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SECURITY FINANCIAL LIFE INSURANCE COMPANY v. DEPT. OF TREASURY

April 12, 2005.

SECURITY FINANCIAL LIFE INSURANCE COMPANY, Plaintiff,
v.
DEPARTMENT OF TREASURY, Defendant.



The opinion of the court was delivered by: SUZANNE CONLON, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Security Financial Life Insurance Company requested documents relating to a line item on the 2000 and 2001 federal budgets from the Department of Treasury under the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"). As a result of the Department's failure to respond to its request, First Security sued the Department for declaratory and injunctive relief under FOIA.*fn1 After First Security initiated this action, the Department produced some documents and withheld others, claiming exemption from disclosure under FOIA. Security Financial moves for summary judgment with respect to a limited number of withheld documents. The Department moves for summary judgment with respect to all withheld documents.*fn2 BACKGROUND

Both parties filed statements of undisputed material facts in support of their summary judgment motions. The Department's statement of facts ("Facts") is supported by citations to the record as required by Local Rule 7.1(h). Security Financial's statement of facts is not. Accordingly, the court disregards Security Financial's statement of facts. See Local Rule 7.1(h). Moreover, Security Financial failed to respond to the Department's statement of facts. Local Rule 7.1(h) provides: "[i]n determining a motion for summary judgment, the court may assume that facts identified by the moving party in its statement of material facts are admitted, unless such a fact is controverted in the statement of genuine issues filed in opposition to the motion." The Department's statement of facts is deemed admitted. See Local Rule 7.1(h); Ramey v. Darkside Productions, Inc., 2004 U.S. Dist. LEXIS 10107, at *3 (D.D.C. May 17, 2004).

  I. Security Financial's FOIA Request

  On May 13, 2002, Security Financial sent the Department a FOIA request seeking agency records related to a $1.359 billion estimate for the line item in the FY 2000 and FY 2001 federal budgets for the proposal to limit pre-funding of welfare benefits of ten or more employer plans. Facts ¶ 1. Security Financial's FOIA request was assigned an internal tracking number and forwarded for processing to the office determined most likely to have responsive records, the Office of Tax Policy ("OTP"). Id. at ¶ 2. On June 19, 2002, the Department sent Security Financial a letter acknowledging receipt of its FOIA request. Id. at ¶ 3. The Department's June 19, 2002 letter explained that OTP was experiencing a backlog of FOIA requests and that Security Financial's request would be processed as soon as possible. Id. OTP interviewed Department employees to identify the possible locations of responsive documents. Id. at ¶ 4. Based on information from those interviews, OTP conducted manual searches of the office files of current and former employees in the Office of Tax Legislative Counsel ("TLC"), the Office of Benefits Tax Counsel ("BTC"), and the Office of Tax Analysis ("OTA") (which includes the Revenue Estimating Division). Id. OTP also conducted various keyword searches on individual employees' hard-drives and email files and BTC's CD-ROM files. Id. at ¶ 5. OTP's searches yielded 268 pages of agency records with responsive material, including 23 pages that originated either in the Office of Management and Budget or the Internal Revenue Service. Id. at ¶ 6. The Department reviewed the materials for responsiveness, privilege and segregability. Id.

  II. The Department's Response

  On January 16, 2004, the Department produced 108 pages of agency records. Id. at ¶ 7. Thirty-three pages were redacted to protect information the Department claimed was exempt from disclosure under FOIA. Id. The Department withheld an additional 149 pages of agency records claiming they fell under FOIA exemptions 3 and 5. Id.

  The Department withheld 55 agency records in whole or in part, claiming exemption from disclosure under the deliberative process privilege. Id. at ¶ 8. The Department produced a Vaughn index to Security Financial that lists the date, document type, author/recipient, number of pages, and a description of each document withheld.*fn3 Security Financial Motion, Ex. 1. The Department served a revised Vaughn index with its summary judgment motion. Department Motion, Ex. A. The revised index provides titles for each author and recipient of a document.*fn4 Id.

  The withheld documents fall into the following categories: revenue estimates; drafts/draft comments; emails; notes; and talking points. Id. Forty-four documents were withheld in their entirety under a claim of deliberative process privilege. Id. at ¶ 16. Of those 44 documents, 25 were also claimed exempt under the attorney-client privilege.*fn5 Id. Security Financial concedes some of the documents were properly withheld. Security Financial Motion at 3, n. 1.

