For a brief case summary, click here.

On May 31, 2017, the Second Circuit issued its long-awaited decision in the “Silk Road” case, United States v. Ulbricht, (15-1815-cr) (2nd Cir. May 31, 2017) (Newman, Lynch, Droney). The panel affirmed Ulbricht’s conviction and sentence of life imprisonment, identifying no reversible error. From 2011-2013 Silk Road, which functioned as an “eBay” for drug dealing, generated approximately $183 million in sales of illegal drugs. Defendant Ross William Ulbricht, who used the pseudonym “Dread Pirate Roberts,” was the owner and creator of Silk Road, and he took a commission on drugs sold through the website.

In 2011, the government began investigating Silk Road. On October 1, 2013, the government arrested and charged Ulbricht, then 29 years’ old, with seven counts of drug trafficking, money laundering, and other crimes, committed through the operation of Silk Road. At trial, the government presented evidence that Ulbricht conspired to engage in multiple murders for hire to protect Silk Road’s anonymity. Ulbricht was not charged with these offenses. During the course of the investigation, two of the undercover DEA agents investigating Silk Road were caught using the black marketplace for their own personal gain, but evidence of this serious government misconduct was kept from the jury. After a three-week jury trial in the Southern District of New York, Ulbricht was convicted on all seven counts.

At sentencing, in its Pre-Sentence Investigation Report, the U.S. Probation Office referenced the five commissioned murders, as well as six drug-related deaths connected with Silk Road. On May 29, 2015, the district court sentenced Ulbricht to life in prison, pursuant to the Guidelines advisory sentence range, and based on the recommendation of the U.S. Probation Office.

Ulbricht appealed the district court’s decision, and now the Court of Appeals affirmed the district court’s decision in all regards in a remarkable 139-page opinion.

I. Second Circuit Affirms District Court’s Denial of Ulbricht’s Suppression Motion

On appeal, Ulbricht made two Fourth Amendment arguments to contend that certain evidence should have been suppressed at trial: first, that the pen/trap orders the government used to monitor Ulbricht’s IP address traffic were obtained without a warrant; and second, that the warrants obtained to search his laptop, and Google and Facebook accounts, violated the particularity requirement of the Fourth Amendment. The Court held there were no Fourth Amendment violations.

A. Pen Register/Trap and Trace Device Orders did not violate Ulbricht’s expectation to privacy

During its investigation, the government used five pen registers and trap and trace devices to get the IP address routing information for communications sent to or from Ulbricht’s devices. Pen registers record phone numbers that are dialed from a particular telephone. Trap and trace devices capture the phone numbers that were used to call a particular phone number. Although these devices were invented to monitor telephone use, both of these devices can also be used to capture IP address routing information, as the government did here. Neither device records the substance of phone or internet communications, only the telephone number or IP routing information. Ulbricht argued that he had a reasonable expectation of privacy in the IP address routing information, and therefore a warrant was required for the government to conduct a legal search.

The Court disagreed, relying on the longstanding rule that there can be “no legitimate expectation of privacy in information [one] voluntarily turns over to third parties.” Smith v. Maryland, 442 U.S. 735, 743-44 (1979). The panel drew an analogy between phone users who rely on, and allow, their phone provider to collect and record information related to their use of their phone with Ulbricht, who was an email and internet user who relied on his internet service provider to route certain information. In both examples, the information was voluntarily shared with a third-party.

Faced with precedent that was on point, Ulbricht asked the Court to “re-evaluat[e] the third-party disclosure doctrine established by Smith,” but the Court did not find that the Orders in this case presented an issue that required a fresh look. Ulbricht, 15-1815-cr at 40-41. Nor did the Court address whether it would have reached the same outcome, if it was confronted with a new technology that called into question the application of Smith and its progeny. Ultimately, the Second Circuit joined every other circuit that has ruled on this issue and held that “collecting IP address information devoid of content” does not require a warrant. Id. at 42.

