T.C. Memo. 2016-131

UNITED STATES TAX COURT

AMAZON.COM, INC. & SUBSIDIARIES, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 31197-12. Filed July 18, 2016.

John B. Magee, Sanford W. Stark, Julia Mara Kazaks, and Rajiv Madan, for

petitioner.

Jill A. Frisch, Melissa D. Lang, Lloyd T. Silberzweig, Anne O’Brien

Hintermeister, and Mary E. Wynne, for respondent.

MEMORANDUM OPINION

LAUBER, Judge: This case was tried during November and December

2014 in Seattle, Washington, where petitioner has its principal place of business. 

The case is currently under advisement. On March 25, 2016, the Court received a
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[*2] Motion to Intervene by Non-Party Guardian News & Media, LLC (Guardian

or Movant). Movant is the U.S. affiliate of the Guardian, a major British

newspaper. Guardian seeks to intervene in this case for the purpose of urging the

Court to unseal, or to make available in unredacted form, certain components of

the trial record that have been sealed pursuant to a protective order. 

Guardian represents that it “recently published an investigation focusing on

Amazon’s decision to move [certain] business operations to Luxembourg” and expresses the view that the documents in question “reach matters of intense public

interest.” We will hold Guardian’s motion in abeyance until the parties have

exercised their rights under the protective order with a view to determining which

portions of the trial record will have the seal removed and which portions contain

Confidential Information (as defined in the protective order) that must be sealed

permanently.

Background

The facts set forth herein are stated solely for the purpose of deciding this

motion and not as findings of fact in this case. See Rule 1(b); Fed. R. Civ. P.

52(a); Cook v. Commissioner, 115 T.C. 15, 16 (2000), aff’d, 269 F.3d 854 (7th

Cir. 2001). The deficiencies at issue, for tax years 2005 and 2006, arise from a

cost-sharing arrangement (CSA) that petitioner (Amazon or petitioner) executed
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[*3] with Amazon Europe Holdings Technologies SCS (AEHT), a Luxembourg

affiliate. Under the CSA, petitioner transferred preexisting intangible assets to

AEHT, and the parties agreed to share future intangible development costs (IDCs). 

This case will require the Court to determine (among other things) the proper amount of AEHT’s buy-in obligation with respect to the transferred property

(including technology, trademarks, and customer information) under section

1.482-7(a)(2) and (g)(2), Income Tax Regs. The Court will also be required to 1

determine the portion of petitioner’s costs properly allocable to IDCs, which

affects the cost-sharing payments required of AEHT. See sec. 1.482-7(a)(1),

(d)(1), Income Tax Regs. In order to decide these issues, the Court received into

evidence voluminous information bearing on the value of the transferred property,

including Amazon’s technology, source code, trademarks, customer information,

and non-public financial data.

With a view to protecting such sensitive information from public disclosure,

petitioner in July 2013 moved for a pre-trial protective order. Respondent opposed entry of a protective order. Following lengthy discussions with the parties,

Unless otherwise indicated, all statutory references are to the Internal 1

Revenue Code in effect at all relevant times, and all Rule references are to the Tax

Court Rules of Practice and Procedure. Section 1.482-7, Income Tax Regs., was

redesignated section 1.482-7A, Income Tax Regs., with the promulgation of new

regulations effective January 5, 2009. See T.D. 9441, 2009-7 I.R.B. 460, 473.
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[*4] the Court indicated that it was disposed to issue a protective order and urged

the parties to work toward a compromise draft. In November 2013 the parties proposed, and the Court adopted, a protective order implementing procedures to protect Amazon’s trade secrets, proprietary technology, and non-public financial

information (collectively, Confidential Information) during the pre-trial phase of

the case. On March 12, 2014, we amended that November 19, 2013, protective

order to add provisions governing the production of source code and other highly

sensitive technical data.

