Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-05060/USCOURTS-caDC-08-05060-0/pdf.json

Nature of Suit Code: 895
Nature of Suit: Freedom of Information Act of 1974
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 4, 2008 Decided March 6, 2009

No. 08-5060

PAULINE STONEHILL, CO-EXECUTOR AND CO-SPECIAL

ADMINISTRATOR OF THE ESTATE OF HARRY S. STONEHILL,

APPELLANT

v.

INTERNAL REVENUE SERVICE,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 06cv00599)

Robert E. Heggestad argued the cause and filed the briefs

for appellant.

Jonathan S. Cohen, Attorney, U.S. Department of Justice,

argued the cause for appellee. With him on the brief were

Nathan J. Hochman, Assistant Attorney General, Jeffrey A.

Taylor, U.S. Attorney, and Bethany B. Hauser, Attorney. John

A. Dudeck Jr., Attorney, entered an appearance.

USCA Case #08-5060 Document #1168872 Filed: 03/06/2009 Page 1 of 14
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Before: HENDERSON, ROGERS and GRIFFITH, Circuit

Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: The issue in this appeal is whether

an agency may withhold documents under Exemption 5 of the

Freedom of Information Act (“FOIA”), 5 U.S.C. § 552(b)(5),

when it did not invoke the same underlying privilege claims in

an ongoing discovery dispute in a different, non-FOIA case in

which those documents were withheld as irrelevant. Harry S.

Stonehill, through his estate, maintains that the waiver rule

requiring all FOIA exemptions to be raised at the same time in

the original district court FOIA proceedings, see, e.g., Maydak

v. Dep’t of Justice, 218 F.3d 760, 764 (D.C. Cir. 2000), should

be extended to apply to contemporaneous proceedings involving

the same documents and parties and equally applicable

privileges. However, Stonehill’s suggestion to extend the FOIA

waiver rule to discovery proceedings overlooks critical

differences between the two information-gathering regimes such

that the extension would not necessarily advance the policy

goals underlying the waiver rule. Accordingly, we affirm the

grant of summary judgment to the IRS. 

I. 

This FOIA case is intertwined with Stonehill’s effort to

obtain vacation of a judgment foreclosing tax liens on his

property. He seeks through civil discovery and FOIA to obtain

documents that would show that United States law enforcement

officials, in resisting a motion to suppress evidence,

misrepresented the United States’ involvement in a 1962 raid on

Stonehill’s offices in the Philippines by Philippine law

enforcement authorities. See United States v. Stonehill, 53 F.

App’x 470, 471 (9th Cir. 2002) (unpublished) (“Stonehill III”);

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United States v. Stonehill, 702 F.2d 1288, 1292 (9th Cir. 1968)

(“Stonehill II”); Stonehill v. United States, 405 F.2d 738, 743-46

(9th Cir. 1968) (“Stonehill I”); Appellant’s Br. at 7-8. The Ninth

Circuit has suggested that suppression of the seized evidence,

consisting of thirty-five truckloads of documents, would have

been required under the Fourth Amendment if United States

agents had conducted the raids. Stonehill I, 405 F.2d at 743.

Stonehill initially filed a FOIA request with the IRS on July

10, 1998, on behalf of himself and his business associate Robert

P. Brooks. He requested all records pertaining to Stonehill and

Brooks, including particular documents regarding the early

1960s investigation of their Philippines businesses. The IRS

responded that only five responsive documents could be found

after “thorough research.” Letter from Stephen H. Flesner,

Disclosure Officer, Internal Revenue Service, to Robert E.

Heggestad, Heggestad & Weiss, PC (undated). On January 5,

1999, Stonehill requested additional information regarding IRS

materials referenced in documents he had obtained from the

State Department. The IRS responded that the documents could

not be located and suggested that the Justice Department might

be able to provide more helpful documents. Stonehill filed an

administrative appeal and the IRS repeated that the documents

could not be located.

