Powell v. Internal Revenue Service ( 2019 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
WILLIAM E. POWELL,
Plaintiff,
v. Civil Action No. 18-2675 (JEB)
INTERNAL REVENUE SERVICE,
Defendant.
MEMORANDUM OPINION
Over the years, pro se Plaintiff William E. Powell has employed a variety of means to
require Defendant Internal Revenue Service to turn over tax records related to his grandfather,
his father, himself, and his family’s printing business. His lack of success in the latest chapter of
this venture spurred this lawsuit in October 2018. Now, in his Motion to Supplement his
Amended Complaint, Powell requests leave of the Court to add new claims arising out of three
Freedom of Information Act requests he lodged in January 2019 and one Privacy Act request
from June 2019. At this stage, Powell’s proposed supplemental claims do not unduly prejudice
Defendant; as a result, the Court will largely grant his Motion, except as to certain record
requests that have been previously adjudicated.
I. Background
Powell initially filed this action on October 29, 2018, see ECF No. 1 (Complaint), and
followed up with an Amended Complaint on February 6, 2019. See ECF No. 9. The latter
pleading encompasses four record requests Powell submitted to the IRS dated August 9, 2018,
August 31, 2018, September 27, 2018, and November 25, 2018. Id. at 2–3. These sought tax
1
forms concerning his family and his family’s business – the Powell Printing Company. Id. at 2–
4. The requests were filed under FOIA and the Privacy Act via the IRS’s Return and Income
Verification System (RAIVS), id., and Plaintiff alleged that Defendant unlawfully withheld
records. Id. at 2–4. This is not Powell’s first foray into the realm of FOIA and Privacy Act
litigation. Indeed, he has filed a number of lawsuits in this Court and the Eastern District of
Michigan seeking to unearth records relating to his family members and himself. See, e.g.,
Powell v. IRS, 255 F. Supp. 3d 33, 37 (D.D.C. 2017).
Turning now to the current suit, the Court notes that on February 27, 2019, it stayed the
proceedings to give the parties an opportunity to attempt to resolve their dispute outside the
courtroom. See Minute Order of Feb. 27, 2019. No progress resulted, and the Court thus lifted
the stay on May 2, 2019. See Minute Order of May 2, 2019. Powell promptly filed a Motion for
Leave to File a Supplemental Complaint on May 7. See ECF No. 17. The Motion proposed new
FOIA and Privacy Act claims regarding additional RAIVS requests dated January 9, 2019, and
January 27, 2019 — seeking tax forms for his father and grandfather. Id. at 2–3. The Court,
however, denied this Motion on that same day because it did not comply with Local Civil Rules
7(m) and 15.1. See Minute Order of May 7, 2019.
The IRS then answered the Amended Complaint on July 17, 2019. See ECF No. 20. The
parties were thereafter ordered to submit a joint briefing schedule by August 1, 2019. See
Minute Order of July 18, 2019. Without submitting the schedule, Powell filed a second Motion
for Leave to File a Supplemental Complaint on August 1, 2019. See ECF No. 21. This Motion
reasserted his January 9 and January 27 RAIVS requests and added a Privacy Act request dated
June 3, 2019, which demanded his own tax forms. Id. at 3. This Motion, which Defendant
opposes, is the one currently before the Court.
2
II. Legal Standard
Federal Rule of Civil Procedure 15(d) allows the Court, “[o]n motion and reasonable
notice . . . [and] on just terms” to permit a party to serve a supplemental pleading setting forth
events that have happened since the filing of its complaint. “Rule 15(d) is used to set forth new
facts that update the original pleading or provide the basis for additional relief; to put forward
new claims or defenses based on events that took place after the original complaint or answer
was filed.” United States v. Hicks, 283 F.3d 380, 386 (D.C. Cir. 2002). “The addition of [a]
new FOIA request is plainly a supplemental pleading as defined by Federal Rule of Civil
Procedure 15(d), as it ‘sets forth transactions or occurrences or events which have happened
since the date of the pleading sought to be supplemented.’” Hall v. CIA, 437 F.3d 94, 100 (D.C.
Cir. 2006) (quoting Fed. R. Civ. P. 15(d)).
