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Henry v. Secretary of Department of Treasury

United States District Court, District of Columbia

September 26, 2017

RICHARD O. HENRY, Plaintiff,
v.
SECRETARY OF THE TREASURY, et al., Defendants.

          MEMORANDUM OPINION [DKTS. ## 25, 26]

          Richard J. Leon United States District Judge

         Former IRS contractor Richard O. Henry ("plaintiff or "Henry") brings this action against the Secretary of the Treasury, the Commissioner of the Internal Revenue Service ("IRS"), and the IRS's Director of Personnel Security (collectively, "defendants" or "IRS") to challenge the IRS's decision to revoke plaintiffs "staff-like access" to IRS facilities and information systems. The IRS revoked plaintiffs access on the ground that plaintiff failed to register with the Selective Service before the age of 26 - a fact the IRS contends renders plaintiff ineligible for staff-like access under current IRS policy. Plaintiff asserts that the IRS violated the Administrative Procedure Act ("APA") by revoking his staff-like access in contravention of IRS regulations and precedent. See Compl. [Dkt. #1], Counts I and IV of the complaint have already been dismissed for failure to state a claim. See 2/29/16 Mem. Op. & Order 10, 17 [Dkt. # 15]. Currently before the Court are plaintiffs Motion for Summary Judgment [Dkt. # 26] on the remaining counts, Counts II and III, of the complaint and the IRS's Renewed Motion to Dismiss or, in the Alternative, Motion for Summary Judgment [Dkt. # 25]. Upon consideration of the pleadings, the evidentiary record, and the relevant case law, the Court agrees with the prior Memorandum Opinion and Order issued in this case that plaintiff's claims are justiciable and that there is subject matter jurisdiction over the action. On the merits, the Court concludes that the IRS is entitled to summary judgment because the agency did not violate the APA by revoking plaintiffs staff-like access due to his failure to meet the Selective Service registration requirement. Therefore, the IRS's Renewed Motion to Dismiss or, in the Alternative, Motion for Summary Judgment [Dkt. # 25] is DENIED in part and GRANTED in part, and plaintiffs Motion for Summary Judgment [Dkt. # 26] is DENIED.

         BACKGROUND

         The facts required to resolve this case are undisputed. Plaintiff Richard O. Henry is an employee of Booz Allen Hamilton ("Booz Allen"). Pl.'s Stmt. Material Facts ("Pl.'s Stmt.") [Dkt. # 27], Ex. A, Decl. of Richard O. Henry ("Henry Decl.") ¶ 3. From 2001 to March 2012, plaintiff worked for the IRS as a contractor employee. Id. ¶¶ 3, 16. In that role, he was responsible for designing, developing, and implementing software information systems. Id.¶3. In order to work as an IRS contractor, plaintiff required "staff-like access" to IRS facilities and information. Id. ¶ 4. IRS regulations define "staff-like access" as "[u]nescorted access to IRS owned or controlled facilities, information systems (passwords), security items and products (as determined by Treasury/bureau officials), and/or sensitive but unclassified information by contractor employees." Pl.'s Stmt., Ex. B, July 18, 2000 Internal Revenue Manual ("2000 IRM"), ch. 2, § 1.23.2.2.1.3(15), at 4.

         Two primary sources of IRS policy and procedure govern the employment and privileges of IRS contract employees. First, the Treasury Security Manual sets forth minimum "investigative requirements for contract employees" who require "staff-like-access" to Treasury-affiliated facilities, such as IRS facilities. Defs.' Mot. Dismiss [Dkt. # 9], Ex. 1, Treasury Security Manual TDP 15-71 ("TDP"), ch. 2, § 2, ¶ 1. Second, and more importantly for purposes of this case, the Internal Revenue Manual ("IRM") provides additional details regarding when and how the IRS will investigate contractors to determine their eligibility and suitability for initial or continued staff-like access. See generally Defs.' Mot. Dismiss, Ex. 3, Apr. 4, 2008 IRM ("2008 IRM"), ch. 2. Each of those manuals is periodically updated with revised procedures and substantive requirements. See, e.g., Id. at cover.

