Inst. for Justice v. Internal Revenue Serv.

• Decision Date: 08 July 2021
• Docket Number: Civil Action No. 1:18-cv-01477 (CJN)
• Citation: 547 F.Supp.3d 1
• Parties: INSTITUTE FOR JUSTICE, Plaintiff, v. INTERNAL REVENUE SERVICE, et al., Defendants.
• Court: U.S. District Court — District of Columbia

547 F.Supp.3d 1

INSTITUTE FOR JUSTICE, Plaintiff,

v.INTERNAL REVENUE SERVICE, et al., Defendants.

Civil Action No. 1:18-cv-01477 (CJN)

United States District Court, District of Columbia.

Signed July 8, 2021

Ryan S. Baasch, Texas Office of the Attorney General, Austin, TX, Andrew D. Prins, Latham & Watkins LLP, Washington, DC, for Plaintiff.

Kristina Marie Portner, Ryan O'Connor McMonagle, Catriona M. Coppler, U.S. Department of Justice, Tax Division, Washington, DC, for Defendant Internal Revenue Service.

John Moustakas, U.S. Attorney's Office for the District of Columbia, Washington, DC, for Defendant Department of Justice.

MEMORANDUM OPINION

CARL J. NICHOLS, United States District Judge

This case involves a series of Freedom of Information Act ("FOIA") requests about a controversial form of civil asset forfeiture carried out by the Internal Revenue Service. The IRS has processed tens of thousands of pages, but tens of thousands remain, and the Institute for Justice (the requester, "IJ") now challenges the scope of the IRS's redactions under several FOIA exemptions. Before the Court are the Parties’ Motions for Partial Summary Judgment, which the Court determined would promote the resolution of this litigation. ECF Nos. 49, 50. For the reasons below, the Court will grant in part and deny in part each Party's respective motion.

I. BACKGROUND

In 2016, IJ lodged a FOIA request to secure information about how the IRS enforces its structuring laws. Structuring laws help the IRS detect money laundering by prohibiting individuals from avoiding financial reporting requirements under the Bank Secrecy Act ("Act"). 31 U.S.C. § 5313(a). Under the Act, banks must file with regulators currency transaction reports, which list all transactions over $10,000. Id. § 5313(a). Structuring laws support the Act by prohibiting individuals from "breaking down ... a single sum of currency exceeding $10,000 into small sums," 31 C.F.R. § 1010.100(xx), "for the purpose of evading reporting requirements." 31 U.S.C. § 5324(a).

While structuring laws are designed to "detect[ ] and deter[ ] [underlying] criminal behavior" (like fraud or money laundering), a 2017 investigation by the Treasury Inspector General for Tax Administration found that the IRS "largely pursued [structuring] cases against legal source funds from business accounts," not against suspected "criminal enterprises." Treasury Inspector Gen. Tax Admin., Criminal Investigation Enforced Structuring Primarily Again Legal Source Funds and Compromised the Rights of Some Individuals and Businesses, Ref. No. 2017-30-025, at 2-3 (Mar. 30, 2017), ECF No. 50-8 ("TIGTA Report"). The practice of seizing money from legal businesses that happen to make large cash deposits led to widespread criticism. See, e.g. , Leonard v. Texas , ––– U.S. ––––, 137 S. Ct. 847, 848, 197 L.Ed.2d 474 (2017) (Thomas, J., concurring in denial of cert.) ("[B]ecause the law enforcement entity responsible for seizing the property often keeps it, these entities have strong incentives to pursue forfeiture."). And in the wake of the Inspector General's investigation, the IRS pledged that it would "no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances." TIGTA Report at 3.

IJ submitted FOIA requests seeking records relating to that pledge, and over the last 26 months the IRS has produced approximately 26,000 pages of records, withholding or redacting certain records under various FOIA Exemptions. See Pl.’s Partial Cross-Mot. Summ. J. 1–3, ECF No. 50 ("Pl.’s Mot."). Although the IRS's production continues, on January 15, 2020, the Court determined that a decision regarding the appropriateness of certain categories of withholdings would promote the resolution of this litigation. See Minute Order dated Jan. 15, 2020. In particular, IJ now challenges the IRS's decision to either fully or significantly redact three categories of records: (1) policy documents describing the agency's approach to legal-source structuring cases; (2) agency-level documents about how the IRS considers petitions for remission or mitigation filed by individuals "seeking the return of money seized under the structuring laws;" and (3) the case files and decision letters the IRS complied for a number of individuals who filed petitions to get their money back. Pl.’s Mot. at 10-11. Following briefing on the Parties’ Motions for Partial Summary Judgment, the Court directed the agency to submit a representative sample of those disputed records under seal. See Minute Order dated Jan. 26, 2021. After reviewing those records in camera , the Court heard oral argument. See Minute Order dated Feb. 18, 2021.