Rule 15(d)’s intent is “to make pleadings a means to achieve an orderly and fair
administration of justice.” Gomez v. Wilson, 477 F.2d 411, 417 n.34 (D.C. Cir. 1973) (quoting
Griffin v. County School Bd., 377 U.S. 218, 227 (1964)). The Rule “promote[s] as complete an
adjudication of the dispute between the parties as is possible.” Wright & Miller, 6A Fed. Prac. &
Proc. Civ. § 1504 (3d ed. 2017). It seeks “to avoid ‘needlessly remitt[ing] [plaintiffs] to the
difficulties of commencing a new action even though events occurring after the commencement
of the original action have made clear the right to relief.’” Scahill v. District of Columbia, 909
F.3d 1177, 1183 (D.C. Cir. 2018) (quoting Fed. R. Civ. P. 15(d), advisory committee notes to the
1963 amendment). “It follows that supplementation of pleadings is encouraged ‘when doing so
will promote the economic and speedy disposition of the entire controversy between the parties,
will not cause undue delay or trial inconvenience, and will not prejudice the rights of any of the
3
other parties to the action.’” U.S. ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 4 (1st Cir.
2015) (quoting Wright & Miller, supra).
Courts typically resolve motions to supplement under Rule 15(d) and motions to amend
under Rule 15(a) via the same standard. See, e.g., Banner Health v. Burwell, 55 F. Supp. 3d 1,
8 n.9 (D.D.C. 2014); Wildearth Guardians v. Kempthorne, 592 F. Supp. 2d 18, 23 (D.D.C.
2008). The key difference between the two Rules is that amendments “relate to matters that
occurred prior to the filing” of the pleading to be amended, whereas supplements “set[] forth
transactions or occurrences or events which have happened since” that pleading. Hall, 437 F.3d
at 100 (emphasis added) (quoting Hicks, 283 F.3d at 385; then quoting Wright & Miller, supra).
Further, “[s]upplements under Rule 15(d) always require leave of the court, and the court has
broad discretion in determining whether to allow supplemental pleadings in the interests of
judicial economy and convenience.” The Fund For Animals v. Hall, 246 F.R.D. 53, 54 (D.D.C.
2007).
Typically, Courts grant leave to amend or supplement “unless there is a good reason,
such as futility, to the contrary.” Willoughby v. Potomac Elec. Power Co., 100 F.3d 999, 1003
(D.C. Cir. 1996); see also Foman v. Davis, 371 U.S. 178, 182 (1962) (noting that reasons not to
permit Rule 15(a) amendment may include “undue delay, bad faith or dilatory motive on the part
of the movant, repeated failure to cure deficiencies by amendments previously allowed, [and]
undue prejudice to the opposing party”). In other words, if the new causes of action would be
deficient as stated in the proposed supplement, courts need not grant leave. See In re Interbank
Funding Corp. Secs. Lit., 629 F.3d 213, 218 (D.C. Cir. 2010) (“[A] district court may properly
deny a motion to amend if the amended pleading would not survive a motion to dismiss.”) (citing
Foman, 371 U.S. at 182, for proposition that “‘futility of amendment’ is permissible justification
4
for denying Rule 15(a) motion”); James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1099 (D.C. Cir.
1996) (“Courts may deny a motion to amend a complaint as futile . . . if the proposed claim
would not survive a motion to dismiss.”).
III. Analysis
In opposing Plaintiff’s proposed supplement, the IRS contends that the counts relating to
the newly alleged requests are either infirm, untimely, or both. The Court will first consider the
January RAIVS requests and then the June Privacy Act request.
A. January RAIVS Requests
The Service argues that Powell cannot supplement his Amended Complaint with his
January RAIVS requests — seeking tax forms for his father and grandfather — because 1) he
unduly delayed in adding these requests, and 2) he did not exhaust his administrative remedies.
See ECF No. 24 (Defendant Opposition to Motion to Supplement) at 3–4. The Court is not
persuaded.
