Adamowicz Ex Rel. Estate of Adamowicz v. Internal Revenue Service

10-263-cv (L); 10-265-cv (CON)
Adamowicz v. IRS
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of
New York, on the 8th day of December, two thousand ten.
PRESENT: REENA RAGGI,
DEBRA ANN LIVINGSTON,
DENNY CHIN,
Circuit Judges.
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MICHAEL ADAMOWICZ, as Executor of the Estate of
Mary Adamowicz, Deceased, ELIZABETH FRASER, as
Executor of the Estate of Mary Adamowicz, Deceased,
Plaintiffs-Appellants,
FREDERICK M. SEMBLER,
Non-Party-Appellant,
v. No. 10-263-cv (L)
No. 10-265-cv (CON)
INTERNAL REVENUE SERVICE,
Defendant-Appellee.
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APPEARING FOR APPELLANTS: FREDERICK M. SEMBLER, The Law Office of
Frederick M. Sembler, PLLC, New York,
New York.
APPEARING FOR APPELLEE: TARA M. LA MORTE, Assistant United States
Attorney (Carolina A. Fornos and Neil M.
Corwin, Assistant United States Attorneys, on the
brief), for Preet Bharara, United States Attorney
for the Southern District of New York, New
York, New York.
Appeal from the United States District Court for the Southern District of New York
(Loretta A. Preska, Chief Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the district court’s order entered on November 24, 2009,1 is AFFIRMED and
the appeal docketed as No. 10-265-cv is DISMISSED.
Plaintiffs Michael Adamowicz and Elizabeth Fraser, as executors of their deceased
mother’s estate, appeal from an award of summary judgment in favor of the Internal Revenue
Service (“IRS”) on their Freedom of Information Act (“FOIA”) claims, see 5 U.S.C. § 552,
charging inadequate responses to inquiries pertaining to the IRS’s examination of a 2003
estate tax return (the “Examination”). Plaintiffs’ counsel appeals from that part of the
judgment subjecting him to “sanctions.” We review de novo a district court’s grant of
summary judgment in FOIA litigation. See Wilner v. NSA, 592 F.3d 60, 69 (2d Cir. 2009);
Halpern v. FBI, 181 F.3d 279, 288 (2d Cir. 1999). We assume familiarity with the facts and
the record of prior proceedings, which we reference only as necessary to explain our
decision.
To secure summary judgment in a FOIA case, the defending agency must show
through reasonably detailed affidavits or declarations that it conducted an adequate search
and that any withheld documents fall within a FOIA exemption. See Wilner v. NSA, 592
1
Although a separate judgment was not entered, see Fed. R. Civ. P. 58(a), judgment
became final 150 days after the order was entered, see Fed. R. Civ. P. 58(c)(2)(B). Thus,
plaintiffs’ notice of appeal was timely filed as of that date, see Fed. R. App. P. 4(a)(2), and
we have jurisdiction over this appeal, see 28 U.S.C. § 1291; Goldberg & Connolly v. N.Y.
Cmty. Bancorp, Inc., 565 F.3d 66, 71 n.3 (2d Cir. 2009).
2
F.3d at 69; Carney v. U.S. Dep’t of Justice, 19 F.3d 807, 812 (2d Cir. 1994). Indeed, we
accord such affidavits “a presumption of good faith,” Wilner v. NSA, 592 F.3d at 69 (internal
quotation marks omitted), which “cannot be rebutted by purely speculative claims about the
existence and discoverability of other documents,” Grand Cent. P’ship, Inc. v. Cuomo, 166
F.3d 473, 489 (2d Cir. 1999) (internal quotation marks omitted); see also Carney v. U.S.
Dep’t of Justice, 19 F.3d at 813.
Here, the IRS’s detailed declarations reveal both (1) a diligent search reasonably
calculated to discover responsive documents, and (2) an adequate explanation why any
withheld documents are exempt. See Carney v. U.S. Dep’t of Justice, 19 F.3d at 812-13.
