KOZACKY & WEITZEL, P.C., Plaintiff, v. UNITED STATES OF AMERICA, DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE, Defendant.
Case No. 07 C 2246
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
April 10, 2008
MATTHEW F. KENNELLY, United States District Judge
MATTHEW F. KENNELLY, District Judge:
Kozacky & Weitzel, P.C. (K&W) has sued the Internal Revenue Service (IRS) under the Freedom of Information Act (FOIA),
Facts
On November 3, 2006, the IRS issued letters to Rodney R. Kirby and Heidi M.
K&W filed this suit on April 24, 2007. On August 20, 2007, Gerald Role, an attorney in the Department of Justice‘s Tax Division, sent a letter to K&W stating that an additional ninety-five pages of documents had been located. The letter explained that the IRS was releasing tеn redacted pages and two unredacted pages and was withholding the remaining pages under certain FOIA exemptions. On October 15, 2007, the IRS moved for summary judgment, attaching declarations from Margaret Keller, an IRS employee who processes FOIA requests, Melissa C. Quale, an IRS attorney who handles FOIA lawsuits, and Role. The three declarations explained the processing of K&W‘s FOIA request. Additionally, Quаle stated in her declaration that the withheld documents fell under certain FOIA exemptions. In response to the IRS‘s summary
Discussion
1. Vaughn Index
Under FOIA, the Court is authorized to “enjoin [an] agency from withholding agency records and to order the production of any agency records improperly withheld from the complainant.”
The exemptions provided in FOIA are construed narrowly, to provide as much access to documents as is feasible and safe for the government to do. Id. at 823. “When the Government declines to disclose a document the burden is upon the agency to provе de novo in trial court that the information sought fits under one of the exemptions to the FOIA.” Vaughn v. Rosen, 484 F.2d 820, 823 (D.C. Cir. 1973). In determining whether the agency has met its burden, the court must decide whether its declarations provide the court with “an adequate factual basis” for determining whether the documents withheld truly fall within one of FOIA‘s exemptions. Patterson v. IRS, 56 F.3d 832, 836 (7th Cir. 1995). Affidavits that do nothing more than categorically describe withheld information as falling into a particular exemрtion category are inadequate. Id.
In seeking summary judgment, the IRS argues – relying on Quale‘s declaration -- that the withheld documents fell under certain FOIA exemptions. K&W argues that Quale‘s declaration does not adequately explain her conclusions that the documents
The term ”Vaughn index” derives from the D.C. Circuit‘s decision in the Vaughn case. In Vaughn, the court expressed its concern that under then-prevailing procedures in FOIA cases, a party seeking disclosure was effectively helpless to controvert the government‘s assertion that infоrmation was exempt from disclosure, because it was forced to argue in the blind, often in response to conclusory governmental claims of exemption from disclosure. This, in turn, left it to the reviewing court to conduct its own investigation, a questionable procedure in a system accustomed to adversary presentations. Vaughn, 484 F.2d at 823-26.
As a result, the court developed what is now known as the Vaughn index, an itemizing and indexing system that correlates each portion of any document withheld with the government‘s reason for withholding it. “In preparing a Vaughn Index, an agency must list the title of the document or category of documents, the date of the document, the author and recipient(s), a detailed factual description of the document, and the statutory exemption the agency is claiming to support nondisclosure.” Becker v. IRS, 34 F.3d 398, 401 n.9 (7th Cir. 1994). The Vaughn index is used with or in lieu of government affidavits supporting а claim of exemption when the affidavits lack specificity sufficient to allow the Court to determine whether withheld documents are exempt from disclosure. See Vaughn, 484 F.2d at 826-27.
There is no per se rule requiring the filing of a Vaughn index in FOIA cases;
To support the withholding of parts or all of particular documents, the IRS relies on the declaration of IRS attorney Melissa Quale. Quale states that the documents numbered 578 through 683 were withheld based on FOIA exemption (b)(3), exemption (b)(5), or both. Quale Decl. ¶¶ 9-20.
a. Documents Withheld under Exemption (b)(3)
The IRS has withheld certain documents under FOIA exemption (b)(3) in conjunction with
specifically exempted from disclosure by statute (other than section 552(b) of this title), provided that such statute (A) requires that the matters be withheld from the public in suсh a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld.
