It all started as a simple request for the records of a sales tax audit of a bar which provided adult entertainment, in the form of both stage and lap dances, for its customers. The bar’s attorney, Barry Leibowicz, had made a request under the Freedom of Information Law (FOIL) for all of the books and records of the audit, whether on paper or in electronic form. Given that the department maintained most of its audit records electronically since 2001, it only seemed reasonable that the records would be provided regardless of their form. Nevertheless, the New York State Department of Taxation and Finance (DTF) refused to produce anything other than paper copies. After being denied at the appeals office, Mr. Leibowicz brought a CPLR Article 78 proceeding in the New York State Supreme Court to compel the DTF to produce the electronic records. After vigorous litigation in which the DTF made one contrived argument after another, the Court ordered it to produce the electronic file, which it subsequently did. However, the files produced could only be read with the DTF’s proprietary AFE software.
At first DTF promised to give Mr. Leibowicz the AFE software so that he could read the files that had been produced under Court order. However, in a change of position that has been called Kafkaesque, the DTF refused to provide a copy of AFE, citing once again an ever-changing litany of excuses and contrivances for withholding it. Even more amazing, when Mr. Leibowicz asked the judge to order the release of the software necessary to read the files which he had ordered the DTF to produce, he refused to do so. In doing so he effectively allowed to hide through technology the very information that he had ordered produced in the first place. It was a very dangerous precedent, since if upheld, any agency in the state could effectively make its records effectively exempt from disclosure under FOIL by simply keeping them electronically in a proprietary format.
While an appeal was called for, the decision to go forward was complicated by the fact that the underlying audit assessment had been settled and the tax case closed. Recognizing the enormous stakes for the public in this issue, Mr. Leibowicz asked his client for, and received, permission to move forward with the FOIL appeal, agreeing that he would accept whatever fees the Court awarded upon the conclusion of the appeal. He subsequently prosecuted the appeal, with intense opposition from the Attorney General of the State of New York acting as counsel for the DTF. This seemed particularly odd, given the public positions taken both by the attorney general and the current administration with regard to the need for openness in government. Apparently, openness falls by the wayside when it comes to maximizing tax revenue from small businesses.
However, I am pleased to report that in a unanimous decision reaffirming the purposes and principles underlying the Freedom of Information Law, the Appellate Division, 3rd Department, of the Supreme Court of the State of New York ordered the release of the AFE software. The Appellate Division also remanded the case to the Supreme Court below for a determination of counsel fees. The Supreme Court subsequently ordered the payment to Barry Leibowicz of a substantial counsel fee, and in doing so, will hopefully discourage the stonewalling that the DTF has engaged in for many years. For more on this decision click on the links below.
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