Leslie Book is a contributing author with Tax Analysts through the Procedurally Taxing blog, which he co-founded in 2013. He is a professor of law at the Villanova University Charles Widger School of Law, a senior fellow at the Center for Taxpayer Rights, and the successor author for the treatise IRS Practice and Procedure, originally authored by Michael Saltzman.
In this post, Book discusses a federal district court case in which a public interest group was awarded attorney fees for its Freedom of Information Act suit against the IRS, despite the fact that the agency’s search returned no records.
The catastrophic failure of FTX , the infamous and bankrupt cryptocurrency exchange and hedge fund, has generated allegations of lax governmental oversight and too-cozy relations between it and regulators and legislators. While the IRS has not been the main target of ire, Protect the Public’s Trust v. IRS, No. 23-cv-340 (D.D.C. 2024), a Freedom of Information Act case, shows that there is interest in former IRS executives’ relationship with FTX.
Protect the Public’s Trust v. IRS raises an interesting and novel issue: Can a party get attorney fees even if a FOIA request turns up no responsive records?
At first blush, it seems improbable, but this case paints a less than flattering view of the IRS, which essentially failed to even look for any FTX/IRS documents until it was sued in federal court. While the search came up empty, Protect the People’s Trust (PPT) filed a motion seeking attorney fees on the basis that the IRS’s eventual decision to search for documents amounted to it substantially prevailing in the suit.
The FOIA Request and IRS Refusal To Search
In December of 2022, PPT sent a FOIA request for documents relating to alleged meetings between then-IRS Commissioner Charles Rettig and high-level executives at the FTX. The IRS declined to search for any such documents and quickly sent a letter stating that the “request is overly broad in nature and we are unable to process [it] as it does not meet the requirements of the FOIA or the applicable agency regulations.” The letter said that it would close the request unless PPT revised it to “not be unreasonably burdensome on the agency.”
PPT responded within a few weeks, stating that the IRS letter failed to describe why its request was overly broad and otherwise failed to meet FOIA’s legal requirements. PPT then added its view that the request was sufficient:
On its face, your claim is contrary to law and fact. The request provides more than sufficient information for an agency employee reasonably familiar with the subject matter of the request to identify and produce the records sought with a reasonable amount of effort. To wit, the request identifies a date range: January 20, 2021, through present. It identifies a single custodian of records: Commision[er] Charles P. Rettig. It identifies a subject matter: communications with a limited set of named FTX executives. It provides names for those FTX executives, as well as specific email addresses and a phone number.
To close, PPT asked the IRS to consider its response as an “administrative appeal” of the IRS’s decision and to respond with “specific information” concerning any disagreement with PPT’s views.
The IRS quickly responded, but basically repeated its earlier position without much elaboration, stating that the request was deficient because “‘communications with a limited set of named FTX executives’ . . . is not a subject matter and instead defines the types of documents” sought rather than a “subject matter . . . regarding these communications.”
PPT then quickly replied, stating that the IRS was intentionally withholding records in IRS custody, explaining why the request was not burdensome, complex, or confusing, and then describing why it was in the public interest to expose “the level of influence between [Commissioner] Rettig and this disgraced company [FTX] and its founder.”
The IRS responded within weeks, but basically doubled down, stating that it was issuing its final response. It attached its previous denial to process the request, stating that the request was not perfected and did not comply with the appropriate FOIA regulations.
The district court characterized the IRS’s approach as follows:
In summary, IRS refused three times in less than two months to comply with PPT’s request and search for responsive records. In each instance, IRS asserted the same justifications for refusing to act contained in its interim response — overly broad, overly burdensome, and inadequately stated under FOIA.
PPT acted quickly, and in January 2023, less than a month after the IRS’s final response, it filed a complaint in federal district court. The complaint challenged the IRS’s failure to search for responsive records under FOIA and the Administrative Procedure Act. After the government filed an answer seeking a dismissal with prejudice and any other relief the court felt proper, the court ordered the government to produce a Vaugh index (a document that an agency prepares in FOIA litigation setting forth any basis for exemption for disclosure) and a supportive dispositive motion.
Attorney Fees When A Search Comes Up With No Documents?
About two months after PPT filed its complaint, the IRS finally undertook the search for the Rettig/FTX documents, but the search turned up no responsive documents. After the search came up empty, the IRS informed the court and PPT, and the court withdrew its request that the government file a dispositive motion. PPT, however, was not satisfied: it filed a motion for attorney fees, justifiably annoyed at the IRS only undertaking the search after it spent time and money filing a lawsuit in federal court.
The IRS responded, claiming that in FOIA cases a party cannot show that they are entitled to fees unless a search produces records; for good measure, the IRS argued that even if PPT was entitled to fees, the request was unreasonable.
