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Case TitleHighland Capital Management LP v. Internal Revenue Service
DistrictNorthern District of Texas
CityDallas
Case Number3:2017cv02906
Date Filed2017-10-20
Date Closed2019-04-02
JudgeSenior Judge A. Joe Fish
PlaintiffHighland Capital Management LP
Case DescriptionHighland Capital Management submitted a FOIA request to the IRS for records concerning the facts or legal analysis behind a Chief Counsel Advice issued to Highland Capital Management. The agency acknowledged receipt of the request and took a 10-day extension. After hearing nothing further from the agency, Highland Capital Management filed suit.
Complaint issues: Failure to respond within statutory time limit, Adequacy - Search, Litigation - Attorney's fees

DefendantInternal Revenue Service
Documents
Docket
Complaint
Complaint attachment 1
Opinion/Order [23]
FOIA Project Annotation: A federal court in Texas has ruled that the IRS conducted an adequate search for records related to a Chief Counsel Advice that was issued by the IRS to Highland Capital Management and that the agency properly withheld the majority of records because their public availability was specifically determined by § 6110(a) as well as Exemption 3 (other statutes) but ordered an in camera inspection of some of its exemption claims made under Exemption 5 (privileges) after finding that the agency had failed to sufficiently justify its invocation of the exemption. The agency's initial search located 76 responsive pages. A subsequent search located another 283 pages and 11 pages of responsive emails were also found. The agency withheld most of the records under § 6110(a). Highland argued that the agency's search was inadequate because it had required multiple searches. The court, however, disagreed, noting that "the fact that the IRS conducted multiple searches indicates that the IRS was complying with its FOIA obligations in good faith. Ultimately, because the court concludes that the IRS's declarations show that it used reasonable search methodology, and because the court is unconvinced by Highland's arguments to the contrary, the court concludes that the IRS has satisfied its burden of showing it conducted an adequate search." The court approved the agency's use of § 6110(a) which provides that "the text of any written determination and background file document relating to such written determinations shall be open to public inspection at such place as the Secretary may by regulations proscribe." The court pointed out that "the term 'written determination' as used in the statute includes Chief Counsel Advice" as well as records related to such advice." The court explained that "as such, it is section 6110 " not the FOIA " that exclusively provides Highland with the means to obtain these records." The court added that "since Highland's complaint did not state a claim seeking relief under section 6110, the Court concludes that it lacks jurisdiction to compel the IRS to produce these withheld documents. Moreover, even if the court had jurisdiction, this court would not be the proper venue for an action under 26 U.S.C. § 6110," which establishes that such an action must be brought in the Tax Court or the District Court for the District of Columbia. The IRS had also cited § 6103 as an Exemption 3 statute. Although Highland argued the agency had not provided sufficient detail to support its Exemption 3 claims, the court noted that "it appears logical that emails between Chief Counsel Attorneys, collected with respect to the possible existence of liability for taxpayers other than Highland, would necessarily have third party tax information that should be withheld in part." The court found the agency's affidavits did not support its invocation of the attorney-client privilege and the deliberative process privilege. Finding that the agency had shown that the records it claimed were exempt under the deliberative process privilege were predecisional, the court observed that the agency had yet failed to show that they were deliberative. The court pointed out that "the IRS's declarations offer the court nothing more than opaque explanations as to how the withheld records contributed to the agency's deliberations, such as statements that the withheld records contain 'thoughts and rationale that may not have been reflected in the published CCA' or 'the deliberations of employees of the [IRS] or their counsel.' Precedent makes clear that the IRS must do more to establish that the deliberative process privilege applies to the withheld records."
Issues: Exemption 3 - Limited agency discretion, Exemption 5 - Privileges
User-contributed Documents
 
