Opinion
Civil Action No. 00-5992
January 28, 2002
Frederick W. Klepp, Esq., Cherry Hill, NJ, Attorney for Plaintiffs, Darrell M. Carp and Carp Tax Services, Ltd.
Christopher J. Christie, Esq., United States Attorney, Paul A. Blaine, Esq., Assistant United States Attorney, Beatriz T. Saiz, Esq., Trial Attorney, Tax Division, Washington, D.C., Attorneys for Defendant, Internal Revenue Service.
OPINION
I. BACKGROUND
In October, 1999, the Cherry Hill, New Jersey office of the Internal Revenue Service ("IRS") referred an investigation to its Criminal Investigation Division when irregularities were discovered in tax forms that were prepared by Plaintiff, Darrell Carp, a former revenue officer of the IRS Collection Division, through his tax services business, Carp Tax Services Limited, (Plaintiffs will be referred to collectively as "Carp"), for Carp's clients. See Lowitz Decl. ¶¶ 4, 5. After an initial investigation, Special Agent Edward Lowitz ("Lowitz") prepared search warrants and supporting affidavits to search Carp's home and business. Id. at ¶ 6. Pursuant to a request from Lowitz, portions of the search warrant applications which contained information pertaining to the details of the IRS investigation, were placed under seal by the United States Magistrate Judge who issued the search warrant. Id. at ¶¶ 7, 11. The search warrants were executed on March 18, 1999. Id. at ¶ 8. Ultimately, the investigation of Carp was halted and the case closed. Id. at ¶ 9.
On June 8, 2000, Carp submitted a request to the IRS, under the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"), and the Privacy Act, 5 U.S.C. § 552 (a), for the release of: (1) the search warrant applications; (2) the affidavits submitted in support of the applications; (3) all reports of the IRS's investigation of Carp; (4) all reports of interviews of witnesses conducted pursuant to the investigation; and (5) the name of the Assistant United States Attorney involved in the investigation. See Compl. at ¶ 4.
In response to Carp's FOIA request, the IRS Disclosure Office identified thirty-four pages that were responsive to Carp's request. From these thirty-four pages, the IRS withheld pages four through thirteen, and pages seventeen through thirty-four, citing specific FOIA exemptions. Id. at ¶ 9. Carp appealed the IRS's decision to withhold certain of the requested documents on October 20, 2000. Id. at ¶ 12. In January 2001, upon request from the Criminal Investigator FOIA coordinator, Special Agent Lowitz identified fifteen additional pages responsive to Carp's FOIA request, including a draft version of a "Discontinued Investigation" memorandum that Lowitz had prepared, and seven memoranda memorializing several witness interviews. See Lowitz Decl. at ¶ 12. of these fifteen pages, eleven pages were released to Carp in whole or in part. See Saiz Supplemental Decl. at ¶ 5. The remaining pages were withheld pursuant to various FOIA exemptions, including: (1) exemption 3, 5 U.S.C. § 552(b)(3), in conjunction with 26 U.S.C. § 6103(e)(7); (2) exemption 7, 5 U.S.C. § 552(b)(7)(C), (E). See Fahy Decl. at ¶ 5.
Carp filed a complaint on December 11, 2000 requesting this Court: (1) to order the IRS to make the withheld documents immediately available; (2) to award Carp his costs and fees; and (3) to issue a written finding that the agency's actions were arbitrary and capricious. See Compl. at ¶¶ 13-16.
The IRS moved for Summary Judgment, pursuant to Fed.R.Civ.P. 56, on July 3, 2001. This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331 and 5 U.S.C. § 552(a)(4)(vii)(B). Pursuant to this Court's Order of January 22, 2002, the IRS submitted, for in camera inspection by this Court, unredacted and redacted copies of the documents requested, with the statutory exemptions pertinent to each document or section thereof specified in the margin. The Court has examined these documents in camera.
II. STANDARD FOR SUMMARY JUDGMENT
A party seeking summary judgment must "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also, Celotex Corp. v. Catrett, 477 U.S. 317. 322 (1986); Abramsom v. William Paterson Coll. of N.J., 260 F.3d 265, 276 (3d Cir. 2001). In deciding whether there is a disputed issue of material fact, the Court must view the underlying facts and draw all reasonable inferences in favor of the non-moving party. See e.g., Abramsom, 260 F.3d at 276 (citing Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000).