  III. The Documents at Issue

  Security Financial only seeks a limited category of documents: those that contain the Department's calculations and assumptions underlying the budget line item entitled "Limit prefunding of welfare benefits for 10 or more employer plans" ("budget line item") for fiscal years 2000 and 2001. Security Financial Motion at 3, 11; Security Financial Opposition at 5, 6, 8. More specifically, Security Financial seeks production of Vaughn index entries A1-A6, A8-A10, A12, A13, A15-A19, A24, A28-A34, A36-A43, C5-C9, C11 ("the withheld documents") on the Vaughn index. The revised Vaughn index contains the following descriptions of the withheld documents:*fn6 Index No. Description

 
A1 This document contains notes of an internal meeting between OTP staff (including Louis Epstein-Associate Tax Legislative Counsel, OTP) and IRS staff (including James Holland, Mark Schwimmer, and Mike Roach) relating to TOLI, COLI, and VEBAs.
A2 This document contains handwritten notes outlining a meeting between Louis Epstein (Associate Tax Legislative Counsel, OTP) and Mike Pincus, a private sector attorney, about his suggestions for additional pension benefits.
 
A3 This document is an email from Sonia Conly (Financial Economist. Office of Tax Analysis ("OTA")) to Platt (Director of Revenue Estimates, OTA) copied to Amy Null (Attorney-Advisor, Office of Benefits Tax Counsel ("OTB") concerning a phone call Conly received from member of Congress relating to the development of OTP's revenue estimates for the Section 419A proposal for the FY 2001 budget.
A4 This draft document written by an unknown OTP staff person outlines possible revenue raisers or limitations of benefits under I.R.C. Section 419A(f)(6) for the FY 2000 budget.
 
A5 This document entitled "Revenue Estimates: Revenue Raising Options Preliminary" is an internal working paper written by an OTA staff member listing preliminary revenue estimates for a ten-year period from FY 2000 to FY 2009 for possible revenue raisers for the FY 2001 budget. Only one line item in this document is responsive to Plaintiff's FOIA request.
A6 This document consists of the following drafts of the description of the Section 419A(f)(6) proposal for the "General Explanations of the Administration's Revenue Proposals for FY 2000." Document was written by Null (Attorney-Advisor, BTC) to Mark Iwry (Benefits Tax Counsel, BTC).
 
A8 This document contains a draft description of the Section 419A(f)(6) proposal for the "General Explanations of the Administration's FY 2000 Revenue Proposals" and an analysis of the "Reasons for Change" section. It was written by Null (Attorney-Advisor).
A9 This document contains Q&As on the Section 419A(f)(6) proposal for the FY 2000 budget that was used in preparation for congressional testimony regarding the FY 2000 budget. It was written by Donald Lubick (Assistant Secretary of Tax Policy). A10 This draft document contains preliminary revenue estimates for the Section 419A(f)(6) proposal for the FY 2000 budget as well as handwritten and typewritten assumptions. Conly (Financial Economist, OTA) typed "Corrected" in the upper left corner of the document.
 
A12 This document consists of the following drafts of the one-paragraph description of the Section 419A(f)(6) proposal for the FY 2000 budget:
a) Draft 1:40 p.m. 1/12/99
b) January 14, 1999 draft
c) Undated draft; Last modified March 5, 1999
d) Draft 4:45 1/11/99
Only one paragraph in each draft is responsive to Plaintiff's FOIA request.
(Note: the final published version was produced). Document was written by unknown BTC staff member.
A13 This email discusses a proposed revision to language in the description of the Section 419A proposal and its possible effect on the revenue estimate. Null (Attorney-Advisor, BTC) wrote email to Iwry (Benefits Tax Counsel, BTC) and other BTC counsel, discussing and analyzes a potential conflict between the current Section 419A proposal and another proposal for the FY 2000 budget then under development by OTP staff.
 
A15 This email by Null (Attorney-Advisor) to Iwry (Benefits Tax Counsel), and other counsel, discusses proposed revisions to the description of the Section 419A proposal and analyzes two drafts (one by IRS staff and one by OTP staff) of the Section 419A language and the implications of those revisions.
A16 This draft document contains preliminary revenue estimates tables for the President's FY 2000 budget that span the 11 year period FY 1999 to FY 2009. Only the line item related to the Section 419A(f)(6) proposal is responsive to Plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to Administration decision makers as to the contents of the President's FY 2000 budget.
 