1. Adequacy of Search
In challenging the adequacy of the IRS search in response to their first FOIA request,
plaintiffs complain that Alan Dichter’s declaration was based on hearsay because Dichter did
not actually supervise the search. This claim is belied by the declaration, which states that
Dichter maintained supervisory responsibility over the first FOIA request and worked
directly with IRS attorneys Glasel and Weitzman – the two individuals identified as
potentially having relevant records – to compile and review responsive documents. See
Carney v. U.S. Dep’t of Justice, 19 F.3d at 814 (“An affidavit from an agency employee
responsible for supervising a FOIA search is all that is needed to satisfy Rule 56(e); there is
no need for the agency to supply affidavits from each individual who participated in the
actual search.”). Insofar as plaintiffs argue that Dichter’s declaration lacked sufficient detail,
the law demands only a “relatively detailed and nonconclusory” affidavit or declaration,
3
Grand Cent. P’ship, Inc. v. Cuomo, 166 F.3d at 488-89 (internal quotation marks omitted),
a standard that Dichter’s declaration easily satisfies.
Plaintiffs assert that other IRS employees may have had documents responsive to the
first FOIA request and that certain records may not have been produced given that (1) the
IRS produced documents in the Tax Court litigation that were not located in its initial FOIA
search, (2) certain records produced refer to others that were not produced, and (3) the IRS
was unable to locate plaintiffs’ protest appeal file. To the extent these allegations are
speculative, they are insufficient to overcome the presumption of good faith accorded the
IRS’s declarations. See id. at 489 (“[T]he plaintiff must make a showing of bad faith on the
part of the agency sufficient to impugn the agency’s affidavits or declarations.” (internal
quotation marks omitted)). In any event, an agency need not show that its search uncovered
every extant responsive document, but only that it “was reasonably calculated to discover the
requested documents.” Id. Here, Dichter sought documents directly from the IRS Appeals
Office, which he identified as the only location where responsive documents might be found.
That this initial search failed to uncover plaintiffs’ protest appeal file, or certain documents
that Rachel Gregory subsequently found by re-reviewing Glasel’s Tax Court litigation files,
does not undercut the adequacy of the IRS’s search.2 See id. (“That some documents were
2
Moreover, the 190 additional pages of documents uncovered by Gregory comprised
the administrative record in the Tax Court litigation, which had been prepared and submitted
jointly by the IRS and plaintiffs to the Tax Court. Thus, plaintiffs would have already
possessed these documents.
4
not discovered until a second, more exhaustive, search was conducted does not warrant
overturning the district court’s ruling.”).3
Plaintiffs’ arguments concerning the second and third FOIA requests are equally
unavailing. Their claim that IRS employees other than Susan Leboff played unspecified
roles in the Examination and, therefore, may have had responsive materials is contradicted
by Leboff’s declaration. See Leboff Decl. ¶¶ 2, 4 (stating Leboff was “sole employee”
assigned to conduct the Examination and had “possession of and access to all documents
gathered and created” in the course thereof). Thus, a search targeting documents in Leboff’s
possession was “reasonably calculated to discover the requested documents.” Grand Cent.
P’ship, Inc. v. Cuomo, 166 F.3d at 489. Neither the IRS’s admission that it was unable to
locate responsive drafts of Leboff’s revenue agent reports,4 nor plaintiffs’ assertion that they
are in possession of documents that the IRS failed to produce, supports a different
conclusion. See id. at 489-90 (requiring that search be reasonably calculated to obtain
information sought, not that it achieve perfection). Accordingly, the district court correctly
determined that plaintiffs failed to raise a genuine issue of material fact as to the adequacy
of the IRS search.
2. FOIA Exemptions
3
Although plaintiffs continue to insist that the documents produced in response to the
first FOIA request contained redactions, the time records relied upon by plaintiffs to support
this assertion show no signs of redaction.
4
In any event, Leboff’s draft reports fall within the deliberative process privilege and,
thus, are exempt from disclosure under FOIA Exemption 5. See infra Section 2(b).
