaluating the reasonableness of the IRS’s search methods 21 Second, Thomas’s declaration fails to provide sufficient information about 22 the process by which the IRS reviewed the 65 boxes of documents. The IRS spent 23 months reviewing the boxes and removing particular documents, but it has not 24 explained what criteria the review team used to determine which documents to 25 remove. 26 calculated to uncover all relevant documents,” Zemansky, 767 F.2d at 571, to 27 evaluate the adequacy of the IRS’s search, the Court needs to know what the 28 search of the 65 boxes entailed to determine whether it was reasonable. See Although an agency need only prove its search was “reasonably 7 15-cv-0453-BTM-JMA 1 County of Santa Cruz v. Ctrs. for Medicare and Medicaid Servs., No. C-07-2889 2 MMC, 2009 WL 816633, at *2 (N.D. Cal. Mar. 26, 2009) (holding IRS failed to 3 demonstrate reasonableness of search where supporting declarations reported 4 that searches of various files located no responsive documents, without explaining 5 “the process used to conduct [the IRS’s] search”). Thomas states the search for 6 responsive records involved “not[ing] which documents were responsive to 7 Plaintiff’s FOIA request,” Thomas Decl. ¶ 24, which does not give the Court an 8 adequate understanding what the responsive records consisted of. See, e.g., 9 Kean v. Nat’l Aeronautics & Space Admin., 480 F. Supp. 2d 150, 156-57 (D.D.C. 10 2007) (finding descriptions of searches “inadequate” where they “[did] not contain 11 any details regarding which databases or records were searched, and what 12 methodology or search terms were used”). The IRS must provide additional detail 13 regarding the search paramaters the review team used to determine what 14 documents to remove from the 65 boxes as responsive, or potentially responsive, 15 to Plaintiff’s FOIA request. 16 Also, Plaintiff indicates in opposition to the IRS’s motion that it has received 17 two productions of documents from the IRS, including one that was produced on 18 August 1, 2016 that encompassed “several thousand more pages of documents” 19 in connection with which the IRS stated it was continuing to search for responsive 20 records. Bonar Decl. ¶ 8. The IRS responds that its subsequent release of 21 additional records does not render its entire search unreasonable. Reply at 4. 22 Perhaps not, but the Court agrees with Plaintiff that the IRS’s failure to address the 23 subsequent release of documents in its motion means it has failed to demonstrate 24 the reasonableness of the entirety of its search. 25 Next, the Court turns to Plaintiff’s argument that the IRS cannot establish the 26 reasonableness of its search without identifying the other entities whose records 27 were in the 65-box commingled file. The IRS did not address this argument in its 28 reply brief. 8 15-cv-0453-BTM-JMA 1 Two countervailing principles bear upon Plaintiff’s contention. On the one 2 hand, the Court must make a de novo determination of the adequacy of IRS’s 3 response to Plaintiff’s FOIA request, Reporters Comm. for Freedom of Press, 489 4 U.S. at 755, and it must be able to “intelligently judge the contest” to perform this 5 role. Wiener, 943 F.2d at 977. On the other hand, withholding information relating 6 to return information of another taxpayer or taxpayers, including the identity of 7 third-party taxpayers, is authorized under 5 U.S.C. § 552(b)(3), in conjunction with 8 26 U.S.C. § 6103(a), and 5 U.S.C. § 552 (b)(7)(C). See Johnson v. Comm’r of 9 Internal Revenue, 239 F. Supp. 2d 1125, 1128-29 (W.D. Wash. 2002). 10 Setting aside the merits of Plaintiff’s argument, as a threshold issue, it seems 11 likely that the alleged alter egos’ identities have already been disclosed. “[O]nce 12 tax return information is made a part of the public domain, the taxpayer may no 13 longer claim a right of privacy in that information” and “‘§ 6103’s directive to keep 14 return information confidential is moot.’” Lampert v. United States, 854 F.2d 335, 15 338 (9th Cir. 1988) (quoting Figur v. United States, 662 F. Supp. 515, 517 (N.D. 16 Cal. 1987). 