A movant must be awarded summary judgment on all properly supported issues identified in its motion, except those for which the non-moving party has provided admissible evidence or affidavits to show that a question of material fact remains. See, e.g., Gleason v. Norwest Mortgage, Inc., 242 F.3d 130, 138 (3d Cir. 2001) (citing Becton Dickinson Co. v. Wolckenhauer, 215 F.3d 340, 343 (3d Cir. 2000)). To defeat summary judgment, "its opponent must do more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also Anderson, 477 U.S. at 247-48 ("By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion . . .; the requirement is that there be no genuine issue of material fact.")
The non-moving party must "go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324 (quoting Fed.R.Civ.P. 56(e)); see also Lujan v. Nat'l. Wildlife Fed., 497 U.S. 871, 888 (1990) ("The object of [Rule 56(e)] is not to replace conclusory allegations of the complaint . . . with conclusory allegations of an affidavit."); If the non-moving party has the burden of proof at trial, summary judgment will be granted if "the nonmovant fails to make a showing sufficient to establish the existence of an element essential to [its] case." Nebraska, 507 U.S. at 590 (citing Celotex, 477 U.S. at 322); see also Omnipoint Communications Enterprises, L.P. v. Newtown Township, 219 F.3d 240, 242 (3d Cir. 2000). If the non-moving party fails to oppose the motion for summary judgment by written objection, memorandum, affidavits and other evidence, the Court "will accept as true all material facts set forth by the moving party with appropriate record support." Anchorage Assocs. v. Virgin Islands Bd. of Tax Rev., 922 F.2d 168, 175 (3d Cir. 1990) (quoting Jaroma v. Massey, 873 F.2d 17, 21 (1st Cir. 1989)). Even where the non-moving party has failed to establish a triable issue of fact, summary judgment will not be granted unless "appropriate." Fed.R.Civ.P. 56(e); see Anchorage Assocs., 922 F.2d at 175.
Summary judgment is proper in a FOIA action if the Government's affidavits "describe the withheld information and the justification for withholding with reasonable specificity, demonstrating a logical connection between the information and the claimed exemption, and are not controverted by either contrary evidence in the record nor by evidence of agency bad faith." Amro v. United States Customs Service, 128 F. Supp.2d 776, 782 (E.D. Pa. 2001) (quoting American Friends Serv. Comm. v. Dep't of Defense, 831 F.2d 441, 444 (3d Cir. 1987)).
III. DISCUSSION
The FOIA mandates disclosure of documents held by a federal agency, absent a relevant exemption. See Dep't of Interior v. Klamath Water Users Protective Ass'n, 121 S.Ct. 1060, 1065 (2001). The FOIA's "dominant objective" is "disclosure, not secrecy," id. (quoting Dep't of Air Force v. Rose, 425 U.S. 352, 360-61 (1976)), thus, FOIA exemptions are to be "narrowly construed." FBI v. Abramson, 456 U.S. 615, 630 (1982). Because the FOIA creates a presumption favoring disclosure, an agency withholding documents pursuant to an exemption has the burden of showing that the claimed exemption applies. Manna v. United States Dep't of Justice, 51 F.3d 1158, 1163 (3d Cir. 1995)
Here, the IRS claims that the requested documents are properly withheld under FOIA Exemption 3, in conjunction with 26 U.S.C. § 6103(e)(7), as well as under FOIA Exemptions 7(C) and (E).
