Pacific Fisheries v. United States

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PACIFIC FISHERIES INC.,  No. 06-35718
Plaintiff-Appellant,
v.  D.C. No.
CV-04-02436-JLR
UNITED STATES OF AMERICA,
OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Washington
James L. Robart, District Judge, Presiding
Argued and Submitted
March 11, 2008—Seattle, Washington
Filed August 21, 2008
Before: Betty B. Fletcher, Richard A. Paez, and
N. Randy Smith, Circuit Judges.
Opinion by Judge B. Fletcher
11297
PACIFIC FISHERIES v. UNITED STATES 11299
COUNSEL
Robert J. Chicoine, Cori Flanders-Palmer, Cory L. Johnson,
Chicoine & Hallett, P.S., Seattle, Washington, for the
plaintiff-appellant.
Jonathan S. Cohen, David M. Katinsky, Gretchen M. Wol-
finer, U.S. Department of Justice, Tax Division, Washington,
11300 PACIFIC FISHERIES v. UNITED STATES
D.C.; John McKay, U.S. Attorney for the Western District of
Washington, Seattle, Washington, (on briefs) for the
defendant-appellee.
OPINION
B. FLETCHER, Circuit Judge:
Pacific Fisheries, Inc. (“Pacific Fisheries”) appeals the dis-
trict court order granting summary judgment to the Internal
Revenue Service (“IRS”) on its claim that the IRS improperly
withheld or redacted certain documents responsive to Pacific
Fisheries’ Freedom of Information Act (“FOIA”) request. See
5 U.S.C. § 552. We reverse in part, affirm in part, and remand
to the district court to determine whether the treaty exemption
applies and whether factual portions of certain documents
subject to the deliberative process privilege were properly
segregated and disclosed.
I
This case arises out of a tax investigation by the Russian
government of Mr. Konstantin Voloshenko (“Voloshenko”),
a Pacific Fisheries employee. Pursuant to the Convention
between the United States of America and the Russian Feder-
ation for the Avoidance of Double Taxation and the Preven-
tion of Fiscal Evasion with respect to Taxes on Income and
Capital (“Tax Treaty”), the Russian authorities requested the
U.S. government’s assistance in the investigation. On April
23, 2004, in furtherance of the Russian authorities’ request,
the IRS issued two third-party summonses to Bank of Amer-
ica, seeking records relating to Pacific Fisheries and Volo-
shenko. Pacific Fisheries notified the IRS that the summonses
were defective, but the government refused to withdraw them.
Pacific Fisheries then filed a petition to quash the summonses
for various reasons, including bad faith, relevance, and timeli-
PACIFIC FISHERIES v. UNITED STATES 11301
ness. The IRS subsequently withdrew the summonses and did
not defend the action.
Pacific Fisheries made several attempts to obtain the docu-
ments that served as the basis for the issuance of the summon-
ses. These included a discovery request in the district court,
which the government opposed as moot after withdrawing the
summonses, and a FOIA request dated July 27, 2004. In its
FOIA request, Pacific Fisheries asked for all documents
related to the issuance of the summonses, as well as “[a]ny
and all tax returns, tax information or other documents which
may have been provided by the Internal Revenue Service to
Russian authorities concerning Pacific Fisheries, Inc.”
On August 23, 2004, the IRS Seattle Disclosure Office
notified Pacific Fisheries that it had transferred the FOIA
request to the IRS Headquarters FOIA Office in Washington,
D.C. On October 12, 2004, not having received a response,
Pacific Fisheries submitted a follow-up request for documents
to the Washington, D.C. office. On November 10, 2004, the
IRS informed Pacific Fisheries that it needed additional time
to determine whether it would produce the documents. As of
December 9, 2004, no documents had been produced. Pacific
Fisheries then filed this FOIA action in the district court seek-
ing a court order requiring the IRS to produce the requested
documents.