         At the time plaintiff applied for staff-like access in 2001, his application was governed by the IRM then in effect, which was the 2000 IRM. The 2000 IRM set forth the procedures that the IRS would use when investigating whether a contractor should be granted staff-like access. Of pertinence here, those investigation provisions required all contractor employees to receive a background investigation prior to being granted stafflike access. 2000 IRM, ch. 2, § 1.23.2.2.2.3, at 7. The provisions also required all contractor employees to be re-investigated every five years "from the completion date of the most recent Background Investigation." Id. § 1.23.2.2.3(1), at 8. The 2000 IRM made clear, however, that the IRS reserved the right to investigate contractors "at any time during the period of access" to determine "whether they continue to meet the requirements for staff-like access." Id. § 1.23.2.2.8.1(1), at 17.

         Pursuant to the investigation provisions of the 2000 IRM, the IRS investigated plaintiff to determine whether he should be granted staff-like access. Henry Decl. ¶¶ 3-4. As part of that investigation, plaintiff completed the "OF 306" form. Id. ¶ 5; cf. Defs.' Mot. Dismiss, Ex. 5, Henry 2011 OF 306 ("Henry OF 306"). That form asks whether the applicant is a male born after December 31, 1959, and, if so, whether he is registered with the Selective Service System. See, e.g., Henry OF 306 at 1. If the applicant admits to not having registered before the age of 26, he must explain that failure to register on the form. Id. In his 2001 OF 306, plaintiff disclosed that he had not registered for the Selective Service. Henry Decl. ¶6. His failure to register with the Selective Service notwithstanding, the IRS granted plaintiff staff-like access in 2001. Id. ¶ 8.

         In 2006, pursuant to the mandatory re-investigation requirements of the then-current IRM (which was the 2003 IRM), plaintiff underwent a second background investigation. See Pl.'s Stmt., Ex. F, Feb. 1, 2003 IRM ("2003 IRM"), ch. 2, § 1.23.2.3(1), at 7. Plaintiff again admitted his failure to register for the Selective Service and again was approved for staff-like access. Henry Decl. ¶¶ 10-11. In a January 2007 memorandum confirming that approval, the IRS informed plaintiff that, pursuant to the re-investigation provisions of the 2003 IRM then in effect, plaintiff would "require an update background investigation" by February 2012. Pl.'s Stmt., Ex. I, Mem. from IRS Assoc. Dir. Personnel Sec. to Contracting Officer's Tech. Representative (Jan. 29, 2007) ("Jan. 2007 IRS Mem.").

         Then, in 2008 and 2011, the IRS made two changes to its IRM that are relevant to this case. First, the IRS established a new set of criteria that contractors must meet in order to be eligible for staff-like access. Those criteria include the requirement that "all males born after 1959[] must be registered with Selective Service or have an exception." Defs.' Mot. Dismiss, Ex. 2, Nov. 15, 2011 IRM ("2011IRM"), ch. 2, § 10.23.2.2(2), at 2; see also 2008 IRM, ch. 2, § 10.23.2.2(2), at 1. Second, the IRS changed the periodic reinvestigation requirement. The 2008 and 2011 IRMs clarified that contractors in "moderate risk" positions would not be subject to a mandatory re-investigation every five years, but instead would need only to submit "updated Federal tax compliance checks and a FBI fingerprint check every five years." 2011 IRM, ch. 2, § 10.23.2.14(2), at 8; see also 2008 IRM, ch. 2, § 10.23.2.14(2), at 8. Unchanged, however, was the IRM provision noting that "[a] 11 contractor employees shall be subject to investigation prior to being granted stafflike access" and "at any time during the period of access to ascertain whether they continue to meet the requirements for staff-like access." 2011 IRM, ch. 2, § 10.23.2.6(1), at 5; see also 2003 IRM, ch. 2, § 1.23.2.8.1(1), at 15. All three of those provisions -the registration requirement, the tax and fingerprint procedure, and the "at any time" investigation provision - remained in effect at all times relevant to this case.

         In 2011, plaintiff was informed by Booz Allen that his IRS re-investigation was due by February 2012. See Henry Decl. ¶ 14; Pl.'s Stmt., Ex. Q, E-mail from Mona Peloquin, Strategy & Organization, Booz Allen, to Richard Henry (Oct. 21, 2011). In accordance with Booz Allen's instructions, plaintiff completed and submitted additional background investigation paperwork at the end of 2011. Flenry Decl. ¶ 14. Plaintiff disclosed his failure to register with the Selective Service when completing the background check forms, explaining that he failed to register "on conscientious grounds." Henry OF 306 at 2. Unlike with his previous background checks, however, plaintiffs materials were evaluated under the contractor eligibility requirements adopted in 2008 - including, as relevant here, the Selective Service registration requirement.