17 submitted in support of Plaintiff’s opposition that Plaintiff issued its FOIA request 18 after being served with an IRS lien based on “payroll tax liabilities of unrelated 19 corporations.” Decl. Brian Bonar ¶ 2. Presumably the alleged alter egos were 20 identified in the IRS lien. 21 declaration; he describes the entities as “unrelated corporations,” and his 22 characterization of the corporations as “unrelated” implies he knows who they are. 23 Also, in researching the relevant legal issues, the Court encountered the district 24 court’s opinion in Goldberg v. United States, No. 13-61528-CIV, 2015 U.S. Dist. 25 LEXIS 104815, at *3-4 n.2 (S.D. Fla. Aug. 5, 2015). The Goldberg litigation 26 apparently arose from the same investigation of RO Black, and the district court’s 27 order appears to have disclosed the names of the entities involved. See id. If so, 28 under Lampert, disclosing their names in this litigation would appear not to run Bonar is Plaintiff’s president, and he indicates in a declaration Such a presumption seems supported by Bonar’s 9 15-cv-0453-BTM-JMA 1 afoul of § 6103(a). 2 The fact that any privilege pertaining to the identities of the alter egos may 3 have been dispelled does not necessarily mean the identity of every entity whose 4 files were in the 65 boxes has to be disclosed to establish the reasonableness of 5 the IRS’s search. At this stage, the record regarding the search the IRS undertook 6 is not yet complete, and the Court will reserve ruling on the merits of Plaintiff’s 7 argument until the record is more fully developed. 8 Based on the foregoing, the Court finds the IRS has failed to carry its burden 9 to demonstrate the adequacy of its search. Its motion for summary judgment will 10 be denied without prejudice. 11 C. Withholding of Responsive Documents Pursuant to FOIA Exemptions 12 The IRS indicates it withheld, in full or in part, responsive documents 13 14 15 pursuant to FOIA exemptions. 1. 5 U.S.C. § 552(b)(3) (“Exemption 3”) in Conjunction with 26 U.S.C. § 6103(a), 5 U.S.C. § 552(b)(7)(C) (“Exemption 7(C)”) 16 The IRS withheld responsive information pursuant to FOIA Exemption 3. 17 Exemption 3 protects from disclosure matters “specifically exempted by statute” “if 18 that statute—(A)(i) requires that the matters be withheld from the public in such a 19 manner as to leave no discretion on the issue; or (ii) establishes particular criteria 20 for withholding or refers to particular types of matters to be withheld….” 5 U.S.C. 21 § 552(b)(3)(A). 26 U.S.C. § 6103 has been determined to be an Exemption 3 22 statute. Long v. United States, 742 F.2d 1173, 1178 (9th Cir. 1984). Section 23 6103(a) provides that taxpayer “returns and return information shall be 24 confidential.” 26 U.S.C. § 6103(a). “Return information” is defined to include, 25 among other things, “a taxpayer’s identity, the nature, source, or amount of his 26 income, payments, receipts, deductions, exemptions, credits, assets, liabilities, … 27 whether the taxpayer’s return was, is being, or will be examined or subject to other 28 investigation or processing, or any other data … with respect to a return…..” 26 10 15-cv-0453-BTM-JMA 1 U.S.C. § 6103(b)(2). 2 Pursuant to Exemption 3 and § 6103(a), the IRS withheld documents 3 because they contained information of “third party taxpayers” and other “entities” 4 other than plaintiff. Maher Decl. ¶¶ 11-12. 5 Exemption 7(C) requires withholding of records or information compiled for 6 law enforcement purposes, but only to the extent the production of such 7 information “could reasonably be expected to constitute an unwarranted invasion 8 of personal privacy.” 5 U.S.C. § 552(b)(7)(C). Pursuant to Exemption 7(C), the 9 IRS withheld information consisting of “bank account numbers of business entities” 10 and “contracts between other businesses and plaintiff” as well as checks written to 11 plaintiff by third-party businesses. 12 At this stage, the Court will reserve ruling on the validity of the IRS’s 13 withholding of information under Exemptions 3 (in conjunction with § 6103(a)) and 14 7(C). Plaintiff’s essential dispute is that the IRS has wrongfully refused to produce 15 documents pertaining to alter ego entities whose tax liability was the basis for the 16 lien against Plaintiff. 17 exemptions relates to unidentified taxpayers and entities other than Plaintiff. Some 18 of the taxpayers or entities may be the alter ego entities whose documents Plaintiff 19 seeks. The IRS disputes whether Plaintiff can obtain tax information relating to 20 Plaintiff’s alter egos without an authorization from the alter ego. Plaintiff cannot 21 obtain such an authorization, however, without knowing which entities’ records 22 have been withheld. Although the IRS claims even the names of the alter egos 23 are protected from disclosure, if those names have already been published such 24 that any related privacy interest has been lost, there would appear to be no 25 impediment to identifying, in subsequent briefing, any alter ego taxpayers whose 26 records were withheld. 