Steele v. United States ( 2022 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
ADAM STEELE, et al.,
Plaintiffs,
v. Case No. 1:14-cv-01523-RCL
UNITED STATES OF AMERICA,
Defendant.
MEMORANDUM OPINION
This case involves a class action against the United States of America regarding
purportedly excessive tax identification number (“PTIN”) fees. Plaintiffs—a group of individuals
who have paid these fees—move this Court to compel the government to produce two sets of
discovery materials: a set of over 1,300 documents withheld based on the deliberative process
privilege, ECF No. 163, and more specific answers to certain interrogatories, ECF No. 167. For
the below reasons, the Court will DENY both motions.
I. BACKGROUND
The Court has outlined the factual and procedural background of this case previously but
will briefly reiterate the facts here. See, e.g., Steele v. United States, No. 1:14-cv-1523 (RCL),
2020 WL 7123100 (D.D.C. Dec. 4, 2020). Between 2000 and 2010, the Internal Revenue Service
(“IRS”) issued over one million voluntary PTINs to tax return preparers for free. Mot. for Summ.
J. 4, ECF No. 175. These PTINs were unrequired and largely unregulated before 2010. Id. In 2009,
the IRS began regulating tax return preparers in earnest to solve the issue of “incompetent and
unscrupulous preparers.” Id. at 5. This new program was funded by PTIN fees. Id.
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Plaintiffs in this case are a certified class of “individuals and entities who have paid an
initial and/or renewal fee for a PTIN.” ECF No. 63. In 2014, they filed a class action alleging that
the Department of the Treasury (“the Treasury”) and IRS lacked statutory authority to charge a fee
for PTIN issuance and renewal. Compl. ¶ 30, ECF No. 1. They claimed that even if charging a fee
is lawful, the amount charged is excessive. Id. Plaintiffs sought declaratory relief, injunctive relief,
and restitution. Id. at ¶ 30–31. Plaintiffs amended their complaint after it was consolidated with
another related action. Am. Compl., ECF No. 41.
Both parties moved for partial summary judgment on the issue of whether the IRS had
statutory authority to charge a fee for PTIN issuance and renewal. ECF Nos. 66 & 67. This Court
ultimately determined that although the IRS could lawfully require the exclusive use of PTINs by
tax preparers, they are not authorized to charge a fee for their issuance or renewal. Steele v. United
States, 260 F. Supp. 3d, 62–67 (D.D.C. 2017). Consequently, the Court issued a permanent
injunction against the IRS, prohibiting them from charging PTIN fees, and ordered them to refund
class members for PTIN fees already paid. Final J. and Perm. Inj., ECF No. 82.
On appeal, the D.C. Circuit held that the IRS was within its authority to charge the PTIN
fees. Montrois v. United States, 916 F.3d 1056, 1058 (D.C. Cir. 2019). Accordingly, the Circuit
vacated and remanded this Court’s judgment. Id. The remaining issue before this Court is whether
the amount charged for PTINs is excessive. Id.Plaintiffs have now filed two motions to compel discovery. The first is a motion to compel
information that the IRS withheld under a claim of deliberative process privilege. Pls.’ Mot. to
Compel (“Pls.’ First Mot.”), ECF No. 163. Plaintiffs argue that the government has failed to meet
the requirements for invoking the deliberative process privilege. Id. The government responded,
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Def.’s Resp. in Opp’n (“Def.’s First Opp’n”), ECF No. 166., and plaintiffs replied. Pls.’ Reply
(“Pls’ First Reply”), ECF No. 169.
The second motion asks this Court to compel the government to fully respond to plaintiffs’
third set of interrogatories pursuant to Fed. R. Civ. P. 37(a)(3)(B). Pls.’ Mot. to Compel (“Pls.’
Second Mot.”), ECF No. 167. Plaintiffs argue that the government failed to sufficiently respond
to their third set of interrogatories that were sent to the government via email. Id. at 1. The
government argues that (1) the third set of interrogatories are not relevant, and (2) the government
has sufficiently responded to plaintiffs’ interrogatories. Def’s Resp. in Opp’n (“Def.’s Second
Opp’n”), ECF No. 171. Plaintiffs replied. Pls.’ Reply (“Pls.’ Second Reply”), ECF No. 172. These
motions are now ripe.
After reviewing the filings, and the record herein, the Court will DENY both motions to
compel.
II. LEGAL STANDARD
“When a party objects to a discovery request, the requesting party may—after first
attempting to resolve the issue by conferring with the refusing party—file a motion to compel.”
