Opinion
16017-21 15631-22
10-29-2024
AMGEN INC. & SUBSIDIARIES, ET AL., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Zachary S. Fried, Special Trial Judge
By Order dated September 4, 2024, and in connection with petitioner's Motion to Compel Responses to Requests Regarding Non-Core Issues, filed July 8, 2024 (motion to compel), the undersigned was assigned to conduct an in camera review of documents in order to determine whether the documents are protected from disclosure by the deliberative process privilege as claimed by respondent. After careful review of the documents, and taking into account the materials submitted by the parties in connection with petitioner's motion and the in camera review, the Court is satisfied that the applicability of the privilege to each document under review can be established without the need for hearing.
The submissions of the parties show that they are well informed of the principles that govern the scope of the deliberative process privilege and its underlying rationale. Consequently, we see no reason to burden this Order with a lengthy discussion on those points. Suffice it to note that in general and as applicable in this Court, the privilege is intended to protect from disclosure materials generated by respondent and/or his agents that are "predecisional" and "deliberative". See P.T. & L. Constr. Co., Inc. v. Commissioner, 63 T.C. 404 (1974). We also note that the burden of establishing the applicability of the privilege rests with respondent, see Rosenfeld v. Commissioner, 82 T.C. 105, 112 (1984), and the privilege is qualified and can be overcome upon a sufficient showing of need by the taxpayer, see P.T. & L. Constr. Co., Inc., 63 T.C. at 409-411.
According to respondent, all of the 75 documents or portions of documents submitted for in camera review, identified on the privilege log attached as Exhibit 8 to petitioner's above-referenced motion to compel, are protected from disclosure by the privilege. According to petitioner, none of the documents are so protected.
Petitioner challenges respondent's assertion of the privilege on various grounds, including: (1) the privilege is inapplicable because respondent's decision making process is at issue; (2) the privilege was asserted by trial counsel rather than a high level agency official that personally reviewed the documents; (3) respondent has improperly shielded entire documents without segregating the information not protected by the privilege; and (4) even if the privilege applies, petitioner's overwhelming need for the documents outweighs the government's interest in nondisclosure.
As summarized above, we'll briefly address each of petitioner's objections, mindful that the burden of establishing the applicability of the privilege in the first place rests with respondent.
Applicability of the Privilege When Respondent's Decision Making Process is at Issue
The Commissioner has wide discretion to grant or deny consent to a change in accounting method. See, e.g., Capitol Fed. Sav. & Loan Ass'n & Sub. v. Commissioner, 96 T.C. 204, 213 (1991). The Commissioner's refusal to consent to a taxpayer's requested change in accounting method is reviewed under an abuse of discretion standard. See id. Therefore, according to petitioner, the privilege is inapplicable because respondent's decision making process is at issue. However, petitioner has not raised a sufficiently compelling issue with respect to respondent's decision making process nor has petitioner established that respondent's deliberations are central to petitioner's claim. See Montrevil v. Decker, No. 20 CV 264(WFK), 2021 U.S. Dist. LEXIS 267339, at *12 (E.D.N.Y. July 19, 2021). Further, the relevant information relied upon by respondent with respect to the change of accounting method issue is included in the final versions of the drafts withheld from discovery (e.g., the Notice of Proposed Adjustment). That being so, respondent is not precluded from asserting the privilege.
Authority to Raise the Privilege in Matters Before this Court
As best we can tell from the record, the privilege is raised by respondent's docket attorney. Nothing in the record suggests that any official of the Internal Revenue Service (IRS) other than respondent's docket attorney has reviewed any of the documents now before us. According to respondent, the privilege is properly raised by respondent's docket attorney pursuant to a delegation of authority that would allow for such action. See Delegation Order 30-4, Internal Revenue Manual (IRM) 1.2.2.16.4 (Oct. 1, 2009). Nevertheless, in reliance upon authority from other Federal courts, petitioner argues that the decision to raise the privilege must be made not by respondent's docket attorney, but by a sufficiently authorized and ranking executive of the IRS. See, e.g., Montrevil, 2021 U.S. Dist. LEXIS 267339, at *12; In re McKesson, 264 F.R.D. 595, 601 (N.D. Cal. 2009); United States v. City of Los Angeles, No. 11-cv-00974-PSG, 2023 U.S. Dist. LEXIS 152770, at *17 (C.D. Cal. Aug. 28, 2023); Gen. Motors Corp. v. United States, No. 07-14464, 2009 U.S. Dist. LEXIS 121383, at *15 (E.D. Mich. Dec. 23, 2009).
