Scott v. Internal Revenue Serv.

JAMES E. SCOTT, Plaintiff, pro se, v. INTERNAL REVENUE SERVICE, Defendant.

CASE NO.: 18-CV-81750-MARRA

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

May 24, 2021

ORDER AND OPINION ON MOTION FOR RECONSIDERATION

THIS CAUSE is before the Court upon the Internal Revenues Service's ("IRS") Motion for Reconsideration [DE 44]. The Court has carefully considered the motion, response, reply, and is otherwise fully advised in the premises.

"[R]econsideration of a previous order is 'an extraordinary remedy, to be employed sparingly.'" L.M.P. v. Florida Dept. of Educ., No. 06-61897-CIV, 2008 WL 4218120, *2 (S.D. Fla. Sept. 15, 2008) quoting Williams v. Cruise Ships Catering & Serv. Int'l, 320 F. Supp. 2d 1347, 1358 (S.D. Fla. 2004) ("Williams") (internal citations omitted). A motion for reconsideration is not a "vehicle to present authorities available at the time of the first decision or to reiterate arguments previously made." Z.K. Marine Inc. v. M/V Archigetis, 808 F.Supp. 1561, 1563 (S.D. Fla. 1992); Pretka v. Kolter City Plaza II Inc., No. 09-80706-CIV, 2011 WL 3204256, *3 (S.D. Fla. July 27, 2011). Courts generally limit reconsideration of earlier rulings to situations where the controlling law has changed, new evidence is available, or manifest injustice or clear error must be prevented. See Williams, 320 F. Supp. 2d at 1357-58; see also DeLong Equipment Co. v. Washington Mills Electro Minerals Corp., 990 F.2d 1186, 1197 (11th Cir. 1993). In addition, and particularly in this case, a motion for reconsideration cannot be a vehicle for presenting new legal theories to reach the end result desired by the moving party. Mitchell v. C.I.R., No. 10891-10, 2013 WL 4606294, at *3 (U.S. Tax Ct. Aug. 29, 2013) citing Estate of Quick v. C.I.R., 110 T.C. 440, 441-442 (U.S. Tax Ct. 1998). Here, the alleged errors of law purported made by the Court were never presented in the IRS's Motion for Summary Judgment, so on that basis alone, the motion is denied. But even considering the merits of the motion, the Court denies the motion as follows.

The IRS asserts that the Court committed clear error of law when it ordered unsealed pages 8-12, 15, 24, 33, 34, 42, 51 and 59-64 of the withheld pages ("Withheld Pages"). See DE 42 at 42. After careful consideration, the Court concludes that an error was made, but not the error argued by the IRS. The mistake was putting two disputed facts under the category of undisputed facts.

In the undisputed facts section of the Order and Opinion which is the subject of the instant motion, at paragraph 66, the Court wrote, "Mr. Keaton states in his Declaration that the information withheld under FOIA Exemption 3 in connection with 26 U.S.C. § 6103(a) includes taxpayer-specific information, including identifying information, which was received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to the determination of the existence or possible existence of a tax liability. Keaton Dec. ¶ 28." DE 42 at 11. At paragraph 67, the Court wrote, "Mr. Keaton states in his Declaration that the withheld information is part of a written determination or background file document that is not open to the public under 26 U.S.C. § 6110. Keaton Decl. ¶ 28." Id. In fact, Scott disputed thesepurported facts, and therefore it was an error to include these assertions in the category of undisputed material facts. DE 27-1 at ¶¶ 68, 69; DE 36 at ¶¶ 68, 69.

The IRS asserts that the Withheld Pages are properly withheld in full as they are, in their entirety, "return information" because they were generated, collected, gathered, or provided to the IRS with respect to a private letter ruling ("PLR") and are part of a written determination or background file document that is not open to the public under 26 U.S.C. § 6110. DE 44 at 1-3, 5-6; DE 49 at 3-4 (emphasis added). Although the Court improperly repeated the later part of this assertion in the undisputed material facts section of the Opinion and Order, the Court did not adopt or address this statement in its analysis because it was not argued in the IRS's memorandum of law in support of its Motion for Summary Judgment.¹

In its Motion for Summary, the IRS lodged one objection to the release of the Withheld Pages: that they consisted of the name and contact information of a third-party taxpayer representative and the name and other return information of a third-party taxpayer.², ³ DE 27-2 at 15 of 25 referring to the IRS's Statement of UndisputedMaterial Facts, ¶¶ 68, 72. The Court correctly concluded that the Withheld Pages did not wholly consist of such information, and that any such information was segregable.⁴ Although the IRS complains in its Motion for Reconsideration that "the Court's analysis as to the Withheld Pages improperly relied on whether those pages 'wholly' identified third-party taxpayers," the Court should not be faulted for addressing that same argument asserted by the IRS in its Motion for Summary Judgment.

