Arthur Andersen & Co. v. I. R. S.

Decision Date21 May 1982
Docket NumberNo. 81-1821,81-1821
Citation679 F.2d 254
Parties, 82-1 USTC P 9385 ARTHUR ANDERSEN & CO. v. INTERNAL REVENUE SERVICE, Appellant.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 80-00705).

Murray S. Horwitz, Atty., Dept. of Justice, with whom John F. Murray, Acting Asst. Atty. Gen., Charles F. C. Ruff, U. S. Atty. at the time the brief was filed, Michael L. Paup and Richard W. Perkins, Attys., Dept. of Justice, Washington, D. C., were on the brief, for appellant.

Eric J. Lobenfeld, New York City, for appellee.

Before WRIGHT and WALD, Circuit Judges, and CELEBREZZE, * Senior Circuit Judge for the Sixth Circuit.

Opinion for the Court filed by Circuit Judge WALD.

WALD, Circuit Judge:

In this appeal, the Internal Revenue Service ("Agency" or "IRS") challenges the district court's judgment that the Freedom of Information Act ("FOIA") 1 requires disclosure of drafts of Revenue Ruling 77-284 2 and accompanying Background Information Notes. Following in camera inspection of the documents under procedures stipulated to by the parties, 3 the court held that the "record" contained insufficient evidence to establish the exempt status of these documents. Arthur Andersen, Inc. v. IRS, 514 F.Supp. 1173, 1177 (D.D.C.1981). The IRS contends that the drafts showed on their face that they fell within 5 U.S.C. § 552(b)(5) ("Exemption 5") which makes FOIA inapplicable to information "normally privileged in the civil discovery context," NLRB v. Sears, 421 U.S. 132, 149, 95 S.Ct. 1504, 1515, 44 L.Ed.2d 29 (1975). Privileged information includes "inter- and intra-agency communications that are part of a deliberative process preceding the adoption and promulgation of an agency policy." Jordan v. Department of Justice, 591 F.2d 753, 772 (D.C.Cir.1978) (en banc). While we agree with the district court that in the usual FOIA case the government's submissions in support of its exemption claim would be inadequate under our prior rulings, we hold that in the unique procedural context of this case, the government's showing was sufficient to establish the exempt status of these drafts.

I. BACKGROUND

On March 5, 1979, Arthur Andersen & Co., a national public accounting firm, requested of the IRS, pursuant to FOIA and IRS public disclosure rules, 4 "a copy of the Internal Revenue Service file on Revenue Ruling 77-284" and "a copy of any background file documents as defined in Section 301.6110-2(g) related to Revenue Ruling 77-284." 5 On July 20, 1979, the IRS notified Andersen that certain documents in the file would be released but that others were exempt from FOIA disclosure requirements. 6 Following an unsuccessful administrative appeal, 7 Andersen filed a complaint in the district court on March 19, 1980. 8

On June 11, 1980, the parties signed a stipulation covering all but one of the withheld documents. The parties agreed to submit the documents to the court for in camera inspection and to each file "position papers" setting forth its case for disclosure or exemption and a reply to the other party's position paper. 9 Andersen further agreed not to pursue discovery and to be bound by the determination of the district court based on these submissions. 10 The court approved the stipulation two days later. 11 The sole document not covered by the stipulation, a general counsel memorandum ("GCM") describing "the reaction of the Office of Chief Counsel to the proposed revenue ruling," 12 was not included in the stipulation because the parties intended either to settle with regard to the document or to file cross-motions for summary judgment, depending upon whether the IRS decided to appeal another district court decision that ordered disclosure of a GCM, Taxation With Representation Fund, Inc. v. IRS, 485 F.Supp. 263 (D.D.C.1980). When the IRS appealed, 13 Andersen moved for summary judgment with respect to the GCM at issue in this case 14 and filed supporting papers, including copies of sworn statements of IRS employees that had been submitted in the Taxation With Representation suit. 15 The Agency cross-moved for summary judgment 16 and submitted the GCM for in camera inspection. 17 On May 21, 1981, the district court issued a single opinion, which covered the documents subject to the stipulation as well as the GCM, and ordered disclosure of them all. Arthur Andersen, Inc. v. IRS, supra, 514 F.Supp. at 1178. On June 29, 1981 the court denied the Agency's Motion for Reconsideration 18 and this appeal followed. The government challenges only that portion of the district court's decision requiring disclosure of the drafts of the Revenue Ruling and accompanying background notes, which it contends are predecisional and deliberative and thus protected by Exemption 5.

