Copyright (c) 1995 Tax Analysts Tax Notes Today SEPTEMBER 27, 1995 WEDNESDAY DEPARTMENT: Other Court Documents (CTO) CITE: 95 TNT 189-59 LENGTH: 2210 words HEADLINE: 95 TNT 189-59 DEFENDANT'S RESPONSE TO PLAINTIFF'S MOTION FOR IN CAMERA INSPECTION OF DOCUMENTS. (Tax Analysts v. IRS) (94-CV-00220 (TFH)) (United States District Court for the District of Dist. of Columbia) (Section 6104 -- Exempt Organization Information) (Release Date: September 22, 1995) (Doc 95-8968 (10 pages)) CODE: Section 6104 -- Exempt Organization Information SUMMARY: Defendant filed its response to plaintiff's motion for in camera inspection of documents in the case of Tax Analysts v. Internal Revenue Service, a suit seeking release of all exempt organization closing agreements entered into by the IRS after Dec. 31, 1992. AUTHOR: Hogan, Thomas GEOGRAPHIC: United States INDEX: exempt organizations, disclosure REFERENCES: Subject Area: Exempt Organizations TEXT: TAX ANALYSTS, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant. Release Date: September 22, 1995 DEFENDANT'S RESPONSE TO PLAINTIFF'S MOTION FOR IN CAMERA INSPECTION OF DOCUMENTS COMES NOW DEFENDANT, Internal Revenue Service, by and through its undersigned counsel, and hereby responds in opposition to plaintiff's motion for in camera inspection of documents. PAGE 25 (c) 1995, Tax Analysts, Tax Notes Today, SEPTEMBER 27, 1995 I. STANDARD FOR IN CAMERA REVIEW. Plaintiff concedes, as it must, that in camera review is generally disfavored. PHE, Inc. v. Department of Justice, 983 F.2d 248, 253 (D.C. Cir. 1993). In Center for Auto Safety v. E.P.A. 731 F.2d 16 (D.C. Cir. 1984), the Court discussed what considerations should be taken into account in exercising its discretion to examine documents in camera. Emphasizing that such review is discretionary, not mandatory, the Court referred to the standard set forth in Hayden v. National Security Agency, 608 F.2d 1381, 1387 (D.C. Cir. 1987), cert. denied, 446 U.S. 937 (1980), as to when affidavits would be sufficient to justify summary judgment without in camera inspection: The affidavits must show with reasonable specificity, why the documents fall within the exemption. The affidavits will not suffice if the agency's claims are conclusory, merely reciting statutory standards, or if they are too vague or sweeping. If the affidavits provide specific information sufficient to place the documents within the exemption category, if this information in not contradicted in the record, and if there is no evidence in the record of agency bad faith, then summary judgment in appropriate without in camera review of the documents. [Citations omitted.] The Court went on to note that: This Circuit has repeatedly held that "when the agency meets its burden [under the FOIA] by means of affidavits, in camera review is neither necessary nor appropriate. [Citations omitted.] Center for Auto Safety v. E.P.A., supra, 731 F.2d at 23. Thus, simply because the discretion to conduct in camera review exists does not mean that it ought to be exercised. See N.L.R.B. v. Robbins Tire & Rubber Co., 437 U.S. 214, 224 (1978) (The in camera review provision is discretionary by its terms, and is designed to be invoked when the issue before the Court could not otherwise be resolved); see also Barney v. Internal Revenue Service, 618 F.2d 1268, 1272 (8th Cir. 1980). In Lam Lek Chong v. Drug Enforcement Administration, 929 F.2d 729 (D.C. Cir. 1991), the Court found no abuse of discretion where the trial court found in camera review unnecessary and the documents at issue exempt under Exemption 3 of the FOIA. The Court stated that such review may be appropriate in two circumstances: first, when the agency affidavits are insufficiently detailed PAGE 26 (c) 1995, Tax Analysts, Tax Notes Today, SEPTEMBER 27, 1995 to permit meaningful review of exemption claims, and second, where evidence of agency bad faith is before the Court. Id. at 735. Neither circumstance is present here. II. IT IS NOT NECESSARY FOR THE COURT TO CONDUCT IN CAMERA REVIEW OF THE DOCUMENTS AT ISSUE. A. THE MILLER DECLARATION SUFFICIENTLY DESCRIBES THE DOCUMENTS AT ISSUE AND THE BASIS FOR WITHHOLDING. The declaration of Steven T. Miller accompanying defendant's motion for summary judgment provides detailed description of the documents at issue which are closing agreements entered into between third party taxpayers and the Internal Revenue Service. (Def. Mo. for Summary Judgment, Miller Declaration.) The declaration states that