Smart-Tek Services, Inc. v. Irs ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS NOV 5 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
SMART-TEK SERVICES, INC., No. 18-56560
Plaintiff-Appellant, D.C. No.
3:15-cv-00449-BTM-JMA
v.
UNITED STATES INTERNAL REVENUE MEMORANDUM *
SERVICE,
Defendant-Appellee.
TRUCEPT, INC., FKA Smart Tek No. 18-56562
Solutions, Inc.,
D.C. No.
Plaintiff-Appellant, 3:15-cv-00447-BTM-JMA
v.
UNITED STATES INTERNAL REVENUE
SERVICE,
Defendant-Appellee.
AMERICAN MARINE, LLC, No. 19-55057
Plaintiff-Appellant, D.C. No.
3:15-cv-00455-BTM-LL
v.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
UNITED STATES INTERNAL REVENUE
SERVICE,
Defendant-Appellee.
SMART-TEK AUTOMATED SERVICES, No. 19-55058
INC.,
D.C. No.
Plaintiff-Appellant, 3:15-cv-00453-BTM-LL
v.
UNITED STATES INTERNAL REVENUE
SERVICE,
Defendant-Appellee.
SMART-TEK SERVICE SOLUTIONS No. 19-55059
CORP.,
D.C. No.
Plaintiff-Appellant, 3:15-cv-00452-BTM-LL
v.
UNITED STATES INTERNAL REVENUE
SERVICE,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of California
Barry Ted Moskowitz, District Judge, Presiding
Argued and Submitted July 20, 2020
Pasadena, California
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Before: BEA and BADE, Circuit Judges, and DRAIN,** District Judge.
After Appellee Internal Revenue Service (“IRS”) recorded tax liens against
Appellants Smart-Tek Services, Inc., Trucept, Inc., American Marine, LLC, Smart-
Tek Automated Services Inc., and Smart-Tek Service Solutions Corp. (collectively,
the “Companies”) based on its determination that the Companies were alter egos of
other entities with delinquent payroll tax liabilities, the Companies sent requests to
the IRS seeking each entity’s employment, corporate, and partnership tax returns
under the Freedom of Information Act, 5 U.S.C. § 552 (“FOIA”). In this
consolidated appeal, the Companies challenge the district court’s orders granting
summary judgment in favor of the IRS and finding that the IRS conducted an
adequate search responsive to the Companies’ FOIA requests and that the IRS
properly withheld the alleged alter egos’ taxpayer return information under FOIA
Exemption 3 and 26 U.S.C. § 6103(a). We have jurisdiction pursuant to 28 U.S.C.
§ 1291.
We review de novo the district court’s summary judgment ruling. Id. To
merit summary judgment in a FOIA case, the agency must:
demonstrate that it has conducted a search reasonably calculated to
uncover all relevant documents. Further, the issue to be resolved is
not whether there might exist any other documents possibly
responsive to the request, but rather whether the search for those
**
The Honorable Gershwin A. Drain, United States District Judge for the
Eastern District of Michigan, sitting by designation.
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documents was adequate. The adequacy of the search, in turn, is
judged by a standard of reasonableness and depends, not surprisingly,
upon the facts of each case. In demonstrating the adequacy of the
search, the agency may rely upon reasonably detailed, nonconclusory
affidavits submitted in good faith.
Zemansky v. U.S. EPA, 767 F.2d 569, 571 (9th Cir. 1985) (internal quotation marks
omitted) (quoting Weisberg v. U.S. Dep’t of Justice, 745 F.2d 1476, 1485 (D.C.
Cir. 1984)). “Agency affidavits are accorded a presumption of good faith, which
cannot be rebutted by purely speculative claims about the existence and
discoverability of other documents.” SafeCard Servs., Inc. v. SEC, 926 F.2d 1197,
1200 (D.C. Cir. 1991) (internal quotation marks and citation omitted).
Here, the IRS demonstrated that it “conducted a search reasonably calculated
to uncover all relevant documents” in response to the Companies’ FOIA requests.
Hamdan v. U.S. Dep’t of Justice, 797 F.3d 759, 770–72 (9th Cir. 2015) (quoting
Zemansky, 767 F.2d at 571). IRS disclosure specialists scanned all documents—
from both the Companies and their alleged alter egos—into electronic format and
reviewed each page of each document, looking for any documents with the
Companies’ identifying information. In all, the IRS reviewed more than 140,000
pages. If a document contained the return information of one of the Companies, it
was marked responsive. The IRS created an index and catalogued which pages
were responsive and which pages were non-responsive to ensure that each page in
all sixty-five boxes was reviewed. IRS attorneys then reviewed the documents and
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determined whether a FOIA exemption applied. The Companies “were entitled to
a reasonable search” for responsive records “[a]nd a reasonable search is what they
got.” Id. at 772. The district court correctly determined that the IRS complied
with its obligations to search for relevant records.
Notwithstanding the reasonable search, the Companies argue that the IRS
improperly withheld documents containing information about their alleged alter
egos. They argue that once the IRS collected the records of the Companies and
their alleged alter egos and commingled them into one file, everything in that file
became part of the Companies’ administrative file to which they were entitled.
Thus, the Companies argue, it was improper for the IRS to withhold records
containing their alleged alter egos’ return information merely because those
records did not contain the Companies’ return information.
But the Companies’ argument misses the simple point: they did not request
this information in their FOIA requests. The Companies had the duty to
“reasonably describe[]” the records they sought. 5 U.S.C. § 552(a)(3)(A). This
requirement is generally satisfied if the request provides “the name, taxpayer
identification number (e.g., social security number or employer identification
number), subject matter, location, and years at issue, of the requested records.”
Treas. Reg. § 601.702(c)(5)(i). However, each of the Companies submitted a
request for its own employment, corporate, and partnership tax returns and listed
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only its own specific entity’s name and taxpayer identification number; none of the
Companies listed the names or taxpayer identification numbers of their alleged
alter egos. Because the Companies seek documents that are outside the scope of
their FOIA requests, the Companies are not entitled to those documents through
this particular process. Consequently, we need not reach the issue of whether the
IRS properly withheld these documents pursuant to FOIA Exemption 3 and 26
U.S.C. § 6103(a). We affirm the district court’s orders granting summary
judgment.
AFFIRMED.
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