5
a. Exemption 3: Documents Withheld by Statute
Plaintiffs fault the IRS for withholding tax return information of (1) Adamowicz and
Fraser in their individual capacities, and (2) entities in which the estate possesses a material
interest. Because these withholdings were expressly mandated by statute, they clearly fall
within FOIA Exemption 3. See 5 U.S.C. § 552(b)(3); see also Wilner v. NSA, 592 F.3d at
69 (reviewing de novo agency reliance on FOIA exemptions). Pursuant to 26 U.S.C. § 6103,
the Estate is not entitled to receive the return information of any third-party without
appropriate authorization, which was lacking here. While § 6103 permits plaintiffs to receive
return information concerning entities in which the estate possesses a material interest,
plaintiffs failed to identify such entities, much less establish the estate’s material interest
therein. See 26 C.F.R. § 601.702(c)(4)(i)(E), (5)(iii).5
b. Exemption 5: Documents Subject to Privilege
FOIA Exemption 5 exempts from disclosure “inter-agency or intra-agency
memorandums or letters which would not be available by law to a party other than an agency
in litigation with the agency.” 5 U.S.C. § 552(b)(5); see also Wood v. FBI, 432 F.3d 78, 83
(2d Cir. 2005); Nat’l Council of La Raza v. Dep’t of Justice, 411 F.3d 350, 356 (2d Cir.
2005). Plaintiffs challenge the district court’s application of this exemption to documents
5
Because we conclude that third-party tax return information was properly withheld
under Exemption 3, we need not consider the IRS’s alternative reliance on Exemption 7(C)
to justify this withholding or plaintiffs’ challenge thereto. See Wilner v. NSA, 592 F.3d at
72 (“Agencies may invoke the exemptions independently and courts may uphold agency
action under one exemption without considering the applicability of the other.” (internal
quotation marks and brackets omitted)).
6
shielded by the attorney-client privilege, citing Glasel’s and Gregory’s reference to
“professional” rather than “legal” advice in their declarations. In context, it is clear that the
declarations referred to documents containing (1) privileged legal communications between
Leboff and attorneys within the IRS and the U.S. Department of Justice, (2) communications
among those attorneys, and (3) Leboff’s memorialization of such privileged communications.
See In re County of Erie, 473 F.3d 413, 418 (2d Cir. 2007) (“[T]he attorney-client privilege
protects most confidential communications between government counsel and their clients that
are made for the purpose of obtaining or providing legal assistance.”). Plaintiffs’ complaint
that the IRS’s descriptions of the privileged material are “vague[]” is also meritless as each
description included the date, persons involved, and subject matter addressed, which
adequately demonstrated that the documents withheld are exempt. See Wilner v. NSA, 592
F.3d at 73.
Plaintiffs also challenge invocation of the deliberative process privilege to withhold
documents that they contend do not pertain to the formation of “policy,” but only to the
execution of existing policies.6 We are not persuaded. The documents at issue reflect the
consultative process underlying IRS decisions concerning the Examination, the FOIA
requests, and related litigation, and are therefore entitled to the same protection as other
important agency decisions. See, e.g., Grand Cent. P’ship, Inc. v. Cuomo, 166 F.3d at 482-
83 (protecting documents related to HUD’s decisions to terminate grant and to issue or void
6
With respect to many of these documents, the IRS also relied on the attorney work-
product doctrine, which plaintiffs do not challenge on appeal, and/or on the attorney-client
privilege.
