Court Opinion

ID: 175389
Source: CourtListenerOpinion
Date Created: 2010-09-16 00:03:08+00
Date Added: 2024-06-11T17:25:34.900702
License: Public Domain

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                           NOT FOR PUBLICATION                                SEP 15 2010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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