The government filed its answer on March 2, 2005, assert-
ing that all documents responsive to the FOIA request were
exempt from disclosure. The government cited FOIA exemp-
tion three, which applies to documents that are “specifically
exempted from disclosure by statute,” 5 U.S.C. § 552(b)(3),
and two provisions of the Internal Revenue Code prohibiting
disclosure of tax-convention information and third-party tax
return information.
Notwithstanding this initial refusal to disclose any respon-
sive documents, on March 27, 2006, the day that dispositive
11302 PACIFIC FISHERIES v. UNITED STATES
motions were due in the district court, the government
released (in whole or in part) 313 of 465 responsive docu-
ments. At that time, the government also filed a motion for
summary judgment asserting that all other responsive docu-
ments were exempt from disclosure either under FOIA
exemption three and the Internal Revenue Code or under
FOIA exemption five, which incorporates both the executive
deliberative process privilege and the attorney work-product
privilege. In support of its motion the government filed a dec-
laration from Helene R. Newsome of the Office of Chief
Counsel, Disclosure & Privacy Law, of the IRS (“Declaration
I”) stating which exemption or exemptions applied to each
document that was withheld in whole or in part. Withheld
documents were identified by page number and a general
description such as “letter” or “email.” Declaration I grouped
documents together according to these general descriptions,
and did not include identifying details such as dates or
authors.
That same day, Pacific Fisheries filed its own motion for
summary judgment, arguing that the government had failed to
carry its burden of demonstrating that the withheld documents
were exempt. Pacific Fisheries also took issue with the fact
that the government did not disclose the documents until the
day that dispositive motions were due, a delay that was
unnecessary, in violation of the statute and regulations, and
which deprived Pacific Fisheries of the opportunity to review
the documents and claimed exemptions before filing its
motion for summary judgment.
On April 24, 2006, after reviewing the disclosed documents
and Declaration I, Pacific Fisheries filed its opposition to the
government’s motion for summary judgment. In its opposi-
tion, Pacific Fisheries specifically challenged the govern-
ment’s failure to segregate and disclose factual portions of the
documents that were withheld pursuant to the deliberative
process privilege. In response, the government submitted a
second declaration from Helene Newsome (“Declaration II”)
PACIFIC FISHERIES v. UNITED STATES 11303
reiterating the previous description of the document search,
stating that Newsome “attempted to make all reasonably seg-
regable non-exempt portions of documents available to plain-
tiff,” and noting that many documents are covered by more
than one exemption, a factor that could affect the segrega-
bility analysis.
Finally, on May 5, 2006, Pacific Fisheries filed its reply to
the government’s opposition to Pacific Fisheries’ motion for
summary judgment. Pacific Fisheries continued to argue that
the government failed to demonstrate the adequacy of its
search or to produce all relevant documents. Additionally, and
for the first time, it challenged the government’s assertion that
the tax-convention information is exempt from disclosure
under 26 U.S.C. § 6105(c)(1)(E), arguing that the govern-
ment’s position was based on an erroneous interpretation of
the law because the requested information was not confiden-
tial vis-à-vis Pacific Fisheries.
On June 1, 2006, the district court filed its order denying
Pacific Fisheries’ motion for summary judgment and granting
the government’s motion. The court first concluded that the
IRS’s search for responsive documents was reasonable. Next,
the court concluded that Declaration I was sufficiently thor-
ough to permit Pacific Fisheries to “intelligently advocate
release of the withheld documents.”
Turning to the specific exemptions, the district court
rejected Pacific Fisheries’ arguments regarding segregation of
factual portions of documents withheld pursuant to FOIA
exemption five because Pacific Fisheries had failed to explain
why it believed that some of the redacted materials might con-
tain factual portions that must be segregated and disclosed,
and because the attorney work-product privilege extends to
factual material contained in work product. The court there-
fore concluded that the IRS had sustained its burden of show-
ing that the documents were properly redacted or withheld.