         By letter dated February 2, 2012, IRS Director of Personnel Security Donna King proposed to deny plaintiffs staff-like access because the IRS had "determined that [he] may not meet the eligibility requirements for being granted access." Attach. A to Compl., Letter from Donna S. King, Director, IRS Personnel Security, to Richard O. Henry (Feb. 2, 2012) ("Feb. 2012 IRS Letter"). Lhe letter explained that plaintiffs "condition which raises a concern and may be disqualifying in this case" was his "non-registration with Selective Service." Id. Lhe letter gave plaintiff an "opportunity to respond in writing" and instructed plaintiff to "include an explanation of why you are not registered." Id.

         Plaintiff responded by letter one week later. See Defs.' Mot. Dismiss, Ex. 6, Letter from Richard O. Henry, to IRS Personnel Security Dep't (Feb. 9, 2012) ("Henry Letter"). He explained that his failure to register "was not a willful act of civil disobedience." Id. Rather, he stated that "[a]t the time, " he "did not fully realize the importance of registering and just kept putting it off until [he] had failed to do so before reaching the age of 26." Id. Plaintiff acknowledged that his explanation was "not a good excuse, " but noted that he was "just trying to be honest here" and did not "have any better explanation." Id.

         After reviewing plaintiffs response, the IRS made a final decision to deny plaintiffs staff-like access. See Attach. B to Compl., Letter from Donna S. King, Director, IRS Personnel Security, to Richard O. Henry (Mar. 20, 2012) ("Mar. 2012 IRS Letter"). Plaintiff, through counsel, asked the IRS to reconsider its decision. See Defs.' Mot. Dismiss, Ex. 7, Letter from Rachel L.L. Rodriguez, to Donna S. King, Director, IRS Personnel Security (Apr. 18, 2012) ("Rodriguez Letter"). Plaintiffs counsel noted that the Selective Service registration requirement was reinstated at a time when plaintiff was in college and changed addresses frequently, meaning that any announcements likely "would have failed to reach him." Id. at 6. Those facts and others, according to plaintiffs counsel, indicated that plaintiffs failure to register was "not willful but excusable." Id.

         The IRS declined to reverse its determination. In another letter, this time addressed to plaintiffs counsel, the IRS explained that, pursuant to the IRM eligibility provisions, Selective Service registration was a requirement for staff-like access for male contractors in plaintiffs position. Attach. C to Compl., Letter from Donna S. King, Director, IRS Personnel Security, to Rachel L.T. Rodriguez (May 16, 2012) ("May 2012 IRS Letter"), at 1. The letter went on to recount the conflicting explanations plaintiff had provided for his failure to register. Id. Specifically, in his February 9, 2012 letter, plaintiff acknowledged that he had knowingly put off registration until it was too late. See Id. (citing Henry Letter). But in his 2011 background paperwork, plaintiff attested under penalty of law that he did not register "on conscientious grounds." Id. (citing Henry OF 306). After recounting those conflicting pieces of information, the letter concluded that plaintiffs "explanation failed to show by a preponderance of the evidence that his failure to register was neither knowing nor willful." Id. at 2. The IRS therefore stuck by its decision to deny plaintiff staff-like access. Id. Without staff-like access, plaintiff could not maintain his position as a contractor with the IRS. A few months after his departure from IRS, plaintiff was approved for staff-like access at the U.S. Census Bureau. Henry Decl. ¶ 17.

         Plaintiff brought suit to challenge the IRS's revocation of his staff-like access. In his four-count complaint, plaintiff alleges that the IRS's decision was unlawful under the APA. See generally Compl. In a Memorandum Opinion and Order issued February 29, 2016, the judge previously assigned to this action denied the IRS's motion to dismiss Counts II and III of plaintiffs complaint for lack of subject matter jurisdiction, but dismissed Counts I and IV. See 2/29/16 Mem. Op. & Order 4-10, 12-14, 17. Currently before the Court are plaintiffs Motion for Summary Judgment on the remaining counts, Counts II and III, of the complaint and the IRS's Renewed Motion to Dismiss or, in the Alternative, Motion for Summary Judgment.

         STANDARD OF REVIEW

         A. ...


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