On October 6, 2014, petitioner moved for a protective order covering the

trial and post-trial phases of the case. This motion was supported by affidavits

from Scott R. Hayden, Vice President and Associate General Counsel for Intellectual Property at Amazon, and from Shelley L. Reynolds, Vice President, Worldwide Controller and Principal Accounting Officer for Amazon. These affidavits

averred that Amazon maintains the highest level of protection for the Confidential

Information; that certain Confidential Information has been licensed to third parties under agreements barring its disclosure; and that if Amazon’s competitors

gained access to the Confidential Information, Amazon and its shareholders would

suffer significant economic harm.
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[*5] Petitioner did not ask the Court to seal the entire trial or the entire trial record. Rather, it proposed that specific documents or portions of documents, and

specific testimony or portions of testimony, be sealed to the extent necessary to

prevent disclosure of its Confidential Information. On October 20, 2014, respondent filed a notice of objection, again contending that Amazon had not shown

good cause for entry of any protective order at all.

We concluded that Amazon had established by affidavit the proposition that

disclosure of its Confidential Information would damage the company and its

shareholders by revealing “trade secrets or other confidential information.” Sec.

7461(b)(1). The Court discussed Amazon’s proposed protective order with the

parties in a series of telephone conferences, and petitioner revised various aspects

of its proposal to address concerns expressed by respondent and the Court. On

October 20, 2014, the Court issued a protective order covering the trial and posttrial phases of the case, stating as follows:

It is the goal of this Court to provide as robust a public record

as possible while protecting petitioner’s Confidential Information. 

We are satisfied that the terms of the protective order set forth below

will enable the largest possible percentage of the trial record to be

made available for ultimate public inspection, consistently with the

protection of Amazon’s proprietary business and technological

information.
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[*6] The parties filed comprehensive pre-trial memoranda. With minor redactions, those memoranda have been placed on the docket for public inspection. 

Trial testimony that did not elicit Confidential Information was heard in open

court; transcripts of that testimony have been placed on the docket for public

inspection. Trial testimony that elicited Confidential Information was heard in

closed court; the parties are working toward finalizing redacted versions of those

transcripts to be submitted to the Court for approval. If and when they are approved, these redacted transcripts will be placed on the docket for public inspection.

Trial exhibits that Amazon did not designate as containing Confidential Information are currently available for public inspection upon request. These exhibits include redacted versions of all expert witness reports (56 in toto). Trial

exhibits that Amazon designated as containing Confidential Information were

given exhibit numbers with the prefix “C.” Respondent retains the right under the

protective order to challenge petitioner’s classification of exhibits as containing

Confidential Information.

The parties filed post-trial briefs that include more than 1,500 pages of proposed findings of fact, objections to proposed findings of fact, and legal argument. 

Redacted versions of those documents have been placed on the public record. All
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[*7] in all, the pre-trial memoranda and post-trial briefs total 2,689 pages; 2,480 of

these pages (or 92%) contain no redactions at all.

On March 25, 2016, the Court filed Guardian’s motion to intervene. Guardian has requested access to 16 specified items, including 14 trial exhibits. Of 2

those 14 trial exhibits, only eight are “C” exhibits designated as containing Confidential Information. Regardless of whether Guardian is allowed to intervene, it is

free to request copies of trial exhibits that are not “C” exhibits. If “C” exhibits are

unsealed or placed on the public record in redacted form, Guardian will also be

free, at a later date, to request copies of those documents.

Petitioner has objected to the granting of Guardian’s motion to intervene.

Respondent has filed a notice of no objection. 

Discussion

A. Protective Orders

Section 7458 provides that “[h]earings before the Tax Court and its divisions shall be open to the public.” Section 7461(a) similarly provides that “all evidence received by the Tax Court and its divisions, including a transcript * * * of

the hearings, shall be public records open to the inspection of the public.” An 

Guardian also requested access to an unredacted version of a stipulation of 2

facts dealing with “Tax Reporting” and to certain sealed transcripts of trial

testimony.
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[*8] exception to these general rules is set forth in section 7461(b)(1), captioned

“Trade Secrets or Other Confidential Information.” It provides that the Court

“may make any provision which is necessary to prevent the disclosure of trade

secrets or other confidential information, including a provision that any document

or information be placed under seal to be opened only as directed by the court.”

Rule 103(a) implements these statutory provisions. It provides that, upon

motion supported by good cause, “the Court may make any order which justice

requires” to ensure that “a trade secret or other information not be disclosed or be

disclosed only in a designated way.” Rule 103(a)(7). Such an order may include

directions that the parties file “specified documents or information enclosed in

sealed envelopes” and that “written materials, after being sealed, be opened only

by order of the Court.” Rule 103(a)(6), (8). 