On October 2, 2000, based on documents he had received

from other agencies in response to his FOIA requests, Stonehill

filed a motion pursuant to Federal Rule of Civil Procedure 60(b)

in the Central District of California to vacate the tax judgment

on the ground it was procured through a fraud on the court. He

also renewed his FOIA request with the IRS on March 15, 2001.

The IRS initially stayed review, responding only on October 16,

2001, after the district court had denied Stonehill’s Rule 60(b)

motion on August 28, 2001. The IRS informed Stonehill that

approximately 90 boxes containing responsive documents had

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1

 The case is lodged in the United States District Court for the

District of Oregon. 

been located. On November 26, 2002, the IRS issued a final

response to Stonehill’s FOIA request, stating that some

documents had been provided to him and others were being

withheld or redacted pursuant to FOIA Exemptions 3, 5, 7(C),

and 7(D). On June 17, 2003, the IRS General Appeals office

issued a partial determination of Stonehill’s appeal, affirming

the disclosure officer’s decision that certain exemptions applied

while reserving judgment on certain documents withheld under

Exemption 3 that were not yet available for review. On

September 5, 2003, that office advised Stonehill that it was

suspending review of the remaining Exemption 3 documents

while the discovery litigation was ongoing in the district court

following a remand by the Ninth Circuit, see Stonehill III, 53 F.

App’x 470; the office noted that if Stonehill prevailed in the

district court, his FOIA appeal would appear to be rendered

moot.

On December 20, 2005, the California district court granted

Stonehill’s motion to compel production of documents and

rejected the IRS’s claims that the attorney-client privilege and

work product doctrine barred production. The district court

ordered the government to “turn over documents regarding the

1966 Tax Division investigation into the government’s role in

the 1962 raids.” United States v. Stonehill, No. CV 65-127-PA,

at 8 (C.D. Cal. Dec. 20, 2005) (“Stonehill IV”).1

 The district

court also denied the motion to compel production of documents

involving third-party taxpayer information and some treaty

obligation information, as well as some confidential informant

information redacted by the Central Intelligence Agency. Id. at

4-8. Although the IRS produced some documents pursuant to 

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the discovery order, those documents were redacted on

relevance grounds; other documents were withheld as irrelevant.

On March 31, 2006, Stonehill filed his FOIA complaint in

the district court here, seeking production of IRS records from

the Stonehill files regarding his former attorney. In an amended

complaint he requested additional documents responsive to his

1998 FOIA request. The IRS produced a Vaughn index,

invoking Exemptions 3, 5, 6, and 7(C), and moved for summary

judgment. In opposing summary judgment, Stonehill argued the

IRS was collaterally estopped from raising the same privileges

in the FOIA litigation as it raised in the Rule 60 proceeding, and

was barred from invoking for the first time the deliberative

process privilege as to 172 documents, as the IRS had not

opposed disclosure of any documents based on the deliberative

process privilege in the Rule 60 discovery proceeding. He

further argued that the IRS could not raise the attorney work

product doctrine as to 681 documents, or 26 U.S.C. § 6103,

protecting confidentiality of tax information, as a justification

for withholding 157 documents under FOIA Exemption 3,

because the IRS had not asserted those grounds for

nondisclosure with respect to those particular documents in the

Rule 60 proceeding. 

The D.C. district court agreed that the IRS was collaterally

estopped with respect to documents for which it had claimed the

same justifications for nondisclosure in discovery. The

California district court’s December 2005 decision had applied

the same criteria in assessing the claimed privileges as apply

under Exemption 5 and the issue had been fully and fairly

litigated then. However, the district court rejected Stonehill’s

waiver argument with regard to new privilege claims and

granted summary judgment for the IRS. 

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II.

