Middle E. Forum v. U.S. Dep't of the Treasury

317 F.Supp.3d 257

MIDDLE EAST FORUM, Plaintiff,

v.UNITED STATES DEPARTMENT OF the TREASURY, et al., Defendants.

Civil No. 17–2010 (JDB)

United States District Court, District of Columbia.

Signed July 3, 2018

Chaim Mandelbaum, Free Market Environmental Legal Clinic, Arlington, VA, Matthew D. Hardin, Hardin Law Offices, Richmond, VA, for Plaintiff.

Megan Eileen Hoffman–Logsdon, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

JOHN D. BATES, United States District Judge The Freedom of Information Act's "core purpose" is to "contribut[e] significantly to public understanding of the operations or activities of the government." U.S. Dep't of Justice v. Reporters Comm. for Freedom of Press, 489 U.S. 749, 775, 109 S.Ct. 1468, 103 L.Ed.2d 774 (1989) (emphasis omitted). The "core purpose" of the Internal Revenue Code's confidentiality provision, 26 U.S.C. § 6103, is to "protect[ ] taxpayer privacy." Tax Analysts v. IRS, 117 F.3d 607, 615 (D.C. Cir. 1997). This case highlights the tension between those two purposes.

Plaintiff Middle East Forum ("MEF"), a nonprofit organization, brought this action against the Internal Revenue Service ("IRS") pursuant to the Freedom of Information Act ("FOIA").¹ In a FOIA request, MEF sought any communications between the IRS Office of Criminal Investigation and other government agencies relating to a third party, Islamic Relief USA. MEF alleges that the IRS violated FOIA by failing to process its request. The IRS has moved to dismiss, claiming that MEF's request was for a third party's "return information," which is protected by the confidentiality provision of the Internal Revenue Code ("IRC"). See 26 U.S.C. § 6103. However, as MEF made clear after the IRS's initial denial, the request sought only any information that was not protected return information. By failing to complete a FOIA search to determine whether any responsive, non-protected material existed, the IRS failed to meet its obligation under FOIA to produce responsive records or adequately explain its refusal to do so. Because the appropriate remedy for an agency's failure to produce records under FOIA is an injunction, the IRS's motion to dismiss will be denied with respect to MEF's claim for injunctive relief and granted with respect to MEF's claim for declaratory judgment.

BACKGROUND

FOIA requires agencies to respond to any records request which "(i) reasonably describes such records and (ii) is made in accordance with published rules stating the ... procedures to be followed." 5 U.S.C. § 552(a)(3)(A). This requirement does not include material that is "specifically exempted from disclosure by statute ... if that statute ... establishes particular criteria for withholding or refers to particular types of matters to be withheld." 5 U.S.C. § 552(b)(3)(A)(ii). The IRC exempts many IRS documents from disclosure with its broad definition of "return information," which includes, among other things,

whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty ... or offense.

26 U.S.C. § 6103(b)(2)(A). Pursuant to this section, the Department of the Treasury promulgated regulations which state that "[i]n the case of records containing information with respect to particular persons the disclosure of which is limited by statute or regulations, persons making requests shall establish their identity and right to access such records." 26 C.F.R. § 601.702(c)(5)(iii)(A). For any "person requesting records ... pertaining to other persons, the requester shall furnish a properly executed ... tax information authorization." Id. § 601.702(c)(5)(iii)(C).

This case arises out of a July 20, 2017 FOIA request submitted by MEF to the IRS. Compl. [ECF No. 1] ¶ 2; see 5 U.S.C. § 552(a)(3)(A). By this request, MEF sought

any and all communications, (including, but not limited to, emails, memos, meeting notes, letters, phone records, or similar materials) created between August 1, 2013 and the present, between (1) Internal Revenue Service (IRS)—Office of Criminal Investigation, and (2) any of the following: the Department of Justice (DOJ), Federal Bureau of Investigation (FBI) and/or the Office of Personnel Management (OPM), (3) that mention, are concerning, or relate to, Islamic Relief USA.

Compl. ¶ 2. The IRS replied on July 27, 2017, informing MEF that the request was invalid because it did not include "written authorization from Islamic Relief USA for the disclosure of the records" pursuant to 26 C.F.R. § 601.702(c)(5)(iii)(C). Compl. ¶ 5; Decl. of Han Huang [ECF No. 8–1] ¶ 4.

