Pacific Fisheries Inc. v. United States , 395 F. App'x 438 ( 2010 )

FILED
NOT FOR PUBLICATION SEP 15 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
PACIFIC FISHERIES INC, No. 09-35618
Plaintiff - Appellant, D.C. No. 2:04-cv-02436-JLR
v.
MEMORANDUM*
UNITED STATES OF AMERICA,
Defendant - Appellee.
Appeal from the United States District Court
for the Western District of Washington
Barbara Jacobs Rothstein, District Judge, Presiding
Argued and Submitted August 31, 2010
Seattle, Washington
Before: HAWKINS, McKEOWN, and BEA, Circuit Judges.
Pacific Fisheries, Inc. (“Pacific Fisheries”) seeks documents that the United
States Internal Revenue Service (“IRS”) provided to the Russian government
pursuant to the Convention between the United States of America and the Russian
Federation for the Avoidance of Double Taxation and the Prevention of Fiscal
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Evasion with respect to Taxes on Income and Capital (“Tax Convention”) to aid in
its tax investigation of Konstantin Voloshenko, an employee of Pacific Fisheries.
Pursuant to Russia’s request, the IRS issued third-party summonses that later
proved to be defective. Pacific Fisheries submitted a request under the Freedom of
Information Act (“FOIA”) to obtain the documents used as the basis for the
summonses and subsequently filed this suit to compel further disclosure. On
remand from this court, the district court granted summary judgment to the IRS
after finding that the IRS had properly withheld documents pursuant to FOIA
Exemption 3, 5 U.S.C. § 522(b)(3), in conjunction with Internal Revenue Code, 26
U.S.C. § 6103 and § 6105.
We apply a two-step review of a district court’s grant of summary judgment
in FOIA cases. First, we “determine[] under a de novo standard whether an
adequate factual basis exists to support the district court’s decisions.” Lane v.
Dep’t of Interior, 523 F.3d 1128, 1135 (9th Cir. 2008) (citations omitted). If we
determine that “an adequate factual basis exists, then the district court’s
conclusions of fact are reviewed for clear error, while legal rulings, including its
decision that a particular exemption applies, are reviewed de novo.” Id.
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I.
The IRS “bears the burden of proving it may withhold documents under a
FOIA exemption.” See Milner v. U.S. Dep’t of the Navy, 575 F.3d 959, 963 (9th
Cir. 2009) (citing 5 U.S.C. § 552(a)(4)(B)). Pacific Fisheries contends that the IRS
provided “no basis to find disclosure would impair federal tax administration,” and
only provided “speculative concerns.” However, together, the declaration from
Helene Newsome, attorney in the Office of Chief Counsel, and the supplemental
declaration from Douglas O’Donnell, the IRS Director of Treaty Administration
and International Coordination in the Large and Mid-Size Business Division of the
IRS, provided the district court an adequate factual basis from which it could
decide whether disclosure would seriously impair federal tax administration. “If
the affidavits contain reasonably detailed descriptions of the documents and allege
facts sufficient to establish an exemption, ‘the district court need look no further.’”
Lewis v. IRS, 823 F.2d 375, 378 (9th Cir.1987) (quoting Church of Scientology of
Calif. v. Dep’t of the Army, 611 F.2d 738, 742 (9th Cir.1979)).
Upon determining that the district court had an adequate factual basis, we
then review the district court’s conclusions that disclosure would seriously impair
federal tax administration under either a de novo or clearly erroneous standard of
review, depending on whether the district court’s conclusions were primarily legal
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or factual. Lane, 523 F.3d at 1135. Here, clear error review is appropriate. See
Long v. IRS, 825 F.2d 225, 228 (9th Cir. 1987), vacated and remanded on other
grounds, 487 U.S. 1201 (1988).
“In evaluating a claim for exemption, a district court must accord substantial
weight to [agency] affidavits, provided the justifications for nondisclosure are not
controverted by contrary evidence in the record or by evidence of [agency] bad
faith.” Minier v. CIA, 88 F.3d 796, 800 (9th Cir. 1996) (citation and internal
quotations omitted). O’Donnell’s supplemental declaration, provides the specific
reasons why federal tax administration would be impaired, including, among other
things, harm to working relations between the United States and Russia and the
chilling of Russia’s future cooperation in exchange-of-information assistance
requests in U.S. tax cases, thereby “interfering with the administration of U.S. civil
and criminal tax investigations.” Pacific Fisheries did not submit any evidence of
bad faith on the part of the IRS or contrary evidence to any statements in
O’Donnell’s declarations.
The district court’s findings are not clearly erroneous, and we affirm the
court’s grant of summary judgment with regard to the disclosure of documents
under 26 U.S.C. § 6103.
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II.
Pacific Fisheries argues that even if the government’s claim of tax
impairment is upheld, at a minimum, it should be allowed access to the documents
the IRS provided to the Russian government. The district court determined that
“tax convention information” under § 6105 is “broad enough to cover information
relating to and reflecting on information it received from Russia.” This is a legal
determination subject to de novo review. Lane, 523 F.3d at 1135.
“[T]ax convention information” is defined in the statute 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). Article 25 of the Tax
Convention provides that “[a]ny information received by a Contracting State shall
be treated as confidential in the same manner as information obtained under the
domestic laws of that State.”
As the district court held, the plain language of the statute and Tax
Convention covers information, whether that information is contained in
documents sent by Russia or documents sent by the United States to Russia.
According to Newsome’s declaration, which categorizes and discusses all of the
documents at issue in the lawsuit by FOIA exemption, the only documents
provided by the IRS to the Russian Competent Authority were provided in part and
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withheld in part so as not to disclose “information that is reflected in the Russian
treaty request . . . concerning the investigation of a Russian individual.”
The confidentiality under the Tax Convention attaches to the information.
Pacific Fisheries cites no contrary authority. We affirm the district court’s grant of
summary judgment on this claim as well.
AFFIRMED.
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