each of the closing agreements identify whether the taxpayer's return was subject to examination or other investigation, and contain some or all of the following items of information: the nature, source or amount of the organization's income, payments, receipts, assets and tax liabilities. Id., paragraph 16.) The declaration describes how the agreements came about, specifically, that all of the closing agreements at issue were entered into as a result of an examination of the organization to which the closing agreement pertains, issues voluntarily brought to the attention of the Service by the organization, or a combination of the two. (Id., paragraphs 17, 18.) The declaration also states that the administrative record for each organization is available for public inspection under Section 6104. (Id.) Contrary to plaintiff's assertions, Miller explains the nature of closing agreements and notes that closing agreements not only contain discrete items of return information but the agreement itself constitutes return information which cannot be segregated for partial release. (Id. paragraphs 5-8.) Plaintiff's analysis of the segregability of information contained in the documents at issue is erroneous. Plaintiff argues that the Service has not adequately addressed the segregability issue because it has not correlated the claimed exemption to particular passages in the closing agreements. In Church of Scientology v. Internal Revenue Service, 484 U.S. 7 (1987), the Supreme Court held that removal of identifying information from confidential return information does not deprive it from the protection of Section 6103. If the documents constitute return information, as defined in Section 6103, then segregability is not an issue. Thus, there is no "middle ground" as plaintiff asserts which would allow the Court to order disclosure of portions of the documents at issue here. In a case plaintiff cites, Schiller v. N.L.R.B., 964 F.2d 1205 (D.C. Cir. 1992), the remand to the District Court was for a finding to determine WHETHER OR NOT the documents contained segregable passages for documents claimed as exempt under Exemptions 2 and 5. In this case, such a consideration is not present as the documents, which constitute return information, are prohibited from disclosure under Section 6103 and thus, exempt in their entirety under Exemption 3. B. THE MILLER DECLARATION DOES NOT "MASK THE TRUTH." PAGE 27 (c) 1995, Tax Analysts, Tax Notes Today, SEPTEMBER 27, 1995 Plaintiff asserts that the Miller declaration appears "to mask the truth" by stating that none of the closing agreements grant tax exempt status without stating whether the Service agreed in the closing agreements to grant such status. A review of the Miller declaration reveals not only that plaintiff's assertion is completely devoid of merit but why in camera inspection is not necessary in this case. Mr. Miller's declaration clearly states with respect to five of the agreements that "[a]lthough some or all of these closing agreements acknowledge the fact that the organizations involved are recognized by the Service as tax exempt, none of the closing agreements grant such tax exempt status to the organizations. The Service's recognition of the tax exempt status of these organizations is based on the content of an administrative record or upon the order of a court." (Id., paragraph 17.) With respect to the sixth agreement, Miller states "[t]he service had already recognized the tax exempt status of the organization based on the content of the administrative record before the Service." Id., paragraph 18.) Accordingly, these closing agreements are not the dispositive documents, as plaintiff asserts, which grant exempt status. Plaintiff's gratuitous statement that it leaves to the Court to decide "if the affidavit's ambiguity amounts to bad faith" demonstrates that the plaintiff has not and cannot allege, much less present, evidence of bad faith so that in camera review is warranted. See Carter v. Department of Commerce, supra, 830 F.2d at 392 ("The more allegation of bad faith does not undermine the sufficiency of agency submissions. There must be tangible evidence of bad faith; without it the Court should not question the veracity of agency submissions.") There is absolutely no evidence of bad faith on the part of the agency in this case. In fact, the record before the Court requires one to look no further than the hearsay statements contained in the declaration of plaintiff's own