Berger v. I.R.S., Civil Action No. 05-3854(HAA).
| Decision Date | 22 May 2007 |
| Docket Number | Civil Action No. 05-3854(HAA). |
| Citation | 487 F.Supp.2d 482 |
| Parties | Lawrence S. BERGER and Realty Research Corporation, Plaintiffs, v. INTERNAL REVENUE SERVICE and Department of the Treasury, Defendants. |
| Court | U.S. District Court — District of New Jersey |
Frank Agostino, Esq., James J. Bonicos, Esq., Cabo Agostino, P.C., Hackensack, NJ, for Plaintiffs.
Christopher J. Christie, Esq., United States Attorney, Gerald A. Role, Esq., Trial Attorney, Tax Division, United States Department of Justice, Washington, DC, for Defendants.
This matter comes before the Court on the motion for summary judgment (Docket No. 10) filed by Defendants Internal Revenue Service and the Department of the Treasury (collectively "IRS" or "Defendants"). Plaintiffs Lawrence S. Berger and Realty Research Corporation ("RRC") brought this action under the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552, and the Privacy Act, 5 U.S.C. § 552a, to compel disclosure of certain documents from the IRS relating to the civil and criminal tax investigation of which Plaintiffs were the subjects. For the following reasons, Defendants' motion for summary judgment will be granted.
Plaintiffs were the subject of a civil Trust Fund Recovery Penalty ("TFRP") investigation and related criminal investigation ("CI") by the IRS.1 Berger resides in Morristown, New Jersey, and RRC is a New Jersey corporation with its principal place of business at Berger's address in Morristown. Revenue Officer Mary M. Williams handled the civil TFRP inquiry in the IRS's small business/self-employed field office in Parsippany, New Jersey, and Special Agent Eric Rennert handled the CI in the IRS's criminal investigation field office in Springfield, New Jersey. No charges were ever brought against Plaintiffs as a result of these investigations.
On December 8, 2003, Plaintiffs' counsel submitted a FOIA and Privacy Act request to the IRS requesting the release to counsel of documents relating to the investigations of Plaintiffs. The FOIA request included demands for the entire civil and criminal investigatory files maintained by Williams and Rennert; all IRS forms and other documents relevant to the TFRP inquiry and unpaid taxes by Plaintiffs; a list of third parties contacted by the IRS during the civil and criminal investigations; and time records kept by Williams relating to the civil investigation. Along with the request, counsel submitted two Power of Attorney forms: one for Berger authorizing disclosure of TFRP-related documents for tax years 1998-2003, and another for RRC authorizing disclosure of employment tax-related matters for tax years 1998-2003.
Plaintiffs' FOIA request was referred to Senior Disclosure Specialist Joseph A. Reidy in the IRS's Disclosure Office in Springfield, New Jersey. After determining that all responsive documents would be found in the field office files of Williams and Rennert, Reidy obtained and reviewed these files. In a letter to Plaintiffs' counsel dated July 23, 2004, the Disclosure Office responded to Plaintiffs' request. The entire CI file was withheld because the information in the CI file was beyond the scope of the Power of Attorney forms submitted by counsel. The IRS concluded that certain documents in the civil TFRP file were exempt from disclosure, in whole or in part, under various FOIA exemptions.2 Of the 459 pages of the TFRP file found responsive to Plaintiffs' request, the Disclosure Office withheld 19 pages in whole or in part pursuant to FOIA exemptions. The IRS also withheld 70 pages in full and 64 pages in part where the information pertained to tax years or matters outside the scope of the Power of Attorney forms.
By letter dated August 27, 2004, Plaintiffs' counsel filed an administrative appeal of the Disclosure Office's decision with the IRS Appeals Office in Riverside, California. Counsel challenged the IRS's failure to provide a detailed description of the information withheld and the reason for withholding. Such a document is commonly called a Vaughn index: "an index correlating each withheld document, or a portion thereof, with a specific exemption and relevant part of an agency's justification for nondisclosure." Davin v. U.S. Dep't of Justice, 60 F.3d 1043, 1047 n. 1 (3d Cir. 1995) (citing Vaughn v. Rosen, 484 F.2d 820 (D.C.Cir.1973)). Counsel also complained that the IRS failed to conduct a reasonable search because it produced no documents from the IRS's Service Center or from a Federal Records Center. Along with the appeal, counsel submitted an additional Power of Attorney form with regard to Berger, broadening the scope of the power of attorney granted to counsel to include tax and TFRP information for the tax years 1996 to 2004.