27 proffers, Plaintiff will have the opportunity to more intelligently advocate for 28 disclosure of the withheld information. Wiener, 943 F.2d at 977. The information withheld on the basis of the foregoing If the IRS can disclose those names in subsequent 11 15-cv-0453-BTM-JMA 1 2 The Court will therefore reserve ruling on these issues until the record has been more fully developed. 2. 5 U.S.C. § 552(b)(5) (“Exemption 5”) 3 4 Exemption 5 protects from disclosure “inter-agency or intra-agency 5 memorandums or letters that would not be available by law to a party other than 6 an agency in litigation with the agency….” 5 U.S.C. § 552(b)(5). “This exemption 7 entitles an agency to withhold . . . documents which a private party could not 8 discover in litigation with the agency.” Pac. Fisheries, 539 F.3d at 1148 (quoting 9 Maricopa Audubon Soc’y v. U.S. Forest Serv., 108 F.3d 1089, 1092 (9th Cir. 1997). 10 “Exemption 5 thus covers the attorney-client privilege, the attorney work-product 11 privilege, and the executive ‘deliberative process’ privilege.” Maricopa, 108 F.3d 12 at 1092. 13 a) Attorney-Client Privilege 14 Pursuant to Exemption 5, the IRS withheld portions of six pages of 15 documents because they contain attorney-client privileged information. “The 16 attorney-client privilege protects confidential disclosures made by a client to an 17 attorney in order to obtain legal advice, ... as well as an attorney's advice in 18 response to such disclosures.” United States v. Ruehle, 583 F.3d 600, 607 (9th 19 Cir. 2009) (internal quotation and citation omitted). 20 The IRS submits the declaration of Joseph T. Maher Jr., an attorney in the 21 IRS’s Office of Associate Chief Counsel, in support of its privilege claim. Maher 22 indicates the withheld information consisted of case history transcripts containing 23 “notes about advice from counsel on issues in the case.” Maher Decl. ¶ 17. 24 Maher’s declaration contains no indication who the “counsel” providing the 25 advice was, including whether the attorney was employed by the IRS Office of 26 Chief Counsel, or any other agency, so as to make it an inter-agency or intra- 27 agency communication covered by Exemption 5. See 5 U.S.C. § 552(b). There 28 is also no representation that the communications reflected in the notes were 12 15-cv-0453-BTM-JMA 1 confidential. See Ruehle, 583 F.3d at 607. On this record, the Court cannot 2 determine whether the withheld information fell within the attorney-client privilege 3 or Exemption 5. Accordingly, the Court denies the IRS’s motion for summary 4 judgment without prejudice on this ground. 5 b) Deliberative Process Privilege 6 The IRS withheld two pages of documents in full and 17 pages in part 7 pursuant to Exemption 5 and the deliberative process privilege. “In order to be 8 protected by the deliberative process privilege, a document must be both (1) 9 ‘predecisional’ or ‘antecedent to the adoption of agency policy’ and (2) 10 ‘deliberative,’ meaning ‘it must actually be related to the process by which policies 11 are formulated.’” United States v. Fernandez, 231 F.3d 1240, 1246 (9th Cir. 2000) 12 (quoting Nat’l Wildlife Fed’n v. U.S. Forest Serv., 861 F.2d 1114, 1117 (9th Cir. 13 1988) (additional citation and internal quotation marks omitted)) (holding death 14 penalty evaluation form completed by U.S. Attorney and submitted before final 15 decision whether to seek the death penalty fell within deliberative process 16 privilege). Shielding such documents from production is meant to encourage 17 forthright and candid discussions of ideas and improve the decision-making 18 process. Id. (citing Assembly of the State of Cal. v. U.S. Dep’t of Commerce, 968 19 F.2d 916, 920 (9th Cir.1992)). 20 The IRS relies on the Maher declaration to support its decision to withhold 21 all or parts of responsive documents pursuant to the deliberative process privilege. 