Lamaute v. Power, 339 F.R.D. 29, 35 (D.D.C. 2021). Federal Rule of Civil Procedure 37 permits
a party to file a motion to compel discovery if, inter alia, the opposing party “fails to answer to an
interrogatory submitted under Rule 33” or “fails to produce documents . . . requested under Rule
34.” Fed. R. Civ. P. 37(a)(1), (a)(3)(B)(iii)-(iv). An incomplete answer or response is treated as a
failure to respond. Fed. R. Civ. P. 37(a)(4).
The moving party bears the initial burden to show that the requested information is
relevant. Lamaute, 339 F.R.D. at 35. Relevance is construed broadly in the discovery context as
“any matter that bears on, or that reasonably could lead to other matter that could bear on any
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party’s claim or defense.” United States ex rel. Shamesh v. CA, Inc., 314 F.R.D. 1, 8 (D.D.C. 2016).
After establishing relevance, “the burden shifts to the party opposing discovery to show why the
discovery should not be permitted.” Lamaute, 339 F.R.D. at 35. That showing must be “specific”
and “detailed.” Id.
III. DISCUSSION
A. Plaintiffs’ First Motion To Compel
Plaintiffs first move to compel documents that the government withholds based on the
deliberative process privilege. Pls.’ First Mot. 1. Plaintiffs’ request for relief is far too broad and
ill-defined: they fail to identify the entries where the government did not properly invoke its
privilege and instead ask this Court to compel all documents withheld under the deliberate process
privilege. Because it is unclear which documents plaintiffs even seek, the Court will DENY
plaintiffs’ first motion to compel.
1. The Requested Discovery Is Relevant
To begin, the Court rejects the government’s argument that materials plaintiffs seek here
are not relevant. Def.’s First Opp’n 1–2. Plaintiffs seek documents related to the IRS’s
considerations in implementing the PTIN program, including discussions of charging potential
fees from before the PTIN program was implemented. Id. As the government acknowledges, the
ultimate issue on remand is whether the PTIN fees are reasonable or arbitrary and capricious. Id.
Information regarding the IRS’s decisionmaking process and any previous analysis plainly “bears
on or . . . could lead to other matter that could bear on” this issue. Shamesh, 314 F.R.D. at 8.
Accordingly, the burden shifts to the government to withhold these documents.
2. The Court Will Not Grant Plaintiffs’ Blanket Motion For All Documents
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The government withheld 1,362 documents on the basis of the deliberative process
privilege, as identified in their privilege log. Def’s First Opp’n 1. Plaintiffs claim that defendants
have not properly asserted the privilege for a single one of the documents. The Court cannot agree.
The deliberative process privilege protects certain documents from discovery requests:
“advisory opinions, recommendations and deliberations comprising part of a process by which
governmental decisions and policies are formulated.” Convertino v. U.S. Dep’t of Just., 674 F.
Supp. 2d 97, 101 (D.D.C. 2009) (citing In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997)
(quoting Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena, 40 F.R.D. 318, 324 (D.D.C. 1966))). The
ultimate purpose of the privilege is to prevent injury to the quality of agency decisions by allowing
government officials the freedom to debate alternative approaches in private. Cobell v. Norton,
213 F.R.D. 1, 4 (D.D.C. 2003). To exercise this privilege, the withholding party must show that
the withheld information is both “predecisional” and “deliberative.” Id. (citing In re Sealed Case,
121 F.3d 729, 737 (D.C. Cir. 1997)).
To qualify as predecisional, a document must be “prepared in order to assist an agency
decisionmaker in arriving at his decision, rather than to support a decision already made.” Id. at 4
(citing Petroleum Info. Corp. v. U.S. Dep’t of the Interior, 976 F.2d 1429, 1434 (D.C. Cir. 1992).
To qualify as deliberative, the withholding party must show that there was a process of decision
making in which the document or information at issue played a role. Id. (citing Coastal States Gas
Corp. v. Dep’t of Energy, 617 F.2d 854, 868 (D.C. Cir. 1980)). Additionally, in this Circuit proper
invocation of the deliberative process privilege requires: (1) a formal claim of privilege by the
head of the department possessing control over the requested information, (2) an assertion of the
privilege based on actual personal consideration by that official, and (3) details regarding the
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information for which the privilege is claimed, along with an explanation why it properly falls
within the scope of the privilege. Id. at 7.
