Bill Schmidt and I had been debating whether the Tax Court judges had grown tired of my writing style. No designated orders at all were issued in my last assigned week of April 1 through 5, and no orders were released through May 1 either. But thankfully for our loyal readers, Judges Buch and Halpern each came through with an order on May 2. Judge Halpern’s order discusses a clarification in this CDP case as to the proper scope of Appeals’ review on remand. The order itself is not very substantive. So let’s move on to Judge Buch’s order…
Docket No. 4891-18W, Whistleblower 4891-18W v. C.I.R. (Order Here)
Well, we did have two cases this week. At some point between when our Designated Orders team logged the cases and now, Judge Buch ordered this docket to be sealed—a relatively rare occurrence in the U.S. Tax Court, but certainly one that occurs more often in the whistleblower context. It’s unclear whether the order of May 2 itself ordered sealing (if so, why designate the order?) or if that came in a subsequent order. Moving forward, I’ll remember to actually download whistleblower orders rather than simply noting the web link. Otherwise, I might again feel like Obi-Wan Kenobi looking for hidden records in the Jedi archives.
Since there’s nothing more to discuss regarding the order itself, I’ll use the remainder of this post to discuss the logistics of seeking to seal part (or all) of a record in Tax Court. I will also suggest changes for the Court’s sealing process in whistleblower cases. Prior posts from Sean Akins and Bob Kamman discuss the substantive rationales for sealing or redacting documents in Tax Court.
Privacy Protections in the Tax Court
Whistleblowers often have an incentive to seal the information disclosed in a Tax Court case, especially their identity. After all, the Whistleblower has revealed damaging information about another taxpayer and understandably might face adverse consequences if the taxpayer learns of it. Yet, the Tax Court has ruled that not all Whistleblower cases are automatically sealed and not all taxpayers may proceed anonymously. See Whistleblower 14377-16W v. C.I.R., 148 T.C. 510 (2017).
So, how does one seal all or part of a case in the Tax Court? There are different rules for different case types. Tax Court Rule 345 sets forth privacy protections for petitioners in a Whistleblower action; Rule 103 governs Protective Orders in discovery disputes; and Rule 27 governs privacy protections generally, including redactions, sealing individual documents, and limiting electronic access to case information.
Let’s put aside those categorizations for a moment and think about these protections functionally. Conceptually, there could be three possible levels of privacy protection:
- Level 1: Redaction or abbreviation of sensitive information within a publicly available document.
- Level 2A: Sealing or redaction of an entire document, within a publicly available docket.
- Level 2B: Sealing of all documents within a publicly available docket.
- Level 3: Sealing the entire docket, with no public access to the docket.
Most Tax Court practitioners are familiar with Level 1 privacy protections. These appear routinely for LITCs that file petitions for taxpayers challenging the denial of refundable tax credits. We must often allege facts regarding minor children (i.e., where the child lived, their age, and their relationship to the taxpayer). Rule 27(a) provides that filings “should refrain from including or should take appropriate steps to redact . . . [1] Taxpayer identification numbers, [2] Dates of birth, [3] Names of minor children, and [4] Financial account numbers,” and provides guidance on how to redact this information (e.g., listing a child’s initials instead of the full name). Beyond these prescribed redactions, the Court may also require further redactions under Rule 27(d), including issuing a protective order under Rule 103(a).
Rule 27(c) also provides the possibility of Level 2 protection for information protected under Rule 27(a) if the Court orders it. The party would file an unredacted document under seal, while filing a redacted copy publicly. Presumably, this would allow the Court to view the unredacted information to the extent that the information would prove useful to a case’s disposition.
In the discovery context, Rule 103(a) provides for both Level 1 and Level 2 protection, within the discretion of the Court. For example, the Court may order “that a deposition or other written materials, after being sealed, be opened only by order of the Court.” Rule 103(a)(6). The Rule provides for other instances whereby the Court can order nondisclosure of a certain fact—which could presumably be accomplished by either Level 1 or Level 2 protection, again subject to the Court’s discretion.
