Sealing Cases or Documents in Tax Court

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We welcome back guest blogger Bob Kamman. Bob practices in Phoenix. He writes today about sealing the record in the context of a whistleblower case. The Tax Court faces this request in other contexts as well and we have covered the issue before here and here. Bob also raises some general privacy issues at the end of his post that deserve attention. Keith

We know that sometimes the government will ask that a case it files be sealed until later developments make public disclosure appropriate. In Tax Court, the government never files the case, but there are circumstances when the petitioner can ask for privacy or secrecy.

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In recent years, most of these sealed cases involve “Whistleblowers” who claim that they are owed an award under Section 7623 for helping the IRS collect from taxpayers who otherwise would have escaped detection. In a ruling last June, the Tax Court ruled that such whistleblowers are not always entitled to confidentiality. That case is still sealed, suggesting that it has been appealed. According to a footnote, “At least four United States Courts of Appeal have held that orders denying leave to proceed under a pseudonym are immediately appealable as collateral orders.”

Not every whistleblower is anonymous. However, even when the petitioner’s name is disclosed, the name of the taxpayer to whom the claim relates must be sealed. That was the point of this April 2017 order in the James Awad case.

Aside from whistleblower cases, when will the Tax Court consider sealing a case? That was reviewed in the Sport Card case (principal petitioners are the McWilliams), where the facts were:

Petitioner in No. 15049-12 filed his petition on June 12, 2012, to which was attached a notice of deficiency issued by the Internal Revenue Service (“IRS”) on March 15, 2012. Petitions in three related cases were filed later that same year, and the cases were consolidated in January 2014. The records in these cases were, as usual, open to the public pursuant to section 7461. Almost three years after the first petition was filed, petitioners first moved on June 5, 2015, for a protective order to seal the record in the consolidated cases, but they thereafter withdrew the motion. On January 27, 2017–four years and nine months after the first petition was filed (during which time the record has been open)–petitioners again moved for a protective order, again requesting that the Court seal the entire record in these consolidated cases, or, alternatively, that the Court seal the public electronic docket index available on the Tax Court website.

Judge Gustafson reviewed the applicable law:

Section 7458 provides that “[h]earings before the Tax Court and its divisions shall be open to the public”; and section 7461(a) provides that, “[e]xcept as provided in subsection (b), all reports ofthe Tax Court and all evidence received by the Tax Court and its divisions, including a transcript of the stenographic report of the hearings, shall be public records open to the inspection of the public.”

Section 7461(b) provides two exceptions. The latter (section 7461(b)(2)) may apply after the decision of the Tax Court has become final (which is not the case here.) The former, section 7461(b)(1), provides that “[t]he Tax Court may make any provision which is necessary to prevent the disclosure of trade secrets or other confidential information, including a provision that any document or information be placed under seal to be opened only as directed by the court.”

Tax Court Rule 103 (“Protective Orders”) provides in subsection (a) that, upon motion and for “good cause shown,” the Court may make any order which justice requires to protect a party or other person from annoyance, embarrassment, oppression, or undue burden or expense.

Common law, statutory law, and the United States Constitution generally support the proposition that official Tax Court records are open for public inspection. Willie Nelson Music Co., 85 T.C. at 917 (citing Nixon v. Warner Communications, Inc., 435 U.S. 589, 597 (1978)). “Nevertheless, the presumptive right to access may be rebutted by a showing that there are countervailing interests sufficient to outweigh the public interest in access.” 85 T.C. at 919.

And perhaps not surprisingly, Judge Gustafson then denied the motion to seal some or all of the case file:

Petitioners have failed to demonstrate such countervailing interests. While we assume correct the facts laid out in petitioners’ motion and supporting declaration, many of them took place years ago, and some of them apparently bear no possible relationship to this case or anything filed herein.

Two pending Tax Court cases where records are sealed illustrate these two branches of the exceptions to public access and disclosure.

The first branch is protection of trade secrets, which is the most likely reason that a major media organization, generally expected to be an advocate for open courts, has requested that the details of several related cases be sealed. The case, filed in February 2017, involves Bloomberg L.P., the financial news service whose majority owner is former New York City mayor Michael Bloomberg. (Bloomberg LP won a Freedom of Information Act case against the Federal Reserve Bank in 2010.)

In June 2017, IRS moved to unseal the petition and answer. That motion is still under consideration. Meanwhile, the petitioners have requested that the place of trial be changed from San Francisco, as it originally requested, to New York. The docket is here.

The second branch of Rule 103 is protection of “a party or other person from annoyance, embarrassment, oppression, or undue burden or expense.” That seems to apply in the case of a cable-television personality who filed his petition in July 2017, asking that the case be sealed.

The petitioner and his partner are surrogate parents of two children born in 2010 and 2011, the years involved in the Tax Court case, along with 2012. One might think that caused the privacy request, but those facts have been reported already, apparently with petitioner’s assistance, in People magazine and elsewhere.

The detail that caused the request for sealing is simply the petitioner’s home address, according to Judge Armen’s September 28, 2017 order.

Petitioner is represented by counsel, whose mailing address is part of the record. But as in all cases, the petitioner was required to attach a copy of the Notice of Deficiency to his petition, and presumably it shows his home address. Judge Armen explained:

Respondent contends in his aforementioned Response that the information petitioner seeks to keep confidential is “currently readily available to the public.” . . . In addition, the allegations made in the pending motion and the affidavit attached thereto may be described as general, non-specific, and conclusory in nature. On the other hand, a fair reading of petitioner’s motion indicates that the only matter that petitioner seeks to keep confidential is his street address, which is a matter that should have no bearing on the disposition of the substantive issues raised by respondent’s notice of deficiency and in the petition for redetermination.

So, Judge Armen approved a redacted petition, identical to the one filed under seal except for the home address, and ordered a redacted pleading from IRS that omits the address.

The exact location of the home might deserve greater protection because petitioner is an interior decorator and photos of his own home have been featured on the “Traditional Home” website.

Petitions and notices of deficiency are not accessible online, except by the parties themselves, but may be found by a visit to the Tax Court building in Washington, D.C. Petitioners are already instructed to expunge Social Security numbers from notices, returns and other evidence submitted to the Tax Court case file.   The SSN instead is listed on a separate filing that is not open for public inspection.

Is there some reason that one petitioner’s home address deserves protection, more so than another’s? Should counsel for Tax Court petitioners now ask their clients if they have a good reason to shield their address from the public? In some cases, the address is essential for a ruling on whether the Notice of Deficiency was mailed to the petitioner’s last-known address. But what would be the harm from adding home address to SSN on the separate filing that is not disclosed?

 

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