II. ANALYSIS

Exemption 5 permits an agency to withhold documents that "would not normally be discoverable by a private party in the course of civil litigation with the agency." Jordan v. Department of Justice, supra, 591 F.2d at 772. "Congress intended that agencies should not lose the protection traditionally afforded through the evidentiary privileges simply because of the passage of the FOIA." Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854, 862 (D.C.Cir.1980). Among those privileges protected by Exemption 5 is the "executive 'deliberative process' privilege," id., which is "unique to the government." Id. at 866. This privilege covers " 'all papers which reflect the agency's group thinking in the process of working out its policy and determining what its law shall be.' " NLRB v. Sears, Roebuck & Co., supra, 421 U.S. at 153, 95 S.Ct. at 1517 (quoting Davis, The Information Act: A Preliminary Analysis, 34 U.Chi.L.Rev. 761, 797 (1967)). "The point, plainly made in the Senate Report, is that the 'frank discussion of legal or policy matters' in writing might be inhibited if the discussion were made public; and that the 'decisions' and 'policies formulated' would be the poorer as a result." Id. at 150, 95 S.Ct. at 1516 (quoting S.Rep.No.813, 89th Cong., 1st Sess. 9 (1965)). However, because the quality of a decision is unlikely to be "affected by communications with respect to the decision occurring after the decision is finally reached," id. at 151, 95 S.Ct. at 1516, forced disclosure of post-decisional communications is unlikely to affect the quality of the decision, "as long as prior communications and the ingredients of the decisionmaking process are not disclosed." Id. Further "(p)redecisional documents are thought generally to reflect the agency "give-and-take" leading up to a decision that is characteristic of the deliberative process; whereas post-decisional documents often represent the agency's position on an issue, or explain such a position, and thus may constitute the 'working law' of an agency" which Congress intended by FOIA to make accessible to the public. Taxation With Representation Fund v. IRS, 646 F.2d 666, 677 (D.C.Cir.1981). Thus, in general, predecisional communications are likely to qualify as privileged and "communications made after the decision and designed to explain it" are not. NLRB v. Sears, supra, 421 U.S. at 151-52, 95 S.Ct. at 1516-17.

In Coastal States, supra, 617 F.2d at 866, this court cited "recommendations, draft documents, proposals, suggestions, and other subjective documents which reflect the personal opinions of the writer rather than the policy of the agency" as examples of predecisional deliberative materials privileged under Exemption 5. The designation of the documents here as "drafts" does not end the inquiry, however. Coastal States forecloses the Agency's argument that any document identified as a "draft" is per se exempt. Even if a document is a "draft of what will become a final document," the court must also ascertain "whether the document is deliberative in nature." Id. Further, "even if the document is predecisional at the time it is prepared, it can lose that status if it is adopted, formally or informally, as the agency position on an issue or is used by the agency in its dealings with the public." Id.

FOIA imposes on the Agency the burden "to sustain its action" in withholding documents. 5 U.S.C. § 552(a)(4)(B). The Agency must thus carry the burden of establishing that documents contain "the ideas and theories which go into the making of the law" and not "the law itself," Sterling Drug, Inc. v. FTC, 450 F.2d 698, 708 (D.C.Cir.1971). This involves showing "what deliberative process is involved, and the role played by the documents in issue in the course of that process." Coastal States, supra, 617 F.2d at 868. To establish that documents do not constitute the "working law" of the agency, the agency must present to the court the "function and significance of the document(s) in the agency's decisionmaking process," Taxation With Representation, supra, 646 F.2d at 678, "the nature of the decisionmaking authority vested in the office or person issuing the disputed document(s)," id. at 679, and the positions in the chain of command of the parties to the documents. Id. at 681.

The procedures by which an agency must ordinarily make such a showing were defined in Vaughn v. Rosen, 484 F.2d 820 (D.C.Cir.1973), cert. denied, 415 U.S. 977, 94 S.Ct. 1564, 39 L.Ed.2d 873 (1974). "(T)o allow the courts to determine the validity of the government's claims without physically examining each document," Coastal States, supra, 617 F.2d at 861, Vaughn required that claims of exemption be supported with specific explanations. The concern in Vaughn was that unassisted court examination might be prohibitively burdensome. "In theory, it is possible that a trial court could examine a document in sufficient depth to test the accuracy of a government characterization." Vaughn, supra, 484 F.2d at 825. But particularly where many documents are involved, "it is...

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