On appeal, Stonehill urges adoption of a rule that where

parallel FOIA and non-FOIA proceedings are pending

contemporaneously involving the same documents, the same

reviewing body or officer, and the same, equally applicable

privileges, failure to raise a privilege in one proceeding will

constitute a waiver in the parallel proceeding, absent compelling

circumstances. See Appellant’s Br. at 27. Alternatively, he

urges this court to hold that waivers occurred in his case because

by not raising the deliberative process and attorney work

product privileges in the parallel discovery proceeding, the IRS

intentionally relinquished its right to assert them in this FOIA

proceeding. Specifically, he points out that despite earlier

opportunities to invoke privileges, the IRS delayed its review

and production of documents and conducted unnecessary

duplicative document reviews in response to his FOIA request,

with the result that his effort to gain access to information has

been unduly delayed. Now, over a decade after his initial FOIA

request, he is confronted with newly invoked FOIA exemptions

involving privileges that could have been asserted earlier in

resisting discovery. 

The requirement for an agency, as a general rule, to invoke

all FOIA exemptions “‘at the same time, in the original district

court proceedings,’” August v. FBI, 328 F.3d 697, 699 (D.C. Cir.

2003) (quoting Maydak v. Dep’t of Justice, 218 F.3d 760, 764-

65 (D.C. Cir. 2000)), is premised on two policy goals: (1) “the

interest in judicial finality and economy, which has ‘special

force in the FOIA context, because the statutory goals —

efficient, prompt, and full disclosure of information — can be

frustrated by agency actions that operate to delay the ultimate

resolution of the disclosure request,’” id. (quoting Senate of

Puerto Rico v. Dep’t of Justice, 823 F.2d 574, 580 (D.C. Cir.

1987)), and (2) preventing the government from playing cat and

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mouse by “withholding its most powerful cannon until after the

[d]istrict [c]ourt has decided the case and then springing it on

surprised opponents and the judge,” id. Basic “fairness to

parties seeking disclosure ordinarily requires that they be

afforded a full and concentrated opportunity to challenge and

test comprehensively the agency’s evidence regarding all

claimed exemptions,” Senate of Puerto Rico, 823 F.2d at 580.

The FOIA disclosure regime, however, is distinct from civil

discovery. See NLRB v. Sears, Roebuck & Co., 421 U.S. 132,

144 n.10 (1975). Different considerations determine the

outcome of efforts to obtain disclosure: relevance, need, and

applicable privileges – bounded by the district court’s exercise

of discretion – in the discovery regime, see FED. R. CIV. P.

26(b)(1), statutory exceptions reflecting a congressional

balancing of interests in FOIA. See North v. Walsh, 881 F.2d

1088, 1095 (D.C. Cir. 1989). Because these considerations

present different issues, that a document is exempt from

discovery does not necessarily mean it will be exempt from

disclosure under FOIA. Id.; cf. 18 CHARLES ALLEN WRIGHT,

ARTHUR R.MILLER &EDWARD H.COOPER,FEDERAL PRACTICE

AND PROCEDURE § 4417, at 449 (2d ed. 2002). Additionally,

while information disclosed during discovery is limited to the

parties and can be subject to protective orders against further

disclosure, when a document must be disclosed under FOIA, it

must be disclosed to the general public and the identity of the

requester is irrelevant to whether disclosure is required. See

FTC v. Grolier Inc., 462 U.S. 19, 28 (1983); Loving v. Dep’t of

Defense, 550 F.3d 32, 39 (D.C. Cir. 2008); North, 881 F.2d at

1095-96. Conversely, even as to FOIA Exemption 5, which

incorporates the privileges the government typically enjoys in

pretrial discovery, see Grolier, 462 U.S. at 28, not all documents

available in discovery are also available pursuant to FOIA.

Exemption 5 “protects only those memoranda which would not

normally be discoverable in civil litigation against an agency,”

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Ryan v. Dep’t of Justice, 617 F.2d 781, 790 (D.C. Cir. 1980),

whereas case-specific exceptions can sometimes permit

discovery of otherwise privileged material. See Grolier, 462

U.S. at 28 (“It is not difficult to imagine litigation in which one

party’s need for otherwise privileged documents would be

sufficient to override the privilege but that does not remove the

documents from the category of the normally privileged.”). The

fact, then, that certain FOIA exemptions overlap with grounds

for nondisclosure in discovery does not require extending the

equitable FOIA waiver rule even when the discovery

proceedings and FOIA litigation are contemporaneous and

involve the same documents and parties and equally applicable

privileges.

