Stephenson v. I.R.S.

• Citation: 629 F.2d 1140
• Decision Date: 07 November 1980
• Docket Number: No. 79-2685,79-2685
• Parties: , 80-2 USTC P 9792 Charles V. STEPHENSON, Plaintiff-Appellant, v. INTERNAL REVENUE SERVICE, Atlanta, Georgia, and John W. Henderson, District Director, IRS Georgia, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1140

629 F.2d 1140

55 A.L.R.Fed. 257, 80-2 USTC P 9792

Charles V. STEPHENSON, Plaintiff-Appellant, v. INTERNAL REVENUE SERVICE, Atlanta, Georgia, and John W Henderson, District Director, IRS Georgia Defendants-Appellees.

No. 79-2685.

United States Court of Appeals Fifth Circuit.

Nov. 7, 1980.

Scott McLarty, Decatur, Ga., for plaintiff-appellant.

Gilbert E. Andrews, Chief, M. Carr Ferguson, Asst. Atty. Gen., Robert A. Bernstein, Murray S. Horwitz, Tax Div., Dept. of Justice, Washington, D. C., for defendants-appellees.

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

Before RONEY, HILL and FAY, Circuit Judges.

FAY, Circuit Judge:

Appellant, Charles Stephenson, seeks reversal of the District Court's entry of summary judgment in favor of the Internal Revenue Service (IRS) in appellant's action for release of documents pursuant to the Freedom of Information Act (FOIA) 5 U.S.C. § 552(a) (1978). He also seeks reversal of the District Court's denial of appellant's motion for a detailed justification, itemization and indexing of all Internal Revenue Service documents withheld from disclosure to appellant pursuant to claimed exemptions under 5 U.S.C. § 552(b)(3), 7(A), 7(C) (1978). We conclude here that the affidavits submitted by the Service provide an insufficient basis for such determinations. Therefore, the judgment of the trial court must be reversed and remanded.

I.

Appellant is the subject of civil and criminal investigations into his tax liabilities for the years 1975 through 1977. While these ongoing investigations by the Internal Revenue Service have not reached the prosecutorial stage, a substantial file has been developed. ¹ The Service released 390 pages of documents covered by appellant's request under the Freedom of Information Act, 5 U.S.C. § 552 (1978). ² Exemptions from release were asserted under 5 U.S.C. § 552(b)(3), (7)(A), (7)(C) (1978) ³ as to some 313 pages of documents. Appellant then sought injunctive and declaratory relief in District Court. ⁴ The court initially granted appellant's motion under 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) and ordered the filing of a detailed justification and index for the withholding of each document. However, on the Service's motion for reconsideration, supported by an affidavit of the IRS Special Agent conducting the ongoing investigations of appellant, ⁵ the District Court reversed its previous decision and denied appellant's motion for a Vaughn index. ⁶ Subsequently, the District Court granted appellee's motion for summary judgment ⁷ and denied appellant's motion for relief from judgment ⁸ and partial summary judgment. We have jurisdiction for this appeal pursuant to 28 U.S.C. § 1291 (1978).

II.

An appellate court has two duties in reviewing determinations under FOIA. ⁹ (1) We must determine whether the district court had an adequate factual basis for the decision rendered and (2) whether upon this basis the decision reached was clearly erroneous. See Church of Scientology v. U.S. Department of Defense, 611 F.2d 738, 742 (9th Cir. 1979). We find that based upon this record the District Court did not have an adequate basis and consequently that the court's factual conclusions and subsequent determinations were clearly erroneous, as admitted in the appellee's brief. ¹⁰

FOIA provides that the district court shall determine de novo whether claimed exemptions are applicable. ¹¹ The Act also leaves to the court's discretion whether to order an examination of the contents of the agency records at issue, in camera, in making this determination. ¹² However, the legislative intent for exercise of this discretion is relatively clear.

(t)he court may examine records in camera in making its determination under any of the nine categories of exemptions under section 552(b) of the law ... While in camera examination need not be automatic, in many situations it will plainly be necessary and appropriate. Before the court orders in camera inspection, the Government should be given the opportunity to establish by means of testimony or detailed affidavits that the documents are clearly exempt from disclosure. The burden remains on the Government under this law.

