Trucept, Inc. v. IRS, No. 15-0447, 2017 WL 2869531 (S.D. Cal. July 5, 2017) (Moskowitz, C. J.)

Trucept, Inc. v. IRS, No. 15-0447, 2017 WL 2869531 (S.D. Cal. July 5, 2017) (Moskowitz, C. J.)

Re:  Request for certain tax records concerning plaintiff

Disposition:  Granting in part and denying in part defendant's motion for summary judgment

• Litigation Considerations, Adequacy of Search:  "[T]he Court finds the IRS has failed to carry its burden to demonstrate the adequacy of its search."  The court finds that, "in key respects, [defendant's] declaration is too conclusory to suffice."  "First, the declaration provides no indication how the IRS interpreted Plaintiff's FOIA request (as initially submitted in writing, or as subsequently clarified), nor does it provide an explanation of the scope or categories of documents it determined were responsive to the request."  "Without knowing what records the IRS was searching for in response to Plaintiff's request, the Court has no context for evaluating the reasonableness of the IRS's search methods."  "Second, [defendant's] declaration fails to give sufficient information about the IRS's review of the [responsive] documents."  "[T]he Court needs information regarding the document review to determine whether the IRS's search of [certain responsive] boxes was reasonable."
   
• Exemptions 3, 6 & 7(C):  "The Court will . . . reserve determining whether the IRS has sufficiently established the validity of its withholding of information under Exemptions 3, 6, and 7(C) until these issues have been more fully developed."
   
• Exemption 5, Attorney-Client Privilege:  "[T]he Court grants the IRS's motion for summary judgment as to its determination that ["confidential written communications between [a revenue officer] and . . . an attorney in the IRS Office of Chief Counsel"] [were] exempt from disclosure pursuant to Exemption 5."  The court notes that "[the officer] sought, and [the attorney] provided, legal advice concerning [the officer's] collection of Plaintiff's outstanding tax liabilities, and the alter ego or successor liability status of entities that might be pursued for collection."
   
• Exemption 7(A):  "The Court finds the information in [defendant's] affidavits sufficient to support the IRS's claim that the withheld information falls within Exemption 7(A), and that it complied with its duty to reasonably segregate and produce non-exempt information."  The court notes that "[t]he withheld information relates to an email from an attorney to an AUSA regarding possible abusive or criminal tax-related activity by one of his clients, and an email exchange between two IRS special agents and an AUSA regarding the attorney’s tip."
   
• Exemption 7(D):  "The Court finds the IRS's evidence sufficient to show the withheld information is protected under Exemption 7(D)."  The court relates that "[t]he IRS . . . attests [that] the documents were withheld or redacted because 'they contain either the identity, or sufficient information from which the identity could readily be discerned, of sources of information that furnished information' to the IRS 'with the understanding that it would only be divulged to the extent necessary to facilitate ongoing efforts . . . to enforce the Federal tax laws as applied to plaintiff.'"
   
• Exemption 7(E):  The court holds that "the IRS's evidence is insufficient to support withholding under Exemption 7(E), and the Court will deny summary judgment without prejudice as to this exemption."  The court relates that defendant "avers that the redacted information relates to Plaintiff's 'Risk Score,' 'which reflects the Service's assessment of the priority of having the taxpayer's account assigned to a dedicated collection specialist to actively pursue collection of the taxpayer's outstanding liabilities.'"  "However, [the court finds that defendant's] declaration does not address whether the Risk Score is a 'technique unknown to the general public.'"