Rule 103(a) resembles rule 26(c)(1) of the Federal Rules of Civil Procedure

(Civil Rules), and this Court generally follows decisions interpreting Civil Rule 26

when considering requests for protective orders. See Willie Nelson Music Co. v.

Commissioner, 85 T.C. 914, 916-917 (1985). A protective order is appropriate

where the material is the type of information that courts will protect and the requesting party shows good cause for protecting it. Publicker Indus., Inc. v. Cohen,
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[*9] 733 F.2d 1059, 1071 (3d Cir. 1984); Estate of Murphy v. Commissioner, T.C.

Memo. 1990-346, 60 T.C.M. (CCH) 73, 75.

These longstanding protections for sensitive business and financial information are fully consistent with Guardian’s qualified right of access, which is the

same interest held by the public at large. See, e.g., Richmond Newspapers, Inc. v.

Virginia, 448 U.S. 555, 573 (1980) (noting that “media representatives enjoy the

same right of access as the public”); Branzburg v. Hayes, 408 U.S. 665, 684

(1972) (“It has generally been held that the First Amendment does not guarantee

the press a constitutional right of special access to information not available to the

public generally.”).

B. Intervention

The issue at hand is whether Guardian should be permitted to intervene in

this case. With limited exceptions inapplicable here, our Rules make no provi3

sion for third-party intervention. In the absence of an express Rule, the Court

“may prescribe the procedure, giving particular weight to the Federal Rules of

Civil Procedure to the extent that they are suitably adaptable to govern the matter

See Rule 216(a) (permitting intervention by PBGC or Secretary of Labor in 3

certain retirement plan actions); Rule 225 (permitting intervention in actions with

respect to section 6110 written determinations); Rule 245(a) (permitting intervention in certain partnership actions); Rule 325(b) (permitting intervention by the

non-electing spouse in action for relief from joint and several liability).
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[*10] at hand.” Rule 1(b); see Guralnik v. Commissioner, 146 T.C. __, __ (slip

op. at 28-31) (June 2, 2016); Amazon.com, Inc. & Subs. v. Commissioner, T.C.

Memo. 2014-245; Estate of Proctor v. Commissioner, T.C. Memo. 1994-208, 67

T.C.M. (CCH) 2943.

Civil Rule 24(a) governs intervention of right. It provides that a court must

permit intervention where the movant is given “an unconditional right to intervene

by a federal statute” or “claims an interest relating to the property or transaction

that is the subject of the action, and is so situated that disposing of the action may

as a practical matter impair or impede the movant’s ability to protect its interest.” 

Guardian does not contend, and it could not plausibly contend, that it is entitled

under these standards to intervention of right.

Civil Rule 24(b)(1) governs permissive intervention. The Court of Appeals

for the Ninth Circuit has ruled that an applicant for permissive intervention must

generally meet certain threshold requirements, including a showing that his “claim

or defense, and the main action, have a question of law or a question of fact in

common.” Perry v. Proposition 9 Official Proponents, 587 F.3d 947, 955 (9th Cir.

2009) (quoting NW. Forest Res. Council v. Glickman, 82 F.3d 825, 839 (9th Cir.

1996)). “[S]uch a strong nexus of fact or law” is generally not required “when a

party seeks to intervene only for the purpose of modifying a protective order.” 
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[*11] Beckman Indus., Inc. v. Int’l Ins. Co., 966 F.2d 470, 473-474 (9th Cir. 1992)

(allowing permissive intervention where movant sought to modify a protective

order to obtain deposition transcripts needed for other pending litigation); see San

Jose Mercury News, Inc. v. U.S. Dist. Court, 187 F.3d 1096, 1100 (9th Cir. 1999). 

The court may consider other factors in the exercise of its discretion, including

“the nature and extent of the intervenor’s interest” and whether that interest is

“adequately represented by other parties.” Perry, 587 F.3d at 955 (quoting

Spangler v. Pasadena City Bd. of Educ., 552 F.2d 1326, 1329 (9th Cir. 1977)).

