Hull v. Internal Revenue Serv.

• Decision Date: 31 August 2011
• Docket Number: No. 10–1410.,10–1410.
• Citation: 108 A.F.T.R.2d 2011,656 F.3d 1174,2011 USTC P 50606
• Parties: Mary M. HULL and Nelson B. Phelps, individually and on behalf of the Association of US West Retirees, Plaintiffs–Appellants,v.INTERNAL REVENUE SERVICE, UNITED STATES DEPARTMENT OF the TREASURY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

656 F.3d 1174

108 A.F.T.R.2d 2011-6015

2011-2 USTC P 50,606

Mary M. HULL and Nelson B. Phelps, individually and on behalf of the Association of US West Retirees, Plaintiffs–Appellants,

v.INTERNAL REVENUE SERVICE, UNITED STATES DEPARTMENT OF the TREASURY, Defendant–Appellee.

No. 10–1410.

United States Court of Appeals, Tenth Circuit.

Aug. 31, 2011.

Curtis L. Kennedy, Denver, CO, for Plaintiffs–Appellants.Gretchen M. Wolfinger (John A. DiCicco, Acting Assistant Attorney General, and Jonathan S. Cohen, Attorney, United States Department of Justice, Tax Division, with her on the brief), Attorney, United States Department of Justice, Tax Division, Washington, D.C., for Defendant–Appellee.Before KELLY, BALDOCK, and LUCERO, Circuit Judges.BALDOCK, Circuit Judge.

Plaintiffs Mary Hull, Nelson Phelps, and the Association of US West Retirees appeal a district court's order rejecting their Freedom of Information Act (FOIA) claim against Defendant Internal Revenue Service (IRS). This appeal focuses primarily on one question: Does Plaintiffs' FOIA request on its face seek only a third party's return information to which they are not entitled without the authorization of that third party? We conclude yes, it does, and, therefore, the IRS properly withheld the requested information in the absence of US West's consent. Accordingly, we affirm the judgment of the district court in favor of the IRS.

I.

Plaintiffs are retired employees of US West, Inc. and participants in the US West Pension Plan. According to Plaintiffs' 2008 FOIA request:

On or about March 15, 1996, US WEST, Inc. made a submission to the IRS under the Voluntary Compliance Review ... Program [VCRP], in which submission the company fully described the problem [with some of its payments to US WEST Pension Plan participants] and requested IRS grant approval to make adjusted pension payments.... On August 28, 1996, the IRS formally approved of US WEST's proposal and issued a Compliance Statement mandating US WEST pay the disputed claims within 90 days....

Plaintiffs Appendix (Appx.) at 112. Plaintiffs requested:

[A] complete copy set of all documents associated with the IRS handling of US WEST's submission in 1996 resulting in the IRS Compliance Statement, plus all other associated records in the agency's file.... This FOIA request includes the full March 15, 1996 dated submission made [to the VCRP] by US WEST and pension plan administrators, including supporting documents, supplemental reports, informal and formal discovery requests, orders, if any, and the written and electronic (e-mail) responses given thereto, including the August 28, 1996 dated IRS's Compliance Statement issued to US WEST.

Id.

In a letter, the IRS informed Plaintiffs their FOIA request for “[VCRP] records regarding US West Pension Plan” sought “tax records” which “are confidential and may not be disclosed unless specifically authorized by law. We must receive US West Pension Plan's written consent before we can consider releasing the information you requested.” Id. at 114. The letter did not inform Plaintiffs if or how they could appeal this determination. Nonetheless, Plaintiffs appealed the IRS's response to the IRS's FOIA Appeals Office. That office provided essentially the same response, only with slightly greater detail:

You asked for [VCRP] records regarding US West Pension Plan.... FOIA exemption 5USC 552(b)(3) exempts from releasing documents that by statute can not be released. Internal Revenue Code § 6103 does not allow the release of documents to a person other than the taxpayer without their consent. Since the government did not receive a consent form ... from US West Pension Plan allowing you to view their tax documents, the government is prohibited by statute from releasing these documents to you. In conclusion the disclosure office has fulfilled their requirements under FOIA.

Id. at 119. The IRS then advised Plaintiffs of their “judicial remedies” under FOIA: “You may file a complaint in the United States District Court for the District in which you reside, or have your principal place of business, or in which the agency records are located, or in the District of Columbia.” Id.