A17 This working document intermingles assumptions from both FY 2000 and 2001 with preliminary estimates spanning the ten-year period from FY 2001 through FY 2010 that were used by Conly in preparing revenue estimates for the I.R.C. Section 419A(f)(6) proposal for the FY 2001 budget. The document was prepared for Conly's supervisor Joel Platt's (Director of Revenue Estimates, OTA) review and approval.
A18 This document compares the I.R.C. Section 419A(f)(6) proposal with the small business health plan proposal in the FY 2000 budget. The document was used in preparation for congressional testimony and was prepared by David Brazell (Financial Economist, OTA). A19 This email from Conly to Null entitled "Pre-funding of certain employee benefits" requests a comparison and analysis of the Administration's FY 2000 budget proposal and a legislative amendment to H.R. 984.
 
A24 This document prepared by Null for Talisman in preparation for congressional testimony on the FY 2000 budget contains a description of the I.R.C. Section 419A(f)(6) proposal as well as talking points for discussing the Administration's position.
A28 This document contains talking points concerning the Administration's I.R.C. Section 419A(f)(6) proposal for the President's FY 2000 budget and outlines two alternative legislative proposals. The document was created in preparation for testimony before the Senate Finance Committee.
 
A29 This working document prepared by OTA staff contains preliminary revenue estimates that span FY 2000 to FY 2009 for possible revenue offset options for the President's FY 2001 budget. Only the line item "Impose Limitations on Pre-funding of Certain Employee Benefits" is responsive to Plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to Administration decision makers as to the contents of the President's FY 2001 budget.
A30 This document consists of two draft descriptions of the I.R.C. Section 419A(f)(6) proposal for the "General Explanations of the Administration's FY 2001 Revenue Proposals." One draft contains a handwritten comment in the margin by Conly. (Note: the final version of the description was produced).
 
A31 This email by Conly to Platt entitled "Section 419A(f)(6) and Section 419A(f)(5)" attaches a draft description of the Administration's FY 2001 budget proposal dated January 5, 2000 and a working document that contains assumptions and preliminary estimates for the FY 2000 and FY 2001 budgets. Only the first paragraph of the transmittal email is responsive to plaintiff's FOIA request.
A32 This document contains a draft description of revenue raisers for the FY 2001 budget. "AAN draft of 1/13" is typed in the upper right-hand corner of the first is responsive to Plaintiff's request. (Note: the final version of the Section 419A(f)(6) proposal was published in the "Federal Receipts" chapter of the "Analytical Perspective" volume of the Administration's FY 2001 budget. A copy was produced). Null prepared the document. A33 This document entitled "Revenue Estimates: FY 2001 Proposals Affecting Receipts" contains estimates over an 11 year period and handwritten comments. Only one line item is responsive to plaintiff's FOIA request. The document was prepared by OTA staff in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget.
 
A34 This document contains a draft description of the Administration's I.R.C. Section 419A(f)(6) proposal and attaches Q&A in preparation for testimony before a congressional committee on the Administration's FY 2001 budget.
A36 This document prepared by Joel Platt to Mary Barth ("OMB") attaches draft preliminary revenue estimates that span the 11 year period FY 1999 to FY 2009 and contains OMB proposals for the President's FY 2000 budget. Only the line item relating to Section 419A(f)(6) is responsive to Plaintiff's FOIA request. This document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget.
 
A37 This document contains draft revenue estimates that span the 11 year period for the President's FY 2000 budget. The document contains handwritten revisions by Joseph Mikrut, the Tax Legislative Counsel. Only the line item showing the revenue estimates for the I.R.C. Section 419A(f)(6) proposal is responsive to plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget.
A38 This document contains draft versions of "Table 303 Effect of Proposals on Receipts" which contains estimates that span the six-year period FY 1999-FY 2004. The document also contains draft OMB proposals. Only one line item in the document is responsive to plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2000 budget and was exchanged between OMB and OTP staff during the development of the President's FY 2000 budget. (Note: the final published version of the table was produced). Document contains Mikrut's handwritten notes.
 