1. Undue Delay
Undue delay “is a valid reason to reject a party’s attempt to add a new theory of liability
to a complaint.” Elkins v. District of Columbia, 690 F.3d 554, 565 (D.C. Cir. 2012). Because
“[c]onsideration of whether delay is undue . . . should generally take into account the actions of
other parties and the possibility of any resulting prejudice,” Atchinson v. District of Columbia,
73 F.3d 418, 426 (D.C. Cir. 1996), the significance of a delay depends on the prejudice it causes.
While Plaintiff’s justification for his tardiness may be a bit flimsy here, the slow progress of this
litigation negates any potential prejudice to the IRS.
Defendant believes Powell did “not act[] in good faith” by waiting until August 1, 2019,
to file his Motion to Supplement. See Def. Opp. at 3–4. The IRS aptly notes that Powell could
5
have brought his January requests to this Court as early as six months before his August 1
Motion. Id. at 3–4. Yet, following the filing of Plaintiff’s Amended Complaint on February 6,
2019, this Court issued a stay giving the parties time to resolve their dispute before continuing
litigation. See Minute Order of Feb. 27, 2019. After lifting the stay on May 2, 2019, see Minute
Order, Plaintiff promptly filed a motion to supplement the Amended Complaint with factual
allegations dating back to January 2019. See First Mot. Suppl. Compl. While the Court denied
this motion for procedural defects, his second bite at the apple cured those infirmities on August
1. Although the second Motion admittedly lagged three months behind the first — but followed
only four weeks after Plaintiff’s June 3 request arguably became actionable — that delay does
not demonstrate prejudice or a lack of good faith. Indeed, the IRS has not yet filed its
forthcoming motion for summary judgment on the Amended Complaint claims, so the
supplemental material will not derail the litigation. Cf. Thorp v. District of Columbia, 325
F.R.D. 510, 514 (D.D.C. 2018) (denying leave to supplement complaint in part because parties’
motions for summary judgment were already ripe).
2. Futility
The IRS next asserts that Powell’s proposed claims are futile because he failed to exhaust
his administrative remedies. See Def. Opp. at 4–5. Plaintiff retorts that FOIA’s administrative
remedies do not apply to RAIVS requests. See Pl. Reply at 3–5. While both parties have
misconstrued the law, the chips ultimately fall for Plaintiff.
Courts often talk about the need to abide by agency procedures as the “exhaustion”
requirement. Such “[e]xhaustion of administrative remedies is generally required before filing
suit in federal court.” Oglesby v. Dep’t of Army, 920 F.2d 57, 61 (D.C. Cir. 1990). A plaintiff’s
“failure to comply with an agency’s FOIA regulations is the equivalent of a failure to exhaust”
6
and generally subjects the case to dismissal. West v. Jackson, 448 F. Supp. 2d 207, 211 (D.D.C.
2006); see Hidalgo v. FBI, 344 F.3d 1256, 1258 (D.C. Cir. 2003) (affirming Rule 12(b)(6)
dismissal for failure to exhaust). To “maintain a civil action,” a litigant must thus first “properly
initiate[]” FOIA’s administrative process by following each agency’s “published rules” on
request procedures. Brown v. FBI, 675 F. Supp. 2d 122, 126 (D.D.C. 2009).
In this case, Defendant claims that “upon receiving the unsatisfactory response from
RAIVS” after his January requests, Plaintiff failed to “proceed[] to the FOIA Disclosure
Office . . . as he has been instructed to do.” Def. Opp. at 5. Plaintiff, however, was not so
required. Defendant neglected the obligation of agencies to reply to every record request and
— if that request is denied — to give the requester an explanation for its decision. See 5 U.S.C.
§ 552(a)(6)(A)(i)–(ii); 26 C.F.R. § 601.702(c)(9)(i); 31 C.F.R. § 1.26(g)(1). If an agency does
not notify the requester of its decision in the statutorily mandated timeframe, the requester has
fulfilled the exhaustion requirement and has the right to file suit in federal court. See 5 U.S.C.
§ 552a(g)(1)(D) (providing right of action under Privacy Act when agency does not respond in
thirty days); 5 U.S.C. § 552(a)(6)(C)(i) (establishing that FOIA requester exhausts administrative
remedies when agency fails to “immediately notify” requester of decision after twenty days); 26
C.F.R. § 601.702(c)(9)(ii) (ordering agency to answer RAIVS requests after twenty days).