Finally, Rule 345 provides for Level 2A and 2B protections in the Whistleblower context. While Rule 340 through 344 were promulgated shortly after the introduction of the Tax Court’s whistleblower jurisdiction in 2008, Rule 345 was promulgated in 2012 after the IRS and the National Taxpayer Advocate raised concerns primarily regarding the confidentiality of the target taxpayer, who is not a party to a whistleblower proceeding. Accordingly, Rule 345(b) provides protections for the taxpayer against whom the whistle was blown. The Rule specifically requires that parties “shall refrain from including … the name, address, and other identifying information of the taxpayer to whom the claim relates.” The Rule also requires filers to include a reference list, to be filed under seal, such that each redaction is appropriately identified. Note the difference between Rule 27(a) (“should refrain from including, or should take appropriate steps to redact”) and Rule 345(b) (“shall refrain from including, or shall take appropriate steps to redact…”). Rule 345 redactions are mandatory.
Rule 345(a) Motions to Proceed Anonymously—and the Related Sealing of the Tax Court Docket
On the other hand—and at issue in the whistleblower cases I discuss below—Rule 345(a) provides anonymity to the whistleblower only if he or she asks for it in the Tax Court proceeding and the Tax Court deems an anonymous proceeding appropriate. (The explanatory note accompanying Rule 345’s promulgation does not fully explain the necessity for or expound on the mechanics of an anonymity motion—though it does so for Rule 345(b)). To proceed anonymously, the petitioner must, along with the petition, file a motion, which must set forth “a sufficient, fact-specific basis for anonymity.” Upon filing the motion “the petition and all other filings shall be temporarily sealed pending a ruling by the Court . . . .” (emphasis added).
This seems to require automatic Level 2B protection (i.e., sealing all documents in the record), but not necessarily Level 3 protection (i.e., sealing the record itself) while the motion is adjudicated. But after the Court rules on the motion, there is no provision within Rule 345(a) for further privacy protections beyond anonymity of the petitioner and accompanying redactions in filed documents.
Nevertheless, the Tax Court’s current practice—as I discovered with the designated order this week—is to seal the entire docket pending resolution of the motion—and potentially thereafter as well. Because the entire docket is sealed, it’s frankly hard to tell when or why the Court would unseal a docket. Had Judge Buch’s order not been publicly accessible weeks earlier when we noted its existence, we wouldn’t even know that this particular docket existed.
What would justify an anonymous proceeding under Rule 345(a)? The Court engages in a balancing test between (1) the public’s right to know the whistleblower’s identity and (2) the potential harm to the whistleblower if his or her identity is revealed. See Whistleblower 14377-16W v. Comm’r, 148 T.C. 510, 512 (2017). The whistleblower, per Rule 345(a) must allege a “sufficient, fact-specific basis for anonymity.” The Court has determined that plausible threats of physical harm (see Whistleblower 12568-16W v. Comm’r, 148 T.C. 103, 107 (2017); Whistleblower 11332-13W v. Comm’r, 142 T.C. 396, 398 (2014); Whistleblower 10949-13W v. Comm’r, T.C. Memo. 2014-94), damage to employment relationships (see Whistleblower 14106-10W v. Comm’r, 137 T.C. 183 (2011)), and risk of losing employment-related benefits (see Whistleblower 13412-12W v. Comm’r, T.C. Memo. 2014-93) all constitute sufficient privacy interests for the petitioner to proceed anonymously.
But under this analysis, it’s merely the petitioner’s identity that remains confidential. Upon filing a motion to proceed anonymously, the record is automatically sealed as a precautionary matter, even though Rule 345(a) does not mandate this practice (“The petition and all other filings shall be temporarily sealed . . . .”) Sealing the record as a substantive matter is another question entirely. The Court addressed this matter in Whistleblower 14106-10W v. Commissioner, where the petitioner had requested the record to be sealed and, in the alternative, to proceed anonymously. The Court granted petitioner the alternative relief sought, as a “less drastic” form of relief that would still preserve the public’s right to an open court system. See Whistleblower 14106-10W, 137 T.C. at 189-91, 206-07. (This case occurred before the Court’s introduction of Tax Court Rule 345 in 2012.) Unfortunately, the Court didn’t delve too deeply into possible considerations that would justifying sealing the record.