A39 This document prepared by Conly is entitled "Estimate of Denial of Deduction for Prefunding Severance and Whole Life Insurance Benefits Under 419(f) exception" contains calculations and assumptions for the FY 2000 budget and OMB projections for FY 2000 to FY 2009. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the President's FY 2000 budget. A40 This document contains draft revenue estimate tables that span the 11 year period FY 2000 to FY 2000 for the FY 2001 budget. Only the line item for the estimates of the Section 419A(f)(6) proposal is responsive to plaintiff's FOIA request. The document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the contents of the President's FY 2001 budget. Fax from Platt to Barth; margin notations by Mikrut.
A41 This draft document contains calculations and assumptions that span the period FY 2001 to 2010 for the Section 419A(f)(6) proposal for the FY 2001 budget. The document also contains forecasts of OMB and OTP assumptions and estimates for FY 2000 and FY 2001 for an alternative legislative proposal. This document was prepared in connection with providing advice and recommendations to the Administration's decision makers as to the President's FY 2001 budget. Document prepared by Conly.
 
A42 This email from Tim Hanford (Tax Counsel to Ways and Means Committee) to Brigen Winters (Ways and Means Committee staff person) is entitled "Springing Cash Value" and suggests clarifying language for the I.R.C. Section 419A report and contains handwritten comments by Epstein expressing her opinion and suggestions on the legislative proposal for I.R.C. Section 419A.
A43 This document consists of draft pages from the "Federal Receipts" chapter of the "Analytical Perspectives" volume of the Administration's FY 2000 budget. Joseph Mikrut's (Tax Legislative Counsel) handwritten comments appear on the only portions of this document that are responsive to plaintiff's FOIA request. The comments are dated January 20 and 21, 1999. OMB originated the document.
 
B1 This document contains data Sonia Conly received from James Holland (IRS) and Ed Sypher (IRS) in response to an inquiry from OTA for information to estimate the effect of a law change. The information was used to estimate the line item "Limit the Prefunding of Welfare Benefits for 10 or More Employer Plans" in the President's FY 2000 and FY 2001 budgets. The document contains calculations, assumptions and opinions by Conly.
C5 This draft document authored by Conly contains assumptions and preliminary revenue estimates for the period FY 2000 through FY 2009 for the I.R.C. Section 419A(f)(6) proposal in the FY 2000 budget that show the revenue impact of the Administration's I.R.C. Section 419A(f)(6) proposal. One copy of the document has handwritten margin notes as well as the notations "99/01" and "used." The document was prepared for Conly's supervisor's (Joel Platt) review and approval. C6 This document compares three revenue estimates spanning the 10-year period FY 2000 to FY 2009:
a) preliminary, unpublished revenue estimates and assumptions by the Office of Tax Analysis relating to the provision in "The Financial Freedom Act of 1999" (H.R. 2488) entitled "Impose Limitation on Prefunding of Certain Employee Benefits."
b) preliminary estimates from the Office of Tax Analysis for I.R.C. Section 419A(f)(6) for FY 2000 to FY 2009. (Note: The estimates for FY 2000-FY 2004 were published in the FY 2000 budget).
c) Joint Tax Committee revenue estimates from JCX-43-99 (for H.R. 2488). The document was prepared in connection with providing advice to Treasury and Administration decision makers on whether to support the proposed legislation.
C7 This document drafted by Null contains descriptions of various proposals for the Administration's FY 2001 budget. Only one paragraph in the document is responsive to plaintiff's FOIA request. (Note: a redacted copy of the Section 419A(f)(6) description and final published version were produced).
 
C8 This document contains notations and legal opinions by Epstein related to the welfare benefit fund plans sent to Epstein by Pincus, a private sector attorney. (Note: a redacted copy was produced).
C9 This document consists of Mikrut's notes and legal opinions on the published and a draft copy of JCX-99. The draft copy was faxed to Mikrut on June 10, 1999 from the Joint Tax Committee. (Note: redacted copies of the document were produced).
 
C11 This document contains Jonathan Talisman's (Deputy Assistant Secretary) comments on JCX-20-00. (Note: a redacted copy was produced).
Security Financial Motion, Ex. A; Department Motion, Ex. A.
  The Department claims each document is exempted from FOIA production in whole or in part under the deliberative process privilege embodied in FOIA Exemption 5. Facts ¶ 8. After each document description, the Vaughn index contains an explanation why the Department believes the document is exempted by the deliberative process privilege. Security Financial Motion, Ex. A.