A. Exemption 3
FOIA Exemption 3, states:
This section does not apply to matters that are specifically exempted from disclosure by statute (other than section 552b of this title), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue; or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld.5 U.S.C. § 552(b)(3). The IRS cross-references a provision of the Internal Revenue Code pertaining to the confidentiality and disclosure of tax returns and return information, which provides:
"Return information with respect to any taxpayer may be open to inspection by or disclosure to any person authorized by this subsection to inspect any return of such taxpayer if the Secretary determines that such disclosure would not seriously impair Federal tax administration." 26 U.S.C. § 6103(e)(7). "Return information" is defined to include: "any . . . data, received by, recorded by, prepared by, furnished to, or collected by the Secretary . . . with respect to the determination of the existence or possible existence, of liability . . . or 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). "Return information" encompasses the types of materials requested here, see Currie v. IRS, 704 F.2d 523, 531 (11th Cir. 1983) (internal agency memoranda regarding tax fraud investigation, memoranda of interviews with witnesses and confidential informants, draft affidavits of confidential informants, IRS personnel's notes and work papers concerning the scope and direction of an investigation were "return information" under 26 U.S.C. § 6103) and 26 U.S.C. § 6103 is the type of contemplated by FOIA Exemption 3. Id. at 527; see also Chamberlain v. Kurtz, 589 F.2d 827, 838-39 (5th Cir. 1979) ("Both the language and legislative history of Exemption 3, as amended, indicate that subsections 6103(c) and 6103(e)(6) qualify for the statutory exemption to the FOIA.").
The IRS contends that the documents submitted by Special Agent Lowitz in support of the search warrant application are exempt because they are "return information" as defined by 26 U.S.C. § 6103 and because § 6103(e)(7) "establishes particular criteria for withholding or refers to particular types of matters to be withheld." In support of this contention, the IRS has submitted an affidavit from a delegate of the Secretary of the IRS, Anne D. Fahy ("Fahy"). See Fahy Aff. at ¶¶ 3, 4 ("I have been delegated the authority to make determinations that certain information is exempt from disclosure pursuant to 26 U.S.C. § 6103 (e)(7) . . . [and] to assert the law enforcement exemptions with respect to the disclosure of IRS Criminal Investigation records which are sought by requesters under . . . FOIA."). Fahy asserts that the information which Carp has requested is exempt from disclosure under FOIA Exemption 3, for the reasons stated by Special Agent Lowitz, see Lowitz Decl. at ¶ 13 (release of the information requested "could lead to circumvention of the law by alerting the public to certain factors CI weighs in considering whether to undertake a criminal investigation . . . [, and] would also impair tax administration.").Id. at ¶ 5.
While I am necessarily constrained in my description of the documents being withheld, after reviewing in camera the documents which are being withheld pursuant to FOIA Exemption 3, I conclude that the information contained in these documents is "return information" as defined in 26 U.S.C. § 6103, and that the release of this information would seriously impair tax administration, as required by § 6103(e)(7). Accordingly, the IRS may withhold these documents pursuant to FOIA Exemption 3, in conjunction with 26 U.S.C. § 6103.
B. Exemptions 7(C) and (E)
The IRS argues that the information which Carp requested is exempt under FOIA Exemption 7(C) and (E). Exemptions 7(C) and (E) state:
This section does not apply to matters that are records or information compiled for law enforcement purposes, but only to the extent that the production of such law enforcement records or information (C) could reasonably be expected to constitute an unwarranted invasion of personal privacy, . . . (E) would disclose techniques and procedures for law enforcement investigations or prosecutions, or would disclose guidelines for law enforcement investigations or prosecutions if such disclosure could reasonably be expected to risk circumvention of the law, . . .5 U.S.C. § 552(b)(7)(C), (E)
The Third Circuit has determined that a court must analyze an exemption claimed under any subsection of § 552(b)(7) under a two-prong "rational nexus" test. See Davin v. United States Dep't of Justice, 60 F.3d 1043, 1056 (3d Cir. 1995). Under this test, the Government must identify the particular individual who is the subject of the investigation and support the connection between that individual and the potential violation of law or security risk with information "`sufficient to support at least a `colorable claim' of its rationality.'" Id. (quoting Pratt v. Webster, 673 F.2d 408, 421 (D.C. Cir. 1982)).
The Government has met this threshold showing. Its affidavits identify Carp and Carp's business as the target of the IRS investigation, see Lowitz Decl. at ¶ 4, and connect Carp, with sufficient evidence, of a possible violation of federal law. Id. at ¶ 5.