The attorney fee provisions in FOIA are found at 5 U.S.C. section 552(a)(4)(E)(i). In the D.C. Circuit, to generate fees, a party must be both “eligible” and “entitled” to fees. To satisfy the eligibility prong, the party must have “substantially prevailed.” Under the statute, a party substantially prevailed “if the complainant has obtained relief through either — (I) a judicial order, or an enforceable written agreement or consent decree; or (II) a voluntary or unilateral change in position by the agency, if the complainant’s claim is not insubstantial.”
To satisfy the entitlement prong, the court uses a four-factor test:
The public benefit derived from the case.
The commercial benefit to the plaintiff.
The nature of the plaintiff’s interest in the records.
The reasonableness of the agency’s withholding of the requested documents.
Most of the opinion addresses the issue of eligibility and whether a party can be considered to have substantially prevailed if a search produces no responsive information or documents. The opinion first notes that D.C. district court opinions have split on the issue, comparing “PETA v. NIH, 130 F. Supp. 3d 156, 163 (D.D.C. 2015) (finding plaintiff eligible for fee award despite “fact that [the agency] did not have responsive documents”) with Mobley v. U.S. Dep’t of Homeland Sec., 908 F. Supp. 2d 42, 48 (D.D.C. 2012) (finding plaintiff ineligible for fee award because they “received no documents”).”
The court then discusses extensively why, in its view, a categorical rule against fee awards is contrary to the statute’s text, relevant precedent, and legislative history. The opinion notes that the D.C. Circuit has not addressed the issue.
Starting the analysis with the text, opinion homes in on the operative fee-shifting statutory language:
Under FOIA, “a complainant has substantially prevailed if the complainant has obtained relief through either — (I) a judicial order, or an enforceable written agreement or consent decree; or (II) a voluntary or unilateral change in position by the agency, if the complainant’s claim is not insubstantial.” 5 U.S.C. section 552(a)(4)(E)(ii). [Emphasis in original.]
That highlights the reach of the term relief: Is the government’s about-face in undertaking the search sufficient? The opinion concludes that relief is “capacious enough to encompass a search not resulting in responsive records and rejects the categorical bar propounded by IRS.”
It gets there by drilling down deeper:
“FOIA defines ‘relief’ broadly as, among other things, the ‘taking of . . . action on the application [ ] or petition of, and beneficial to, a person[,]’ 5 U.S.C. section 551(11), and in this regard, the statute appears merely to have imported the ordinary meaning of ‘relief’ into the agency context.” Conservation Force v. Jewell, 160 F. Supp. 3d 194, 202 (D.D.C. 2016) (Jackson, J.); see also Relief, Black’s Law Dictionary (11th ed. 2019) (defining “relief,” in relevant part, as “[t]he redress or benefit . . . that a party asks of a court”).
The opinion then discusses how the “taking of action” means something broader than turning over documents, pointing to the IRS’s actions following the initial FOIA request and lawsuit to illustrate the point:
IRS took “action” on PPT’s “petition” by voluntarily searching for records. See ECF No. 10; see also Def.’s Opp’n 5-7 (conceding PPT’s suit triggered the search for records). This conferred at least some of the “benefit” that PPT had sought from the Court — performance of a search previously refused by the agency. In other words, what PPT obtained in this case appears to squarely fit FOIA’s definition of “relief.”
The opinion discusses how the FOIA fee-shifting provision itself does not mention records and characterizes the government as asking this “Court to rewrite the statute to make “relief” incorporate a requirement pertaining to “records.” The opinion declined to do so, noting that Congress could have tied fee shifting to the receipt of records if it wanted to:
Surely Congress, selectively arraying “relief” amidst a sea of “records,” did not mean for these two terms to be synonymous. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 170 (2012) (“A word or phrase is presumed to bear the same meaning through a text; a material variation in terms suggests a variation in meaning.”). And it strains credulity to suggest that notwithstanding its express definition, “relief” implicitly incorporates a requirement that plaintiffs cannot substantially prevail unless they obtain responsive records. Congress used a distinctive, capacious term when it prescribed FOIA plaintiffs’ path to fee eligibility, and the Court must faithfully effectuate that choice of language. IRS provides no justification whatsoever for venturing such an unwarranted deviation from the text.
Worth highlighting as well is the well-reasoned discussion concluding that the term relief means the same regardless as to whether the outcome arises from a court order or the government’s changing course in the absence of a mandate:
Also significant is that section 552(a)(4)(E)(ii)’s introductory clause uses the phrase “obtained relief” to introduce both pathways to fee eligibility. Recall that a plaintiff has “substantially prevailed” if they have “obtained relief through either — (I) a judicial order, or an enforceable written agreement or consent decree; or (II) a voluntary or unilateral change in position by the agency, if the complainant’s claim is not insubstantial.” 5 U.S.C. section 552(a)(4)(E)(ii) (emphases added). That Congress prefaced these alternative pathways using the same phrase suggests that “relief” means the same thing regardless of how it was obtained.
