Court Opinion

ID: 5649619
Source: CourtListenerOpinion
Date Created: 2022-01-11 22:01:30.16524+00
Date Added: 2024-06-11T08:38:31.388905
License: Public Domain

United States Court of Federal Claims
                                             No. 20-808T
                                        Filed: January 11, 2022

 ALEARIS, INC.,

                      Plaintiff,

 v.

 UNITED STATES,

                     Defendant.

                                                ORDER & OPINION

HODGES, Senior Judge

      I.       BACKGROUND

        Plaintiff, Alearis, Inc., is an organization incorporated in the state of Delaware. Its sole
member, “the Church,” was “founded at time immemorial when the Old Ones placed the Game
into ecclesiastical trust for such purpose.” Plaintiff is “organized exclusively for religious purposes
to perform or carry out the functions of the Church.”

        In 2019, Plaintiff sought an initial classification from the Internal Revenue Service (IRS)
as a non-private foundation. 1 To this end, Plaintiff’s attorney mailed a letter request 2 for an official
determination (or Request for Determination) on July 12, 2019. 3 The IRS verified receipt of
Plaintiff’s letter request by mailing a date-stamped copy back to Plaintiff three days later.

           1
          Non-private foundations under IRC §§ 509(a)(1) and 170(b)(1)(A)(i), such as churches,
are exempt from requirements typically imposed on private foundations like self-dealing
provisions under § 4941, minimum distribution requirements under §4942, excess business
holdings requirements under §4943, jeopardy investments under § 4944, and taxable expenditures
under § 4945. They enjoy statutory rights to participate in pooled income funds under § 642 and
the right to receive a greater donor threshold of deductible contributions under § 170(b)(1)(A).
           2
         IRS Revenue Procedure 2019-05 § 4.02(7)(b) provides that any determination request
not required to be submitted on a specified form may be submitted by letter.
           3
        Section 3.01(3)(b) of IRS Revenue Procedure 2019-05 provides that the IRS will issue
determinations concerning the classification or reclassification of private foundation status,
        After six months without receiving a determination, Plaintiff’s attorney telephoned the IRS.
Allegedly, an IRS representative told Plaintiff’s attorney that the letter request had confused the
agency: specifically, it was unclear whether Plaintiff was seeking an initial determination of
foundation status or a reclassification because Plaintiff’s letter was captioned “Classification or
reclassification of private foundation status.” The IRS representative noted that Alearis (i) did not
provide IRS Form 8940 (Request for Misc. Determination); (ii) Alearis’ Employer Identification
Number was not associated with a completed Form 1023 (Application for Recognition of
Exemption Under Section 501(c)(3) of the Internal Revenue Code); and (iii) the $400 check
submitted did not correspond with the correct fee to process a request for reclassification of
foundation status.

        Plaintiff’s attorney clarified that Plaintiff was seeking an initial determination of
foundation status, not a reclassification. The IRS representative then asked Plaintiff’s attorney to
send another copy to him directly for his review the same day. When Plaintiff’s attorney called
again a few days later, the IRS representative explained that the letter request had been “sent back”
for further consideration and was being reviewed by another department. Plaintiff’s attorney
requested a point of contact for the new department handling the request, but the IRS representative
replied that he was unauthorized to provide any further details.

        On December 20, 2019, an IRS employee was directed to manually refund Plaintiff’s check
that accompanied the letter request because “[Alearis] [] never received a formal exemption so
they will need to submit a Form 1023/1024 or 1023EZ with the correct user fee.” ECF No. 22 at
38.

   II.     PROCEDURAL HISTORY

         Plaintiff filed this Complaint seeking declaratory judgment on July 2, 2020. The Court
granted Plaintiff’s motion to seal the Complaint and its attachments and directed the Government
to file the Administrative Record under seal. Plaintiff filed a motion to amend the Administrative
Record and a motion for judgment on the Administrative Record. Subsequently, the parties filed
an agreed-upon public version of the Administrative Record. Finally, Defendant filed a motion to
dismiss for lack of jurisdiction and a motion to unseal the Administrative Record.

        After the motions were briefed, the Court ordered Plaintiff to submit additional evidence
to establish the Court’s jurisdiction of this matter. Plaintiff declined to comply for various reasons,
including that doing so would invite the risks that (a) the additional evidence would ultimately be
disclosed publicly and (b) Plaintiff would be subject to discovery, “resulting in further disclosure
of protected church information which Alearis cannot currently foresee or control.”