1. Exemption 7(C)
In evaluating a claim made pursuant to FOIA Exemption 7(C), a court must balance the public interest in the disclosure of third-party information with the privacy interest of those third parties. See Dep't of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 776 (1989). In Reporters Committee, the Supreme Court held that "categorical decisions may be appropriate and individual circumstances disregarded when a case fits into a genus in which the balance characteristically tips in one direction." 489 U.S. at 776. The names and addresses of private individuals which appear in the investigative files of government agencies are generally exempt from disclosure unless that information is necessary to confirm or refute compelling evidence of agency misconduct.See Safecard Serv., Inc. v. SEC, 926 F.2d 1197, 1206 (D.C. Cir. 1991);cf. Manna, 51 F.3d at 1166-67 (quoting Nat'l Ass'n of Retired Fed. Employees v. Horner, 879 F.2d 873, 870 (D.C. Cir. 1989) ("Absent proof of misconduct, which is needed to justify invading the demonstrable privacy interests involved here, we `need not linger over the balance' because `something . . . outweighs nothing every time.'"). The Government's "`interest in assuring future cooperation of witnesses with FBI investigations is not a valid reason for refusing to disclose information under Exemption 7(C).'" Davin, 60 F.3d at 1059 (quoting McDonnell v. United States, 4 F.3d 1227, 1256 (3d Cir. 1993)).
After reviewing the material withheld pursuant to Exemption 7(C) in camera, I conclude that the balance of factors weighs in favor of withholding the material. The material contains information which identifies third parties involved in the investigation of Carp, but does not shed any light on the conduct of the IRS. Release of "information about private citizens that is accumulated in various government files but that reveals little or nothing about an agency's own conduct" does not further the FOIA's basic purpose of "open[ing] agency action to the light of public scrutiny." Reporters Comm., 489 U.S. at 772-73. Accordingly, I conclude that those portions of the requested material which contain information about third-parties, are properly withheld under FOIA Exemption 7(C) because their privacy interests are not outweighed by the public interest in disclosure.
2. Exemption 7(E)
FOIA Exemption 7(E) applies to law enforcement records, which, if disclosed, would risk circumvention of the law, see Davin, 60 F.3d at 1064, but the exemption may not be asserted to justify the withholding of "`routine techniques and procedures already well-known to the public, such as ballistic tests, fingerprinting, and other scientific tests commonly known.'" Id. (quoting Ferri v. Bell, 645 F.2d 1213, 1224 (3d Cir. 1981), modified, 671 F.2d 769 (3d Cir. 1982)). Exemption 7(E) has been held to apply to disclosure of agency procedures used to identify and investigate tax protestors, see Becker v. IRS, 34 F.3d 398,
05 (7th Cir. 1994), and to disclosure of agency guidelines which specify the sources of information which are available to its agents. See PHE, Inc. v. Department of Justice, 983 F.2d 248, 251 (D.C. Cir. 1993).
After an in camera review of the documents and portions thereof which are being withheld pursuant to FOIA Exemption 7(E), I am satisfied that disclosure of the information would risk circumvention of the law by exposing specific, non-routine investigative techniques used by the IRS to uncover tax fraud. Accordingly, the IRS may withhold these documents pursuant to FOIA Exemption 7(E).
C. Privacy Act
Section (j)(2) of the Privacy Act permits agencies to exempt from all the civil remedies specified in section (g) of the Act, systems of records "maintained by an agency or component thereof which performs as its principal function any activity pertaining to the enforcement of criminal laws, . . ." 26 U.S.C. § 552a(j)(2). Among the IRS's (j)(2) systems of records are 46.002, "Criminal Investigation Management Information System" which includes "[p]ersonal and financial information developed in criminal tax investigations, potential tax investigations and in projects including information from other Federal, state and local agencies." 63 Fed. Reg. 69, 894 (Dec. 17, 1998); 31 C.F.R. § 1.36 (2000).
All of the documents requested by Carp fall within the system of records exemption, because they were all compiled during the course of a criminal tax investigation, and thus, fall within system of records 46.002. Thus, in this case, under the Privacy Act more, indeed, all, of the documents which Carp requested, would have been exempt from disclosure than were exempt from disclosure under FOIA. Thus, Carp's pursuit of the documents under the Privacy Act affords him no relief.
IV. CONCLUSION
For the reasons set forth above, I find that the IRS may withhold the information requested by Carp pursuant to FOIA Exemption 3, in conjunction with 26 U.S.C. § 6103, and FOIA Exemptions 7(C) and 7(E). Accordingly, the IRS's motion for summary judgment shall be GRANTED. The Court will enter an appropriate form of Order.