State of New York
Supreme Court, Appellate Division
Third Judicial Department
Decided and Entered: July 21, 2016 522169
________________________________
In the Matter of MOODY'S
CORPORATION AND
SUBSIDIARIES,
Respondent-
Appellant, MEMORANDUM AND ORDER
v
NEW YORK STATE DEPARTMENT OF
TAXATION AND FINANCE et al.,
Appellants-
Respondents.
________________________________
Calendar Date: May 26, 2016
Before: Lahtinen, J.P., Rose, Lynch, Clark and Aarons, JJ.
__________
Eric T. Schneiderman, Attorney General, Albany (Robert M.
Goldfarb of counsel), for appellants-respondents.
Sutherland Asbill & Brennan LLP, New York City (Marc A.
Simonetti of counsel), for respondent-appellant.
__________
Lynch, J.
Cross appeal from a judgment of the Supreme Court (Elliott
III, J.), entered September 11, 2015 in Albany County, which
partially granted petitioner's application, in a proceeding
pursuant to CPLR article 78, to annul two determinations of
respondent Department of Taxation and Finance partially denying
petitioner's Freedom of Information Law requests.
Petitioner, a Delaware corporation headquartered in New
York, operates a credit rating agency that analyzes financial
-2- 522169
information and also generates and publishes opinions concerning
debt instruments and securities (i.e., credit ratings) in press
releases and on the Internet. In April 2014, petitioner
submitted a Freedom of Information Law (see Public Officers Law
art 6 [hereinafter FOIL]) request to respondent Department of
Taxation and Finance seeking all records "relating to the
sourcing of credit rating receipts for tax years 2004 to
present." By its June 2014 response, the Department's Record
Access Office agreed to release certain documents, including
petitioner's audit file, and identified 807 pages that were
responsive but were withheld as exempt. When that office
released the audit file in August 2014, five pages were released
with redactions and 178 pages were withheld as exempt.
Petitioner filed administrative appeals challenging the
Department's initial FOIL responses. By an August 2014 response,
the Department's Records Appeals Officer (hereinafter ROA)
reviewed the 807 pages of documents withheld in June 2014 and
determined that three pages were blank and 12 were not
responsive. Of the remaining 792 pages, the RAO released 68
without redactions and 13 redacted pages and upheld the
determination withholding the remaining 711 pages. In a
September 2014 determination regarding petitioner's audit file,
the RAO upheld the redaction of the five pages, released an
additional 26 pages without redactions and released an additional
six redacted pages. The RAO upheld the determination to withhold
the remaining 146 pages of documents.
In December 2014, petitioner commenced this CPLR article 78
proceeding to challenge the Department's August 2014 and
September 2014 determinations. In response, the Department
answered and submitted two privilege logs and all of the
documents that had been withheld or redacted to Supreme Court for
its review. The Department also submitted an affirmation by the
RAO who advised that the Department had failed to include a five-
page attachment to an email that was exempt from disclosure. In
February 2015, petitioner served the Department with a notice to
admit pursuant to CPLR 3123. Respondents served a response
wherein they admitted and denied certain facts and objected to
the relevancy of the remaining requests. Petitioner moved to
strike the Department's response and for an order deeming its
-3- 522169
requests to be admitted. Supreme Court denied the motion to
strike and, after conducting an in camera review of all the
responsive documents, partially granted the petition. More
specifically, the court determined that an additional 13
unredacted pages and four redacted pages should have been
provided and otherwise upheld the Department's FOIL response.
Both petitioner and the Department now appeal.
Upon receipt of a FOIL request, an agency is "duty bound to
conduct a diligent search of the records in its possession
responsive to the request and to state, in writing, the reason
for the denial of access" (Matter of West Harlem Bus. Group v
Empire State Dev. Corp., 13 NY3d 882, 884 [2009] [internal
quotation marks and citation omitted]; see Public Officers Law
§ 89 [3] [a]; [4] [a]; 21 NYCRR 1401.7 [b]). The agency's
response must not "merely parrot[]" the statutory language of the
FOIL exemptions (Matter of West Harlem Bus. Group v Empire State
Dev. Corp., 13 NY3d at 884), but must "adequately describe[] the
documents withheld and set forth the reasons for withholding
them" (Matter of Miller v New York State Dept. of Transp., 58
AD3d 981, 984 [2009], lv denied 12 NY3d 712 [2009]; see Matter of
Kaufman v New York State Dept. of Envtl. Conservation, 289 AD2d
826, 827 [2001]). Where, as here, a party is challenging an
administrative determination to withhold or redact documents that
are responsive to a FOIL request, the proper procedure is to
commence a CPLR article 78 proceeding where the agency's burden
to "articulat[e] a particularized and specific justification for
denying access" (Matter of Rose v Albany County Dist. Attorney's
Off., 111 AD3d 1123, 1125 [2013] [internal quotation marks and
citations omitted]) may be satisfied through the submission of
the responsive documents with a privilege log (see Matter of
Mazzone v New York State Dept. of Transp., 95 AD3d 1423, 1425
[2012]; Matter of Kaufman v New York State Dept. of Envtl.
