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Zimmer Biomet Holdings, Inc. v. IRS, No. 22-2966, 2024 WL 4298856 (D.D.C. Sept. 26, 2024) (Berman Jackson, J.)

Date

Zimmer Biomet Holdings, Inc. v. IRS, No. 22-2966, 2024 WL 4298856 (D.D.C. Sept. 26, 2024) (Berman Jackson, J.)

Re: Request for records concerning three tax examinations

Disposition:  Denying plaintiff’s motion for partial summary judgment; granting defendant’s cross-motion for partial summary judgment

  • Exemption 5, Deliberative Process Privilege:  The court relates that “plaintiff has filed a motion for partial summary judgment to resolve the dispute surrounding the [Appeals Case Memorandum  (“ACM”)].”  The court finds that “the 2008-2009 ACM represents recommendations from subordinates to their Appeals Team Manager – the very ‘core’ of deliberative materials.” The court first finds that “[t]he creation of the ACM . . . ‘precede[d] a final decision’ on plaintiff's 2008-2009 tax liability and was, therefore, predecisional.”  The court looks to several documents which, it finds, “support defendant’s contention that IRS Appeals’ approval of the settlement came after the ACM was finalized on December 3, 2018, rather than before.”  Additionally, the court notes that, “based on the sworn affidavit submitted by [an] IRS Attorney . . . , the creation of an ACM was a necessary predicate to the agency’s approval of those aspects that were part of the settlement.”  Next, the court finds that “[t]he 2008-2009 ACM was drafted by members of the IRS Appeals team and relayed those team members’ personal views regarding plaintiff’s tax liability, including the relative pros and cons of various tax adjustments and potential litigation hazards associated with those adjustments.”  “It was compiled and submitted from a subordinate . . . to her superior . . . for the purpose of recommending or not recommending the settlement of various tax disputes.” “And, as described above, the ACM was a necessary predicate to the ultimate settlement of plaintiff’s 2008-2009 tax dispute.”  “Moreover, the Court conducted an in camera review to assist in its responsible decisionmaking, and the redacted portions of the ACM do, in fact, involve IRS Appeals Team members’ personal opinions and recommendations related to plaintiff’s tax adjustments.”

    “Finally, plaintiff argues that defendant waived any application of the deliberative process privilege under Exemption 5.” “It points to a March 17, 2020, teleconference during which a member of the IRS examination team allegedly ‘affirmatively stated . . . that she had relied upon the contents of the 2008-2009 ACM to prepare a write-up of issues’ for a subsequent examination.”  “However, even assuming arguendo that the IRS examination team did make the comments as plaintiff alleges, those comments are insufficient to demonstrate defendant waived its deliberative process privilege.”  “According to plaintiff, the IRS employee on the teleconference call did not ‘adopt’ the contents of the ACM, but rather stated that she used the ACM ‘to understand and develop the examination team’s position’ on issues relating to a subsequent tax period.”  “This type of affirmative comment falls short of the ‘express[ ]’ adoption required . . . .”  “Rather, an oral acknowledgement that the Appeals Team relied on the contents of the ACM during a teleconference meeting simply reaffirms its pre-decisional nature and falls squarely within the category of ‘casual allusion[s]’ insufficient to constitute waiver.”
     
  • Exemption 5, Foreseeable Harm and Other Considerations:  The court finds that “as defendant points out, the ACM is a particularly sensitive intra-agency document given that it ‘reflect[s] a marked difference of opinion between IRS Exam and IRS Appeals regarding the proper amount of Plaintiff’s tax liabilities.’”  “Documents like the ACM at issue – which contains discussion among employees ‘so candid or personal in nature that public disclosure is likely in the future to stifle honest and frank communication within the agency,’ . . . – are squarely the concern of the deliberative process privilege, and the Court finds that defendant has sufficiently demonstrated that disclosure would cause harm to internal functioning.”
     
  • Litigation Considerations, Evidentiary Showing, “Reasonably Segregable” Showing:  “The Court will . . . grant defendant’s motion for summary judgment on the issue of segregability.”  “Plaintiff argues that defendant has failed to meet its segregability obligation because the IRS affidavit supporting its cross-motion for summary judgment ‘fails to provide [the] Court with sufficient information’ to make a specific finding on segregability.”  “It points to a single statement offered in the affidavit, which reads in full:  ‘To the extent that any factual or non-privileged material is being withheld, [defendant] believe[s] it is so intertwined with the material protected by Exemption 5 deliberative process that such additional material cannot be released without releasing material protected by deliberative process.’”  “The Court agrees with plaintiff that, in the abstract, such a conclusory statement, without more, would not enable the Court to make the necessary factual findings regarding segregability.”  “IRS has nevertheless provided an index that describes the nature of and rationale for the relevant withholdings . . . and the Court has had the opportunity to review the ACM in camera.”  “Considering defendant’s averments and descriptions in its declaration, and the Court’s subsequent confirmation of those descriptions, the Court is satisfied that the agency has met its segregability requirement.”
Court Decision Topic(s)
District Court opinions
Exemption 5, Deliberative Process Privilege
Litigation Considerations, Foreseeable Harm Showing
Litigation Considerations, “Reasonably Segregable” Requirements
Updated November 5, 2024