Plaintiff asserts that Defendant never responded to any of his three RAIVS requests or his
single Privacy Act request. See Second Mot. Suppl. Compl. at 3. He points out that the Service
merely “refunded [his RAIVS] request fees” from January 2019 — without further
explanation — and did not respond to his June 3 Privacy Act request at all. Id. Given that the
IRS did not satisfy its requirements under FOIA, RAIVS, and the Privacy Act, no further
7
exhaustion was required. Powell, accordingly, may supplement his Amended Complaint with
counts relating to these three requests.
B. June Privacy Act Request
Defendant finds more success — though not complete victory — in opposing Plaintiff’s
June 3 Privacy Act request. The IRS submits that the doctrine of issue preclusion bars Powell
from litigating portions of this request. See Def. Opp. at 6. “Under collateral estoppel, once a
court has decided an issue of fact or law necessary to its judgment, that decision may preclude
relitigation of the issue in a suit on a different cause of action involving a party to the first case.”
Allen v. McCurry, 449 U.S. 90, 94 (1980). In other words, “an issue of fact or law that was
actually litigated and necessarily decided is conclusive in a subsequent action between the same
parties or their privies.” Johnson v. Duncan, 746 F. Supp. 2d 163, 168 (D.D.C. 2010). “If a new
legal theory or factual assertion put forward in the second action is related to the subject-matter
and relevant to the issues that were litigated and adjudicated previously, so that it could have
been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly
pleaded or otherwise urged.” Yamaha Corp. of Am. v. United States, 961 F.2d 245, 257–58
(D.C. Cir. 1992) (quoting James Wm. Moore et al., 1B Moore’s Federal Practice ¶ 0.443(2) at
760–61 (1988)).
Issue preclusion requires three elements: (1) “the same issue now being raised must have
been contested by the parties and submitted for judicial determination in the prior case”; (2) “the
issue must have been actually and necessarily determined by a court of competent jurisdiction in
that prior case”; and (3) “preclusion in the second case must not work a basic unfairness to the
party bound by the first determination.” Martin v. Dep’t of Justice, 488 F.3d 446, 454 (D.C. Cir.
2007) (quoting Yamaha Corp., 961 F.2d at 254).
8
Powell’s June 3 request sought his individual Master File (MF) transcripts — both
“Specific and Complete” — and his automated Non-Master File (NMF) transcripts “of any
records contained therein pertaining to me.” See Second Mot. Suppl. Compl., Exh. C (June 3
Request). He requested transcripts from 1987 to 2019. Id.Litigating FOIA and Privacy Act requests is well-trodden ground for Powell, and this
Court has adjudicated many of his claims. In order to assess the IRS’s defense here, the Court
must set out the relevant requests Powell has previously litigated for his personal tax forms.
These include:
Request Date Transcript
MF-Complete (1988–1992)
July 19, 2016 MF-Specific for Form 1040 (1988–1992)
NMF (years unspecified)
June 19, 2017 All NMF (1987–2017)
March 5, 2018 MF-Specific for Form 1040 (1987–2017)
While knee deep in Powell’s other lawsuits, this Court came to three relevant conclusions
regarding his past requests for personal tax forms. These conclusions are at the core of
Defendant’s futility argument.
First, Powell’s MF-Complete requests were rendered moot once the IRS “turn[ed] these
records over to [Powell]” on May 15, 2017. See Powell, 255 F. Supp. 3d at 46. In the FOIA
context, where the Government has released certain requested documents, the case is moot as to
those requests. Williams & Connolly v. SEC, 662 F.3d 1240, 1244 (D.C. Cir. 2011); cf. Perry v.
Block, 684 F.2d 121, 125 (D.C. Cir. 1982) (“[H]owever fitful or delayed the release of
information under the FOIA may be, once all requested records are surrendered, federal courts
have no further statutory function to perform.”). “By definition, . . . [the MF-]complete
transcript contains data from any past years relevant to that taxpayer.” Powell, 255 F. Supp. 3d
9
at 36 (emphasis added). The MF-Complete transcript handed over in 2017 would, therefore,
include relevant transcripts from all prior years. To the extent his June 3 request sought the same
information, that request is moot. Powell’s requests for his 2018 and 2019 MF-Complete
transcripts, however, have not yet been addressed.