B. Overbroad warrant did not violate particularity requirement

The Court considered whether the broad search warrant that the government obtained to search and seize Ulbricht’s laptop, and Google and Facebook accounts, violated the particularity requirement under the Fourth Amendment. The government’s warrant allowed for the search and seizure of two categories of information: evidence on the laptop concerning Silk Road and evidence to corroborate the identification of Ulbricht as Dread Pirate Roberts. The Court held that the warrant did not violate the Fourth Amendment, explaining that “a search warrant does not necessarily lack particularity simply because it is broad.” Id. at 49. The Court concluded that the warrant was sufficiently specific about the information that it sought, even if it sought a lot of information.

The Court discussed the reality that the rules drawn up for the searching of physical files may be an imperfect fit for our digital world, and acknowledged that Ulbricht’s “arguments merit careful attention.” Id. at 53. Ulbricht and amicus National Association of Criminal Defense Lawyers (“NACDL”) argued that the warrant was not particular enough because it did not specify the search terms and protocols to be used in carrying out the search. The Court disagreed with the impracticality of the suggestion, pointing out that “it will often be impossible to identify in advance the words or phrases that will separate relevant files or documents before the search takes place, because officers cannot readily anticipate how a suspect will store information related to the charged crimes.” Id. at 53-54. Certainly, drug dealers do not label their files under incriminating names such as “drug records.” Id. at 54 n.36. One telling example was the government’s collection of a chat on Ulbricht’s laptop labeled “mbsobzvkhwx4hmjt.” Id. at 54. While the government anticipated that it might encounter these types of problems in conducting the search, it could not have possibly created a search term that would have identified that chat referenced above. Instead, the government used keyword searches in an ad hoc, but reasonable, fashion. Nonetheless, the Court “remain[ed] sensitive to the difficulties” of preserving a defendant’s privacy and noted that a “future case may require this Court to articulate special limitations on digital searches,” but that case was not before the Court in Ulbricht. Id. at 57, 59.

The Court then applied the same analysis to Ulbricht’s challenges to the warrants for the Google and Facebook accounts, finding no violation of the Fourth Amendment.

II. Second Circuit Affirms District Court’s Discovery and Trial-Related Decisions

Ulbricht argued, inter alia, that he was denied a right to a fair trial because the district court did not allow him to rely on information related to two corrupt DEA agents who worked on the Silk Road Investigation. While the Court did not deny that the DEA agents engaged in serious illegal conduct, that fact alone was insufficient to affect the reliability of the government’s evidence against Ulbricht. The government appropriately disclosed the pending grand jury investigation against one of the corrupt agents in a letter to the defense, and “purge[ed] its trial evidence of anything arguably traceable” to those agents. Id. at 64. Ulbricht’s argument to unseal the government’s letter for use at trial did not show a “particularized need for disclosure” that was greater than the need for “preserving the secrecy” of a grand jury investigation. Therefore, the district court did not abuse its discretion in denying his request. Id. at 67.

The district court also did not err in denying Ulbricht certain discovery related to the investigation of the DEA agents because Ulbricht’s requests were too broad, immaterial, and could compromise the grand jury investigation. To this end, the Court held that the district court carefully balanced Ulbricht’s right to build a case with the need to limit discovery to what is relevant.

On one level, looking at the defendants’ claims one-by-one, it is hard to disagree with the Court’s rulings. The Court held that Ulbricht was unable to show that any specific evidence could have been used to undermine the government’s case against him. At the same time, it is astounding that the investigation went awry to this extent and that all of this evidence was kept from the fact finder. Ulbricht made several other arguments based on evidentiary issues relating to the preclusion of an expert witness’s testimony to show that he was deprived of his right to a fair trial.

The Court ultimately affirmed the district court, finding no abuse of discretion, no due process violation from the government delaying disclosure of the corruption, no prejudice in precluding Ulbricht’s proffered expert witnesses, and no cumulative error.

III. Second Circuit Affirms Sentence As Both Procedurally And Substantively Reasonable

Ulbricht and several amici challenged his sentence of life in prison as both procedurally and substantively unreasonable.