22 Maher Decl. ¶¶ 18-21. He states the withheld information consists of “notes which 23 contain predecisional and deliberative recommendations and analysis of the case, 24 along with some notes about advice from counsel on issues in the case” (¶ 21(a)) 25 and a “memorandum from one Service employee to another” that contained 26 material that “is both predecisional and deliberative” (¶ 21(b)). This information is 27 “predecisional and deliberative as they contain assumptions or recommendations 28 reflecting ‘the give-and-take’ of the agency’s deliberative processes and release of 13 15-cv-0453-BTM-JMA 1 this information would reveal predecisional thoughts and analysis of Service 2 employees….” Id. ¶ 18. 3 The Court finds the Maher declaration insufficient to support the IRS’s 4 privilege claim. In particular, although he describes deliberative materials in the 5 abstract, Maher fails to indicate in non-conclusory fashion how the withheld 6 information was “actually related” to the IRS’s effort to decide how to proceed with 7 the collection action in this case. Fernandez, 231 F.3d at 1246 (to be “deliberative,” 8 information “must actually be related to the process by which policies are 9 formulated”) (emphasis added). Accordingly, the Court will deny the IRS’s motion 10 11 on this ground without prejudice. 3. 5 U.S.C. § 552(b)(6) (“Exemption 6”) 12 Exemption 6 restricts from disclosure “personnel and medical files and 13 similar files the disclosure of which would constitute a clearly unwarranted invasion 14 of personal privacy.” 5 U.S.C. § 552(b)(6). To determine whether information has 15 been properly withheld under Exemption 6 requires a court to “balance the privacy 16 interests or personal nature of the information sought against the public interest 17 that would be served by disclosure.” Chamberlain v. Kurtz, 589 F.2d 827, 841-42 18 (5th Cir. 1979); see Horowitz v. Peace Corps, 428 F.3d 271, 278 (D.C. Cir. 2005). 19 The IRS relies on the declaration of Maher in support of its withholding of 20 information under Exemption 6. He describes the information withheld under 21 Exemption 6 as “personal guaranty and signature sections of contracts between 22 other businesses and the plaintiff” that “contain the home addresses and social 23 security numbers of individuals” (Maher Decl. ¶ 23(a)); portions of documents 24 containing the social security numbers, email addresses, and phone numbers of 25 individuals (¶¶ 23(b)-(f)); and copies of checks written to plaintiff by third-party 26 individuals (¶ 23(g)). 27 The Court finds the referenced information was properly withheld under 28 Exemption 6, because it consists of personal information of individuals that falls 14 15-cv-0453-BTM-JMA 1 within the ambit of information typically subject to privacy protection, and the 2 privacy interests of the individuals involved outweigh any public interest that might 3 be served by disclosure. Chamberlain, 589 F.2d at 841-42. The Court also finds 4 the IRS has complied with its duty to disclose any reasonably segregable portions 5 of the affected documents. See Maher Decl. ¶ 9. Accordingly, the Court grants 6 the IRS’s motion for summary judgment as to its withholding of information 7 pursuant to Exemption 6. 8 4. 5 U.S.C. § 552(b)(7)(A) (“Exemption 7(A)”) 9 Exemption 7(A) relates to “records or information compiled for law 10 enforcement purposes” to the extent production of such information “could 11 reasonably be expected to interfere with enforcement proceedings….” 5 U.S.C. § 12 552(b)(7)(A). To support withholding documents under Exemption 7(A), an agency 13 “must establish only that they were investigatory records compiled for law 14 enforcement purposes and that production would interfere with pending 15 enforcement proceedings.” Barney v. Internal Revenue Service, 618 F.2d 1268, 16 1272-73 (8th Cir. 1980). 17 enforcement agency, Shannahan v. Internal Revenue Serv., 680 F. Supp. 2d 1270, 18 1281 (W.D. Wash. 2010), and civil tax enforcement proceedings are “enforcement 19 proceedings,” Barney, 618 F.2d at 1273. “The IRS need only make a general 20 showing that disclosure of its investigatory records would interfere with its 21 enforcement proceedings.” Lewis v. Internal Revenue Serv., 823 F.2d 375, 380 22 (9th Cir. 1987). “[D]isclosure of such records as witness statements, documentary 23 evidence, agent’s work papers and internal agency memoranda, prior to the 24 institution of civil or criminal tax enforcement proceedings, would necessarily 25 interfere with such proceedings by prematurely revealing the government’s case.” 26 Barney, 618 F.2d at 1273; see NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 27 236-37 (1978). 