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Educap Inc. v. Internal Revenue Service

February 18, 2009


The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge


In response to an Internal Revenue Service audit, EduCap Inc. sued the IRS under the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"), seeking an order requiring the IRS to (i) "identify every third party contact made by it in connection with its audit of EduCap" and (ii) "produce complete and unredacted copies of all materials related to such third party contacts, including all materials requested in EduCap's June 1, 2007 FOIA request." Compl. ¶ 38(a) & (b). The IRS argues that the Court lacks jurisdiction to order EduCap's first request for relief and that the materials sought in EduCap's second request for relief are exempt from compelled disclosure. This matter is before the Court on cross motions for summary judgment. For the reasons explained herein, the Court will grant the IRS's motion and deny EduCap's.


EduCap is a Maryland corporation that is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501(c)(3). On August 4, 2004, the IRS informed EduCap of its intent to audit the corporation. On December 14, 2004, pursuant to Section 7602(c) of the Internal Revenue Code, 26 U.S.C. § 7602(c) ("Section 7602(c)"), the IRS informed EduCap that it intended to contact third parties as part of its audit.*fn1 The IRS's letter did not provide the names of any third parties whom the IRS intended to contact; it simply gave notice of the agency's intent to make such contacts.

As of August 18, 2005, the IRS had not provided EduCap with the name of any third party contacted as part of the audit. Accordingly, counsel for EduCap began sending weekly written requests that the IRS identify its third party contacts pursuant to Section 7602(c).*fn2 As of the date of the Complaint, EduCap had submitted 112 requests to the IRS. In response to those requests, the IRS provided 16 letters listing 146 third party contacts and 15 letters stating that it had made no additional third party contacts since the time of its last response to EduCap's request. Of the 146 third party contacts listed by the IRS, 95 were identified by the word "reprisal" without further explanation, apparently an effort by the IRS to avail itself of the disclosure exception in Section 7602(c).*fn3 In response to EduCap's subsequent requests, the IRS continued to insert the word "reprisal" in place of the identities of the third parties who apparently believed they may be subject to reprisal from EduCap. EduCap alleges that the IRS has no good-faith basis for refusing to identify these persons.

Believing that the IRS had failed to comply with Section 7602(c), counsel for EduCap submitted a FOIA request to the IRS on June 1, 2007, requesting "all documents relating to the IRS third party contacts in the EduCap audit, including the identities of all third parties contacted." Compl. ¶ 17. In response, the IRS produced 63 pages of partially redacted materials on August 16, 2007, including a 13-page printout labeled "THIRD PARTY DATABASE" listing 38 third party contacts with the names of 22 redacted. Id. ¶ 19. The IRS asserted that the 22 redacted names were exempt from compelled disclosure under FOIA Exemption 7(F), which exempts agency records compiled for law enforcement purposes that "could reasonably be expected to endanger the life or physical safety of any individual." 5 U.S.C. § 552(b)(7)(F). EduCap administratively appealed this determination within the IRS on September 19, 2007. On October 23, 2007, the IRS denied the appeal and upheld its prior determination but relied instead on FOIA Exemption 7(D), which exempts, in relevant part, agency records compiled for law enforcement purposes that "could reasonably be expected to disclose the identity of a confidential source." Id. § 552(b)(7)(D).

On November 20, 2007, EduCap filed suit in this Court seeking to compel the IRS "to fully disclose the names of third parties it has contacted during its audit of EduCap as required under § 7602(c) . . . ." Compl. ¶ 1. EduCap asserts that the Court has jurisdiction under the FOIA, 5 U.S.C. § 552(a)(4)(B), and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202. Id. ¶ 2. On May 15, 2008, the IRS moved for summary judgment, arguing that the third party contact records sought by EduCap are exempt from compelled disclosure under FOIA Exemptions 3, 5, 6, 7(A), and 7(C), 5 U.S.C. § 552(b)(3), (5), (6), (7)(A), & (7)(C). See Dkt. ## 10 & 14. EduCap filed a cross motion for summary judgment on July 31, 2008, arguing that because the third party contacts must be disclosed pursuant to Section 7602(c), the IRS has no basis under the FOIA for withholding all or part of documents relating to third party contacts. See Dkt. # 16. Oral argument on the motions was held on February 17, 2009.


Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment must be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Moreover, summary judgment is properly granted against a party who "after adequate time for discovery and upon motion . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than "the mere existence of a scintilla of evidence" in support of its position. Id. at 252. In addition, the nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999). Rather, the nonmoving party must present specific facts that would enable a reasonable jury to find in its favor. Id. at 675. If the evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted).

FOIA cases are typically and appropriately decided on motions for summary judgment. Miscavige v. IRS, 2 F.3d 366, 368 (11th Cir. 1993); Rushford v. Civiletti, 485 F. Supp. 477, 481 n.13 (D.D.C. 1980).In a FOIA case, the Court may award summary judgment solely on the basis of information provided by the department or agency in declarations when the declarations describe "the documents and the justifications for nondisclosure with reasonably specific detail, demonstratethat the information withheld logically falls within the claimed exemption, and are not controverted by either contrary evidence in the record nor by evidence of agency bad faith." Military Audit Project v. Casey, 656 F.2d 724, 738 (D.C. Cir. 1981). An agency must demonstrate that "each document that falls within the class requested either has been produced, is unidentifiable, or is wholly [or partially] exempt from the Act's inspection requirements." Goland v. CIA, 607 F.2d 339, 352 (D.C. Cir. 1978) (internal citation and quotation omitted).


As a preliminary matter, it is necessary to clarify that this is a FOIA case and not an action to compel compliance with Section 7602(c). EduCap concedes as much. See EduCap's Opp'n & Cross Mot. for Summ. J. at 3 n.3. EduCap asserts that the Court has jurisdiction under the FOIA and the Declaratory Judgment Act, not the Internal Revenue Code. See Compl. ΒΆ 2. Thus, Section 7602(c) is ...

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