Ulbricht’s claim of procedural error was primarily based on the district court’s alleged reliance on erroneous facts and its improper consideration of six drug-related deaths during his sentencing. The Court did not agree with the government’s insistence on putting in evidence of the six drug-related deaths, which led to the issue taking on “a disproportionate focus” in relation to the district court’s well-reasoned explanation of the sentence imposed. Id. at 118. The Court made clear its discomfort with this aspect of the proceedings, stating that “we might not, in the prosecutors’ shoes have chosen to offer this evidence at sentencing, or have admitted it as district judges.” Id. at 124. However, the Court framed its analysis only around whether the district court committed clear error or abused its discretion, a question that the court answered in the negative. The Court also expressed hesitance about whether the sentence here served the larger social goals and policies that animate our drug laws. The Court explained that “we may come to regard these policies as tragic mistakes.” Id. at 120. In light of the clear record before the Court showing that that the district court “would have imposed the same sentence if the evidence of the drug-related deaths had been excluded,” the Court held “any error would be harmless.” Id. at 122.

The Court, in an abundance of caution, also addressed the argument raised by amici that because the district court considered the drug-related deaths that were not charged in the Indictment or proven to the jury, Ulbricht’s rights under the Fifth and Sixth Amendments were violated. The Court disagreed, explaining that at sentencing a district court may consider “uncharged conduct proven by a preponderance of the evidence” as long as it does not increase the maximum possible punishment. Id. at 123. Here, Ulbricht’s sentence was not increased based on those uncharged facts. It is unlikely the Court would have rendered the same decision if reviewing de novo.

In reviewing whether the district court’s sentence was substantively unreasonable, the Court’s review was deferential. While the Court recognized that a life sentence for selling drugs was rare and could be considered harsh, the facts of this case involved much more than routine drug dealings—namely that Ulbricht commissioned at least five murders for hire and did not challenge those murders on appeal. Given the additional facts identified by the district court, the district court’s decision was not substantively unreasonable.

The Court stated that it did not “reach [its] conclusion lightly,” but it found that the district court handled the case with “care and prudence.” Id. at 138-39.

IV. Commentary

The trial and sentencing in this case were closely watched because of the novelty of the facts: a massive on-line drug marketplace, linked to multiple possible deaths, and a mysterious, pseudonymous operator named Dread Pirate Roberts (a named derived from the Cary Elwes character in The Princess Bride), seemingly beyond the reach of the law. Silk Road moved drug dealing from face-to-face street corner dealings to a seemingly anonymous online black market, perhaps drawing people to drug use who otherwise might fear dealing with a possibly violent drug dealer or being caught in the act. The investigation was no less shocking than the crime, with two case agents violating their oaths and participating in Silk Road for their own benefit.

The Court of Appeals recognized the challenge of presiding over a proceeding with as many difficult and new questions of law and fact. All three judges on this panel had distinguished careers as district judges and this shared experience may have led them to conclude that even if the panel might not have handled every issue exactly as did the district court, the district court acted within its discretion. The Court struggled most with the life sentence and the decision to admit evidence of the drug-related deaths of Silk Road customers. Nevertheless, the district court imposed a within-the-range sentence, and it was no ordinary narcotics case in terms of the scale and human impact of the enterprise. The Court was particularly affected in its thinking by the murder-for-hire evidence, which portrayed the defendant as a cold, calculated person, determined to protect Silk Road by any means necessary. The sentencing section of the opinion is scholarly and thoughtful.

On the issues relating to new technologies, the Court continued its practical, common-law approach from recent cases, such as Ganias: look for analogies between old and new technologies, avoid questions that don’t need to be decided, and bear in mind the actual issues faced by law enforcement officers who are trying to follow the law. For example, the Court did not rule out the idea that a search warrant for electronic data might one day be too broad, but it did not believe that was an issue here, leaving the question for another day. The Court also analogized the use of trap/pen devices to capture IP addresses to their traditional use to capture phone numbers; ultimately, the Court was content to follow the older body of law.

With respect to the search warrant process, the Court recognized that the strict search terms proposal made by amici would be too limiting and make electronic documents harder to find than are paper documents. This cautious, incremental approach seems likely to result in sounder decisions than would a desire to proclaim new rules for every new technological question.

In short, a fascinating trial has led to an equally compelling appellate decision. The Court’s opinion is definitely worth reading—if you have the time!