   III.    ANALYSIS

           a. Defendant’s Motion to Dismiss

including whether an organization is described by IRC §§ 509(a)(1) and 170(b)(1)(A) (other than
clauses (v), (vii) and (viii)).

                                                  2
        Defendant asserts that the Court is without subject matter jurisdiction to consider Plaintiff’s
Complaint. I.R.C. § 7428(a)(1)(B) is Plaintiff’s jurisdictional basis for this case. It provides that
“[i]n a case of actual controversy involving …. a determination by [the IRS] . . . . with respect to
the initial classification . . . of an organization as a private foundation (as defined in section
509(a)),” or “a failure by the [IRS] to make a determination with respect to [that] issue,” this Court
“may make a declaration . . . with respect to such initial classification . . . .”

        Here, Plaintiff does not have an official IRS determination to contest because Plaintiff
failed to submit the requisite forms as instructed by the IRS representative. The IRS refunded
Plaintiff’s fee submitted with the letter request and directed Plaintiff to submit a Form 1023 for an
affirmative determination of its non-private foundation status.

        Plaintiff contends that it does not seek an affirmative classification of its 501(c)(3) status,
rather its status as a public charity, and that submitting a Form 1023 would violate its religious
tenets. However, an official determination by the IRS that Plaintiff is a 501(c)(3) is a predicate to
an affirmative classification as a public charity or as a private foundation. See generally, Found.
of Human Understanding v. United States, 88 Fed. Cl. 203, 212 (2009) (when seeking an
affirmative determination, “[a]n organization’s mere declaration that it is a church is insufficient;
plaintiff must demonstrate its qualification for tax-exempt status as a church.”) Moreover,
Plaintiff’s one-page “Statement of Facts” is insufficient to enable the Court to make a
determination as to whether plaintiff is a “church” within the meaning of IRC § 170(b)(1)(A)(i).
The Court is therefore without jurisdiction to issue a declaratory judgment because this is not a
case of actual controversy.

           b. Defendant’s Motion to Unseal the Record

       Defendant filed a Motion to Unseal the Administrative Record asserting that most of the
redacted material Plaintiff seeks to seal is already public and that Plaintiff has not demonstrated
the requisite “compelling justification” to overcome the presumption of public access to judicial
records. The Court previously granted Plaintiff’s Motion for Leave to File Under Seal Parts of
Exhibit A to the Complaint, specifically, portions of Plaintiff’s underlying Request for
Determination and corporate bylaws. 4 Plaintiff wishes for the Administrative Record and all
documents filed under seal to remain permanently sealed.

       When the Court considers whether to seal a record permanently, “[t]here is a strong
presumption in favor of a common law right of public access to court proceedings,” and there is
also “a First Amendment right of public access to court proceedings.” In re Violation of Rule
28(D), 635 F.3d 1352, 1356 (Fed. Cir. 2011) (citations omitted). Thus, only the “most compelling
showing can justify” the permanent sealing of judicial records. Id. at 1358 (quotation omitted).

       4
          Plaintiff did not provide the information at issue in the Motion for Leave to the Court
until after the Court granted the Motion. The Court had only a redacted version of Exhibit A, filed
under seal with the Complaint.

                                                  3
The party seeking to seal bears the burden of overcoming the presumption of open judicial records.
“By contrast [to a party needing to establish good cause for a protective order to prevent disclosure
of discovery material pursuant to RCFC 26(c)], a party seeking to prevent disclosure of
information submitted as evidence in dispositive judicial proceedings, whether at trial or in
connection with a motion for summary judgment, must demonstrate compelling reasons for
keeping such information out of public view.” AmerGen Energy Co., LLC v. United States, 115
Fed. Cl. 132, 141 (2014) (citations omitted). “Even when the parties agree to maintain
confidentiality of publicly filed information pursuant to a protective order,” a trial court has “an
independent duty to protect the public’s right of access.” DePuy Synthes Prods., Inc. v. Veterinary
Orthopedic Implants, Inc., 990 F.3d 1364, 1370 (Fed. Cir. 2021).