II. STANDARD OF REVIEW

FOIA "generally require[es] federal agencies to make their records available to the public upon request." DiBacco v. U.S. Army , 795 F.3d 178, 183 (D.C. Cir. 2015). An agency may redact or withhold information covered by one of the exemptions listed in 5 U.S.C. § 552(b). If a plaintiff objects, "the agency has the burden of showing that [the] requested information comes within a FOIA exemption." Pub. Citizen Health Research Grp. v. FDA , 185 F.3d 898, 904 (D.C. Cir. 1999) (citation omitted). To do so, an agency must "describe the justifications for nondisclosure with reasonably specific detail, demonstrate that the information withheld logically falls within the claimed exemption," Citizens for Responsibility & Ethics in Wash. v. U.S. Dep't of Justice , 746 F.3d 1082, 1088 (D.C. Cir. 2014) (citation omitted), and "reveal as much detail as possible" about "the nature of the document, without actually disclosing information that deserves protection." Oglesby v. U.S. Dep't of the Army , 79 F.3d 1172, 1176 (D.C. Cir. 1996). The Court must then decide "whether [the agency's] non-disclosure was permissible." Elec. Privacy Info. Ctr. v. U.S. Dep't of Homeland Sec. , 777 F.3d 518, 522 (D.C. Cir. 2015).

III. ANALYSIS

A. The Privacy Exemptions

Most of the Parties’ current dispute turns on FOIA's privacy exemptions. Those exemptions let agencies redact "names and identifying information" from "personnel and medical files" (Exemption 6) and "law enforcement" records (Exemption 7(C)) to prevent "unwarranted invasion[s] of personal privacy." 5 U.S.C. § 552(b)(6) & (b)(7)(C). IJ argues that the IRS has impermissibly redacted interview notes that cannot be used to identify any individual. Pl.’s Mot. at 13–19.¹ Those notes memorialized interviews between IRS Task Force Officers and bank employees and became part of the case files the IRS compiled on individuals who attempted to recover their assets. Id. at 14. The IRS largely sidesteps IJ's identification principle, focusing instead on its perceived obligation to redact any non-public information that is personal in nature. See, e.g. , Defs.’ Opp'n & Reply 4, 7–8, ECF No. 53 ("Defs.’ Opp'n"). IJ has the better argument.

Identification is the touchstone of FOIA's privacy exemptions. The Supreme Court has held that Exemption 6 "cover[s] detailed Government records on an individual which can be identified as applying to that individual." Dep't of State v. Wash. Post Co. , 456 U.S. 595, 602, 102 S.Ct. 1957, 72 L.Ed.2d 358 (1982) (citation omitted). Exemption 7(C) sweeps more broadly, covering traditional examples of personally-identifiable information like "names, addresses, [and] dates of birth," as well as information whose "mosaic effect" may "lead to the identification" of "third parties." BuzzFeed Inc. v. U.S. Dep't of Educ. , 2019 WL 3718928, at *2 (D.D.C. Aug. 7, 2019) (comparing cases).² But neither exemption authorizes agencies to withhold information that (either on its own or in combination with other disclosed information) cannot reasonably be used to identify a specific individual. See Citizens for Resp. & Ethics in Washington , 746 F.3d at 1094 (agencies may not redact "all of the material in" a responsive record "solely on the grounds that the record includes some information which identifies a private citizen or provides that person's name and address"). Courts thus regularly require agencies to disclose information that some may deem personal, so long as strategic redactions are used to stop readers from linking those records to any particular person. See Dep't of the Air Force v. Rose , 425 U.S. 352, 380, 96 S.Ct. 1592, 48 L.Ed.2d 11 (1976) (summaries of Air Force Academy disciplinary proceedings released "with personal references ... deleted"); U.S. Dep't of State v. Ray , 502 U.S. 164, 169, 178, 112 S.Ct. 541, 116 L.Ed.2d 526 (1991) (interviews between immigration officers and deported non-citizens released after redacting all names); Arieff v. Dep't of Navy , 712 F.2d 1462, 1467 (D.C. Cir. 1983) (released records listing prescription medications taken by unnamed members of Congress); New Orleans Workers’ Ctr. For Racial Justice v. U.S. Immigr. & Customs Enf't , 373 F. Supp. 3d 16, 63 (D.D.C. 2019) (immigration "case history" descriptions released without "personally identifying information"); BuzzFeed Inc. , 2019 WL 3718928, at *2 (Title IX investigation letters released, which had language "too general to allow for identification of individuals involved").

In each case, the key question is not whether the "investigative details" described in an agency's records touch on personal matters in the abstract, but whether those details "would reveal the identity or otherwise implicate the privacy interests of any third party." Mays v. DEA , 234 F.3d 1324, 1327–28 (D.C. Cir. 2000). When an agency finds material likely to reveal the identity of a third party, it must redact that "specific information" and release the rest. Id. at 1327 ; see also Powell v. U.S. Bureau of Prisons , 927 F.2d 1239, 1242–43 (D.C. Cir. 1991). And to ensure that it does so, the agency must "provide[ ] a detailed justification and not just conclusory statements to demonstrate that all reasonably segregable information has been...