Second, Powell’s past requests for MF-Specific transcripts have been focused on certain
Form 1040 transcripts. See Powell v. IRS, 280 F. Supp. 3d 155, 159 (D.D.C. 2017); Powell, 255
F. Supp. 3d at 47–48; Powell v. IRS, No. 18-453, 2019 WL 1980973, at *4–5 (D.D.C. May 3,
2019). This Court previously found these requests moot because the IRS had turned over Form
1040 transcripts from 1989 to 1992, see Powell, 280 F. Supp. 3d at 159, and it had “adequate[ly]
search[ed]” for the 1987 to 2017 forms. See Powell, 2019 WL 1980973, at *4–5; see also
Valencia-Lucena v. U.S. Coast Guard, 180 F.3d 321, 325 (D.C. Cir. 1999) (“An agency fulfills
its obligations under FOIA if it can demonstrate beyond material doubt that its search was
‘reasonably calculated to uncover all relevant documents.’” (quoting Truitt v. Dep’t of State, 897
F.2d 540, 542 (D.C. Cir. 1990)). While Powell’s earlier MF-Specific requests were under FOIA,
the same search would have satisfied the Privacy Act. See Thompson v. Dep't of Justice, 146
F. Supp. 3d 72, 82 (D.D.C. 2015) (adequacy of search for FOIA and Privacy Act analyzed under
same standard when searches would be coextensive). Although Powell’s June 3 request does not
identify the specific transcript sought, the Court has no way of knowing what (if anything) he
seeks beyond the Form 1040 transcripts. If he wishes to acquire some other form, he will have to
make that clear in a subsequent suit. As he defined it here, however, this claim is also moot
except for MF-Specific requests from 2018 and 2019.
Finally, this Court previously rejected Powell’s suit over his requests for all automated
NMF transcripts between 1987 and 2017 because IRS’s “NMF search was adequate.” Powell v.
10
IRS, 317 F. Supp. 3d 266, 279 (D.D.C. 2018). In the same vein as his other requests, Powell’s
request for 2018 and 2019 NMF transcripts, however, is a new issue before this Court.
For these reasons, the doctrine of collateral estoppel precludes Powell from relitigating
requests for the following personal tax forms: MF-Complete transcripts between 1988 and 2017,
MF-Specific transcripts for Form 1040 between 1987 and 2017, and automated NMF transcripts
between 1987 and 2017. Only the requests for 2018 and 2019 in each category may proceed.
C. Bad Faith
Finally, the IRS flags Powell’s demonstrated proclivity for filing multiple related
lawsuits. Its Opposition laments his multi-suit quest to discover myriad forms of records,
claiming that Plaintiff “now appears more interested in harassing the agency than he does in
acquiring records.” Def. Opp. at 6. Such frustration is not entirely unfounded. Powell himself
has indicated that he would file “another lawsuit” based on his proposed supplemental claims.
See Second Mot. Suppl. Compl. at 4.
While the IRS points to cases where courts have grappled with the harassing nature of
seemingly duplicative litigation, those cases do not require the Court to expand its undue-
prejudice inquiry outside the realm of this specific lawsuit, nor do they support Defendant’s
argument for denying the Rule 15(d) motion here. See In re Powell, 851 F.2d 427, 431 (D.C.
Cir. 1988) (denying injunction against plaintiff filing multiple FOIA suits because “the district
court should be careful not to conclude that . . . FOIA actions[] in and of themselves warrant a
finding of harassment”).
Even if Powell’s litigiousness weighed heavily on the Rule 15(d) analysis, Defendant’s
grievances would still be misplaced. Here, the IRS has the opportunity to avoid piecemeal
litigation, but it would seem to prefer it over supplementation. Especially given that no
11
summary-judgment motion has yet been filed, the Court believes that the better way to proceed is
all in one suit.
IV. Conclusion
For the foregoing reasons, the Court will grant in part and deny in part Plaintiff’s Second
Motion to Supplement the Amended Complaint. A Minute Order so stating will issue this day.
/s/ James E. Boasberg
JAMES E. BOASBERG
United States District Judge
Date: September 30, 2019
12