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Goldstein v. Internal Revenue Service

United States District Court, District of Columbia

September 29, 2017

RICHARD GOLDSTEIN, Plaintiff,
v.
INTERNAL REVENUE SERVICE, Defendant.

          MEMORANDUM OPINION AND ORDER

          AMIT P. MEHTA, UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This case arises from a request Plaintiff Richard Goldstein made under the Freedom of Information Act (“FOIA”), in which he sought several categories of information from Defendant Internal Revenue Service (“IRS”) that, generally speaking, relate to the estate of his father, Samuel R. Goldstein. Plaintiff divided his request into nine “Items, ” each directed at a particular category of tax records or related tax information. Defendant produced thousands of pages of responsive documents, but withheld many others on the basis that Plaintiff had failed to “perfect” his requests; that is, he had not established his right to access those records under the Internal Revenue Code and IRS regulations. In response, Plaintiff filed suit in this court, challenging Defendant's treatment of his FOIA request.

         In a prior ruling in this matter, the court granted Defendant's Motion to Dismiss and Motion for Summary Judgment only in part, holding that the agency had not afforded Plaintiff an adequate opportunity to perfect his request as to certain Items or had wrongly disqualified Plaintiff from receiving records as to others. The court therefore remanded Plaintiff's FOIA request to the IRS for further consideration of seven of Plaintiff's nine Items.

         On remand, the IRS produced additional records, but refused to disclose others, determining, over Plaintiff's objection, that he still had not perfected a number of Items. Consequently, this matter is back before the court, requiring it once again to explore the intersection of FOIA, the Internal Revenue Code and its corresponding regulations, and the law of trusts and estates. In its current round of briefing, Defendant moves to dismiss Plaintiff's FOIA claims, either in whole or in part, as to six of Plaintiff's remanded Items on the ground that Plaintiff has not perfected them. As to the Items that Plaintiff did perfect, either in whole or in part, Defendant moves for summary judgment with respect to the adequacy of its searches and its segregability determinations. Plaintiff, with uncommon prolixity, opposes Defendant's Motion.

         After thorough consideration of the record and for the reasons stated herein, the court grants in part and denies in part Defendant's Second Motion to Dismiss and Motion for Summary Judgment, and denies Plaintiff's Cross-Motion for Summary Judgment.

         II. BACKGROUND

         After the court decided Goldstein v. IRS (Goldstein I), [1] the IRS and Plaintiff began a dialogue about the particular FOIA requests, or “Items, ” that the court returned to the agency for further consideration. The parties exchanged a series of letters between April 2016 and December 2016, in which the IRS identified the information that Plaintiff would need to supply to perfect the seven remaining Items, and Plaintiff responded with information that he maintained established his entitlement to the requested records. See Def.'s Second Mot. to Dismiss & Mot. for Summ. J., ECF No. 52, Ex. 3, ECF No. 52-5 [hereinafter Rowe Decl.], ¶¶ 5-10. In the end, after considering Plaintiff's multiple submissions, the IRS determined that Plaintiff had perfected three requests in part (Items 1, 2, and 8) and one in full (Item 3), but that he had failed to perfect three other requests either in full or in part (Items 4, 5, and 7). Id. ¶¶ 11-28. In response to the perfected and partially perfected Items, the IRS searched for and released an additional 828 pages of documents in full and 91 pages in part. Id. ¶¶ 19, 27. As to those unperfected Items, or Item subparts, the IRS issued a final determination on December 15, 2016, informing Plaintiff that it would not search for any more responsive records. Id. ¶ 10.

         In the motions pending before the court, Defendant moves to dismiss Plaintiff's FOIA claims insofar as they relate to all unperfected Items. The agency also moves for summary judgment on the adequacy of its search and its segregability review of the materials it produced in response to the perfected Items. Plaintiff vigorously opposes Defendant's Motion. The court now turns to resolve the parties' disputes.

         III. LEGAL STANDARD

         Defendant moves to dismiss Plaintiff's unperfected requests under Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to exhaust administrative remedies. It is settled in this Circuit, however, that exhaustion of administrative remedies in a FOIA case is not a jurisdictional bar to judicial review and, thus, is not a defense properly presented by a Rule 12(b)(1) motion. Hidalgo v. FBI, 344 F.3d 1256, 1258 (D.C. Cir. 2003) (stating that the “exhaustion requirement is not jurisdictional because the FOIA does not unequivocally make it so”). Where, as here, a defendant files a motion to dismiss under Rule 12(b)(6) and “matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56.” Fed.R.Civ.P. 12(d). Accordingly, the court treats Defendant's Motion as one for summary judgment. See Rosenberg v. U.S. Dep't of Immigration and Customs Enf't, 956 F.Supp.2d 32, 36 (D.D.C. 2013); Barouch v. U.S. Dep't of Justice, 962 F.Supp.2d 30, 48 n.6 (D.D.C. 2013).

         A. Standard for Motion for Summary Judgment

         Courts are to grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). To make this determination, the court must “view the facts and draw reasonable inferences in the light most favorable to the [non-moving] party.” Scott v. Harris, 550 U.S. 372, 378 (2007) (internal quotation marks omitted). A dispute is “genuine” only if a reasonable fact-finder could find for the non-moving party, and a fact is “material” only if it is capable of affecting the outcome of litigation. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). A non-material factual dispute must not prevent the court from granting summary judgment. See Id. at 248-50.