Under section 6103(a), “[r]eturns and return information shall be confidential.”
a taxpayеr‘s identity, the nature, source, or amount of his income, payments, receipts, deductions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer‘s return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by thе Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition or offense . . . .
Quale states that “the [IRS] withholds [documents] 000578-000585, 000595, 000607, and 000616-000619 in full and [documents] 000586-000594, 000596-000606, and 000645-000683 in part pursuant to FOIA exemption (b)(3) in conjunction with [
- document 578-579 is a “flowchart showing relationships between third-party promoters and investors“;
- document 580-585 is an “(2) emаil from a third-party taxpayer representative with attachments pertaining to protective lists as provided by Treas. Reg. § 301.6112-1(e)(3)(i), for distressed asset/debt transactions,”
- document 586-594 is an “attachment to email from third-party taxpayer representative containing protective list of investors in distressed assets/debt transaction [sic]“;
document number 595 is another third-party taxpayer representаtive email “discussing protective list for an additional transaction” - document 596-604 is a “protective list and privilege statement submitted by third-party taxpayer representative for distressed asset/debt transaction”
- document 605-606 is an “internal memorandum discussing team assigned to distressed asset/debt transactions containing names of several third-party taxpayer promoters“;
- document 607 is a “letter from IRS tо third-party taxpayer requesting production of protective list“;
- document 616 is an “internal email requesting information about a third-party taxpayer promoter and its distressed asset/debt transactions“;
- and document 617-618 is an “email exchange between IRS employees discussing possible distressed asset/debt case and its promoter.”
Quale Decl. ¶ 10.
These explanations are too curt to permit the cоurt to determine whether the documents are fully exempt or could appropriately be produced in redacted form, that is, after redacting any return information protected under
Under FOIA, “‘any reasonable segregable portion of the record’ must be disclosed.” Patterson, 56 F.3d at 840 (quoting
b. Documents Withheld under Exemption (b)(5)
The IRS claims documents numbered 620-644 are exempt from disclosure under FOIA exemption (b)(5), which provides that disclosure is not required of “inter-agency or intra-agency memorandums or letters which would not be available by law to a party
Exemption (b)(5) exempts from disclosure documents that are protected from civil discovery under, among other things, the deliberative process privilege. See King v. IRS, 684 F.2d 517, 519 (7th Cir. 1982) (citing EPA v. Mink, 410 U.S. 73 (1973)). The exemption is narrowly construed; “for this privilege to apply, the document must be ‘pre decisional’ and ‘deliberative.‘” Becker, 34 F.3d at 403. The government bears the burden of proving the deliberative process that was involved and the role the document played in that process. Id.
In a single sentence of her declaration, Quale states that these twеnty-five pages are an “unreviewed draft outline of points for consideration used internally by IRS employees working on distressed asset/debt transactions.” Quale Decl. ¶ 19. The Court cannot determine, based on this statement, that these pages are both “pre decisional” and “deliberative” or, as discussed in the previous section, whether there are segregable parts of the document thаt could be disclosed. As a result, there is a need for further explanation so K&W can address the government‘s claim and the Court can make an informed decision.
The IRS argues that the documents numbered 608-615 are appropriately withheld in full because they fall under both exemptions (b)(3) and (b)(5). Quale describes these documents as “email exchanges between numerous employees discussing the treatment of several distressed asset/debt cases where the promoters, third-party taxpayers, are under examination.” Quale Decl. ¶ 14. For the same reasons described earlier, this description is insufficient to permit the court to make an informed decision as to whether these documents, in their entirety, actually fall within the claimed exemptions.
Quale also states that document 605-606 is exempt under
In sum, due to the inadequacy of the affidavits submitted by the IRS, a Vaughn index is required to enable K&W to argue the case adequately and to permit the Court to dеtermine (either with or without in camera inspection) whether the documents are appropriately withheld under the claimed exemptions. Vaughn “requires the government to list the title of the document or category of documents, the date of the document, the author and recipient, a detailed factual description of the document, and the statutory exemption claimed by the agency to supрort nondisclosure.” Patterson, 56 F.3d at 839 n.11. The government should also address the issues of segregability and redaction, and it should be prepared to produce the documents in question for in camera inspection by the Court.
