266 F. Supp. 3d 80
D.D.C.2017Background
- Richard O. Henry, a Booz Allen contractor, had "staff-like access" to IRS systems from 2001 until revoked in 2012 after an IRS re-investigation revealed he failed to register with the Selective Service before age 26.
- Henry disclosed the non-registration on multiple forms: the 2001 and 2006 OF-306s (yet was approved) and again in 2011 when he completed re-investigation paperwork; his explanations varied (conscientious grounds vs. having "put it off").
- The IRS updated its Internal Revenue Manual (IRM) in 2008 and 2011 to require that male contractors born after 1959 be registered with the Selective Service (or have an exception); it also revised re-investigation procedures for certain risk levels.
- The IRS initiated a 2011 re-investigation (consistent with its practice for cases scheduled prior to the 2008 IRM changes), concluded Henry did not meet the Selective Service requirement, and revoked his access after finding his explanations inconsistent and insufficient to show the failure was not "knowing and willful."
- Henry sued under the Administrative Procedure Act (APA), alleging (among other claims) that the IRS (1) improperly based the 2011 investigation on superseded IRM provisions and (2) acted arbitrarily in revoking access without properly applying the "knowing and willful" standard.
- The district court held the claims justiciable (procedural review only), rejected Henry’s challenges, and granted summary judgment for the IRS as to the remaining counts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Justiciability under Egan | Henry argues court can review IRS compliance with IRM procedures (procedural claim) | IRS contends access/security decisions are committed to executive discretion and nonjusticiable under Egan | Court: Procedural challenges to IRM compliance are justiciable; Egan does not bar review here |
| Lawfulness of 2011 re-investigation | Henry: IRS relied on superseded pre-2008 IRM provisions and improperly subjected him to a full background reinvestigation | IRS: It consistently re-investigated contractors whose five-year dates predated the 2008 IRM; IRM permits investigation "at any time" | Court: IRS practice permissible and authorized by IRM’s "at any time" language; any procedural error was not prejudicial |
| Application of Selective Service requirement | Henry: Revocation was arbitrary because IRS departed from precedent and failed to apply proper standards | IRS: Selective Service requirement adopted in 2008; prior practice is irrelevant; requirement applied legitimately | Court: No improper departure—requirement post-dated Henry’s earlier approvals; revocation on that ground lawful |
| Adequacy of "knowing and willful" adjudication | Henry: IRS failed to follow 5 C.F.R. procedures and did not adequately investigate or explain that his failure was knowing/willful | IRS: Henry had multiple opportunities to explain; agency recited conflicting explanations and reasonably concluded failure was knowing/willful | Court: IRS satisfied procedural requirements, considered relevant data, and reasonably explained its conclusion; action not arbitrary or capricious |
Key Cases Cited
- Department of the Navy v. Egan, 484 U.S. 518 (1988) (security-clearance decisions involve sensitive judgments and are generally committed to agency discretion)
- Ryan v. Reno, 168 F.3d 520 (D.C. Cir. 1999) (distinguishes reviewable procedural challenges from nonreviewable substantive security-clearance decisions)
- Motor Vehicle Manufacturers Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious standard: agency must consider relevant data and articulate rational connection between facts and decision)
- Taylor v. Huerta, 723 F.3d 210 (D.C. Cir. 2013) (deference to agency interpretation of its own regulations unless clearly contrary to plain meaning)
- PDK Labs., Inc. v. U.S. Drug Enforcement Admin., 362 F.3d 786 (D.C. Cir. 2004) (affirming that procedural errors are reviewable only if prejudicial)