Conservation, 289 AD2d at 827).
Here, there is no reason for us to consider petitioner's
claims with regard to the adequacy of the administrative
responses because, by submitting the documents and the log for
Supreme Court's review, the Department properly responded to
petitioner's challenge pursuant to CPLR article 78 (see Matter of
Rose v Albany County Dist. Attorney's Off., 111 AD3d at 1125;
-4- 522169
Matter of Kaufman v New York State Dept. of Envtl. Conservation,
289 AD2d at 827). Further, while we agree with petitioner that,
generally, judicial review of an administrative determination
will be "limited to the grounds invoked by the agency at the time
of its determination" (Matter of Rose v Albany County Dist.
Attorney's Off., 111 AD3d at 1125), its claim that the Department
raised new grounds in the CPLR article 78 proceeding is belied by
the record. Moreover, this standard does not necessarily apply
and such grounds may be considered where, as here, the privacy
rights of a nonparty are at issue (see id.).
We next consider petitioner's challenge with regard to
Supreme Court's determination that certain records were properly
withheld or redacted under the statute. Our in camera review
reveals that the responsive documents identified by the
Department are emails, draft agreements, a final closing
agreement, draft correspondence and correspondence from and
regarding petitioner and nonparty taxpayers. Privilege Log F-
02170 identifies documents regarding another taxpayer and
Privilege Log F-02261 identifies documents regarding the
Department's audit of petitioner. The Department asserted that
many of the records were exempt pursuant to both Public Officers
Law § 87 (2) (a) and (g). The former exemption provides that
records that "are specifically exempted from disclosure by state
or federal statute" are not subject to FOIL (Public Officers Law
§ 87 [2] [a]). In response to petitioner's FOIL request,
respondents cited Tax Law § 211 as a basis to deny access to
certain responsive documents. In relevant part, this statute
provides that "it shall be unlawful for any tax commisioner, any
officer or employee of the [Department], . . . or any person
who[,] in any manner may acquire knowledge of the contents of a
report filed pursuant to [Tax Law article 9-A], to divulge or
make known in any manner the amount of income or any particulars
set forth or disclosed in any report under [Tax Law article 9-A]"
except that respondent Commissioner of Taxation and Finance "may
. . . publish a copy or a summary of any determination or
decision rendered after the formal hearing provided for in [Tax
Law § 1089]" (Tax Law § 211 [8] [a]).
Based on our in camera review of the documents submitted to
Supreme Court, we agree with Supreme Court's determination that
-5- 522169
certain documents, or the redacted portions thereof, were
properly withheld pursuant to Public Officers Law § 87 (2) (a).
Contrary to petitioner's argument, the protections afforded by
Tax Law § 211 (8) (a) are not limited to the return only. "The
policy behind the [tax] secrecy provisions is twofold: to protect
personal privacy interests in the information on a return, which
may reveal information concerning a person's activities,
associations and beliefs, and to encourage voluntary compliance
with the tax laws by preventing use of return information to harm
the reporting taxpayer" (Kooi v Chu, 129 AD2d 393, 395 [1987];
see Matter of New York State Dept. of Taxation & Fin. v New York
State Dept. of Law, Statewide Organized Crime Task Force, 44 NY2d
575, 580 [1978]). As relevant here, the statute prohibits the
disclosure of "any particulars" by any person who "is permitted
to inspect" a return, receives "any information contained in any
[return]" or who "in any manner may acquire knowledge of the
contents of a [return]" (Tax Law § 211 [8] [a]). By its terms,
therefore, the confidentially required by the statute necessarily
extends to any document that reflects information included in a
return. If we were to construe the statute to only protect the
secrecy of the return, the purpose of the statute would not be
served (see Matter of Tartan Oil Corp. v State of New York Dept.