  The Department submits a declaration of Gregory F. Jenner, the Acting Assistant Secretary of the Treasury (Tax Policy), in support of its motion. Jenner is in charge of the Office of Tax Policy for the Department. Jenner Decl. ¶ 1. Jenner's declaration attests that each withheld document contains predecisional and deliberative agency records that reveal preliminary estimates, opinions, recommendations, or mental impressions formulated during the development of the Administration's FY 2000 and FY 2001 federal budget. Jenner Decl. ¶ 12, 22 a-e. Jenner's declaration also attests that the withheld documents were created in connection with the deliberative process that produced the federal budgets for fiscal years 2000 and 2001. Id. at ¶ 12. Jenner attests none of the withheld documents represents a statement of agency policy or a final agency decision. Id. at ¶ 21.

  IV. The Budgetmaking Process

  The federal budget is generally released each year on the first Monday of February. Facts ¶ 11. Potential tax policy proposals to be included in the federal budget may be identified at any time during the preceding year. Id. The process of considering, refining, and deciding budget proposals is most intense during the several months before the budget's release. Id. The development of budget proposals is an iterative process. Id. at ¶ 12. Proposals are suggested, analyzed, and often revised depending on their impact on the overall budget. Id. The Assistant Secretary of the Department of Treasury or one of the Deputy Assistant Secretaries determines which proposal revisions are studied. Id. This process continues until a decision is made either to include or exclude the proposal in the budget. Jenner Decl. ¶ 15. The final decision to include a budget proposal ultimately is made by the President, although his decision-making authority may be delegated to others.*fn7 Id. The Department's role in the budgetmaking process is advisory to the Office of Budget and Management ("OMB"), which in turn, has an advisory role to the President on the federal budget. Jenner Second Decl. ¶ 3.*fn8 In connection with the study of a particular budget proposal, OTP might create written analyses and materials, including but not limited to revenue estimates, explanations, descriptions, legislative histories for budget proposals, and talking points. Facts ¶ 13. Only final revenue estimates, Treasury Blue Book write-ups, and budget proposal explanations are ever published. Id. OTP generally does not prepare statutory language for budget proposals. Jenner Decl. ¶ 17. However if a member of Congress or congressional committee decides to include a budget proposal in legislation, OTP is typically involved in several ways. Id. The Assistant Secretary, the Deputy Assistant Secretaries, and/or OTP staff members may be consulted as the legislation is developed and drafted. Id. OTP staff members may generate revenue estimates, analyze revenue estimates, and compare and analyze proposals. Id. If a budget proposal progresses beyond introduction in Congress, the proposal may be revised in congressional committee and on the floor of both houses of Congress. Facts ¶ 14. OTP's involvement at this stage of the process might include preparing analyses and other written materials similar to those created during the Department's study of a budget proposal. Id. The process continues until a determination is made to include the proposal in the budget. Id.

  If Congress ultimately passes the budget proposal, OTP might be asked to analyze it for use during the President's consideration of the legislation. Id. at ¶ 15. If the President signs the legislation into law, OTP might be asked to prepare written materials on the new law for public release or for use in congressional testimony or to facilitate the development of regulations pursuant to the new law. Id. The long-standing policy of the President and OMB is to keep confidential such written materials exchanged within agencies and between agencies and OMB and the President in connection with the budgetmaking process. Id. at ¶ 13.

  DISCUSSION

  I. Standard of Review

  Summary judgment is appropriate when the moving papers and affidavits show there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Kaempe v. Myers, 367 F.3d 958, 966 (D.C. Cir. 2004). A party seeking summary judgment bears the initial responsibility of informing the court of the basis for its motion, and identifying evidence that demonstrates the absence of a genuine issue of material fact. The non-moving party must then come forward with evidence and designate specific facts that establish there is a genuine triable issue. Kingman Park Civic Ass'n. v. Williams, 348 F.3d 1033, 1041 (D.C. Cir. 2003). A genuine issue of material fact exists when the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Waterhouse v. District of Columbia, 298 F.3d 989, 992 (D.C. Cir. 2002).

  Security Financial moved for summary judgment with respect to the withheld documents only. Its motion makes clear that it is not challenging the Department's asserted exemptions for any of the other documents on the Vaughn Index ("the unchallenged documents"). The Department moved for summary judgment with respect to all documents on its Vaughn Index. In its opposition, Security Financial makes clear that it is only seeking a limited category of documents: those that reflect the basis for the budget line item. Opposition at 5, 6, 8. Because the ...


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