Given the distinct nature of these two information-gathering

regimes, extension of the FOIA waiver rule to discovery

proceedings would not advance the policy interest in finality and

judicial economy, which is based on FOIA’s goal of prompt

disclosure of information. See, e.g., Senate of Puerto Rico, 823

F.2d at 580. Stonehill maintains that allowing the IRS to raise

FOIA exemptions for the first time in this FOIA litigation has

resulted in unnecessary delay and wasted judicial resources. In

part, he offers, this is because the IRS undertook a separate

review of the documents for the FOIA proceeding even though

the IRS had previously reviewed the documents in response to

his discovery requests. However, for two principal reasons we

conclude Stonehill has not shown that extension of the FOIA

waiver rule would eliminate an agency’s need to conduct a

separate FOIA review or otherwise avoid necessary delays. 

First, although the grounds for nondisclosure underlying

FOIA Exemptions 3 and 5 may be invoked in civil discovery,

some FOIA exemptions are not applicable to discovery. Even

after reviewing documents for privileges in response to a

discovery request, an agency could reasonably undertake a

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separate review to determine whether other exemptions are

applicable. Likewise, even those privileges that are available

both in discovery and in the FOIA context may not be equally

applicable in the two proceedings. Therefore, an agency could

reasonably reconsider its invocation, or lack thereof, of certain

privileges before making determinations in the FOIA litigation.

That an agency ultimately may conclude that the privileges are

equally applicable would not necessarily mean that it could

know this in advance of a separate FOIA-specific review.

Similarly, as the IRS did here, an agency may need to assess the

applicability of any unwaivable statutory exemptions, like 26

U.S.C. § 6103, which protects confidentiality of tax information.

See August, 328 F.3d at 701.

Second, the stakes of disclosure are different in the two

regimes, justifying and arguably necessitating separate reviews

with distinct considerations in mind during each. Documents

released in a FOIA action must be made available to the public

as a whole, North, 881 F.2d at 1096, and, unlike in civil

discovery, see FED. R. CIV. P. 37, there is no opportunity to

obtain a protective order. In that respect, the stakes of

disclosure for the agency are greater in the FOIA context. The

stakes in the discovery context are also high insofar as there is

a risk of a production order if a privilege is not invoked and

because of the generally non-appealable nature of discovery

orders, see In re England, 375 F.3d 1169, 1174 (D.C. Cir. 2004).

However the agency may prioritize these considerations, the

motivating concerns are distinct in the two contexts. 

Extending the waiver rule, then, would not necessarily

prevent separate reviews of documents for parallel proceedings

involving the same documents and privileges that turn out to be

equally applicable. Moreover, even to the extent a waiver rule

might eliminate the need for a separate review in response to a

FOIA request, the rule itself could result in delay in judicial

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resolution of the discovery issues while the agency, anticipating

the possibility of future FOIA litigation, prepared a Vaughn

index or developed reasons for objecting to release in a later

FOIA case even where those reasons would not be raised in the

discovery proceeding; the agency would need to assess all

possible privileges even after it determined that the documents

were irrelevant to the non-FOIA proceedings. Cf. North, 881

F.2d at 1099. 

Neither would extension of the FOIA waiver rule to

discovery proceedings necessarily advance the second goal of

promoting government fairness by requiring the government, in

general, to raise all its exemptions at the same time, so that

neither the parties nor the court are surprised by assertions of

new exemptions, and so that parties have concentrated

opportunities to challenge agency attempts to withhold

documents. See Senate of Puerto Rico, 823 F.2d at 580.

