Solers, Inc. v. IRS, No. 15-1608, 2016 WL 3563487 (4th Cir. June 30, 2016) (Niemeyer, J.)

Solers, Inc. v. IRS, No. 15-1608, 2016 WL 3563487 (4th Cir. June 30, 2016) (Niemeyer, J.)

Re: Request for records concerning tax audit of requester

Disposition: Affirming district court's grant of defendant's motion for summary judgment

• Litigation Considerations, Vaughn Index/Declarations:  Responding to the requester's arguments, the Court of Appeals for the Fourth Circuit holds that "because the district court reviewed the documents in camera, it correctly concluded that its own 'thorough[ ] review[ ]' had 'completely eradicated' 'any issue about an inadequate Vaughn Index.'"  "Stated otherwise, the issue of whether the IRS provided a Vaughn index sufficient to enable the district court to evaluate the IRS' claimed exemptions became irrelevant and moot after the IRS complied with the district court's order to produce the records for in camera review and the court completed its own review of the records."
   
• Exemption 5, Deliberative Process Privilege:  "[The Court of Appeals for the Fourth Circuit] conclude[s] that the district court's factual findings regarding the content of the notes are amply supported by the record – which includes the IRS representative's statement that the four pages of notes 'consist[ ] of [Agent Sharma's] thoughts, impressions, and [indicate the] possible direction of the examination' – and therefore [those findings] are not clearly erroneous."  "[The court] also affirm[s] the district court's implicit ruling that there are no segregable portions of the notes subject to production."
   
• Exemption 3:  The Court of Appeals for the Fourth Circuit relates that "IRS contends that its withholdings with respect to these three pages are justified by Exemption 3 and 26 U.S.C. § 6103(a)[,]" which "prohibits the disclosure of '[r]eturns and return information ... except as authorized by [Title 26],' . . . and . . . defines the term 'return information' as including 'a taxpayer’s identity . . . [and] whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing,'" and "concludes[s] that, although the summary report does not specifically name third-party individuals whose tax returns were considered in conjunction with [the requester's] audit, the individuals' identities could easily be discerned from the report or any segregable portion of it, therefore justifying its being withheld."  "Likewise, because the graph and checksheet specifically identified third-party individuals and entities, [the court] conclude[s] that the IRS acted properly in withholding the graph and redacting one line from the checksheet."  Additionally, the court relates that "[i]n an effort to avoid this conclusion, [the requester] asserted for the first time during oral argument that four of its employees had authorized the IRS to release their tax return information to [the requester] . . . and that the IRS was therefore not entitled to rely on Exemption 3 and § 6103(a) to withhold records insofar as they relate to those third parties."  The court finds that "[i]t is well settled, however, 'that contentions not raised in the argument section of the opening brief are abandoned.'"  "Moreover, the record reflects that after the IRS noted to the district court that [the requester's] employees had failed to submit the proper authorization forms, [and the requester] made no effort to counter this representation."
   
• Exemption 5, Attorney-Client Privilege:  The Court of Appeals for the Fourth Circuit "conclude[s] that the attorney-client privilege justifies the IRS' limited redaction of the activity report so as to keep confidential the specific issues on which [a] Revenue Agent . . . sought legal advice while working on the audit."  The court finds that, "[w]hile, as [the requester] contends, 'the general purpose of the work performed [by an attorney] [is] usually not protected from disclosure by the attorney-client privilege because such information ordinarily reveals no confidential professional communications between attorney and client,' . . . the privilege nonetheless shields from disclosure 'the specific nature of the legal advice sought by [the client][.]'"
   
• Exemptions 6 & 7(C):  The Court of Appeals for the Fourth Circuit "conclude[s] . . . that the district court struck the right balance in permitting these email redactions."  "On the one side of the scale, IRS employees, as well as other government employees, 'have a substantial interest in the nondisclosure of their identities and their connection with particular investigations because of the potential for future harassment, annoyance, or embarrassment.'"  "But, on the other side of the scale in this case, the record contains no indication that disclosing the names and contact information of these IRS employees would serve the public interest."  "Accordingly, we conclude that the district court did not err in holding that the IRS employees' interest in maintaining the privacy of their names and contact information outweighed the public interest in the disclosure of this information."