Shortly thereafter, Plaintiffs did just that. They filed a complaint in Colorado federal district court pursuant to the civil enforcement provision of FOIA, 5 U.S.C. § 552, seeking the IRS's disclosure of the requested information or, alternatively, an in camera court review of the withheld information.¹ The IRS filed a motion for summary judgment, arguing that by failing to provide US West's authorization to receive its return information, Plaintiffs had failed to file a perfected FOIA request and, thus, had failed to exhaust their administrative remedies. According to the IRS, such failure meant the district court did not have jurisdiction to adjudicate Plaintiffs' FOIA claim. In support of its motion, the IRS submitted the sworn declarations of three IRS agents who had reviewed Plaintiffs' FOIA request and determined it sought a third party's return information without that party's authorization. Plaintiffs filed their own motion for summary judgment, maintaining they had exhausted their administrative remedies, demanding the information's immediate release, contesting the IRS's categorization of the information as exempt return information, and, alternatively, requesting an in camera review of the information.

The district court granted the IRS's motion for summary judgment, denying Plaintiffs' motion and request for an in camera review. The court determined “[b]ecause information submitted under [the VCRP] could implicate tax liability, the specific information that [Plaintiffs] seek is return information” which the IRS could not disclose to Plaintiffs without US West's authorization. Hull v. IRS, No. 09–cv–0024, 2010 WL 3034463, at *3 (D.Colo. Aug. 3, 2010) (unpublished). Without that authorization, the district court concluded Plaintiffs had filed an unperfected FOIA request. Id. at *5. And, without a perfected request, the court held Plaintiffs had not exhausted their administrative remedies and, as a result, the court lacked subject matter jurisdiction over the action to order an in camera review. Id. at *6. The district court added that even if it had subject matter jurisdiction, it would uphold the IRS's decision because Plaintiffs requested third party return information without that third party's authorization.

Plaintiffs' timely appeal followed. Exercising our appellate jurisdiction under 28 U.S.C. § 1291, we first reject the district court's conclusion that it was jurisdictionally barred from deciding the merits of Plaintiffs' FOIA claim. Nevertheless, reaching the merits, we agree the IRS properly withheld the requested information and, so, affirm the district court's judgment in favor of the IRS. Before doing either, however, we will review the law applicable to this summary judgment action.

II.

We review a district court's grant of summary judgment de novo, applying the same legal standard used by the district court, drawing all reasonable inferences in favor of the nonmoving party—in this case, in favor of Plaintiffs. Trentadue v. Integrity Comm., 501 F.3d 1215, 1226 (10th Cir.2007). FOIA provides the public “a right of access, enforceable in court, to federal agency records, subject to nine specific exemptions.” Anderson v. Dep't of Health & Human Servs., 907 F.2d 936, 941 (10th Cir.1990). FOIA places upon the government agency the burden of proving the requested information falls within one of the nine specific exemptions from disclosure. 5 U.S.C. § 552(a)(4)(B). FOIA also provides that “[a]ny reasonably segregable portion of a record shall be provided to any person requesting such record after deletion of the portions which are exempt.” 5 U.S.C. § 552(b). We and our district court colleagues review the government's refusal to release requested information de novo, reading the act broadly in favor of disclosure and construing its exemptions narrowly. Anderson, 907 F.2d at 941–42.

To satisfy its burden of proof under FOIA, an agency typically submits affidavits. These:

[A]ffidavits must show, with reasonable specificity, why the documents fall within the exemption. The affidavits will not suffice if the agency's claims are conclusory, merely reciting statutory standards, or if they are too vague or sweeping. If the affidavits provide specific information sufficient to place the documents within the exemption category, if the information is not contradicted in the record, and if there is no evidence in the record of agency bad faith, then summary judgment is appropriate without in camera review of the documents.

Quiñon v. FBI, 86 F.3d 1222, 1227 (D.C.Cir.1996) (quoting Hayden v. Nat'l Sec. Agency/Cent. Sec. Serv., 608 F.2d 1381, 1387 (D.C.Cir.1979)). If unsatisfied with the agency's affidavits or declarations, a district court, in its discretion, may order the agency to produce a Vaughn index or to submit the requested information for an in camera review.²

Id. See also DeSalvo v. IRS, 861 F.2d 1217, 1222 n. 6 (10th Cir.1988) (“The FOIA allows the district court flexibility in utilizing [an] in camera review of the disputed documents, indexing, oral testimony, detailed affidavits, or alternative procedures to determine whether a sufficient factual basis exists for evaluating the correctness of the [agency] determination in each case.”). But “an in camera review should not be resorted to as a matter of course, simply on the theory that ‘it can't hurt.’ ” Quiñon, 86 F.3d at 1228.

Central to this case is FOIA's Exemption 3, which provides FOIA's disclosure requirements do:

[N]ot apply to matters that are ... (3) specifically exempted from disclosure by statute ..., if that statute (i) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (ii) establishes particular criteria for withholding or refers to...