28 For purposes of Exemption 7(A), the IRS is a law The IRS submits the declaration of Rosanna Savala, a Supervisory Revenue 15 15-cv-0453-BTM-JMA 1 Officer, in support of its decision to withhold 45 pages in full, and 106 pages in 2 part, of responsive documents under Exemption 7(A). Savala Decl. ¶¶ 10-12. She 3 describes the withheld information as “case history transcripts and notes that 4 contain information about the case that if released would provide plaintiff with 5 earlier and greater access to information about the IRS’s investigation than it would 6 otherwise be entitled to receive” (¶ 12(a)); emails and memoranda that “reveal the 7 specific items and transactions that are the focus of an ongoing law enforcement 8 investigation” that reveal “the nature, direction, scope, and limits of the 9 investigation” (¶ 12(b)); notes of a meeting with a confidential informant that 10 contain information about plaintiff’s case (¶ 12(c)); and notes of meetings between 11 IRS employees “that contain information that if released would provide plaintiff with 12 earlier and greater access to information about the IRS’s investigation than it would 13 otherwise be entitled to receive” (¶ 12(d)). She indicates that disclosure of the 14 withheld information would give plaintiff the opportunity to tamper with or conceal 15 evidence, or construct explanations and defenses to the IRS’s theories, thus 16 interfering with the IRS’s law enforcement proceedings. Id. ¶ 12(a)-(d). 17 The Court finds the IRS’s evidence sufficient to show disclosure of the 18 referenced information would interfere with its enforcement proceedings pursuant 19 to Exemption 7(A), and that the IRS complied with its duty to reasonably segregate 20 and produce non-exempt information. Maher Decl. ¶ 9. 21 motion for summary judgment is granted as to this exemption. 22 5. 5 U.S.C. § 552(b)(7)(D) (“Exemption 7(D)”) 23 24 25 26 27 28 Accordingly, the IRS’s Exemption 7(D) protects information compiled for law enforcement purposes from disclosure to the extent it: could reasonably be expected to disclose the identity of a confidential source, including a State, local, or foreign agency or authority or any private institution which furnished information on a confidential basis, and, in the case of a record or information compiled by criminal law enforcement authority in the course of a criminal investigation or by an 16 15-cv-0453-BTM-JMA 1 2 agency conducting a lawful national security intelligence investigation, information furnished by a confidential source[.] 3 5 U.S.C. § 552(b)(7)(D). Exemption 7(D) “has long been recognized as affording 4 the most comprehensive protection of all of FOIA’s law enforcement exemptions.” 5 Billington v. U.S. Dep’t of Justice, 301 F. Supp. 2d 15, 22 (D.D.C. 2004). To invoke 6 its protections, an agency must show the particular source “provided information 7 under an express assurance of confidentiality or in circumstances from which such 8 an assurance could be reasonably inferred.” U.S. Dep’t of Justice v. Landano, 9 508 U.S. 165, 172 (1993). “A source should be deemed confidential if the source 10 furnished information with the understanding that the [agency] would not divulge 11 the communication except to the extent [it] thought necessary for law enforcement 12 purposes.” Id. at 174. 13 Pursuant to Exemption 7(D), the IRS withheld 28 pages in full, and one page 14 in part, of documents responsive to Plaintiff’s request. Maher Decl. ¶ 14. Maher 15 declares the withheld records contain information provided by a source who 16 “obtained implicit assurance of confidentiality” the release of which would disclose 17 the source’s identity. Id. 18 The Court finds Maher’s declaration insufficient to carry the burden of 19 demonstrating the withheld information is exempted from disclosure. Exemption 20 7(D) applies where there is an “express assurance of confidentiality” or 21 “circumstances from which such an assurance could be reasonably inferred.” 