So, here we are. The Tax Court apparently believes it has the inherent authority to seal the record in its entirety (as its current practice makes abundantly clear). As a statutory matter, notwithstanding any textual deficiency in Rule 345(a), the Tax Court could rely on its broad authority under section 7461(b)(1), and under its own rules. The Court can, under Rule 27(d), “require redaction of additional information” and may issue a protective order under Rule 103(a). That “additional information” and/or the protective order could presumably cover the entire docket.
Why Seal the Entire Docket? A Proposal for Change
What’s the normative basis for withholding all information from the public after a motion to proceed anonymously has been filed? There could be information in the petition or other filings that reveal the Whistleblower’s identity, trade secrets, or other confidential information. This is an understandable concern. However, the Rule’s automatic and complete approach sweeps too far against the public’s right to an open court system, including access to court records.
Under the common law, the public has a right to access judicial records. Openness and access are the baselines. As Judge Thornton intones in Whistleblower 14106-10W:
“[T]his country has a long tradition of open trials and public access to court records. This tradition is embedded in the common law, the statutory law, and the U.S. Constitution . . . . Consistent with these principles, section 7458 provides that hearings before the Tax Court shall be open to the public. And section 7461(a) provides generally that all reports of the Tax Court and all evidence received by the Tax Court shall be public records open to the inspection of the public.”
Whistleblower 14106-10W at 189-90.
Indeed, secret dockets were completely unheard of in English common law or during the country’s founding. See Press-Enterprise Co. v. Sup. Ct. Cal., 464 U.S. 501, 505-08 (1984). For an entertaining dive into this history and a review of other sealed dockets in more recent history, see Stephen W. Smith, Kudzu in the Courthouse: Judgments Made in the Shade, 3 Fed. Cts. L. Rev. 177 (2009).
This history has provided a basis for some courts to find that sealing dockets in their entirety violates the public’s First Amendment right of access to the courts. For example, Connecticut state courts maintained a “secret docket” throughout the 80s and 90s, hiding the misadventures of the state’s rich and famous litigants. The Second Circuit held that the public generally had a First Amendment right to access the courts’ docket information, subject to a case-by-case balancing of the individual litigants’ privacy interests. See Hartford Courant Co. v. Pellegrino, 380 F.3d 83 (2d. Cir. 2004). Additionally, the Eleventh Circuit held that the Middle District of Florida’s completely sealed criminal docket violated the First Amendment. See United States v. Valenti, 987 F.2d 708, 715 (11th Cir. 1993).
Of course, any court, including the Tax Court, may seal as much of the record as necessary. The Tax Court possesses statutory authority to do so in IRC § 7461(b)(1) and under its own Rules as previously described. The Supreme Court has recognized that a right of public access must be balanced against other interests. See Globe Newspaper Co. v. Sup. Ct., 457 U.S. 596, 606-07 (1982); Press-Enterprise Co., 464 U.S. at 510.
But when is sealing necessary and to what extent? No statutory mandate binds the Tax Court’s hands (unlike in, for example, qui tam actions under 31 U.S.C. § 3730(b), which in a 2009 study represented a plurality of sealed civil cases in federal district court). The appropriate use of its sealing authority lies entirely in the Court’s discretion.