Next, the IRS argues at length that since the records are in and of themselves "return information," then Church of Scientology requires that the entire record be withheld in full. DE 44 at 8-9. At the same time, the IRS acknowledges that "if the records merely contain return information, then the courts are tasked with ensuring the withheld information is 'return information' and that all other non-returninformation is produced." DE 44 at 8.

The IRS complains that the Court failed to make the predicate determination that the Withheld Pages were themselves "return information." According to the IRS, the Withheld Pages are, in their entirety, "return information" because they include "taxpayer-specific information including identifying information, which was received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to the determination of the existence or possible existence of a tax liability" and are part of a written determination or background file document that is not open to the public under § 6110." DE 44 at 2 (emphasis in original). The IRS states, "[b]ackground file documents⁵ that are not open to public inspection under § 6110 are, in and of themselves 'return information' under § 6103(b)(2)(B), which provides that return information is 'any part of any written determination or any background file document relating to such written determination (as such terms are defined in § 6110(b)) which is not open to public inspection under § 6110 . . ." DE 44 at 2-3. The IRS further asserts that the

Supreme Court . . . made clear in Church of Scientology v. IRS, 484 U.S. 9 (1987), that if a document is itself return information, then there is no need to determine whether the document directly identifies the taxpayer. Thus, to the extent these pages are themselves return information because they are generated, collected, gathered, or provided to the Service with respect to a private letter ruling ("PLR") and are part of a written determination or background file document that is not open to the public under § 6110, then it does not matter whether they 'wholly' identify the taxpayer; they must be withheld infull.

DE 44 at 2 (emphasis added). So, according to the IRS, it is well established that under the facts it asserts, the Withheld Pages are properly categorized as return information and must be withheld in full.

The IRS's argument might have merit if Scott had not disputed the IRS's claim that the documents are not open to the public under § 6110. Now, after briefing on the Motion for Reconsideration, the Court realizes that this key legal conclusion was improperly placed in the section of undisputed facts when it was in fact disputed by Scott. This led the Court to examine the Withheld Pages once again, to see if they fall into any of the categories under § 6110 that makes a document not open to public inspection.

The IRS's assertion that these pages are not open to the public under § 6110 is a broad sweeping legal conclusion made without reference to any factual basis to support it. The IRS refers to the confluence of a complex statutory scheme involving 5 U.S.C. § 552(b)(3) ("Exemption 3"),⁶ 26 U.S.C. § 6103(b)(2)(B)⁷ and 26 U.S.C. §6110.⁸

Section 6110 is a disclosure provision rather than a nondisclosure provision. Section 6110 of the Internal Revenue Code provides generally that "[e]xcept as otherwise provided in this section, the text of any written determination and any background file document relating to such written determination shall be open to public inspection . . ." 26 U.S.C § 6110(a) (emphasis added); Electronic Frontier Foundation v. United States Dep't of Justice, 376 F. Supp. 3d 1023, 1032 (N.D. Cal. 2019). Section 6110 includes various exemptions from disclosure substantially patterned after the exemptions in the FOIA, see 26 U.S.C. § 6110(c); Britt v. I.R.S., 547 F. Supp. 808, 812 (D.D.C. 1982); Scott v. Internal Revenue Service, Case No. 18-CV-8152, 2021 WL 256417, at *12 (S. D. Fla. 2021). Section 6110(c) sets out the following exemptions from disclosure:

Before making any written determination or background file document open or available to public inspection under § 6110(a), the Secretary shall delete—

(1) the names, addresses, and other identifying details of the person to whom the written determination pertains and of any other person, other than a person with respect to whom a notation is made under subsection (d)(1), identified in the written determination or any background file document;

(2) information specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy, and which is in fact properly classified pursuant to such Executive order;(3) information specifically exempted from disclosure by any statute (other than this title) which is applicable to the Internal Revenue Service;

(4) trade secrets and commercial or financial information obtained from a person and privileged or

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