Docket Events (Hide)
Date FiledDoc #Docket Text

2017-10-201COMPLAINT against Internal Revenue Service filed by Highland Capital Management LP. (Filing fee $400; Receipt number 0539-8754024) Clerk to issue summonses for federal and non-federal defendants. In each Notice of Electronic Filing, the judge assignment is indicated, and a link to the Judges Copy Requirements is provided. The court reminds the filer that any required copy of this and future documents must be delivered to the judge, in the manner prescribed, within three business days of filing. Unless exempted, attorneys who are not admitted to practice in the Northern District of Texas must seek admission promptly. Forms, instructions, and exemption information may be found at www.txnd.uscourts.gov, or by clicking here: Attorney Information - Bar Membership . If admission requirements are not satisfied within 21 days, the clerk will notify the presiding judge. (Attachments: # 1 Cover Sheet) (Allen, Katherine) (Entered: 10/20/2017)
2017-10-202CERTIFICATE OF INTERESTED PERSONS/DISCLOSURE STATEMENT by Highland Capital Management LP. (Allen, Katherine) (Entered: 10/20/2017)
2017-10-203New Case Notes: A filing fee has been paid. Pursuant to Misc. Order 6, Plaintiff is provided the Notice of Right to Consent to Proceed Before A U.S. Magistrate Judge (Judge Stickney). Clerk to provide copy to plaintiff if not received electronically. (ran) (Entered: 10/20/2017)
2017-10-204Summons issued as to Internal Revenue Service, U.S. Attorney, and U.S. Attorney General. (ran) (Entered: 10/20/2017)
2017-10-255ORDER: Within 15 days of the date of this order, Timothy L. Jacobs, Esquire shall either (1) provide to the court, and to the clerk of court, satisfactory documentation of membership or (2) apply for membership in the Bar of this court or for admission pro hac vice for this case. (Ordered by Senior Judge A. Joe Fish on 10/25/2017) (ran) (Entered: 10/25/2017)
2017-10-276Application for Admission Pro Hac Vice with Certificate of Good Standing for Attorney Timothy L. Jacobs (Filing fee $25; Receipt number 0539-8769277) filed by Highland Capital Management LP (Attachments: # 1 Certificate of Good Standing, # 2 Proposed Order) (Allen, Katherine) (Entered: 10/27/2017)
2017-11-027ORDER granting 6 Application for Admission Pro Hac Vice of Timothy L. Jacobs. If not already done, Applicant must register as an ECF User within 14 days (LR 5.1(f)). (Ordered by Senior Judge A. Joe Fish on 11/2/2017) (epm) (Entered: 11/02/2017)
2017-12-208ANSWER to 1 Complaint filed by Internal Revenue Service. Unless exempted, attorneys who are not admitted to practice in the Northern District of Texas must seek admission promptly. Forms and Instructions found at www.txnd.uscourts.gov, or by clicking here: Attorney Information - Bar Membership . If admission requirements are not satisfied within 21 days, the clerk will notify the presiding judge. Attorney Stephanie Sasarak added to party Internal Revenue Service(pty:dft) (Sasarak, Stephanie) (Entered: 12/20/2017)
2017-12-209ORDER: No later than 20 days after this order is filed, defendant must comply with Rule 3.1(c) or 3.2(e) so that the court can ensure that recusal is not required in this case. (Ordered by Senior Judge A. Joe Fish on 12/20/2017) (chmb) (Entered: 12/20/2017)
2017-12-2010STATUS REPORT ORDER: Joint Status Report due by 1/10/2018. See order for specifics. (Ordered by Senior Judge A. Joe Fish on 12/20/2017) (chmb) (Entered: 12/20/2017)
2018-01-0211CERTIFICATE OF INTERESTED PERSONS/DISCLOSURE STATEMENT by Internal Revenue Service. (Sasarak, Stephanie) (Entered: 01/02/2018)
2018-01-0912Joint STATUS REPORT filed by Highland Capital Management LP. (Allen, Katherine) (Entered: 01/09/2018)
2018-01-1613ORDER: The defendant shall file and serve the anticipated motion for summary judgment no later than 4/30/2018. A response and reply may be filed in accordance with the local rules. (Ordered by Senior Judge A. Joe Fish on 1/16/2018) (sss) (Entered: 01/16/2018)
2018-01-1914NOTICE of Plaintiff's Initial Disclosures filed by Highland Capital Management LP (Allen, Katherine) (Entered: 01/19/2018)
2018-04-3015MOTION for Summary Judgment filed by Internal Revenue Service with Brief/Memorandum in Support. (Attachments: # 1 Proposed Order) (Sasarak, Stephanie) (Entered: 04/30/2018)
2018-04-3016Brief/Memorandum in Support filed by Internal Revenue Service re 15 MOTION for Summary Judgment (Sasarak, Stephanie) (Entered: 04/30/2018)
2018-04-3017Appendix in Support filed by Internal Revenue Service re 15 MOTION for Summary Judgment (Sasarak, Stephanie) (Entered: 04/30/2018)
2018-05-2118RESPONSE filed by Highland Capital Management LP re: 15 MOTION for Summary Judgment (Sharp, Joel) (Entered: 05/21/2018)
2018-05-2119Appendix in Support filed by Highland Capital Management LP re 18 Response/Objection (Sharp, Joel) (Entered: 05/21/2018)
2018-05-2520MOTION for Extension of Time to File Response/Reply to 15 MOTION for Summary Judgment , 18 Response/Objection filed by Internal Revenue Service with Brief/Memorandum in Support. (Attachments: # 1 Proposed Order) (Sasarak, Stephanie) (Entered: 05/25/2018)
2018-05-3121ORDER granting 20 Motion to Extend Time to File Response/Reply. Replies due by 6/11/2018. (Ordered by Senior Judge A. Joe Fish on 5/31/2018) (rekc) (Entered: 05/31/2018)
2018-06-1122REPLY filed by Internal Revenue Service re: 15 MOTION for Summary Judgment (Attachments: # 1 Affidavit(s) Second Declaration of Christopher Valvardi) (Sasarak, Stephanie) (Entered: 06/11/2018)
2019-03-1523MEMORANDUM OPINION AND ORDER granting in part and denying in part 15 Motion for Summary Judgment. For the records on which summary judgment is denied, i.e., those records withheld due to FOIA Exemption Five (attorney-client privilege) and FOIA Exemption Five (deliberative process privilege), the IRS shall, within 15 days of this date, file those records under seal for in camera inspection by the court. (Ordered by Senior Judge A. Joe Fish on 3/15/2019) (zkc) (Entered: 03/15/2019)
2019-03-2724NOTICE of Compliance re: 23 Memorandum Opinion and Order, filed by Internal Revenue Service (Sasarak, Stephanie) (Entered: 03/27/2019)
2019-04-0225Order: Summary judgment is GRANTED in favor of the IRS with respect to the documents withheld under FOIA Exemption Five. (Ordered by Senior Judge A. Joe Fish on 4/2/2019) (svc) (Entered: 04/03/2019)
2019-04-0226JUDGMENT: The Internal Revenue Service's motion for summary judgment is GRANTED; Judgment is entered in favor of the Internal Revenue Service. (Ordered by Senior Judge A. Joe Fish on 4/2/2019) (svc) (Entered: 04/03/2019)
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by FOIA Project Staff
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