On Oct. 16, 2017, the United States Supreme Court granted the government’s petition for certiorari in an important case concerning law enforcement and privacy in the digital age. In the case, now captioned United States v. Microsoft Corporation, the Supreme Court will consider whether the government may compel an electronic communications service provider, like Microsoft, to comply with a warrant issued under the Stored Communications Act, requiring disclosure of electronic communications that are within the provider's control but are stored overseas. The Court’s decision should offer a significant contribution to a string of recent case law contending with the reach of American law in an increasingly interconnected world.
As explained in a prior Kramer Levin Alert, the case began in December 2013, when the government applied for and obtained a warrant under Title II of the Electronic Communications Privacy Act (ECPA), also known as the Stored Communications Act (SCA), codified at 18 U.S.C. § 2701 et seq. The warrant required Microsoft to disclose e-mails from a Microsoft customer’s account that the government had shown probable cause to believe was associated with illegal drug trafficking. In response to the warrant, Microsoft provided the government with non-content account information that was stored in the United States, but declined to produce the content of the emails, which it had chosen to store at one of its overseas datacenters in Dublin, Ireland. Microsoft moved to quash the warrant to the extent that it required production of data stored overseas, arguing that compelling disclosure of this data constituted an impermissible extraterritorial application of the SCA. The magistrate judge who issued the warrant denied Microsoft’s motion to quash, reasoning that while the SCA warrants described in 18 U.S.C. § 2703 must be issued pursuant to the federal rule of criminal procedure concerning warrants, these instruments are functionally equivalent to subpoenas in their manner of execution. Recipients of subpoenas are generally required to produce information in their custody or control regardless of its location. In any case, the magistrate judge also found that compliance with the SCA warrant would involve no governmental searches or seizures overseas and would require only domestic conduct on the part of Microsoft to remotely access the records and provide them to the government. As a result, there was no impermissible extraterritorial application of the statute, and Microsoft was obliged to disclose the information.
A district court judge affirmed the magistrate’s ruling, but a panel of the Second Circuit Court of Appeals reversed. The three-judge panel rejected the lower courts’ construction of an SCA warrant as part-subpoena and held that execution of the warrant abroad would in fact qualify as an impermissible international application of a federal statute under the line of recent Supreme Court decisions construing extraterritorial application of U.S. law in RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (2016); Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (2013); and Morrison v. National Australian Bank, Ltd., 561 U.S. 247 (2010). These cases direct that, absent some expression of contrary congressional intent, federal laws are presumed to apply only within the territory of the United States. Here, it was uncontested that the SCA contained no such expression. The Second Circuit thus moved to the second step of the analysis — an examination of whether the conduct relevant to the focus of the statute occurred abroad or in the United States. The panel determined the focus of the SCA and the broader ECPA was customer privacy, and found that the privacy interest was implicated in Ireland, where Microsoft, acting as an agent of the government, would have seized the e-mails covered by the warrant. As a result, the Second Circuit concluded that execution of the warrant in this case qualified as an impermissible extraterritorial application of the statute, and refused to enforce the warrant.
Petition for Certiorari
As recounted in another Kramer Levin Alert, on Jan. 24, 2017, the Second Circuit denied the government’s petition for an en banc rehearing of the case in a divided 4 – 4 vote, leaving intact the panel’s ruling. This in turn led the government to seek Supreme Court review.
The government’s certiorari petition argued that the Second Circuit’s extraterritoriality analysis was flawed, and that the ruling, if allowed to stand, would pose a significant threat to public safety. Citing Second Circuit judges who dissented from the denial of rehearing en banc, the government stated that, even assuming privacy to be the focus of the statute, the conduct relevant to that focus is the disclosure of the information, not the moment of access. Because that disclosure would occur within U.S. territory, compliance with the warrant would involve no extraterritorial application of U.S. law. The government also took issue with the panel’s understanding of the term “warrant,” arguing that Congress used this term because, under the process described in the statute, the government must make a showing of probable cause before a neutral judicial officer, as it must do when obtaining normal warrants. But, as the judges who dissented from the rehearing denial had noted, in its execution, an 18 U.S.C. § 2703 warrant operates as a subpoena. Under the relevant case law concerning subpoenas, the government asserted, recipients are required to produce materials under their control regardless of the location of those materials.
The government also highlighted the “immediate, grave, and ongoing harm to public safety, national security, and the enforcement of our laws” effected by the Second Circuit’s decision. Echoing a statement made by Judge Cabranes in his dissent from the decision on the petition for rehearing, the government noted that criminals “need do nothing more than falsely state a location outside the United States when signing up for an account” to put their communications beyond the reach of American law enforcement. The government also claimed that electronic communications service providers across the country were reducing their cooperation with law enforcement in response to the ruling, further hampering legitimate and necessary law enforcement activities. The government countered Microsoft’s argument that a Mutual Legal Assistance Treaty would allow the government to achieve the same ends by noting that the United States does not have an MLAT with most countries, and that the process for obtaining information through these treaties is slow and uncertain. The government also rejected the idea that privacy interests were advanced by the ruling, pointing out that the warrant was issued after a finding of probable cause by a neutral magistrate, and noting that the alleged privacy interest of the customer turned entirely on a discretionary business decision made by the service provider.
In opposing the government’s petition for certiorari, Microsoft argued that the Second Circuit had properly found that the focus of the Stored Communications Act and the broader Electronic Communications Privacy Act was on protecting the privacy of stored communications. According to Microsoft, the government’s argument that “disclosure” was the focus of the statute was only tenable if one were to ignore §§ 2701 and 2702, which protect customer privacy by restricting access to electronic communications. Microsoft argued that the Second Circuit was also correct in identifying the relevant conduct as the seizure of electronic communications where they are stored. Microsoft underscored that Congress used the term “warrant” in the statute. Cases cited by the government concerning subpoenas issued to corporations demanding their own records — as opposed to requesting information a customer entrusted to an electronic communications service provider — were therefore inapposite.
Microsoft conceded that “everyone agrees that there is a clear need” to update the SCA, now more than 30 years old. However, Microsoft argued that Congress, not the court, is the proper body to address the law’s shortcomings. The company noted that members of Congress have already taken up the issue in the “International Communications Privacy Act,” introduced by Senators Orrin Hatch (R-UT) and Christopher Coons (D-DE). Microsoft claimed that such legislation would yield “precisely the sort of balanced solution that litigation cannot achieve.” Congress was particularly qualified, and the courts ill-equipped, to balance the sometimes competing public interests in play, including promoting international comity and avoiding conflicts of laws, providing the necessary tools to American law enforcement agencies, protecting consumer privacy, and avoiding unnecessary adverse effects on U.S. technology companies.
Without comment on the merit of these arguments, the Supreme Court granted certiorari on Oct. 13, 2017.
The parties to this litigation, legal commentators, and members of Congress agree that the existing statutory framework for regulating the government’s access to electronic communications is out of step with the realities of modern digital communication and commerce. But absent quick action by the other two branches of the federal government rendering the case moot, the Supreme Court will have to evaluate the construction and application of the SCA as it stands. In doing so, it will have the chance to offer answers to the questions raised in the litigation that may serve to clarify the operation of territoriality analysis in the context of the SCA and beyond. Is privacy the focus of the statute? Or is the focus the disclosure that the government may require of electronic communications service providers under certain conditions? Does the conduct that is the focus of the statute occur domestically or overseas? Are the “warrants” discussed in 18 U.S.C. § 2703 in effect subpoenas? Even in the event that Congress enacts new legislation in this area, the answers to these questions are likely to have continued relevance for the interpretation of the laws of the United States and their application beyond its borders.