Smart-Tek Services, Inc. v. United States Internal Revenue Service

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SMART-TEK SERVICES, INC.,

Plaintiff-Appellant,

v.

UNITED STATES INTERNAL REVENUE
SERVICE,

Defendant-Appellee.

No. 18-56560

D.C. No.
3:15-cv-00449-BTM-JMA

MEMORANDUM
*

TRUCEPT, INC., FKA Smart Tek
Solutions, Inc.,

Plaintiff-Appellant,

v.

UNITED STATES INTERNAL REVENUE
SERVICE,

Defendant-Appellee.

No. 18-56562

D.C. No.
3:15-cv-00447-BTM-JMA

AMERICAN MARINE, LLC,

Plaintiff-Appellant,

v.

No. 19-55057

D.C. No.
3:15-cv-00455-BTM-LL

*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FILED

NOV 5 2020

MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

2

UNITED STATES INTERNAL REVENUE
SERVICE,

Defendant-Appellee.

SMART-TEK AUTOMATED SERVICES,
INC.,

Plaintiff-Appellant,

v.

UNITED STATES INTERNAL REVENUE
SERVICE,

Defendant-Appellee.

No. 19-55058

D.C. No.
3:15-cv-00453-BTM-LL

SMART-TEK SERVICE SOLUTIONS
CORP.,

Plaintiff-Appellant,

v.

UNITED STATES INTERNAL REVENUE
SERVICE,

Defendant-Appellee.

No. 19-55059

D.C. No.
3:15-cv-00452-BTM-LL

Appeal from the United States District Court
for the Southern District of California
Barry Ted Moskowitz, District Judge, Presiding

Argued and Submitted July 20, 2020
Pasadena, California

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Before: BEA and BADE, Circuit Judges, and DRAIN,
**
District Judge.

After Appellee Internal Revenue Service (“IRS”) recorded tax liens against
Appellants Smart-Tek Services, Inc., Trucept, Inc., American Marine, LLC, Smart-
Tek Automated Services Inc., and Smart-Tek Service Solutions Corp. (collectively,
the “Companies”) based on its determination tha t the Companies were alter egos of
other entities with delinquent payroll tax liabilities, the Companies sent requests to
the IRS seeking each entity’s employment, corporate, and partnership tax returns
under the Freedom of Information Act, 5 U.S.C. § 552 (“FOIA”). In this
consolidated appeal, the Compa ni es challenge the district court’s orders granting
summary judgment in favor of the IRS and finding tha t the IRS conducted an
adequate search responsive to the Companies’ FOIA requests and that the IRS
properly withheld the allege d alter egos’ taxpayer return information under FOIA
Exemption 3 and 26 U.S.C. § 6103(a). We have jurisdiction pursuant to 28 U.S.C.
§ 1291.
We review de novo the district court’s summary judgment ruling. Id. To
merit summary judgment in a FOIA case, the agency must:
demonstrate that it has conducted a search reasonably calculated to
uncover all relevant documents. Further, the issue to be resolved is
not whether there might exist any other documents possibly
responsive to the request, but rather whether the search for those

**
The Honorable Gershwin A. Drain, United States District Judge for the
Eastern District of Michigan, sitting by designation.

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documents was adequate. The adequacy of the search, in turn, is
judged by a standard of reasonableness and depends, not surprisingly,
upon the facts of each case. In demonstrating the adequacy of the
search, the agency may rely upon reasonably detailed, nonconclusory
affidavits submitted in good faith.

Zemansky v. U.S. EPA, 767 F.2d 569, 571 (9t h Cir. 1985) (int erna l quotation marks
omitted) (quoting Weisbe rg v. U.S. Dep’ t of Jus tice, 745 F.2d 1476, 1485 (D.C.
Cir. 1984)). “Agency affidavits are accorded a presumption of good faith, which
cannot be rebutted by purely speculative claims about the existence and
discoverability of other documents.” SafeCard Servs., Inc. v. SEC, 926 F.2d 1197,
1200 (D.C. Cir. 1991) (int erna l quotation marks and citation omitted).
Here, the IRS demonstrated that it “conducted a search reasonably calculated
to uncover all relevant documents” in response to the Companies’ FOIA requests.
Hamdan v. U.S. Dep’ t of Jus tice, 797 F.3d 759, 770–72 (9t h Cir. 2015) (quoting
Zemansky, 767 F.2d at 571). IRS disclosure spe cialists scanned all documents—
from both the Compa ni es and the ir allege d alter egos—into electronic format and
reviewed each page of each document , looking for any documents with the
Companies’ identifying information. In all, the IRS revi ewed mor e tha n 140,000
pa ge s. If a document contained the return information of one of the Companies, it
was marked responsive. The IRS created an index and catalogued which pages
were responsive and which pages were non-responsive to ensure that each page in
all sixt y- five boxes was reviewed. IRS attor ne ys the n revi ewed the document s and

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de termine d whe the r a FOIA exe mpt ion appl ied. The Compa nies “were ent itled to
a reasonabl e search” for responsive recor ds “[a]nd a reasonabl e search is wha t the y
got.” Id. at 772. The district court correctly determined that the IRS compl ied
with its obliga tions to search for releva nt recor ds .
Not withs tanding the reasonabl e search, the Companies argue that the IRS
improperly withheld documents containi ng inf or mation about the ir allege d alter
egos. The y argue that once the IRS collected the recor ds of the Companies and
the ir allege d alter egos and commingl ed them into one file, everything in tha t file
became part of the Companies’ administrative file to whi ch the y were ent itled.
Thus, the Companies argue, it was impr oper for the IRS to withhold records
containi ng the ir allege d alter egos’ return inf ormation merely because those
records did not contain the Companies’ return information.
But the Compa ni es’ argument misses the simpl e point : the y di d not reque st
thi s inf or mation in the ir FOIA requests. The Compa ni es ha d the duty to
“reasonably describe[]” the records the y sought. 5 U.S.C. § 552(a)(3)(A). This
requirement is generally satisfied if the request provides “the name, taxpayer
identification number (e.g., social security number or employer identification
number), subject matter, location, and years at issue, of the requested records.”
Treas. Reg. § 601.702(c)(5)(i). Howeve r, each of the Compa ni es submitted a
request for its own employment, corporate, and partnership tax returns and listed

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only its own specific entity’s name and taxpayer identification number; none of the
Companies listed the na mes or taxpaye r ide nt ification numbe rs of the ir allege d
alter egos. Becaus e the Compa ni es seek document s tha t are outside the scope of
the ir FOIA requests, the Companies are not ent itled to those document s thr ough
thi s pa rticul ar proc ess. Consequent ly, we ne ed not reach the issue of whe the r the
IRS pr ope rly withheld the se document s pur sua nt to FOIA Exe mption
3 and 26
U.S.C. § 6103(a). We affirm the di strict court’s or de rs gr ant ing summary
judgment.
AFFIRMED.