Stonehill’s reasons for extension of the FOIA waiver rule are

stronger here. He contends he has been deprived of “a fair and

concentrated opportunity to challenge the evidentiary basis for

hundreds of IRS exemptions that have changed in the FOIA

administrative proceeding, the Rule 60(b) proceeding and again

in the FOIA litigation.” Appellant’s Br. at 36. A change of

agency tactics in invoking privileges could indeed be evidence

of the cat-and-mouse game of which this court has been “wary,”

August, 328 F.3d at 697. 

The IRS’s decision to invoke additional privileges in the

FOIA litigation is hardly inconsistent with the different stakes

involved, as distinct from reflecting a “sinister,” August, 328

F.3d at 700, or improper motivation. For example, the IRS was

under no obligation to invoke privileges for documents it had

determined were irrelevant under Rule 26(b)(1) in the Rule

60(b) proceeding whereas it had the prerogative to invoke

privileges for those documents in the FOIA litigation, where

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relevance was not a bar to production. More significantly, the

incentives for prompt agency review and production in response

to document requests already exist. In the FOIA context, the

waiver rule seeks to eliminate further litigation about newly

asserted FOIA exemptions, once an exemption has been asserted

and the court has rejected it. See Maydak, 218 F.3d at 764;

Ryan, 617 F.2d at 792; Jordan v. Dep’t of Justice, 591 F.2d 753,

779-80 (D.C. Cir. 1978). Absent such a rule, the IRS offers, an

agency “might be tempted to litigate its claimed FOIA

exemptions one by one for strategic reasons, see Ryan, 617 F.2d

at 792, or to delay a careful examination of documents until its

first claimed exemptions have been rejected, see Jordan, 591

F.2d at 780.” Appellee’s Br. at 30-31. As noted, in a discovery

proceeding there are potentially adverse consequences if the

agency fails to examine the documents and to raise all its

defenses: The district court may order production, see FED. R.

CIV. P. 37, and the agency could not rely on immediate appeal.

On appeal, the agency would encounter the prudential rule

against raising new arguments, see Jordan, 591 F.2d at 780, and

could not rely, as a matter of course, on the opportunity to

invoke additional defenses to production upon remand.

Given the existing motivations for an agency to be

forthright in asserting its justifications for nondisclosure during

discovery, extending the FOIA waiver rule to those proceedings

would at best have a marginal benefit in terms of ensuring

government fairness. Undue delays and duplicative agency

conduct can be prevented through the exercise of district court

discretion, cf. Laborers’ Int’l Union of N. Am. v. Dep’t of

Justice, 772 F.2d 919, 920-21 (D.C. Cir. 1984), advancing many

of the objectives that Stonehill seeks from extension of the

waiver rule. For example, after succeeding in his appeal to the

Ninth Circuit, Stonehill obtained a broad discovery production

order from the district court in December 2005, Stonehill IV, No.

CV 65-127-PA, at 8, 17, rejecting most of the IRS’s privilege

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objections. In the FOIA litigation, too, the district court ruled

that collateral estoppel barred the IRS from invoking the same

privileges for the same documents as in the Rule 60 proceeding

as the issues had been decided under the same standards in the

December 2005 order.

Although Stonehill was confronted in the FOIA action with

new objections to disclosure long after he made his FOIA

request, even the particular circumstances of his case do not

show that extending the waiver rule to discovery would advance

the relevant policy goals, much less that there was a waiver by

the IRS. Assuming the IRS’s stay of his administrative FOIA

appeal pending resolution of the discovery proceedings was

unfair to the extent it postponed resolution of asserted FOIA

exemptions, the stay also arguably facilitated the efficient use of

judicial resources by avoiding delays in the discovery

proceeding attendant to agency reviews influenced by FOIA

demands. The district court’s application of estoppel principles

in the FOIA action avoided further delay and conserved judicial

resources regarding privileges that had already been litigated

and decided. In any event, the stay alone does not show an

improper motivation by the IRS. Cf. Boyd v. Criminal Division

of the U.S. Dep’t of Justice, 475 F.3d 381, 391 (D.C. Cir. 2007);