Appeals Officer Heidi Peterson handled the appeal. Peterson determined that all responsive documents were located in the files maintained by Williams and Rennert in their respective field offices, and that there were no responsive documents at any Service Center. In a letter dated July 15, 2005, the Appeals Office resolved Plaintiffs' appeal, affirming in part and reversing in part the Disclosure Office's determination. Based upon its review and the new Power of Attorney form, the Appeals Office disclosed an additional 16 pages in full and 8 pages in part from the civil TFRP file. The Appeals Office affirmed the withholding of the remaining undisclosed portions of the TFRP file for the reasons stated by the Disclosure Office. With regard to the CI file, the Appeals Office, based in part on the new Power of Attorney form, reviewed the over 2,300 pages of the CI file and disclosed to counsel 844 pages in full and 151 pages in part. Approximately 1,370 pages were withheld in full or in part pursuant to FOIA exemptions. Some pages were withheld because the information in those pages still fell beyond the scope of the Power of Attorney forms submitted by counsel. The Appeals Office also informed counsel that Plaintiffs were not entitled to a Vaughn index on administrative appeal.3
Plaintiffs filed the Complaint in this matter on August 3, 2005, seeking disclosure of the information withheld by the IRS. The Complaint contains five counts, seeking disclosure pursuant to: 1) FOIA; 2) the Privacy Act; 3) Internal Revenue Code ("I.R.C.") § 6103; 4) I.R.C. § 6203; and 5) I.R.C. § 7602(c).4 Plaintiffs' case was referred for review to Mary Ellen Keys in the IRS's Office of Assistant Chief Counsel for Disclosure and Privacy Law. Keys reviewed the entire administrative history and the documents withheld by the IRS. Approximately ten months after filing their Complaint, Plaintiffs' counsel submitted two additional Power of Attorney forms again expanding the scope of authorized disclosure. Based on this expanded authority and on her review of this matter, Keys, in August 2006, authorized the disclosure of approximately 900 pages, in whole or in part, from the TFRP and CI files previously withheld by the Appeals Office. Keys also authorized, in October 2006, the disclosure of a list of third parties contacted by the IRS in its investigations. She additionally authorized the disclosure of several IRS forms that were not disclosed by the Appeals Office. All of these documents have been released to Plaintiffs. The IRS asserted FOIA exemptions with regard to the remainder of the responsive documents sought by Plaintiffs, and Keys's Declaration submitted in support of the instant motion provides detailed grounds for the IRS's assertion of various FOIA exemptions. The remaining documents withheld by the IRS included
• 6 pages in full and 2 pages in part of the CI file pursuant to Exemption 3 in conjunction with I.R.C. § 6103(a) where the information concerned third-party return information;
• 64 pages in full and 1 page in part of the CI file pursuant to Exemption 3 in conjunction with 31 U.S.C. § 5319 where the documents consist of Currency Transaction Reports ("CTRs") and other reports compiled by the IRS (or information from such reports) and exempt from disclosure by § 5319;5
• 4 pages in full pursuant to Exemption 5 where the documents are subject to a litigation privilege;
• 21 pages in full and 357 pages in part pursuant to Exemption 7(C) where disclosure could reasonably be expected to constitute an unwarranted invasion of personal privacy; and
• 711 pages in full pursuant to Exemption 6 where the information involves time records of Williams kept during the investigation of Plaintiffs and where disclosure would constitute a clearly unwarranted invasion of personal privacy.
Defendants filed the instant motion for summary judgment on October 27, 2006. Defendants support their motion with affidavits from Reidy, Rennert, Peterson, Keys, and Department of Justice trial counsel Gerald A. Role. In responding to Defendants' motion, Plaintiffs submitted the Vaughn Index prepared by the IRS and provided to Plaintiffs during this litigation. Keys again reviewed Plaintiffs' request and arguments following receipt of their response to Defendants' motion. Shortly before filing its reply papers, the IRS released to Plaintiffs an additional 22 pages of documents previously withheld under Exemption 3 in conjunction with 31 U.S.C. § 5319. These pages were disclosed because they contained information not drawn from CTRs and other statutorily-exempt reports. Keys's Second Declaration, submitted with Defendants' reply papers, contains a detailed response to Plaintiffs' summary judgment brief based on the IRS's "re-review" and reasserted and elaborated upon the IRS's reliance on various FOIA exemptions.
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