In their motion, plaintiffs argue that the government’s three privilege logs provide only
“boilerplate descriptions” of the documents withheld that do not fulfill the government’s burden
in asserting the deliberative process privilege. Pls.’ First Mot. 1. As a result of the government’s
alleged failure to assert the privilege, plaintiffs seek an incredible remedy: they ask this Court to
compel the government to produce every single document withheld under the deliberative process
privilege alone. Pls.’ First Mot. 8: see ECF No. 163-1. Plaintiffs’ compact motion shuns individual
analysis of the documents in question, instead taking a blanket approach where one bad privilege
log entry spoils the bunch.
Furthermore, it is insincere of plaintiffs to argue that the government has failed to meet its
burden in asserting the privilege for every privilege log entry, given the declaration by Deputy
Associate Chief Counsel Richard Goldman that details why twenty-six of the log entries were
withheld (the twenty-six documents plaintiffs identified as deficient in their communications to
the government.). Richard Goldman Decl. ¶ 12, ECF No. 166-4. So the Court cannot deny all of
the government’s claims of deliberative process privilege in one fell swoop.
And even a cursory review of the government’s privilege logs illustrates that many entries
are properly constructed and do support the government’s claim of deliberative process privilege.
See, e.g., ECF No. 163-3 at 33–34. Take, for example, plaintiffs’ challenge to a number of records,
each described as a “draft document related to agency decisionmaking regarding [Annual Filing
Season Program] implementation and risks.” Pls.’ First Mot. 5–6. The privilege log indicates the
date of these entries, the topic of discussion, the fact that these documents were a draft, who drafted
them (Booz Allen Hamilton), and who they were sent to. See ECF No. 136-3. The D.C. Circuit
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has explained that the “nature of the decisionmaking authority vested in the officer or person
issuing the disputed document, and the relative positions in the agency's chain of command
occupied by the document's author and recipient” can assist the court in determining whether the
deliberative process privilege applies. Khatchadourian v. Def. Intel. Agency, No. 1:16-cv-311-
RCL, 2022 WL 971206, at *12 (D.D.C. Mar. 31, 2022). The government has provided that
information here. The United States also confirmed that the information withheld was not shared
with the public and did not memorialize a final IRS policy. Def.’s First Opp’n 8. The fact that the
language the government uses to describe the records is repetitive, without more, does not waive
its privilege.
Plaintiffs also request the production of a “2012 user-fee cost model” that they allege was
“linked to and incorporated into a 2013 user-fee cost model.” Pls.’ First Mot. 7. They argue that
an individual who prepared the 2013 cost model testified that the model included “inherited” data
from the 2012 cost model, and therefore the cost model was “adopted by the agency” and is not
predecisional. Id. To start, this Court’s review of the testimony of the individual in question reveals
different responses: Christopher Kurtz expressed specific confusion about the graphs in the 2013
user fee cost model, noted that he “d[id]n’t know” if the 2012 and 2013 cost models were
“automatically linked,” and explained that the “graphs” and “budget exhibits” were carried over
from the 2012 model—not the data. See ECF No. 163-8. And the fact that the 2012 user-fee cost
model includes factual data is not dispositive: factual information “may be protected if ‘the manner
of selecting or presenting those facts would reveal the deliberative process.’” Cobell, 213 F.R.D.
at 6 (quoting Ryan v. Dep’t of Just., 617 F.3d 781, 790 (D.C. Cir. 1980). The government explains
that the 2012 cost model involves a “preliminary analysis conducted during an off year review,”
with the 2013 cost model as the final agency action. ECF No. 163-9 at 3.
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Because plaintiffs did not produce “a set of objections that identifies each log entry” that
they challenge and because this Court cannot agree that each log entry is insufficient—especially
given Goldman’s accompanying declaration—plaintiffs are essentially asking this Court to engage
in an entry-by-entry analysis of the privilege log to evaluate whether the government has fulfilled
its burden. United Affiliates Corp. v. United States, 154 Fed. Cl. 335, 341 (2021). This is “certainly
not the Court’s responsibility.” Id. In fact, at least one other court has held that when plaintiffs fail
to identify specific log entries they challenged and provide only “exemplar” deficient log entries
isntead, their challenges are not yet ripe. Id. The movants in cases that plaintiffs cite confirm the
notion that they must object with some specificity: In Department of the Treasury v. Pension
Benefit Guaranty Corporation, for example, the plaintiffs filed a detailed list of each document
they were seeking. 222 F. Supp. 3d 38, 41 (D.D.C. 2016).