The court also rejected Pacific Fisheries’ tax convention
11304 PACIFIC FISHERIES v. UNITED STATES
information argument. Although the court noted that Pacific
Fisheries “inexplicably” waited until its reply brief to raise the
issue, thus depriving the IRS of the opportunity to respond,
the court rejected the argument on the merits, concluding that
Pacific Fisheries had not created any question of fact over
whether the IRS properly withheld treaty information.
Finally, the district court ordered the government to show
cause why the court should not impose sanctions. The court
opined that the IRS “unreasonably and vexatiously multiplied
proceedings” by refusing to disclose documents for almost
two years and then producing the disclosed documents on the
day that dispositive motions were due. The court ordered the
parties to attempt to negotiate a settlement on the issue of
appropriate compensation for Pacific Fisheries and ordered
the IRS to file a pleading in response to the order to show
cause if the parties were unable to reach an agreement.
On June 22, 2006, Pacific Fisheries filed a notice of settle-
ment with the district court. The government agreed to pay
Pacific Fisheries $17,274.10 as reimbursement for attorneys’
fees. Both parties reserved the right to appeal the district
court’s order with respect to any issue other than sanctions.
That same day, the district court dismissed the case. Pacific
Fisheries timely appealed.
II
The Freedom of Information Act is premised on the theory
that in order for democracy to function properly, citizens must
have access to government information, particularly where
access might be “needed to check against corruption and to
hold the governors accountable to the governed.” John Doe
Agency v. John Doe Corp., 493 U.S. 146, 152 (1989) (quoting
NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 242
(1978)). It thus mandates “full agency disclosure” unless
information is clearly exempted under one of FOIA’s nine
statutory exemptions. Id.PACIFIC FISHERIES v. UNITED STATES 11305
A.
[1] Although FOIA espouses a policy of broad disclosure,
exemption three protects documents “specifically exempted
from disclosure by statute.” 5 U.S.C. § 552(b)(3). At issue
here is 26 U.S.C. § 6105(a), a provision of the Internal Reve-
nue Code prohibiting the disclosure of tax-convention infor-
mation, which is defined as “information exchanged pursuant
to a tax convention which is treated as confidential or secret
under the tax convention,” 26 U.S.C. § 6105(c)(1)(E).
The government withheld 24 documents in their entirety
and 45 documents in part as confidential tax-convention infor-
mation. In its reply brief to the district court, Pacific Fisheries
argued that the government’s position was based on an erro-
neous interpretation of law. The district court rejected this
argument on the merits. On appeal, the government argues
that Pacific Fisheries waived the tax convention information
argument by failing to raise it in its motion for summary judg-
ment or opposition brief.
[2] We decline to hold that Pacific Fisheries waived the tax
convention information argument. Pacific Fisheries received
the disclosed documents and Declaration I on the same day
that dispositive motions were due in the district court. By
waiting until that day to make the disclosure, the government
deprived Pacific Fisheries of the opportunity to review and
challenge the claimed exemptions in its motion for summary
judgment. Although Pacific Fisheries could have raised the
argument in its opposition to the government’s motion for
summary judgment, it was not required to do so. It is enough
that Pacific Fisheries raised the issue in the district court and
that the district court rejected the argument on the merits. See
Glaziers & Glassworkers Local Union No. 767 v. Custom
Auto Glass Distribs., 689 F.2d 1339, 1342 n.1 (9th Cir. 1982).
However, because the government has not briefed the merits
of this issue, we remand so that the district court can consider
11306 PACIFIC FISHERIES v. UNITED STATES
the question in the first instance, after thorough briefing by
the parties.
B.
[3] Under FOIA exemption five, an agency can withhold
“inter-agency or intra-agency memorandums [sic] or letters
which [sic] 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). This exemption “entitles an agency to withhold
. . . ‘documents which a private party could not discover in
litigation with the agency.’ ” Maricopa Audubon Soc’y v. U.S.
Forest Serv., 108 F.3d 1089, 1092 (9th Cir. 1997) (quoting
NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 148 (1975)).