“The Tax Court, like other Federal courts, may permit intervention by third

parties in those unique situations where the ends of justice so require.” See Estate

of Proctor, 67 T.C.M. (CCH) at 2944. “[T]he allowance of intervention in a Tax

Court proceeding is within the sound discretion of the Court.” Estate of Smith v.

Commissioner, 77 T.C. 326, 329 (1981). We have allowed permissive intervention where “the moving party has a stake in the outcome of the litigation” that

“cannot be adequately protected by the parties currently before the Court” and

where “permitting the intervention will lead to a more complete presentation of the

legal issues to be decided.” Ibid. We have denied motions to intervene where the

movant failed to show that a party “was taking a position that was contrary to the

moving party’s interests in the litigation.” Ibid.; see Sampson v. Commissioner,
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[*12] 81 T.C. 614, 617 (1983), aff’d without published opinion, 829 F.2d 39 (6th

Cir. 1987). If a party is adequately representing the interests the movant seeks to

advance, the Court may deny intervention.

The public interest that Guardian seeks to advance has been, and continues

to be, powerfully represented by respondent. Respondent has objected to the

issuance of a protective order at every stage of this litigation. When the Court

indicated its intention to issue a protective order of some kind, respondent worked

assiduously to narrow the scope of protection and to ensure himself the ability to

challenge petitioner’s designation of information as “confidential.” 

In so doing, respondent’s attorneys faithfully adhered to the policy set forth

in the Internal Revenue Manual (IRM). It instructs Internal Revenue Service

lawyers to oppose most requests for protective orders because “[t]he Office of

Chief Counsel, in representing the public interest, has an obligation to protect the

integrity of the tax litigation process by encouraging transparency in the judicial

workings of the Tax Court.” IRM pt. 35.4.6.5(10) (Aug. 16, 2010). Throughout

the trial and post-trial phases of this case, the IRS has exercised its rights under the

protective order to ensure that the public will have available to it all information

that is not properly classified as “trade secrets or other confidential information.”

Sec. 7461(b)(1). Although the redaction process has not yet been completed, the
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[*13] Court is confident that respondent will continue to assert his rights, and

those of the public, under the protective order. 

Guardian has not cited, and our own research has not discovered, any instance in which this Court, or any other court, has been asked to decide whether a

media organization should be allowed to intervene in a pending Federal tax controversy. Guardian’s motion presents novel questions, both as to the proper standards for intervention in the absence of any Rule governing the subject, and as to

whether the IRS, as an agency of the United States, adequately represents Guardian’s interest in public disclosure. Cf. Prete v. Bradbury, 438 F.3d 949, 956-957

(9th Cir. 2006) (“[There is] an assumption of adequacy when the government is

acting on behalf of a constituency that it represents. In the absence of a very compelling showing to the contrary, it will be presumed that a state adequately represents its citizens when the [intervention] applicant shares the same interest.” (quoting Arakaki v. Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003))).

We are hesitant to address these questions until it is necessary to do so. Under the process outlined in the protective order, the parties are currently finishing

their review of transcripts to determine what information should remain sealed. 

Once the parties have completed their review, they will submit the agreed-upon

redactions, together with any redaction-related matters on which they do not agree,
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[*14] to the Court for review and resolution. The Court will make the ultimate

decision as to which portions of the record must remain permanently sealed as

containing “trade secrets or other confidential information.” Sec. 7461(b)(1). 

Once this process has been completed, the documents Guardian seeks may become

available for public inspection, by agreement of the parties or by order of the

Court, and Guardian’s motion may become moot.

Guardian can now access the parties’ briefs and pre-trial memoranda, which

have been placed on the public record in redacted form. The unsealed portions of

the trial transcript are currently available for public inspection, and the Court expects that redacted versions of the closed trial sessions should be available in the

next two months. Guardian can request copies now of any trial exhibits that do

not bear the “C” prefix, which include five of the specific documents to which it

seeks access. Other trial exhibits may become available once the parties have

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completed, under the Court’s supervision, the review procedures ordained by the

Court’s protective orders. For these reasons, we will hold Guardian’s motion to

intervene in abeyance until these review procedures have been more fully completed.

Although six of the exhibits do not bear the “C” prefix, one exhibit was not

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admitted into evidence.
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[*15] To reflect the foregoing,

An appropriate order will be issued.