of Taxation & Fin., 239 AD2d 36 [1998] [construing analogous
statute]), and we find, in particular, that Tax Law § 211 (8) (a)
prohibits the Department from releasing an agreement made with
another taxpayer (see Tax Law §§ 171 [18]; 210-A [11]). Further,
we find that Supreme Court properly withheld from Privilege Log
F-02170: tab Nos. 1-7, 15, 17, 19, 36, 53-54, 57-58, 61-89, 96-
97, 100, 104, 112, 115, 121, 124, 126, 128, 131, 134-138, 140,
142-143, 155-160, 162, 170, 178-179, 181-182, 184, 187, 189, 191
and 276-277; and from Privilege Log F-02261: tab Nos. 12 and 48.
Contrary to petitioner's arguments, where, as here, a document is
exempt from disclosure pursuant to state statute, it may not be
subjected to redaction (see Matter of Short v Board of Mgrs. of
Nassau County Med. Ctr., 57 NY2d 399, 404-405 [1982]; Matter of
MacKenzie v Seiden, 106 AD3d 1140, 1143 [2013]).
We also agree with Supreme Court's determination that
certain documents were intra- or inter-agency materials and,
thus, properly withheld pursuant to Public Officers Law § 87 (2)
(g). This exemption applies to intra- or inter-agency materials
-6- 522169
that are not "statistical or factual tabulations or data,"
"instructions to staff that affect the public" or "final agency
policy or determinations" (Public Officers Law § 87 [2] [g] [i],
[ii], [iii]; see Matter of M. Farbman & Sons v New York City
Health & Hosps. Corp., 62 NY2d 75, 83 [1984]). The exemption
"applies to records that are deliberative, 'i.e., communications
exchanged for discussion purposes not constituting final policy
decisions'" (Matter of Miller v New York State Dept. of Transp.,
58 AD3d at 984, quoting Matter of Russo v Nassau County Community
Coll., 81 NY2d 690, 699 [1993]) and includes communications
shared between different agencies (e.g., the city and state
taxing authorities) in furtherance of the decision-making process
(see Matter of Marino v Pataki, 55 AD3d 1171, 1173 [2008]). The
purpose of this exemption is "to protect the deliberative process
of the government by ensuring that person[nel] in an advisory
role will be able to express their opinions freely to agency
decision makers" (Matter of Smith v New York State Off. of the
Attorney Gen., 116 AD3d 1209, 1210 [2014] [internal quotation
marks, brackets and citation omitted], lv denied 24 NY3d 912
[2014]; see Matter of Xerox Corp. v Town of Webster, 65 NY2d 131,
132 [1985]). The relative importance or significance of the
agency decision at issue is not a relevant consideration when
determining whether the exemption applies (see Matter of Smith v
New York State Off. of the Attorney Gen., 116 AD3d at 1212).
Petitioner argues that the exemption was not applicable
because the documents withheld included final agency policy, in
particular, records regarding the position taken during audits
and with regard to one taxpayer; instructions to staff that
affect the public; and/or statistical or factual data (see Public
Officers Law § 87 [2] [g] [i], [ii], [iii]). Contrary to
petitioner's argument, neither internal memoranda used to discuss
and advance a position pending negotiations with a party nor a
position taken during an audit can be characterized as a final
determination by an agency (see Matter of Kheel v Ravitch, 62
NY2d 1, 8 [1984]; Matter of Miller v New York State Div. of Human
Rights, 122 AD3d 431, 432 [2014]; Matter of Miller v New York
State Dept. of Transp., 58 AD3d at 984). Rather, the opinions
and recommendations exchanged by agency personnel constitute
"predecisional material, prepared to assist an agency decision
maker . . . in arriving at his [or her] decision" (Matter of
-7- 522169
Xerox Corp. v Town of Webster, 65 NY2d at 132; see Matter of
Stein v New York State Dept. of Transp., 25 AD3d 846, 847-848
[2006]).