Iturralde v. Comptroller of Currency, 315 F.3d 311, 314-15

(D.C. Cir. 2003). That the same person reviewed the requested

documents in both proceedings lends no support for extension

of the FOIA waiver rule, because the likely effect of a ruling on

that basis would be for agencies to use different reviewers in

different proceedings, hardly consistent with the goals of

efficiency and prompt disclosure. That the IRS did not assert

the deliberative process privilege during the administrative

appeal is not inconsistent with the waiver rule, which requires

only that all privileges be asserted in the original district court

proceedings and even allows for exceptions in extraordinary

circumstances. See August, 328 F.3d at 699. The IRS also is not

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responsible for all of the delay in this case. Cf. Weisberg v.

Dep’t of Justice, 745 F.2d 1476, 1498 (D.C. Cir. 1984).

Stonehill submitted his FOIA request in 1998, but did not file

his FOIA action until 2006, more than five years after he filed

the Rule 60(b) motion. Given that Stonehill adopted a litigation

strategy based on using two separate regimes for obtaining the

desired documents, Stonehill’s complaints about delay cannot be

totally divorced from the choices he made. 

Finally, Stonehill’s proposal to extend the FOIA waiver rule

to discovery proceedings fails to take into account that the

waiver rule is not rigidly applied. Rather, the court sometimes

excuses apparent waivers based on extraordinary circumstances,

in recognition of the fact that “although FOIA strongly favors

prompt disclosure, its nine enumerated exemptions are designed

to protect those ‘legitimate governmental and private interests’

that might be ‘harmed by release of certain types of

information.’” August, 328 F.3d at 699 (quoting John Doe

Agency v. John Doe Corp., 493 U.S. 146, 152 (1989)); see also

EPA v. Mink, 410 U.S. 73, 80 (1973). Absent evidence of

improper motives for obtaining a tactical advantage, interim

developments including the factual development of a case or

changes in an applicable legal doctrine may warrant allowing an

agency to invoke an exemption for the first time on appeal. Id.

at 700. Implicit in this approach is the acknowledgment that,

given the balance of interests reflected in FOIA, some delays are

inevitable in litigation over the invocation of statutory

exemptions. Here, the several discovery proceedings and

Stonehill’s successful appeal to the Ninth Circuit led to

production requirements that, to some extent, may have affected

the IRS’s approach in resisting discovery and hardly curtailed its

efforts to protect privileges in the FOIA proceeding.

Congress has addressed concerns about delays in civil

proceedings in the Civil Justice Reform Act of 1990, see 28

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U.S.C. §§ 471-73, and district court rules reflect such efforts,

see, e.g., D.D.C. R. 16.3 (pre-trial conference requirement,

largely mirroring D.D.C. Civil Justice Expense and Delay

Reduction Plan, eff. Mar. 1, 1994). But delays attendant to

information-gathering regimes may often simply be the result of

additional searches for documents as well as additional

document reviews. Some delay may be reduced, as occurred

here, through the district court’s exercise of discretion to

facilitate production of documents and to eliminate needless

relitigation through application of equitable estoppel principles.

Although the IRS did not produce 90 boxes of documents until

after the California district court denied Stonehill’s Rule 60(b)

motion, and then stayed the administrative appeal pending the

district court’s discovery decision on remand, Stonehill does not

suggest that the IRS would have located the documents sooner

or proceeded without staying the FOIA appeal had the FOIA

waiver rule applied to discovery. Any unfairness caused by

release of requested documents after Stonehill’s death is

mitigated by his estate’s vigorous pursuit of his claims.

Considering the circumstances as a whole, then, we are not

persuaded that the court should link the two informationgathering regimes through a waiver rule when doing so would

not necessarily advance the policy goals underlying the rule.

Delays within the FOIA regime, Stonehill’s principal focus, do

not provide a rationale for linking its waiver rule to discovery

where different considerations are involved. Accordingly, we

affirm the grant of summary judgment.

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