Outside the Tax Court, openness of records is a presumption, able to be overcome only “where countervailing interests heavily outweigh the public interests in access.” United States v. Pickard, 733 F.3d 1297, 1302 (10th Cir. 2013) (citing Colony Ins. Co. v. Burke, 698 F.3d 1222, 1241 (10th Cir. 2012). Other circuits have adopted the Supreme Court’s test from the criminal context in Globe Newspaper Co., where the Court held that “the presumption of openness may be overcome only by an overriding interest based on findings that closure is essential to preserve higher values and isnarrowly tailored to serve that interest.” 457 U.S. at 606-07; see, e.g., United States v. Ochoa-Vasquez, 428 F.3d 1015, 1030 (11th Cir. 2005).
The Court’s current approach strikes the wrong balance, as it hides cases from public view in their entirety. This automatic and complete approach also portends serious First Amendment concerns. This prophylactic approach allows for no individualized assessment of the privacy interests at stake; while that interest is adjudicated later, this only relates to the anonymity decision, not whether to seal the entire docket. Further, the automatic and complete sealing that occurs seems decidedly untailored.
In my view, a more reasonable and less constitutionally problematic approach would be that of the U.S. Court of Appeals for the D.C. Circuit. We can run through an example to see this difference. In Tax Court Docket 14377-16W, the case is sealed. Trying to pull up the case on the Tax Court’s website reveals the following:
But, we have some insight into what occurred in this case because the Court issued a reviewed opinion in Whistleblower 14377-16W v. Commissioner, 148 T.C. 510 (2017). The Court denied petitioner’s motion to proceed anonymously, but, allowing for the possibility that petitioner would appeal that interlocutory decision, changed the case’s caption and continued to seal the docket to preserve petitioner’s anonymity.
Petitioner took the Tax Court up on its invitation and appealed the decision to the Eighth Circuit. The IRS objected to venue, because under the catchall provision of section 7482, proper venue for whistleblower cases lies in the D.C. Circuit, where the case was eventually transferred.
The dockets for both the Eighth Circuit and D.C. Circuit proceedings are partially open to the public—or at least, the part of the public that pays for PACER access. The Eighth Circuit docket even allows for access to some underlying motions, orders, and other documents. Notably, the Tax Court record and petitioner’s appellate motion to proceed under seal themselves remain sealed. This approach has some drawbacks, however, as petitioner revealed his identity in one of the unsealed filings. I will not do the same on this blog, but the filing remains available to anyone with a PACER account. Additionally, petitioner’s address is listed on the docket itself. While the former may be a foot fault on petitioner’s part, the latter seems an oversight by the Eighth Circuit.
The D.C. Circuit docket, in contrast, allows for no public access to any underlying document. It does helpfully list every proceeding on the docket itself. For example, we know that after the initial briefs were filed, the D.C. Circuit appointed an amicus to argue petitioner’s position (and file subsequent briefs). Oral argument was held on April 2, 2019 in a sealed courtroom and we’re now awaiting the D.C. Circuit’s opinion.
Could the Tax Court follow suit? The Court need not amend its Rule 345(a) to do so, given that textually, it requires only that the underlying filings are sealed. If the Court is concerned about petitioners inadvertently disclosing their private information, the Court may wish to amend Rule 345(b), which requires the filing of various identifying information on the petition itself in all cases. The Court could require any petitioner seeking anonymity to file an original petition under seal, while filing a redacted petition for public view. The petitions are not available online in any case, and so the Court could alternatively deny access to the underlying filings to parties who request hard copies while it adjudicates the motion for anonymity.
Anonymity would still need to be maintained online, but only orders and opinions are available online to non-parties. For these documents, the Court would have responsibility to ensure appropriate redactions. The Petitioner is also identified in the online docket, but it seems easy enough to change a petitioner’s name to “Whistleblower [Docket Number]” online.
The D.C. Circuit’s approach seems to strike the right balance: let the public know what’s going on generally, while preserving petitioners’ potential right to anonymity. By releasing select, non-sensitive information, the Court instills confidence in the public that secrecy has not affected the Court’s adherence to procedure and precedent. The Tax Court, which has in the past remedied its prior opaque nature, seems to have the legal and technical ability to follow the same approach; it ought to do so.