        Defendant filed an “agreed upon public version of the administrative record” on January
12, 2021. The redactions in this version of the Administrative Record cover: (1) the approximately
one-page “Statement of Facts” that Plaintiff included with its letter request; (2) portions of the
“Analysis” in the letter request; and (3) a portion of the corporate bylaws. 5 Pleadings, including
the complaint and its exhibits, and the Administrative Record are judicial records. Plaintiff filed a
motion for judgment based on these records. Because a motion for judgment is a dispositive
judicial proceeding, these records are subject to the compelling showing standard.

        Plaintiff asserts that the redactions at issue cover “secret” or “confidential” information
that is “of irreplaceable value to the church.” However, Plaintiff has provided no declaration,
affidavit, or attestation to prove the confidentiality of the redactions. Moreover, the only attested
facts submitted in this case are contained in Plaintiff’s one-page “Statement of Facts” (AR 30 at
4-5),” which is accompanied by the attestation of “Amory Feriae, Secretary of Alearis, Inc.” Mr.
Feriae does not claim to have personal knowledge of these facts, only that they are “true, correct,
and complete.” Mr. Feriae’s attestation fails to demonstrate how Plaintiff would be harmed by
public disclosure, nor does it substantiate the secret nature of the information in the record.

        Plaintiff presents various arguments to assert that its religious practice would be harmed
by public disclosure. For example, Plaintiff insists that its religious practice depends on the
confidentiality of the sealed information because the religion is “enactivist—focusing on affective
religious experience through the dynamic revelation of ‘plateaus.’” It explains that “the religion of
Alearis is…a process implicated by the sequencing and circumstance of revelation…similar to a
story.” If the record were unsealed, Plaintiff argues that it would be deprived of its ability “to
present the story as intended” because “Alearis’ model reinforces associational bonds by
emphasizing experiences shared only with other genuine members.” Ultimately, Plaintiff explains,
if answers to revelations that are used to progress individuals through plateaus are available in the
public domain, it will be difficult to effectively measure novice adherents’ understanding of the
religion.

        Plaintiff urges that “it is not for [courts] to determine the religious importance or rationality
of the affected belief or practice.” Murphy v. Collier, 139 S. Ct. 1475, 1484 (2019). Indeed, the
Court acknowledges that federal laws “do not allow a court to undertake for itself the determination

        5
            These redactions are the same redactions that Plaintiff made in Exhibit A.

                                                   4
of which religious practices are sufficiently mandatory or central to warrant protection.” Id.
However, the lack of evidentiary support for Plaintiff’s claims as to the potential harm it would
suffer from public disclosure prevents the Court from even considering the importance of these
practices. See DePuy, 990 F.3d 1364, 1372–73 (Fed. Cir. 2021) (holding that trial court concluded
correctly that allegedly proprietary information was not entitled to confidential treatment because
parties provided no evidence of how its public disclosure would be harmful).

         The legal arguments Plaintiff offers fail to satisfy the evidentiary standard it must meet to
seal permanently the record in this case. Nor does this evidence establish that Plaintiff is a church
– the basis of its demand for affirmative recognition of its nonprivate foundation status. Plaintiff
filed a Complaint to circumvent the IRS process because completing a Form 1023 would violate
its religious tenets. Yet, without providing even a slice of evidence supporting its claims of secrecy
and confidentiality, Plaintiff seeks a judicial declaration from this Court that would enable it to
operate uninhibited by the substantial burdens and regulations that Congress imposes specifically
upon private foundations. The evidence submitted in this case is sufficient to establish neither the
Court’s subject matter jurisdiction nor a basis for sealing the record permanently.

   IV.      CONCLUSION

       This Court is without subject matter jurisdiction to consider the merits of the Complaint.
Furthermore, Plaintiff has not met the evidentiary standard to justify sealing permanently the
documents in this case. Therefore,

         1. Defendant’s motion to dismiss this case is GRANTED;
         2. Defendant’s motion to lift the seal on the Administrative Record and on all documents
            filed under seal in this case is GRANTED;
         3. Plaintiff’s motion to amend the Administrative Record is DENIED as moot; and
         4. Plaintiff’s motion for judgment on the Administrative Record is DENIED as moot.

     It is so ORDERED.
                                                                      s/Robert H. Hodges, Jr.
                                                                      Robert H. Hodges, Jr.
                                                                      Senior Judge

                                                  5