         Most FOIA cases are appropriately decided on motions for summary judgment. See Defs. of Wildlife v. U.S. Border Patrol, 623 F.Supp.2d 83, 87 (D.D.C. 2009). A court may award summary judgment in a FOIA case by relying on the information included in the agency's affidavits or declarations if they are “relatively detailed and non-conclusory, ” SafeCard Servs., Inc. v. SEC, 926 F.2d 1197, 1200 (D.C. Cir. 1991) (internal quotation marks omitted), and describe “the documents and the justifications for nondisclosure with reasonably specific detail, demonstrate that 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).

         To prevail on a motion for summary judgment, the agency must demonstrate that “each document that falls within the class requested either has been produced, is unidentifiable, or is wholly exempt from the Act's inspection requirements.” Goland v. CIA, 607 F.2d 339, 352 (D.C. Cir. 1978). “Unlike the review of other agency action that must be upheld if supported by substantial evidence and not arbitrary or capricious, the FOIA expressly places the burden ‘on the agency to sustain its action' and directs the district courts to ‘determine the matter de novo.'” U.S. Dep't of Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749, 755 (1989) (quoting 5 U.S.C. § 552(a)(4)(B)).

         B. FOIA Requests for IRS Information

         FOIA provides that an agency must promptly provide records in response to a request that (1) “reasonably describes” the records sought, and (2) “is made in accordance with [the agency's] published rules stating the time, place, fees (if any), and procedures to be followed.” 5 U.S.C. § 552(a)(3)(A). If a party believes that the agency has not responded adequately, then that party must exhaust his administrative remedies before filing suit in federal court. Wilbur v. CIA, 355 F.3d 675, 677 (D.C. Cir. 2004); Oglesby v. U.S. Dep't of Army, 920 F.2d 57, 61 (D.C. Cir. 1990). FOIA's administrative scheme “favors treating failure to exhaust as a bar to judicial review.” Wilbur, 355 F.3d at 677 (internal quotation marks omitted). “An agency's obligations commence upon receipt of a valid request; failure to file a perfected request therefore constitutes failure to exhaust administrative remedies.” Dale v. IRS, 238 F.Supp.2d 99, 103 (D.D.C. 2002).

         The IRS will process only those FOIA requests that fully comply with the requirements of the Internal Revenue Code and its attendant regulations. 26 C.F.R. § 601.702(c)(4)(i). If an agency receives a request that falls short of the statutory or regulatory requirements, then “it is not obligated to process the request, ” and if a “requester nonetheless files suit, [then] she is said to have failed to exhaust her administrative remedies, and she must file a perfected request before a court will compel the agency to respond.” Kalu v. IRS, No. 14-9938, 2015 WL 4077756, at *4 (D.D.C. July 1, 2015). At the same time, if the agency determines that a requester has not met those legal requirements when making a request for information, then the agency has an obligation to inform the requester of the deficiencies in her request. 26 C.F.R. § 601.702(c)(1)(i).

         Two provisions of the Internal Revenue Code are relevant to Plaintiff's FOIA Request. The first pertains to requests for tax returns and their attachments. The Internal Revenue Code defines the term “return” to include

any tax or information return, declaration of estimated tax, or claim for refund required by, or provided for or permitted under, the provisions of this title which is filed with the Secretary by, on behalf of, or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists which are supplemental to, or part of, the return so filed.

26 U.S.C. § 6103(b)(1). Requests for returns are governed by 26 C.F.R. § 601.702(d), which requires requesters to submit an IRS Form 4506, “Request for Copy or Transcript of Tax Form.” The second relevant Code provision pertains to requests for a broader category of materials called “return information.” As pertinent here, the Internal Revenue Code defines “return information” to mean:

[A] taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense[.]

26 U.S.C. § 6103(b)(2)(A). Requests for return information are subject to the detailed procedures set forth at 26 C.F.R. § 601.702(c).

         IV. DISCUSSION

         The parties' motions present three distinct issues: (1) whether Plaintiff perfected his outstanding requests and, thereby, exhausted his administrative remedies; (2) whether Plaintiff adequately pleaded his Privacy Act claim; and (3) whether Defendant is entitled to summary judgment on the adequacy of its search and its segregability review as to Plaintiff's perfected and partially perfected requests. The court addresses each issue in turn below.

         A. Whether Plaintiff Perfected Items 1, 2, 4, 5, 7, and 8

         The court begins with whether Plaintiff fully perfected Items 1, 2, 4, 5, 7, and 8. As noted earlier, if Plaintiff has failed to perfect an Item, then he has failed to exhaust administrative remedies and the court must enter judgment in favor of Defendant as to that Item. See Kalu, 2015 WL 4077756, at *4. For ease of discussion, the analysis that follows groups related Items together by subject matter and addresses the parties' contentions concerning each grouping in the order presented in the parties' briefing. Further, the court begins its discussion of each Item grouping by recounting its history.

         1. Items 1 and 2: Plaintiff's Request for the Tax Examination File, Tax Return,and Return ...


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