of tax return information. Thus, the IRS contends that it is both responsible for determining Plaintiffs' rights, and bound by federal statute to deny disclosure.
The Board offers a somewhat parallel argument in support of its motion for protective order. It contends that any discovery by Plaintiffs is properly directed at the IRS alone, the primary subject of the Court of Appeals' opinion. The Board argues, in essence, that Plaintiffs' participation in the application procedure can be defined only by IRS procedures. It notes also that it is not entitled to Plaintiffs' submissions to the IRS, and therefore may withhold its submissions from Plaintiffs.
Plaintiffs' response to these arguments is rather straightforward: They are party to an action pending before a federal court. Under Federal Rule of Civil Procedure 26, they are entitled to discovery "regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action." Fed. Rule Civ. Pro. 26(b)(1). According to Plaintiffs, by engaging in the application and approval process, which includes a consideration of an employer's "substantial business hardship," the Board and the IRS have placed the tax return information at issue in the litigation. In addition, Plaintiffs argue that the statutory bar to the release of trust tax return information contains an exception for persons having a material interest in a trust, a category in which Plaintiffs would place themselves.
The procedural posture of this case compels denial of Plaintiffs' Motion on a ground which neither Defendant has raised. It is quite clear to the Court that this is not a "discovery" dispute at all. To some extent, Plaintiffs originally brought suit precisely to force Defendants to produce the type of documents at issue. Though Plaintiffs style their motion as one for discovery, in reality, they are asking the Court to decide one of the claims in their complaint. They had that opportunity before Judge Smith, and on appeal. The Court of Appeals saw fit to return the entire matter to the IRS. Procedurally, Plaintiffs' claims are before the IRS.
The doctrine of exhaustion of administrative remedies bars a decision on Plaintiffs' Motion altogether at this time. The doctrine provides that "no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 82 L. Ed. 638, 58 S. Ct. 459 (1938). The exhaustion requirement may arise under a statute specifically, or be implied from an administrative scheme providing avenues of agency relief. See Linfors v. United States, 673 F.2d 332 (11th Cir. 1982).
In McKart v. United States, 395 U.S. 185, 23 L. Ed. 2d 194, 89 S. Ct. 1657 (1969), the Supreme Court articulated the policies behind the requirement of exhaustion: (1) to avoid premature interruption of the administrative process; (2) to let the agency develop the necessary factual background upon which decisions should be based; (3) to permit the agency to exercise its discretion or apply its expertise; (4) to improve the efficiency of the administrative process; (5) to conserve scarce judicial resources, since the complaining party may be successful in vindicating rights in the administrative process and the courts may never have to intervene; (6) to give the agency a chance to discover and correct its own errors; and (7) to avoid the possibility that "frequent and deliberate flouting of administrative processes could weaken the effectiveness of an agency by encouraging people to ignore its procedures." Id. at 193-95.
Each of these applies with some force to Plaintiffs' attempt to compel disclosure of the documents here. The matter has been remanded to the IRS to allow that agency to reconsider the proposed plan amendment and to fashion a procedure by which Plaintiffs can participate in the administrative proceeding. The Court retained jurisdiction, certainly. But it did so for the purpose of ensuring that the IRS' ultimate decision comports with the holding of the Court of Appeals. The parties cannot be permitted to abandon the administrative forum at every conflict to seek interlocutory relief with this Court. Moreover, this is no ordinary conflict. Plaintiffs' request for "discovery" squarely poses a primary aspect of their original claim.
In his Order of Remand, Judge Smith specifically stated that jurisdiction was retained "pending completion of the Internal Revenue Service determination." One case from this Court clearly addresses the consequence of a District Court remand to an administrative agency while the Court retains jurisdiction. In Turner v. Callaway, 371 F. Supp. 188 (D.D.C. 1974), Judge Corcoran held a plaintiff's suit against the Secretary of the Army in abeyance until an Army administrative Board could act on the complaint. In addressing the plaintiff's objections to that course, the Court made the following observation:
Finally, plaintiff misconstrues the legal effect of remanding the case to [the Army Board] with this Court retaining jurisdiction. Exhaustion of administrative remedies relates not to the court's ultimate jurisdiction but to the timing of the court's consideration of the issues. It is a concept similar to that of ripeness which delays, but does not necessarily foreclose, judicial disposition of the issues until after the agency involved has had a full opportunity to dispose of the matter administratively.
Id. at 192 (citing Ogden v. Zuckert, 111 U.S. App. D.C. 398, 298 F.2d 312 (D.C.Cir. 1961); Sohm v. Fowler, 124 U.S. App. D.C. 382, 365 F.2d 915 (D.C.Cir. 1966)).
The language of the Court of Appeals decision in this case also supports Plaintiffs' relegation to the administrative forum pending a final IRS determination. The Court of Appeals spoke repeatedly of the agency's role in promulgating procedures to accommodate Plaintiffs' interests with the need for orderly administrative processes. It concluded simply that "the agency must therefore reconsider whether and upon what conditions it will permit public participation in such proceedings," and remanded. Nichols, 835 F.2d at 899. The Court of Appeals clearly recognized the broad discretion of the IRS in defining the nature of Plaintiffs' participation.
The answer is somewhat less clear with respect to Plaintiffs' claim against the Board for the documents. Nonetheless, the Court of Appeals concluded that a remand would ensure "that plan beneficiaries will gain a renewed opportunity to participate in the agency's deliberations upon the amendment," thus, "further consideration of the claim is not warranted." In this Court's view, this statement indicates that the Court of Appeals meant for IRS procedures to govern what "discovery" Plaintiffs would have incidental to their right to participate in the proceeding. The IRS could promulgate a procedure whereby it would turn over documents itself; it could provide for discovery from the Board. If it denies access to Plaintiffs for some documents, as apparently is the case, and ultimately approves the amendment, Plaintiffs can then return to federal court and argue that the participation afforded them by the agency was less than adequate. In the alternative, Plaintiffs could pursue their claim of breach of fiduciary duty against the Board. Yet the possibility remains that on remand the IRS will decline to approve the amendment proposed by the Board. Thus would Plaintiffs' claims evaporate.
Plaintiffs' "discovery" request is in actuality a request that the Court decide one of the claims in Plaintiffs' complaint. Because the Court of Appeals ordered Plaintiffs' claims remanded to the IRS, their remedy lies, at least presently, within IRS procedures, if at all. Following any final IRS determination adverse to their position, Plaintiffs are entitled to return to federal court to argue the inadequacies of those procedures, and if successful, receive the disputed documents on further remand to the agency. Alternatively, Plaintiffs may pursue their claims against the Board. At present, however, Plaintiffs' request that the Court resolve these issues is premature, and must be denied.
ORDER -October 30, 1989, Filed
Upon consideration of Plaintiffs' Motion for Expedited Discovery and Defendants' Opposition thereto, Defendants' Motions for Protective Order and Plaintiffs' Opposition thereto, it is by the Court this 30th day of October, 1989,
ORDERED, that Plaintiffs' Motion be and hereby is DENIED; and it is
FURTHER ORDERED, that Defendants' Motions for Protective Order be and hereby are GRANTED.