7
sanction); Hopkins v. U.S. Dep’t of Hous. & Urban Dev., 929 F.2d 81, 85 (2d Cir. 1991)
(protecting HUD reports collected for use in monitoring compliance and enforcing federal
wage laws). The fact that the deliberative materials at issue were generated by a low-level
official like Leboff and not circulated or considered by a final decisionmaker does not alter
this conclusion. See Grand Cent. P’ship, Inc. v. Cuomo, 166 F.3d at 482 (holding that
deliberative process privilege focuses on “documents reflecting advisory opinions,
recommendations and deliberations comprising part of a process by which governmental
decisions and policies are formulated” (internal quotation marks omitted)).7
c. Exemption 7(D): Documents Revealing a Confidential Source
FOIA Exemption 7(D) protects information compiled for law enforcement purposes
where disclosure “could reasonably be expected to disclose the identity of a confidential
source.” 5 U.S.C. § 552(b)(7)(D); see also U.S. Dep’t of Justice v. Landano, 508 U.S. 165,
171 (1993); Halpern v. FBI, 181 F.3d at 298. Plaintiffs do not dispute that information
withheld pursuant to this exemption was compiled for a law enforcement purpose and
provided pursuant to Leboff’s express assurance of confidentiality. See Halpern v. FBI, 181
F.3d at 298-99. Instead, they argue that the IRS waived Exemption 7(D) by revealing the
confidential source’s identity through inconsistent redactions. Even if the IRS made such
7
Plaintiffs’ argument that the IRS failed to release all segregable material was not
raised below, and is therefore waived. See In re Nortel Networks Corp. Sec. Litig., 539 F.3d
129, 132 (2d Cir. 2008). In any event, Gregory’s affidavit shows that to the extent any
purely factual material was withheld under this privilege, it was not segregable from
deliberative portions and, further, that the IRS released any deliberative material pertaining
to peripheral matters. Plaintiffs offer no evidence to undermine the presumption of good
faith accorded these assertions. See Wilner v. NSA, 592 F.3d at 69.
8
inadvertent disclosures, the promised confidentiality could only be waived by the source.
See United Techs. Corp. v. NLRB, 777 F.2d 90, 96 (2d Cir. 1985) (“The privilege belongs
to the beneficiary of the promise of confidentiality and continues until he or she waives it.”);
see also Ferguson v. FBI, 957 F.2d 1059, 1068 (2d Cir. 1992) (“[W]e reject the idea that
subsequent disclosures of the identity of a confidential source . . . requires full disclosure of
information provided by such a source.”). Plaintiffs allege no such waiver and, thus, their
challenge to Exemption 7(D) fails as a matter of law.8
3. Sanctions
Plaintiffs’ counsel contends that the district court failed to provide him with the notice
and opportunity to be heard required by Rule 11 of the Federal Rules of Civil Procedure and
due process prior to imposing “sanctions.” The district court’s characterization of certain
arguments as “ranging from the frivolous to the outright misleading,” Adamowicz v. IRS,
672 F. Supp. 2d 454, 471 (S.D.N.Y. 2009), does not equate to a finding of professional
misconduct that we have jurisdiction to review on appeal distinct from the legal issue to
which the arguments were addressed, see Keach v. County of Schenectady, 593 F.3d 218,
225 (2d Cir. 2010) (holding that appellate court “has no power to reverse a judge’s poor
8
Plaintiffs argue for the first time on appeal that the district court should have
conducted an in camera review to confirm their suspicions about the identity of the
confidential source. Not only is this argument waived, see In re Nortel Networks Corp. Sec.
Litig., 539 F.3d at 132, but in camera review was unnecessary given the absence of waiver
from the source. See generally Wilner v. NSA, 592 F.3d at 76 (“If an agency’s statements
support[] exemption . . . the court should not conduct a more detailed inquiry to test the
agency’s judgment and expertise or to evaluate whether the court agrees with the agency’s
opinions.” (internal quotation marks and brackets omitted)).
9
opinion of the skill or trustworthiness of a lawyer who has appeared before him or her”). Nor
is a different conclusion warranted by the district court’s directive that plaintiffs’ counsel
“review ABA Model Rule of Professional Conduct 3.3 and Federal Rule of Civil Procedure
11(b) before making further representations of law to this Court.” Adamowicz v. IRS, 672
F. Supp. 2d at 477. This instruction, which itself is not tied to any specific finding of a
violation, is not a sanction, but merely a prophylactic intended to assist counsel in avoiding
future sanction.
4. Conclusion
We have considered plaintiffs’ remaining arguments and conclude that they are
without merit. For the foregoing reasons, the judgment is AFFIRMED, and the appeal
docketed as No. 10-265-cv is DISMISSED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
10