Currie v. I.R.S., 81-7984

• Decision Date: 02 May 1983
• Docket Number: No. 81-7984,81-7984
• Citation: 704 F.2d 523
• Parties: 83-1 USTC P 9340 Ralph H. CURRIE, Jr., and Carpets by Ralph Currie, Inc., Plaintiffs-Appellants, v. INTERNAL REVENUE SERVICE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 523

704 F.2d 523

83-1 USTC P 9340

Ralph H. CURRIE, Jr., and Carpets by Ralph Currie, Inc., Plaintiffs-Appellants, v. INTERNAL REVENUE SERVICE, Defendant-Appellee.

No. 81-7984.

United States Court of Appeals, Eleventh Circuit.

May 2, 1983.

Arnall, Golden & Gregory, S. Jarvin Levison, Donald I. Hackney, Jr., Atlanta, Ga., for plaintiffs-appellants.

Myles E. Eastwood, Asst. U.S. Atty., Atlanta, Ga., Michael L. Paup, Chief Appellate Section, Glenn L. Archer, Asst. Atty. Gen., Richard W. Perkins, Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before GODBOLD and KRAVITCH, Circuit Judges, and MORGAN, Senior Circuit Judge.

LEWIS R. MORGAN, Senior Circuit Judge:

Ralph H. Currie and Carpets by Ralph H. Currie, Inc., (Appellants) appeal from an order of the United States District Court for the Northern District of Georgia denying the release of Internal Revenue Service documents pursuant to the Freedom of Information Act, 5 U.S.C. Sec. 552 (1978). The Internal Revenue Service contends the documents are exempt from disclosure under the Freedom of Information Act, 5 U.S.C. Secs. 552b(3), and (b)(7)(A) (1978), and the Internal Revenue Code, 26 U.S.C. Sec. 6103(e)(7). The appellants contend the Internal Revenue Service did not provide a sufficient factual basis and justification for their claimed exemptions from disclosure. We conclude the Internal Revenue Service has sufficiently demonstrated the withheld documents are exempt from disclosure under the Freedom of Information Act and therefore affirm the court below.

I. BACKGROUND

The Internal Revenue Service is conducting a civil and criminal investigation into the tax liabilities of Ralph H. Currie for the tax years 1975 through 1978 and a civil investigation into the tax liabilities of Carpets by Ralph Currie, Inc., for the tax years 1976 through 1978. The appellants filed a Freedom of Information Act (FOIA), 5 U.S.C. Sec. 552 (1978), request with the Internal Revenue Service (IRS) seeking the release of certain documents ¹ within the control of the IRS relating to the IRS's investigation of their tax liabilities. The IRS released part of the documents covered by the FOIA request but refused to disclose the remainder of the documents, ² contending the undisclosed documents were exempt from disclosure pursuant to Exemption 3, 5 U.S.C. Sec. 552(b)(3), and Exemption 7(A), 5 U.S.C. Sec. 552(b)(7)(A), ³ of the FOIA and pursuant to Sections 6103(c) and (e)(6) ⁴ of the Internal Revenue Code of 1954, 26 U.S.C. Secs. 6103(c) and (e)(6). After the IRS failed to timely process and respond to an administrative appeal, the appellants filed this action in the district court seeking production of the withheld documents. ⁵

The district court found the withheld material was not subject to disclosure pursuant to 26 U.S.C. Sec. 6103 and alternatively, that the withheld material was exempt from disclosure under the Freedom of Information Act's Exemption 3, 5 U.S.C. Sec. 552(b)(3), and Exemption 7(A), 5 U.S.C. Sec. 552(b)(7)(A). ⁶ The district court also denied the appellants' request for an order requiring the IRS to submit an index detailing each withheld document and justifying the exemption from disclosure pertaining to each document. From the grant of summary judgment in favor of the IRS, the appellants bring this appeal pursuant to 28 U.S.C. Sec. 1291 (1978).

II. DISCUSSION

The IRS contends that I.R.C. Sec. 6103, 26 U.S.C. Sec. 6103, is a self-contained statutory scheme regulating the disclosure of tax return information and therefore the disclosure or nondisclosure of such information is not subject to the FOIA and its concomitant procedural requirements and policy objectives. Judicial review of the agency's decision to withhold these documents, they argue, is limited to a determination of whether the decision was arbitrary or an abuse of discretion. We disagree.