Accordingly, the plaintiffs’ first motion to compel is DENIED.
B. Plaintiffs’ Second Motion
Plaintiffs next move this Court to compel the government to supply “complete” answers to
the questions included in their third set of interrogatories. ECF No. 167-1. The interrogatories in
question ask what percentage of “work time” certain employees spent dedicated to specific PTIN-
related tasks. See ECF No. 167-3. The government argues that the information is irrelevant and,
more importantly, that the specific information does not exist—not all IRS employees keep
contemporaneous time records. Def.’s Second Opp’n 11. For the below reasons, the Court will
DENY plaintiffs’ second motion to compel.
1. The Information Sought by Plaintiffs in Their Third Set of Interrogatories is Relevant
to the Parties’ Claims and Defenses in this Case
The relevance bar for discovery material is low, requiring only that the information sought
may have some bearing on proving either party’s claim or defense. Shamesh, 314 F.R.D. at 8.
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Here, plaintiffs’ remaining claim challenges whether the PTIN fees issued by the government are
reasonable, and this involves determining whether the amount of the PTIN fee “unreasonably
exceeds the costs to the IRS to issue and maintain PTINs.” Montrois, 916 F.3d at 1058.
The Court has no doubt that the information plaintiffs seek meets the standard for
relevance. Plaintiffs request documents related to the time allocated by IRS employees on PTIN-
related tasks. ECF No. 167-3. Because reasonableness in this case involves whether the fees
unreasonably exceed the costs to the IRS for PTIN issuance and maintenance, the time allocated
by IRS employees on PTIN-related tasks (and so the relevant portions of their salaries) absolutely
bears on figuring out whether this cost to the IRS is exceeded by the PTIN fee. Montrois, 916 F.3d
at 1058.
2. The Court Cannot Compel the Government to Produce Information it Does Not Have
Although the information requested by plaintiffs in their third set of interrogatories is
relevant, the Court cannot compel the government to produce materials that it does not possess or
information it does not have. See U.S. ex rel Fago v. M & T Mortg. Corp., 235 F.R.D. 11, 19
(D.D.C. 2006). While plaintiffs assert that the government’s responses to its third set of
interrogatories are insufficient, Pls.’ Second Mot., the government is correct in their observation
that plaintiffs are not looking for a response; they are looking for a different response. Def.’s
Second Opp’n 1.
It is acceptable for parties to respond to interrogatories by stating that they are unable to
provide certain information sought while identifying the information they possess. M & T Mortg.
Corp., 235 F.R.D. at 19. The government has already provided plaintiffs with numerous
declarations from various employees regarding staffing and PTIN work, including some time
allocation breakdowns. Id. at 10. However, not all employees kept contemporaneous time records.
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Id. The government contends that if the information sought by plaintiffs is not included in those
materials already provided, it does not exist. Id.
The Court acknowledges that the government should have stated the nonexistence of this
information more clearly in their actual interrogatory answers, instead of in their response to
plaintiffs’ letter alleging deficiencies. Still, while plaintiffs argue that this information “exists in
the brains of IRS employees and former employees,” Pls.’ Second Mot. 1, the Court agrees with
the government that forcing employees and former employees to produce a detailed record of time
spent on PTIN tasks over the last ten years based on memory alone is absurd. Def.’s Second
Opp’n 11.
Plaintiffs cite two cases that they believe should lead the Court to compel the government
to somehow provide these interrogatory answers. In Wolfe v. Churray, a District of South Carolina
court explained that a blanket “I do not remember” statements used by defendants to answer
numerous interrogatories were unacceptable. Order, Wolfe v. Churray, No. 4:20-cv-244 (JD)
(TER) (D.S.C. April 1, 2021), ECF No. 275. Similarly, in Collins v. Grey Hawk Transportation,
a District of New Mexico court compelled the plaintiff to “rack his memory” to respond to
interrogatories requesting information about communications he had with others about hist past
injuries. 2021 WL 3931131, No. 20-cv-869 (JHC) (CG), at *5 (D.N.M Sept. 2, 2021).
These cases are not persuasive. To start, the government does not contend it cannot
“remember” the answers to certain interrogatories—it contends there are no records to answer
plaintiffs’ questions. Def.’s Second Opp’n 10. Additionally, the government here already has
performed the equivalent of “racking [its] brain.” The government pointed plaintiffs towards
information already provided that would answer the interrogatories, see, e.g., ECF No. 167-8 at
12—information including declarations of current and former directors at the IRS who discussed
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