counsel to see just how desperate plaintiff is to create an issue here. /1/ C. BECAUSE THIS DISPUTE DOES NOT CENTER ON THE CONTENT OF THE WITHHELD DOCUMENTS, IN CAMERA REVIEW IS DISFAVORED HERE. The dispute in this case is not on the content of the documents but whether the documents are prohibited from disclosure under Section 6103, and thus exempt from production under FOIA Exemption 3. In Carter v. Department of Commerce, supra, the Court noted that "in camera review is of little help when the dispute centers not on the information contained in documents but on the parties' differing interpretations as to whether the exemption applies." Id. at 393. In the only case plaintiff cites involving Exemption 3, Krikorian v. Department of State, 984 F.2d 461 (D.C. Cir. 1993), the Court emphasized that when a claim under Exemption 3 of the FOIA is made, it does not scrutinize the contents of withheld documents. ("In reviewing an Exemption 3 claim, we do not closely scrutinize the contents of a withheld document; instead, we determine only whether there is a relevant statute and whether the document falls within that statute." Id. at (Citation omitted.]) In another case involving Exemption 3, Association of Railroad Workers v. United States Railroad Retirement Board, 830 F.2d 331, 336 (D.C. Cir. 1987), the Court stated that de novo review ends with the finding that the particular matter sought is covered by the statu[t]e. Id. at 335. In that case, the appellant nonprofit organization, "existing for the sole purpose of promoting the social welfare of all retired persons," sought the names and addresses of PAGE 28 (c) 1995, Tax Analysts, Tax Notes Today, SEPTEMBER 27, 1995 retired railroad workers which the Board denied under Exemption 3. The Court noted that It is quite true that FOIA mandates de novo review by the district court for all nine exemptions. 5 U.S.C. section 552(a)(4)(B). Yet the scope of the review is not identical in all cases. * * * Exemption 3 differs from other FOIA exemptions in that its applicability depends less on the detailed factual contents of specific documents." Id. at 336. In this case, the applicability of Exemption 3 turns on whether the documents at issue are prohibited from disclosure under Section 6103. Based on the record, in camera review is not necessary for the Court to make this determination. Finally, plaintiff alleges that because only six documents are at issue, in camera review is favored. Because the declaration sufficiently describes the documents and the basis for withholding and there is no bad faith, in camera inspection is unnecessary regardless of the number of documents involved. Accordingly, the Court should not exercise its discretion to review the documents in camera. Dated: September 22, 1995. Respectfully submitted, MARGARET M. EARNEST Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Ben Franklin Station Washington, DC 20044 Telephone: (202) 307-6562 OF COUNSEL: ERIC E. HOLDER United States Attorney [CERTIFICATE OF SERVICE OMITTED] FOOTNOTE TO DEFENDANT'S RESPONSE /1/ See Supplemental Declaration of Bruce L. Stern appended to Plaintiff's Reply to Defendant's Response to Plaintiff's Motion for Summary Judgment dated August 15, 1995. From hearsay statements made in that declaration, plaintiff's reply states that a favorable ruling letter was not issued to Old Time Gospel Hour. (Pl. Reply to Def. Opp. to Pl. Mo. for Summary Judgment, pp. 5-8.) As noted in Mr. Miller's declaration, the favorable ruling letter issued by the Service to this organization is available for public inspection pursuant PAGE 29 (c) 1995, Tax Analysts, Tax Notes Today, SEPTEMBER 27, 1995 to Section 6104. (Def. Resp. to Pl. Mo. for Summary Judgment, Second Declaration of Steven T. Miller, paragraph 17.) END OF FOOTNOTE ORDER Having considered plaintiff's motion for in camera inspection of documents, defendant's response thereto, and plaintiff's reply [if any], it is this day of , 1995, hereby ORDERED that plaintiff's motion is DENIED. The Clerk is directed to mail conforming copies of this Order to the parties listed below. THOMAS F. HOGAN United States District Judge cc: Margaret M. Earnest Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Ben Franklin Station Washington, D.C. 20044 William J. Lehrfeld, Esquire Bruce L. Stern, Esquire William J. Lehrfeld, P.C. Suite 740 1250 H Street, NW Washington, DC 20005-3908 William A. Dobrovir, Esquire William A. Dobrovir, P.C. 65 Culpepper street Warrenton, VA 22186