This is significant in the tax context, as in Title 26 cases where the IRS has successfully avoided fee shifting following concession. But the language in FOIA suggests that there should be no difference in evaluating fee worthiness if the government’s actions result from a (somewhat) voluntary about-face:
IRS concedes this point [that relief means the same] and directs the Court to cases where plaintiffs were denied fee eligibility under the first pathway because they did not obtain responsive records. See Def.’s Opp’n 6-7. This approach misses the mark, however, because there is persuasive authority in this District awarding fees under the first pathway to a plaintiff who did not ultimately receive responsive records; this again demonstrates the impropriety of imposing a categorical bar.
The opinion continues by carefully parsing some of the district court cases that both parties cited, with the court ultimately finding that even the government’s cases can be read as not supporting a categorical bar.
Even the lead case cited by the IRS for the proposition that FOIA plaintiffs have not obtained relief unless they have received responsive records, Mobley v. U.S. Dep’t of Homeland Sec., 908 F. Supp. 2d 42 (D.D.C. 2012), acknowledged that:
Although the ultimate goal of any FOIA requester is, of course, to obtain records from the government, a FOIA requester must sometimes obtain interim relief that is antecedent or incident to any dispute about the production or non-production of records themselves. If an agency were to provide this sort of interim relief to a plaintiff by way of a voluntary and unilateral change in the agency’s position, then it could be reasonable to conclude that, under the catalyst theory, that plaintiff has “substantially prevailed.”
Entitlement to Fees
After finding that PPT was eligible for relief because it substantially prevailed, the opinion continues by examining the less controversial aspect of whether PPT was “entitled” to relief under the D.C. Circuit’s multi-factor test set out above. That was a fairly straightforward analysis, and the court fairly easily concluded that the information sought in the request had public value, was not done to commercially benefit PPT, and was of benefit to PPT, which is a nonprofit whose mission is to “monitor and inform the American people about the self-dealing and conflicts of interest, and the improper and illegal behavior of senior officials across the government.”
The final entitlement factor is reasonableness of the government’s position. That “considers whether the agency’s opposition to disclosure ‘had a reasonable basis in law,’ and whether the agency ‘had not been recalcitrant in its opposition to a valid claim or otherwise engaged in obdurate behavior.’” (Citations omitted.) The IRS’s view on this factor presupposed that the agency was withholding records, which the court rejected.
Of some moment was the court’s characterization of the IRS’s about-face in deciding to do the search as originally requested only after PPT filed suit:
It also bears repeating that IRS does not now attempt to justify its stubborn refusal to process PPT’s FOIA request. See Def.’s Opp’n. PPT’s request was stated with specificity, reasonable in scope, and contained helpful information to guide the agency. See FOIA Req. IRS refused to process PPT’s request because it alleged it was “overly broad.” Interim Letter 1. Despite requests from IRS, PPT never narrowed, modified, or clarified its request. Yet IRS was able to process it without issue after PPT filed suit. The Court sees no reason to give IRS the benefit of the doubt when it has already disclaimed any need to explain these events. Nor does the Court believe it would be proper to import the responsive records requirement that it rejected under the fee eligibility prong into the fee entitlement prong.
Reasonableness of Fees
The opinion concludes by finding that the fee request of about $18,000 was reasonable. The government essentially imported its argument that the absence of any records should influence the court’s determination of reasonableness, but the court brushed that away as essentially “rehashing” its earlier views.
Of more interest is the court’s discussion of PPT’s entitlement to fees that arose in connection with seeking fees; there, the court noted that there is also some uncertainty in the D.C. Circuit on whether fees generated in seeking a fee-shifting finding were appropriate. Of some moment, however, was the court’s conclusion that PPT was efficient in its litigation and had not sought fees from an associate, law clerk, and paralegal and did not seek fees in connection with preparing a reply brief:
Having surveyed case law in this District, the Court does not believe that it should reduce PPT’s “fees-on-fees” award merely because its percentage share of the total litigation costs is high. Cf, e.g., Elec. Priv. Info. Ctr., 999 F. Supp. 2d at 77 (reducing “fees on fees” by 15 percent to reflect that plaintiffs fee application was only partially successful and contained several shortcomings). PPT’s counsel effectively and diligently pursued this motion while simultaneously disclaiming certain fees and costs in the interest of fairness.
Conclusion
One might expect the government to press forward on appeal of the novel legal issue in this case. On the other hand, the facts do not paint the IRS in a favorable light, and perhaps this is not the best vehicle to seek the D.C. Circuit’s views on an important issue that extends well beyond FOIA litigation with the IRS.