2. Discovery
K&W contends discovery is warranted “to determine whether an adequate initial search was conducted, whether adequate subsequent searches were conducted, whether the withheld documents are truly exempt from disclosure, and whether declarations submitted by the IRS in support of its motion for summary judgment are sufficient.” Pl. Mot. at 9. K&W requests that the IRS be compelled to answer the interrogatories that K&W served on July 13, 2007.
The IRS argues that discovery is generally inappropriate in FOIA cases and is impermissible in this case because the Court has not determined the sufficiency of the IRS‘s declarations. The IRS argues that K&W‘s discovery requests are aimed at finding
To decide whether further discovery is warranted, the Court must determine whether the IRS conducted a reasonable search for documents in response to K & W‘s FOIA request. Patterson, 56 F.3d at 841. As the Seventh Circuit has stated,
[t]he issue is not whether other documents may exist, but rather whether the search for undisclosed documents was adequate. . . . The adequacy of the document search is judged under a reasonableness standаrd. The agency may rely on reasonably detailed nonconclusory affidavits submitted in good faith to support their claims of compliance.
Becker, 34 F.3d at 405-06 (emphasis in original) (internal quotation marks omitted).
The history of the case suggests that the IRS may have made a less-than diligent effort to respond to K&W‘s FOIA requests. In response to K&W‘s first FOIA request, the IRS‘s search “was limited to the information contained in the Kirby‘s individual files.” Keller Decl. ¶ 7. Only upon further inquiry by K&W did the IRS advise K&W that “requests seeking information not contained within the Kirby‘s individual filеs, but about a national tax shelter initiative should be directed to the Baltimore, Maryland Disclosure Officer (Baltimore Office).” Id. Then, in response to K&W‘s second FOIA request, the IRS determined that the request was too vague and that the request “should be closed as imperfect,” at which point the IRS requested more detailed information from K&W. Id. ¶¶ 12-14. Finally, after K & W filed this suit, the IRS received information about the names of people who “may have infоrmation responsive to the Second FOIA Request.” Id. ¶ 16.
One might reasonably infer from this sequence of events that continuous prodding was required to get the IRS to conduct a search for responsive documents.
That said, most of K&W‘s interrogatories go beyond the scope of what is appropriate in discovery in a FOIA suit. Interrogatories 2 through 4 and 8 through 13 concern the appropriateness of deductions claimed by the Kirbys and are thus inappropriate because “[the plaintiff] cannot use FOIA discovery to conduct an investigation into the IRS’ rationale for [an] audit.” Flowers v. IRS, 307 F. Supp. 2d 60, 72 (D.D.C. 2004). Interrogatories 16 and 19 likewise appear, as best as the Court can determine, to concern statements in the IRS‘s answer to allegations in the complaint involving matters of underlying tax policy that are not, in the Court‘s view, pertinent to the FOIA disclosure and exemption issues involved in this case. Interrogatories 5 through 7 concern the IRS‘s contention that the Kirbys are not eligible for attorney‘s fees and costs should they prevail; the Court will not require an answer to these interrogatories because they involve a matter more appropriately taken up if and when the Kirbys prevail in the case. Interrogatories 14 and 18 seek clаrification of the IRS‘s responses to particular paragraphs of the complaint, responses that are, in the Court‘s view, clear enough that further elaboration is not required. Finally, interrogatory 20 seeks clarification of the IRS‘s lack-of-information denial of a rather argumentative allegation in K&W‘s complaint in this case regarding alleged “harassment” of taxpayers; in the Court‘s view, further clarification of the IRS‘s statement that it lacks sufficient
The remaining interrogatories – 15, 17, 21, and 22 – each concern the nature and adequacy of the IRS‘s search(es) for documents following K&W‘s FOIA requests. The Court directs the IRS to answer these interrogatories, as an answer may help illuminate whether the IRS has done what FOIA requires.
Conclusion
For the reasons stated above, the Court grants plaintiff‘s motion to compel production of Vaughn index and grants in part its motion to compel discovery [docket nos. 18 & 20]. The Court directs defendant to answer plaintiff‘s interrogatories 15, 17, 21, and 22, and to produce a Vaughn index, by May 15, 2008. Defendant‘s motion for summary judgment is terminated without prejudice [docket no. 15], as it is clear that the basis for any such motion will be altered by the disclosures the Court has ordered. The case is set for a status hearing on May 22, 2008 at 9:30 a.m.
MATTHEW F. KENNELLY
United States District Judge
Date: April 10, 2008