S.Rep. No. 1200, 93d Cong., 2d Sess. 9 (1974), reprinted in (1974) U.S.Code Cong. & Admin.News, pp. 6267, 6287-88 (Conference Report). ¹³

Appellant's contention that the court should order the IRS to submit a detailed index and justification for the withholding of the documents, as well as conduct an in camera review, derives from a line of D.C. Circuit opinions initiated by 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) on appeal from remand, 523 F.2d 1136 (D.C.Cir.1975). The sole support initially offered by the government in Vaughn was a conclusory affidavit of the Director of the Bureau of Personnel Management Evaluation claiming exemption under 5 U.S.C. § 552(a)(3) (1970). 484 F.2d at 824. The use of affidavits created difficult problems of procedure and proof for the Vaughn court since the resolution of most FOIA disputes centers around the factual nature of the information sought and the statutory category asserted in response. Id. The Vaughn court observed that factual characterizations in affidavits may or may not be accurate. Id. at 824. Such concern has been conclusively justified in the present action.

Of the 209 pages deemed exempt by the District Court as tax return information of third parties under 5 U.S.C. § 552(b)(3) (1978) and 28 U.S.C. § 6103 (1979), Record, vol. I, at 155-56, it was subsequently discovered that, in fact, 156 pages consisted of checks and deposit slips comprising financial information (not related to tax returns) of third parties possibly exempt, if at all, only under 5 U.S.C. § 552(b)(7)(C) (1978). Brief for Appellee at 11. Therefore, the District Court was led astray in its determination by factual conclusions founded in an affidavit which described the withheld documents in fairly detailed but generic terms. ¹⁴

To avoid such a result, and mindful of the disadvantages of in camera review, the Vaughn court articulated an intermediate approach by requiring from the withholding agency an index and detailed justification for their claim. 484 F.2d at 825, 826-28. Subsequent decisions approved of variations on this basic approach such as, index and court examination of sample reports stipulated by both parties to be representative, see, e. g. Vaughn v. Rosen, 523 F.2d at 1139-40, use of detailed justifications alone where indexing would be inappropriate, see, e. g. Pacific Architects & Engineers, Inc. v. Renegotiation Board, 505 F.2d 383, 385 (D.C.Cir.1974), and random sample inspection of documents listed and described in an affidavit see, e. g. Ash Grove Cement Co. v. F. T. C., 511 F.2d 815, 816 (D.C.Cir.1975). See also, Lead Industries Association v. OSHA, 610 F.2d 70, 88 (2nd Cir. 1979) (affidavit and index without in camera inspection).

Such flexibility is consistent with the purposes of the Act and the role of the trial court in such actions. Resort to in camera review is discretionary, N. L. R. B. v. Robbins Tire & Rubber Co., 437 U.S. 214, 224, 98 S.Ct. 2311, 2318, 57 L.Ed.2d 159, 167 (1978), as is resort to a Vaughn index. However, as this case clearly demonstrates, in instances where it is determined that records do exist, the District Court must do something more to assure itself of the factual basis and bona fides of the agency's claim of exemption than rely solely upon an affidavit. ¹⁵ While we are aware of eminent decisions arguably to the contrary, ¹⁶ we remain unpersuaded. In situations where records do not exist, affidavits are probably not only sufficient but possibly the best method of verification. However, once it is established that records and documents are in the possession of the governmental agency, more is required. The facts of this case amply demonstrate the dangers inherent in reliance upon agency affidavit in an investigative context when alternative procedures such as sanitized indexing, random or representative sampling in camera with the record sealed for review, oral testimony or combinations thereof would more fully provide an accurate basis for decision.

III.

In light of the foregoing, we vacate the summary judgment and remand the case to the District Court with directions to conduct a fuller development of the factual basis for decision consistent with this opinion and its obligations under 5 U.S.C. § 552(a)(4)(B) (1978).

VACATED AND REMANDED.

1 The I.R.S. indicated that appellant's file consisted of 703 pages of documents. Brief for appellee at 2.

2 5 U.S.C. § 552 (1978) provides:

(a) Each agency shall make available to the public information as follows:

(3) Except with respect to the records made available under paragraph (1) and (2) of this subsection, each agency, upon any request for records which (A) reasonably describes such records and (B) is made in accordance with published rules stating the time, place, fees (if any), and procedures to be followed, shall make the records promptly available to any person.

3 5 U.S.C. § 552(b) (1978) provides:

(b) This section does not apply to matters that are-

(3) specifically exempted from disclosure by statute (other than section 552b of this title), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld.

(7) investigatory records compiled for law enforcement purposes, but only to the extent that the production of such records would (A) interfere with enforcement proceedings, (B) deprive a person of a right to a fair trial or an impartial adjudication, (C) constitute an unwarranted invasion of personal privacy, (D)...