22 Landano, 508 U.S. at 172. Here, Maher says only that the source received an 23 “implicit assurance of confidentiality,” which is not an “express assurance of 24 confidentiality,” and since Maher does not explain what he means by an “implicit 25 assurance of confidentiality” the Court cannot determine whether the circumstance 26 he is referring to was one “from which such an assurance could be reasonably 27 inferred.” Id. Maher’s declaration in this case is less robust than the declarations 28 the IRS submitted to the Court in two of the cases related to this one, Case Nos. 17 15-cv-0453-BTM-JMA 1 15-cv-447 and 15-cv-452, which the Court found were sufficient to establish that 2 Exemption 7(D) applied. See Trucept, Inc., fka Smart Tek Solutions, Inc. v. IRS, 3 Case No. 15-cv-447-BTM-JMA, Queener Decl. (ECF No. 25-3) at ¶¶ 24-25 (stating 4 the withheld information “reveals a confidential source who/that received 5 assurance of confidentiality from the Service” and “was provided to the Service 6 with the understanding that it would only be divulged to the extent necessary to 7 facilitate ongoing efforts by the Service to enforce the Federal tax laws as applied 8 to plaintiff”); Smart-Tek Service Solutions Corp. v. IRS, Valvardi Decl. (ECF No. 9 29-5) at ¶ 25 (stating that the withheld information disclosed information or 10 identities of confidential sources who “have been assured confidentiality by the 11 Service”). Nor does the Maher declaration indicate whether the confidential source 12 he is referring to is the same one discussed in the declarations the IRS submitted 13 in the other cases. Thus, on this record, the Court cannot determine whether the 14 withheld information meets the standard for withholding under Exemption 7(D). 15 16 17 Accordingly, the Court will deny the IRS’s motion for summary judgment on this ground without prejudice. 6. Exemption 3 in Conjunction with 26 U.S.C. § 6103(e)(7) 18 The IRS withheld parts of documents pursuant to 26 U.S.C. § 6103(e)(7), 19 which is an Exemption 3 statute. Chamberlain v. Kurtz, 589 F.2d 827, 839-40 & 20 n.26 (5th Cir. 1979) (referring to § 6103(e)(7) under its then-applicable statutory 21 designation, § 6103(e)(6)). Pursuant to § 6103(e)(7), “[r]eturn information with 22 respect to any taxpayer may be open to inspection by or disclosure to any person 23 authorized by this subsection to inspect any return of such taxpayer if the Secretary 24 determines that such disclosure would not seriously impair Federal tax 25 administration.” 26 U.S.C. § 6103(e)(7). Section 6103(e)(7) gives a taxpayer 26 “unrestricted access to his own returns, but as to other information or materials 27 collected by the IRS in the course of determining tax liability” availability of the 28 returns “is conditioned on the Secretary’s determination that such access would 18 15-cv-0453-BTM-JMA 1 not impair tax administration.” 2 reflecting information “prepared or collected by the Secretary with respect to 3 determining the existence of liability for a tax or penalty” is subject to withholding 4 under § 6103(e)(7). Id. at 840. Chamberlain, 589 F.2d at 837. Documents 5 The IRS relies on the declaration of Savala, who states she is authorized by 6 Treasury Department Order No. 150-10 and related authority to determine under 7 § 6103(e)(7) whether disclosure of return information would impair tax 8 administration. Savala Decl. ¶¶ 6-9. She determined that 45 pages of documents 9 in full, and 106 pages in part, should be withheld because they would have such 10 an impairing effect. The withheld documents are the same as the ones identified 11 and withheld pursuant to Exemption 7(A). See id. ¶ 9(a)-(d); ¶ 12(a)-(d). Savala 12 indicates the withheld information would, if disclosed, give plaintiff an unfair 13 advantage “in the midst of an ongoing investigation” and allow it to prematurely 14 craft explanations and defenses based on the information, which would 15 “reasonably be expected to impair the Service’s ability to determine the correct 16 application of the Federal tax laws.” Id. ¶ 9(a)-(d). 17 The Court finds the IRS’s evidence sufficient to show disclosure of the 18 withheld information access would impair tax administration, such that it is subject 19 to withholding under § 6103(e)(7). The Court further finds the IRS complied with 20 its duty to reasonably segregate and produce non-exempt information. See Maher 21 Decl. ¶ 9. Accordingly, the Court grants the IRS’s motion for summary judgment 22 as to this exemption. 23 // 24 // 25 // 26 // 27 // 28 // 19 15-cv-0453-BTM-JMA 1 2 3 4 5 III. CONCLUSION AND ORDER For the reasons discussed above, the IRS’s motion for summary judgment is GRANTED IN PART and DENIED WITHOUT PREJUDICE IN PART. IT IS SO ORDERED. Dated: July 20, 2017 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 15-cv-0453-BTM-JMA

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