Exemption 3 of the FOIA, 5 U.S.C. Sec. 552(b)(3), provides that the FOIA's disclosure requirements do not apply to matters specifically exempted from disclosure by another statute, provided the statute meets particular criteria. ⁷ In Chamberlain v. Kurtz, 589 F.2d 827 (5th Cir.1979), cert. denied 444 U.S. 842, 100 S.Ct. 82, 62 L.Ed.2d 54 (1980), this court's predecessor ⁸ determined that 26 U.S.C. Sec. 6103 satisfied the criteria of Exemption 3 after extensively analyzing the language of Section 6103 and the legislative history of Exemption 3 and Section 6103. Accordingly, the court held that tax return information, as defined in 26 U.S.C. Sec. 6103(b)(2), ⁹ is not subject to disclosure pursuant to 26 U.S.C. Sec. 6103(e)(6) (now codified as 26 U.S.C. Sec. 6103(e)(7), ¹⁰ where the IRS can demonstrate the release of the information would seriously impair federal tax administration. Id. at 838-40. Importantly, the court viewed the nondisclosure of the requested information as an exemption from the normal policy of full disclosure under the FOIA.

The IRS's contention that Section 6103 is a self-contained scheme governing disclosure derives from a line of cases having their genesis in Zale Corporation v. IRS, 481 F.Supp. 486 (D.D.C.1979). Judge Gesell, in a well-reasoned opinion, determined that Section 6103 is the sole standard governing the release of tax return information. Id. at 490. Therefore the court limited judicial review of the IRS's determination on disclosure not to the FOIA required de novo review, but rather to a determination consistent with the Administrative Procedure Act, 5 U.S.C. Secs. 701 et seq., of whether the decision was rational and supported by the record. Id. at 490. ¹¹ Any other construction, it was concluded, would render Section 6103 a "legislative futility." Judge Gesell reasoned:

[T]he structure of section 6103 is replete with elaborate detail identifying the discrete groups to whom disclosure of certain specified types of information is permissible. In this respect it differs markedly from the structure of FOIA, which calls for the release of information to the public at large with no showing of need required. Despite ample indication in the legislative history that Congress was aware of FOIA while it labored over the tax reform legislation, there is no evidence of an intention to allow that Act to negate, supersede, or otherwise frustrate the clear purpose and structure of Sec. 6103. For a court to decide that the generalized strictures of FOIA take precedence over this subsequently enacted, particularized disclosure scheme would in effect render the tax reform provision an exercise in legislative futility. Absent an indication that Congress so intended, this Court will not imply such a prospective pre-emption by FOIA.

481 F.Supp. at 489 (footnotes omitted).

The IRS nonetheless argues Zale and Chamberlain can be reconciled because Chamberlain never addressed the question of whether Section 6103 is the sole standard governing disclosure of tax return information. ¹² Accordingly, they argue we are free to follow Zale and declare Section 6103 is both an Exemption 3 statute and a self-contained disclosure statute. We decline to do so. For the court to follow Zale would be an exercise in judicial futility. District courts would be compelled to engage in both FOIA and Zale analyses when confronted with cases such as this. Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981). (Prior decisions of the Eleventh Circuit, including decisions of the Former Fifth Circuit adopted as precedent by the Eleventh Circuit, may be overruled only by the Eleventh Circuit sitting en banc ). See also, United States v. McIver, 688 F.2d 726 (11th Cir.1982). Indeed, such a procedure was employed in this case. Once a district court has analyzed a case under the strictures of FOIA it is unnecessary for it to engage in the Zale analysis; a nondisclosure decision that passes muster under the "tougher" FOIA requirements will have a rational basis. Such needless use of scarce judicial resources is not to be encouraged.

The appellants contend that the district court erred in finding all of the documents are exempt from disclosure under the FOIA. In reviewing determinations under the FOIA, we must determine (1) whether the district court had an adequate factual basis for its determination and (2) assuming an adequate factual basis, whether the court's determination was clearly erroneous. Chilivis v. Securities and Exchange Commission, 673 F.2d 1205, 1210 (11th Cir.1982); Stephenson v. IRS, 629 F.2d 1140, 1144 (5th Cir.1980). We hold that the court below did have a sufficient factual basis for its determination and that its determination was not clearly erroneous.

The appellants argue the IRS has failed to support adequately its claim for exemption from disclosure under the FOIA. At the outset of these proceedings the appellants filed a motion requesting that the district court order the IRS to submit to them a Vaughn v. Rosen ¹³ index setting forth an index of the documents, the exemptions from disclosure claimed for each document, and the factual basis for the claimed exemption. See Stephenson v. IRS, 629 F.2d at 1144. The district court deferred ruling on the motion until it had considered the IRS's motion for summary judgment. The IRS supported its motion for summary judgment with affidavits of IRS personnel ¹⁴ which briefly outlined the exemptions claimed and the harm that would flow from disclosure. However, after the decision in Stephenson v. IRS, supra, which held similar affidavits ¹⁵ were insufficient to satisfy the government's burden of proof in FOIA cases, Id. at 1145, the IRS tendered all of the disputed documents to the court for an in camera inspection together with individual cover sheets for each document. The cover sheets set forth the claimed exemptions applicable to that document, the extent to which the document was withheld, an explanation relative to the claimed...