Specifically, it protects documents that would be covered by
the attorney work-product privilege and the executive deliber-
ative process privilege.1 Id. However, the agency must dis-
close “[a]ny reasonably segregable portion of a record . . .
after deletion of the [exempt] portions.” 5 U.S.C. § 552(b).
[4] The attorney work-product and deliberative process
privileges are both rooted in the law of discovery and are
designed (in part) to encourage the author of a document to
be candid. See Coastal States Gas Corp. v. Dep’t of Energy,
617 F.2d 854, 864, 867 (D.C. Cir. 1980). But they differ in
important ways, not the least of which is their treatment of
factual material within documents. Factual portions of docu-
ments covered by the deliberative process privilege must be
segregated and disclosed unless they are “so interwoven with
the deliberative material that [they are] not [segregable].”
United States v. Fernandez, 231 F.3d 1240, 1247 (9th Cir.
2000).
[5] The same is not true for documents withheld pursuant
to the attorney work-product privilege. See id. That privilege
1
It also incorporates the attorney-client privilege, but that privilege is
not at issue in this appeal.
PACIFIC FISHERIES v. UNITED STATES 11307
shields both opinion and factual work product from discovery.
Fed. R. Civ. P. 26(b)(3) (“Ordinarily, a party may not dis-
cover documents and tangible things that are prepared in
anticipation of litigation . . . .”); Hickman v. Taylor, 329 U.S.
495, 510 (1947) (holding that attorney’s notes of client inter-
views are not discoverable absent a showing of “necessity or
justification”); cf. Fed. R. Crim. P. 16(a)(2) (providing that as
a general matter, criminal defendants are not entitled to “dis-
covery or inspection of reports, memoranda, or other internal
government documents made by an attorney for the govern-
ment or other government agent in connection with investigat-
ing or prosecuting the case”). Therefore, if a document is
covered by the attorney work-product privilege, the govern-
ment need not segregate and disclose its factual contents. See
5 U.S.C. § 552(b); Maricopa Audubon Soc’y, 108 F.3d at
1092.
The burden is on the agency to establish that all reasonably
segregable portions of a document have been segregated and
disclosed. 5 U.S.C. § 552(a)(4)(B), (b). “Courts must apply
that burden with an awareness that the plaintiff, who does not
have access to the withheld materials, is at a distinct disad-
vantage in attempting to controvert the agency’s claims.”
Maricopa Audubon Soc’y, 108 F.3d at 1092 (internal quota-
tion omitted). The agency can meet its burden by offering an
affidavit with reasonably detailed descriptions of the withheld
portions of the documents and alleging facts sufficient to
establish an exemption. Id.; see also Wiener v. FBI, 943 F.2d
972, 979 (9th Cir. 1991) (holding that the FBI’s explanation
was not sufficiently specific when it “provide[d] no informa-
tion about particular documents and portions of documents
that might be useful in contesting nondisclosure”). The affida-
vits must not be conclusory. Church of Scientology of Cal. v.
U.S. Dep’t of the Army, 611 F.2d 738, 742 (9th Cir. 1979).
Rather they should disclose “as much information as possible
without thwarting the claimed exemption’s purpose.” Wiener,
943 F.2d at 979 (citation omitted).
11308 PACIFIC FISHERIES v. UNITED STATES
We employ a two-part test in reviewing a district court
order granting summary judgment in a FOIA case. Lion Rai-
sins v. U.S. Dep’t of Agric., 354 F.3d 1072, 1078 (9th Cir.
2004). First, we determine “whether the district court had an
adequate factual basis for its decision.” Id. Whether a particu-
lar set of documents gives the court an adequate factual basis
for its decision is a question of law that we review de novo.
