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 the limits of judicial oversight on agency resource decisions in the context of Freedom of Information Act request processing.
It can be frustrating waiting for IRS responses to Freedom of Information Act requests. While FOIA allows access to the courts when an agency fails to respond timely, the recent case of The 2005 Robert Julien Family Delaware Dynasty Trust v. IRS, No. 9:23-cv-80756 (S.D. Fla. 2024), highlights the relationship between discovery under the Federal Rules of Civil Procedure and FOIA. The case reveals limits on what a court may do if the IRS fails to dedicate sufficient resources to ensure that FOIA requests are responded to in a timely way. While district court judges wield broad powers, there are limits on what an Article III judge may be willing to compel an agency to do. At the same time, as Robert Julien Family Delaware Dynasty Trust illustrates, if an agency fails to timely address a FOIA request, it may open the door to discovery that will explore the agency’s efforts (or lack of effort) in responding.
I recently discussed Protect the Public’s Trust v. IRS, No. 23-cv-340 (D.D.C. 2024), which raised a novel FOIA issue in the context of a public interest organization seeking to find any information concerning the relationship between former IRS executives and executives of FTX, the bankrupt crypto exchange and hedge fund. In that case, the IRS quickly rejected a FOIA request as essentially nonprocessible. When Protect the Public’s Trust sued, the IRS reversed course and agreed to do the search, and quickly informed the court that there were no responsive documents. In an important opinion, Protect the Public’s Trust held that if an agency improperly fails to consider a FOIA request, a party may still be entitled to attorney’s fees even if a FOIA search ultimately comes up empty.
Robert Julien Family Delaware Dynasty Trust v. IRS presents a different set of facts but also highlights a novel FOIA issue. Rather than being brought by a party interested in general issues of transparency and government oversight, Robert Julien Family Delaware Dynasty Trust (“the Trust”) submitted a FOIA request to the IRS to uncover information about an IRS examination and penalty assessment relating to the 2005 and 2006 tax years. (This type of FOIA request is known a first-person FOIA request; see Margaret Kwoka, “First-Person FOIA,” 127 Yale Law Journal 2204 (2018)).
Approximately two years after the initial request, in December 2021 the Trust supplemented the initial FOIA request, seeking additional information relating to the penalty assessment. In December 2022 the IRS finally responded, telling the Trust that it located 4,868 responsive pages. The IRS released 1,749 pages in full, 131 partially redacted pages, and withheld 2,988 pages in full based on FOIA exemptions. A few months later, on March 7, 2023, IRS notified the Trust that it found another approximately 4,851 pages and withheld all but 37 pages based on FOIA exemptions.
In May 2023, frustrated with the slow pace and limited documents it received, the Trust filed suit in federal court, seeking a declaratory judgment and an injunction relating to the IRS’s failure to act in accordance with FOIA’s time requirements.
In its answer, the IRS admitted that it failed to comply with the time limits set out in FOIA (by the way, under FOIA, the government is supposed to respond withing 20 days, a ridiculously short amount of time). That admission led to the Trust serving discovery requests on the IRS, as well as informing the IRS that it intended to call an expert witness to opine that the IRS could be processing requests faster and that “the IRS has failed to comply with its duties promptly and reasonably to comply with the subject FOIA requests.”
The IRS objected to the discovery request. Under Federal Rule of Civil Procedure 26(b)(1), discovery must be relevant to well-pleaded claims and proportional to the needs of the case.
The opinion explores the limited role of discovery in FOIA cases. In FOIA matters, courts may allow discovery if there are plausible allegations of agency bad faith in considering or processing requests. Agency bad faith can lead a court to order accelerated processing, though discovery is not meant to be used for the “‘bare hope of falling upon something that might impugn the affidavits’ submitted by the agency.” Founding Church of Scientology v. NSA, 610 F.2d 824, 836–37 n. 101 (D.C. Cir. 1979) cited in Pub. Citizen Health Rsch. Grp. v. F.D.A., 997 F. Supp. 56, 73 (D.D.C. 1998) (citation omitted), aff'd in part, rev'd in part and remanded sub nom. Pub. Citizen Health Rsch. Grp. v. Food & Drug Admin., 185 F.3d 898 (D.C. Cir. 1999).
The Trust’s Allegations of Bad Faith
The IRS informed the Trust and the court that it had only processed about one-third of the pages that were related to the Trust’s FOIA request. The Trust alleged that the IRS acted in bad faith, pointing to the IRS’s slow pace in responding and processing. According to the Trust, it needed discovery to find facts “supporting the conclusion that the process by which the IRS reviews documents in response to FOIA requests is inadequately designed and inadequately implemented, its personnel assigned to the task are poorly trained and are denied access to modern document review technology.”
The Trust intended as well to use the expert to show that the IRS was not using appropriate e-discovery technology that litigants use in class action or multi-district litigation.
The government objected to any discovery, and the opinion explores that while it has the power to compel the IRS to process the matter faster, it can only do so much in fashioning a remedy:
In evaluating the proportionality factors, it is also important to consider what remedies are (and are not) available. The Trust may be entitled to an order that would require the IRS to process the Request faster. Although FOIA authorizes this kind of relief, it has practical limits. An enjoined party must have the ability to comply. F.T.C. v. Leshin, 618 F.3d 1221, 1232 (11th Cir. 2010). To that end, an Article III court must be sensitive to an Executive Branch agency's ability to expend public funds or to reallocate its workforce. Put simply, this Court cannot simply order the IRS to buy better software or hire more people. The Court also must be mindful of other demands on the IRS's FOIA resources. Deference must be given to the agency's decision on how to prioritize its workload.
That led the court to deny the Trust’s request for discovery that considered the IRS’s use (or lack of use) of e-discovery technology and techniques, as the court stated that it had “extremely limited” power to compel the IRS to use or purchase technology and that any such “evidence is not proportional to the needs of the case; it is not important enough to resolving the issues in the case to justify the expense or the diversion of IRS resources to respond.”
While the government prevailed on much of the discovery dispute, it was not a complete victory. The government sought an order denying the Trust’s right to use an expert; that request was premature, as a challenge to a possible use of an expert would require a separate motion once the expert was identified and the Trust sought that testimony.
More importantly, the court did find that the slow pace of the government’s response supported a credible allegation of bad faith:
The Trust has made a sufficient showing of possible bad faith to entitle it to limited discovery. As its evidence of bad faith and therefore a justification for discovery, the Trust points to the pace of production. The Request has been pending for over four years. At the current estimated pace, the production will not be completed for another three years. The IRS has processed only approximately 1/3 of the responsive documents (approximately 12,000 out of 27,700). This pace is longer than the median and average production times for complex requests. Full production at the IRS's proposed pace will exceed the longest production period from FY 2022 (1696 days–approximately 4.6 years). This evidence justifies limited discovery into how the IRS is processing the Request, but not broader discovery of the IRS's internal training, policies, or procedures. There is no evidence that the IRS is not complying with its own policies and procedures, or that the IRS personnel assigned to this case are not properly trained.
Conclusion
While agency resource decisions are generally free from judicial scrutiny, this opinion opens the door for some limited discovery concerning the processing approach that IRS has taken in the particular matter. By closing the door to broader discovery, the opinion highlights that even if there may be some reasonable technology-driven ways for the IRS to more efficiently review documents, it is not typically within the court’s power to even explore agency resource issues in the context of a FOIA dispute.