We recognize that different governmental agencies might have varying rules regarding the level of executive input and review that controls the assertion of the deliberative process privilege. We further recognize that other Federal courts might require, by affidavit from an agency executive or otherwise, a specific showing of authority and review before the privilege is recognized. For purposes here, however, we concern ourselves only with the procedures applicable to respondent in matters before this Court, and, in the absence of any showing of abuse, defer to respondent's delegation of authority on the point. That being so, we find that if otherwise applicable, then the privilege may, in this instance, be raised by respondent's docket attorney consistent with the above-cited and published delegation of authority.
Whether Respondent Met the Burden of Establishing the Privilege's Applicability
Next, petitioner argues that "[r]espondent's wholesale refusal to produce responsive documents reflects an improper 'blanket assertion' over" the withheld documents, and that respondent should disclose the non-deliberative information.
Under the circumstances, we are satisfied that the reviewed documents may be protected from disclosure by the privilege because the documents contain "advisory opinions, recommendations, and deliberations comprising part of a process by which . . . [respondent's] decisions . . . are formulated." NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 150 (1975); see P.T. & L. Constr. Co., Inc., 63 T.C. at 409. The information is "predecisional", and publication of the documents (many of which are Appeals Case Memorandum, drafts of respondent's notice of proposed adjustment, drafts of respondent's rebuttal to petitioner's protest, draft information document requests, a draft PowerPoint, draft report transmittals, and emails, including email threads, by and between IRS employees) might have the tendency to dissuade open and frank communications between government officials.
To the extent that non-deliberative information withheld or redacted is included in the reviewed documents, that information is (1) well known to the petitioner; (2) more likely than not elsewhere in the record; and/or (3) bears little, if any, relevance or significance to the issues involved in this case. Accordingly, the objectives of discovery do not require the production of this material. See P.T. & L. Constr. Co., Inc., 63 T.C. at 411-412.
Whether Petitioner's Need for the Documents Outweighs Respondent's Confidentiality Interests
According to petitioner, even if the privilege applies, petitioner's overwhelming need for the documents outweighs the government's interest in nondisclosure. See Rutter v. Commissioner, 81 T.C. 937, 949 (1983). Courts have applied a five-factor balancing test to determine whether the deliberative process privilege should be upheld. Relevant factors for the Court to consider include: (1) the relevance of the evidence sought to be protected; (2) the availability of other evidence; (3) the seriousness of the litigation and the issues involved; (4) the role of the government in the litigation; and (5) the possibility of future timidity by government employees who will be forced to recognize that their secrets are violable. See In re Sealed Case, 121 F.3d 729, 737 (D.C. Cir. 1997); Gen. Motors Corp. v. United States, No. 07-14464, 2009 U.S. Dist. LEXIS 121383, at *15-16 (E.D. Mich. Dec. 23, 2009) (citing Dairyland Power Co-op v. United States, 77 Fed.Cl. 330, 338 (Fed. Cl. 2007)).
We reviewed the withheld and redacted documents to determine whether, on balance, justice requires disclosure. As it currently stands, we are not persuaded by petitioner's argument that its needs for any of the reviewed documents, whether specifically identified or not, otherwise protected from disclosure by the privilege outweigh the reasons for that protection. For what it is worth, we note that our in camera review has not revealed any information that in and of itself would tend to make petitioner's assumed burden of proof more or less difficult.
In closing we note that in ruling on the applicability of the privilege to the documents under review, we have taken into account the controlling principles that govern the application of the privilege, whether or not the principle was expressly discussed here, the information provided by the parties in connection with petitioner's motion, and if relevant, other materials contained in the record.
In so doing, it is
ORDERED that petitioner's Motion to Compel Responses to Requests Regarding Non-Core Issues, filed July 8, 2024, is denied.