The U.S. Tax Court put on hold a motion by a major British newspaper to unseal certain parts of the trial record of’s suit against the IRS involving transfer pricing issues. In doing so, it shed light on how it deals with protective orders and third-party intervention (TC Memo 2016-131).

The Guardian newspaper told the court that it believed that the documents in question “reach matters of intense public interest.”


Generally, all reports of the Tax Court, and all evidence it receives, are public records open to public inspection. However, the court may prevent the disclosure of trade secrets or other confidential information, including by sealing any document or information so that it can be opened only with permission of the court.

In the case in question, Amazon sued the IRS over issues related to the company’s transfer of intangible assets to a Luxembourg affiliate and to the sharing of future intangible development costs under a cost-sharing arrangement with that affiliate. The court received into evidence large amounts of data related to the value of the transferred property, including confidential Amazon information about the company’s technology, source codes, customers and nonpublic financial data.

To protect that information from public disclosure, Amazon moved for a pretrial protective order. The IRS opposed the motion. Following instructions from the court, the parties proposed, and the court adopted, a protective order setting up procedures to protect Amazon’s confidential information during the pretrial phase of the case. Amazon later moved for a protective order covering the trial and posttrial phases of the case, which the court issued.

Open and closed court

Transcripts of trial testimony that didn’t include confidential information were heard in open court. Transcripts of testimony that included confidential information were heard in closed court.

At the time of the Guardian’s motion, the parties were working on redacted versions of those confidential transcripts to submit for court approval. The newspaper sought to intervene for the purpose of urging the court to make available sealed, unredacted parts of the trial record.

The court put the Guardian’s motion on hold until the parties exercise their rights under the protective order, with a view to determining which parts of the trial record will be unsealed and which must be sealed permanently. The court also shed light on how it deals with protective orders and with intervention by third parties.

Protective orders

The court noted that it generally follows Federal Rules of Civil Procedure when considering requests for protective orders. Citing several cases decided under the civil rules, the court said that a protective order is appropriate where the material is the type of information that courts will protect and the requesting party shows good cause for safeguarding it.

These longstanding protections for sensitive business and financial information are fully consistent with the Guardian’s qualified right of access, which is the same interest held by the public at large. “It has generally been held that the First Amendment doesn’t guarantee the press a constitutional right of special access to information not available to the public generally,” the court stated.


The court then looked to the issue of whether the Guardian should be permitted to intervene. With limited exceptions, the court’s rules make no provision for third-party intervention. However, the court said it “may prescribe the procedure, giving particular weight to the Federal Rules of Civil Procedure to the extent that they are suitably adaptable to govern the matter at hand.”

Civil Rule 24(a) governs intervention as a matter of right. The court noted that the rule states a court must permit intervention where the petitioner is given “an unconditional right to intervene by a federal statute” or “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the [petitioner’s] ability to protect its interest.” The court said that the Guardian didn’t contend, and it couldn’t plausibly contend, that it was entitled under these standards to intervention as a matter of right.

Civil Rule 24 also governs permissive intervention, which arises when the petitioner’s claim or defense and the suit have a question of law of fact in common. The court noted that it has allowed permissive intervention where “the moving party has a stake in the outcome of the litigation” that “cannot be adequately protected by the parties currently before the Court” and where “permitting the intervention will lead to a more complete presentation of the legal issues to be decided” (Estate of Smith, 198177 TC 326). The court has denied motions to intervene where the petitioner failed to show that a party was taking a position that was contrary to the interests in the litigation of the party filing a motion. If a party is adequately representing the interests the petitioner seeks to advance, the court may deny intervention, the court added.

IRS objects

The court said that the public interest that the Guardian sought to advance has been, and continues to be, powerfully represented by the IRS. The tax agency has objected to the issuance of a protective order at every stage of the litigation. When the court indicated its intention to issue a protective order of some kind, the IRS worked assiduously to narrow the scope of protection and to ensure itself the ability to challenge Amazon’s designation of information as “confidential,” the court noted.

It added that there is an assumption of adequacy when the government is acting on behalf of a constituency that it represents. In the absence of a very compelling showing to the contrary, it will be presumed that a state adequately represents its citizens when the intervention applicant shares the same interest.

© 2016