Id. If we determine that an adequate factual basis exists to
support the district court’s decision, we review the district
court’s conclusions under either the clearly erroneous or de
novo standard of review, depending on whether the district
court’s conclusions are primarily factual or legal. See id.The government withheld 108 documents in their entirety
and 26 documents in part claiming that they were protected by
either the deliberative process privilege, the attorney work-
product privilege, or both. In the district court, Pacific Fish-
eries challenged the government’s failure to segregate and
disclose factual materials in documents withheld pursuant to
the deliberative process privilege. In response, the govern-
ment filed Declaration II, stating that “[i]n asserting the delib-
erative process privilege, [Newsome] attempted to make all
reasonably segregable non-exempt portions of documents
available to plaintiff,” but noting that many documents were
withheld under both the deliberative process privilege and the
attorney work-product privilege, the latter of which covers
factual material as well as opinions. The district court granted
summary judgment to the government because Pacific Fish-
eries had failed to explain why it believed that the government
might have improperly redacted factual material and, more-
over, the attorney work product privilege extends to factual
materials contained in work product. On appeal, Pacific Fish-
eries argues that the district court improperly shifted the bur-
den of proof from the government to Pacific Fisheries and that
factual portions of documents are not exempt from disclosure.
Pacific Fisheries further argues that the district court erred by
not conducting in camera review of the redacted documents.
PACIFIC FISHERIES v. UNITED STATES 11309
[6] We interpret Pacific Fisheries’ first argument as a chal-
lenge to the sufficiency of the factual record on which the dis-
trict court based its decision. We conclude that the record was
insufficient because it did not provide Pacific Fisheries or the
district court with specific enough information to determine
whether the IRS had properly segregated and disclosed factual
portions of those documents that the IRS claimed were
exempt under the deliberative process privilege but not the
attorney work-product privilege. We have identified five
pages of responsive documents that meet this description.2
Although Declaration II states that Newsome attempted to
segregate all factual portions of these documents, that state-
ment is too conclusory to meet the agency’s burden. Given
the inadequacy of the factual record, the district court erred in
granting the IRS’s motion for summary judgment on this
point.
[7] On remand the district court must make specific find-
ings as to whether factual information has been properly seg-
regated and disclosed in all documents or portions of
documents that the IRS claims are exempt from disclosure
under the deliberative process privilege but not the attorney
work-product privilege. See Church of Scientology of Cal.,
611 F.2d at 744. In order to assist the district court, the IRS
should submit affidavits describing in more detail the with-
2
We identified pages 59, 138, 143, 193, and 199. On remand, however,
Pacific Fisheries may identify additional documents. We understand that
the IRS claimed that each of the documents we identified was also exempt
in part because they contained either tax-convention information or confi-
dential information regarding a third party. This does not alter our conclu-
sion that the agency has failed to meet its burden. Given that we have
ordered the district court to consider Pacific Fisheries’ tax convention
information argument on remand, we currently cannot rely on that claimed
exemption as a basis for determining that the IRS has met its burden. As
for the documents containing confidential third-party information, the
record is insufficient to establish that these documents do not contain dis-
closable factual information that could be reasonably segregated from any
confidential information regarding third parties.
11310 PACIFIC FISHERIES v. UNITED STATES
held portions of these documents so that both the district court
and Pacific Fisheries can evaluate the government’s claims of
exemption. If the government is unable to provide sufficiently
specific affidavits, the district court should review the docu-
ments in camera to determine whether the factual portions
were properly segregated and disclosed. See Harvey’s Wagon
Wheel, Inc. v. NLRB, 550 F.2d 1139, 1143 (9th Cir. 1976)
(noting that in camera review is “appropriate and perhaps
necessary” where there is a factual dispute as to the nature of
the documents withheld).
III
[8] We affirm the district court order in so far as it held that
factual portions of documents withheld pursuant to the attor-
ney work-product privilege need not be segregated and dis-
closed. We reverse the district court order in so far as it held
that the IRS was not required to segregate and disclose factual
portions of documents withheld pursuant to the deliberative
process privilege, as well as the conclusory holding, without
the benefit of thorough briefing by the parties, that the IRS
properly applied the tax convention information exemption.
The order of the district court is vacated and the case is
remanded for further proceedings consistent with this opinion.
Each side shall bear their own costs on appeal.
VACATED AND REMANDED.