MEF claims that this reply was a decision by IRS to deny the request and thus was appealable. Compl. ¶ 6. The IRS replies that the allegedly imperfect initial request did not trigger its obligation to respond, so the reply was an unappealable determination of deficiency rather than a denial of access. Def.'s Mot. to Dismiss [ECF No. 8] at 3. Nevertheless, MEF "administratively appealed" on August 24, 2017, claiming that the requested records were "not tax records" and therefore no authorization was required. Def.'s Mot. to Dismiss at 3; Decl. of Han Huang ¶ 7. By a September 15, 2017 letter, the IRS again refused to search, citing FOIA's exemption for law enforcement information and claiming that all responsive information was protected return information. Decl. of Han Huang ¶ 8 (citing 5 U.S.C. § 552(b)(7)(C) ).² The IRS informed MEF that the IRS's action was final and that the request was closed. Id.

MEF claims that the IRS failed to respond to its allegedly perfected FOIA request by the statutory deadline and unreasonably misinterpreted the request. Compl. ¶¶ 28, 32. Therefore, MEF filed suit "to compel IRS to comply with the law, to search for, and to produce" the records described in the request. Compl. ¶ 8. MEF seeks (1) injunctive relief compelling the IRS to produce responsive records, id. ¶¶ 36–37; (2) a declaratory judgment that the records it requests are subject to release, that the IRS must release those records, and that the IRS may not assess costs, id. ¶ 33; and (3) an award of fees and costs from the IRS, id. ¶ 41. The IRS has moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), claiming that MEF's failure to provide third-party authorization rendered its request imperfect and non-compliant with the IRS's FOIA regulations, and thus insufficient to trigger the IRS's FOIA obligations. See Def.'s Mot. to Dismiss at 4–5. The IRS's motion is now fully briefed and ripe for decision.

LEGAL STANDARD

To survive a motion to dismiss for failure to state a claim under Rule 12(b)(6), a complaint must "contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim need not be more likely to succeed than to fail but must "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. The court must "treat the complaint's factual allegations as true and must grant plaintiff ‘the benefit of all inferences that can be derived from the facts alleged.’ " Elec. Privacy Info. Ctr. v. IRS, 261 F.Supp.3d 1, 5 (D.D.C. 2017) (citing Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) ). When ruling on a 12(b)(6) motion, a court may consider the complaint along with "any documents either attached to or incorporated in the complaint and matters of which [the Court] may take judicial notice." EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997).

FOIA requesters must exhaust administrative remedies before filing suit, but the exhaustion requirement is "a jurisprudential doctrine" rather than a jurisdictional bar. Hidalgo v. FBI, 344 F.3d 1256, 1258 (D.C. Cir. 2003). Thus, although "FOIA cases typically and appropriately are decided on motion for summary judgment," courts "evaluate FOIA-exhaustion claims under Rule 12(b)(6)." Kalu v. IRS, Civil Action No. 14-998 (JEB), 2015 WL 4077756, at *3–4 (D.D.C. July 1, 2015) ; see also Campaign for Accountability v. U.S. Dep't of Justice, 278 F.Supp.3d 303, 313 (D.D.C. 2017) ("FOIA's ‘reactive’ disclosure provision ... indicates that an agency's denial of ‘any [procedurally compliant] request for records’ is improper, at least as a prima facie matter." (alteration in original) (quoting 5 U.S.C. § 552(a)(3) ) ).

ANALYSIS

The IRS claims that MEF's FOIA request was imperfect because it did not comply with FOIA or the IRS's FOIA regulations, and that MEF therefore failed to exhaust administrative remedies. The IRS also claims that the declaratory judgment MEF seeks is unavailable because the IRS has not engaged in a pattern of denials or systemic FOIA violations. The Court will examine each of these arguments in turn.

I. INJUNCTIVE RELIEF

The standard remedy for a FOIA violation is an injunction from a district court ordering "the production of any agency records improperly withheld from the complainant." 5 U.S.C. § 552(a)(4)(B). To oppose an injunction, "the burden is on the agency to sustain its action." Id. IRS claims that injunctive relief is improper because MEF's request is imperfect and MEF failed to exhaust administrative remedies. Def.'s Mot. to Dismiss at 9. Because the IRS has not sufficiently justified its refusal to search for records responsive to MEF's request, the IRS's motion to dismiss will be denied with respect to MEF's claim for injunctive relief.

A. Perfected Request

The IRS's FOIA regulations require that, "[i]n the case of records containing...