Applying these standards during our in camera review of the
responsive documents, we are satisfied that Supreme Court
properly withheld or redacted portions of the following documents
as exempt pursuant to Public Officers Law § 87 (2) (g): Privilege
Log F-02170: tab Nos. 1-7, 10-15, 18, 20-49, 51-54, 61-88, 90-99,
101-103, 113-114, 117-125, 127-133, 139-142, 144-161, 166-177,
185-186, 188, 190-331, 333-365 and 367-373;1 Privilege Log F-
02261: tab Nos. 1-2, 6-76 and 91-94. We agree with petitioner's
claim that documents that were shared outside of the agency
should not have been exempted pursuant to Public Officers Law
§ 87 (2) (g) (see Matter of Miller v New York State Dept. of
Transp., 58 AD3d at 984-985). Accordingly, although we do not
agree with Supreme Court's determination that the documents
provided within Privilege Log F-02170: tab Nos. 326, 327 and 331
were exempt pursuant to Public Officers Law § 87 (2) (g), because
the documents included material falling within the protection of
Tax Law § 211 (8), the court should have deemed each to be exempt
pursuant to Public Officers Law § 87 (2) (a).2
Respondents contend that Supreme Court should not have
directed it to release certain documents.3 We agree that Supreme
Court should not have directed the Department to release the
1
As set forth above, documents at Privilege Log F-02170:
tab Nos. 15, 36, 53, 54, 61-88, 96, 97, 121, 124, 128, 131, 140,
160, 170, 191, 276 and 277 were also exempt pursuant to Public
Officers Law § 87 (2) (a).
2
Upon its review of these documents also submitted at
Privilege Log F-02170: tab Nos. 137, 138 and 140, Supreme Court
determined that Public Officers Law § 87 (2) (a) and not Public
Officers Law § 87 (2) (g) was applicable.
3
Supreme Court did not express any basis for its
determination that the Department should have provided certain
documents in response to the FOIL request.
-8- 522169
document provided at Privilege Log 02170: tab No. 16. This
document is a memorandum wherein a Department employee proposes
that an agency regulation be amended. In our view, this opinion,
prepared to assist with governmental decision-making, is exempt
from disclosure under FOIL (see Matter of Xerox Corp. v Town of
Webster, 65 NY2d at 132). Similarly, we find that the document
provided at Privilege Log 02170: tab Nos. 56 and 332 (same
document), an intra-agency memorandum wherein an agency employee
seeks approval of a tax determination made with respect to a
taxpayer who is not a party to this proceeding, should not have
been redacted, but was exempt from disclosure pursuant to Public
Officers Law § 87 (2) (g). Moreover, to the extent that each
involves information embraced within the protection of Tax Law
§ 211 (8) (a), these documents are also exempt from disclosure
pursuant to Public Officers Law § 87 (2) (a). As set forth
above, we find that Supreme Court should not have directed the
disclosure of the agreement between a taxpayer who is not a party
to this proceeding and the Department (Privilege Log 02170: tab
Nos. 60 and 183) or the document explaining or referencing the
agreement (Privilege Log 02170: tab Nos. 59 and 116). In our
view, these documents are exempt pursuant to Public Officers Law
§ 87 (2) (a). As for Privilege Log 02261: tab No. 89, we agree
with respondents that Supreme Court should have directed that the
recommendation set forth in the paragraph preceding the redacted
paragraph also be redacted prior to its release.
Finally, while a notice to admit is technically available
in a special proceeding without leave of court (see CPLR 408;
Stapleton Studios v City of New York, 7 AD3d 273, 274-275 [2004];
State of New York ex rel. H. v P., 90 AD2d 434, 427 n 2 [1982]),
it is generally used only where there are issues of fact
requiring a trial (see Vincent C. Alexander, Practice
Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 408 at
405). Here, no trial was pending or warranted and petitioners
sought admissions of facts that were either material to the
central issues of the proceeding or not relevant to the
proceeding. We thus agree that the notice to admit was improper
and find that Supreme Court properly denied petitioners' motion
to strike the Department's responses to the notice to admit (see
32nd Ave. LLC v Angelo Holding Corp., 134 AD3d 696, 698-699
[2015]; Kimmel v Paul, Weiss, Rifkind, Wharton & Garrison, 214
-9- 522169
AD2d 453, 453 [1995]; Howlan v Rosol, 139 AD2d 799, 802 [1988];
Handy v Geften Realty, 129 AD2d 556, 557 [1987]).
We have considered the parties' remaining contentions and
find them to either be without merit or, in light of the
foregoing, not necessary to resolve.
Lahtinen, J.P., Rose, Clark and Aarons, JJ., concur.
ORDERED that the judgment is modified, on the law, without
costs, by reversing so much thereof as (1) ordered disclosure of
Privilege Log 02170: tab Nos. 16, 56, 60, 116, 183 and 332, and
(2) failed to redact a portion of Privilege Log F-02261: tab No.
89 as set forth herein, and, as so modified, affirmed.
ENTER:
Robert D. Mayberger
Clerk of the Court