The Stored Communications Act (SCA) authorizes criminal and private civil actions against a person who "intentionally accesses without authorization a facility through which an electronic communications service is provided" and obtains "access to a wire or electronic communication while it is in electronic storage." 18 U.S.C. § 2701(a). This offense encompasses intentionally accessing other people's stored email without permission.
On March 18, the Fourth Circuit announced a potentially important decision construing the SCA's civil remedies. Van Alstyne v. Electronic Scriptorium, Ltd., 2009 WL 692512; 2009 U.S. App. Lexis 5548, although it oddly designated the case as non-precedential. Rejecting broader interpretations previously applied by several U.S. District Courts, the Fourth Circuit panel held that statutory damages may be awarded only where a plaintiff has suffered "actual damages." Thus, statutory damages may not be awarded when the plaintiff does not allege or does not prove that he or she suffered actual damages from the violation. This ruling could limit the amount of civil litigation under the SCA, but additional judicial analysis of the SCA's punitive damages remedy, in light of the Fourth Circuit's construction of it, will be needed before the picture becomes clear.
Case Background
This litigation arose from conflict between the president of a small business, Edward Leonard, and his vice president of marketing, Bonnie Van Alstyne. As reported by the Court of Appeals, "Leonard sexually propositioned her, but she declined his advances." Their business relationship deteriorated, and several months later the employer "unilaterally terminated Van Alstyne." Several lawsuits and administrative proceedings followed, with Van Alstyne alleging sexual harassment and unpaid commissions and Leonard's company alleging "business torts."
During discovery, it emerged that Leonard had accessed Van Alstyne's "private password-protected" AOL email account on many occasions without authority and obtained "copies of 258 different emails," some of which he sought to use in support of his litigation contentions. On learning of those intrusions, Van Alstyne brought the subject to civil action under the SCA. Prior to trial, Van Alstyne abandoned any claim for actual damages (she had originally alleged damages consisting of attorneys fees for defending Leonard's suit, and "mental anguish and emotional distress"), but continued to seek statutory damages, punitive damages and attorneys' fees. On June 21, 2007, the jury returned a verdict in favor of Van Alstyne, including $150,000 in statutory damages ($1,000 for each violation) and $75,000 in punitive damages against Leonard. The final judgment also included $124,768.38 in attorneys' fees.
On appeal, Leonard and his company argued that it was error to "award Van Alstyne statutory damages, punitive damages, and attorneys' fees and costs without first requiring her to prove actual damages under the SCA."
The Fourth Circuit Analysis
The Fourth Circuit opinion, authored by Chief Judge Williams and joined by Judges Shedd and Agee, focused on the actual damages issue, which they felt could be resolved on the face of the statute because "the statute's language is plain." The language in question, 18 U.S.C. § 2707(c), provides for an award of damages "in the sum of the actual damages suffered by the plaintiff and any profits made by the violator as a result of the violation, but in no case shall a person entitled to recover receive less than the sum of $1,000." The Court of Appeals found the meaning of that language to be both clear and controlled by the U.S. Supreme Court's decision in Doe v. Chao, 540 U.S. 614 (2004), where the Supreme Court interpreted the federal Privacy Act to require proof of actual damages before statutory damages can be awarded. (See Privacy In Focus, March 2004). The Fourth Circuit noted there were two differences in the language of the two statutes but neither "has any material impact." In that context, it simply adopted the prior Supreme Court construction, holding that the "plain language of § 2707(c) unambiguously requires proof of actual damages as a prerequisite to recovery of statutory damages." Having reached this conclusion, Chief Judge Williams went on to consider and reject other arguments raised by Van Alstyne, finding that nothing in the legislative history of the SCA or in the common law of trespass to chattels suggested a different result. Consequently, the Fourth Circuit vacated the statutory damages award.
The appellants also argued that the punitive damages award was improper in the absence of a showing of some actual damages. The Fourth Circuit disagreed. It reasoned that without "statutory language to the contrary, punitive damages are not recoverable absent proof of actual damage," but here § 2707(c) "provides such language" by stating that if the violation "is willful or intentional, the court may assess punitive damages." In so finding, Chief Judge Williams noted that earlier Fourth Circuit decisions had determined that the federal Fair Credit Reporting Act authorized an award of punitive damages without an award of actual damages. Despite adopting that rule, the Court of Appeals remanded the punitive damages award "for the district court to reevaluate in light of" the ruling vacating the statutory damages award. It did not address what standards the district court should apply when reevaluating.
Finally, the Fourth Circuit rejected the appellants' argument that an award of attorneys' fees is improper absent a finding of actual damages. It noted that § 2707(b)(3) provides that appropriate relief provided to an "aggrieved" person may include "a reasonable attorney's fee and other litigation costs reasonably incurred" and found that language to authorize such an award "apart from any requirement that damages, actual or otherwise, but recovered." Nevertheless, it vacated the award in favor of Van Alstyne, because it was based partly on the erroneous premise that she had prevailed on statutory damages and, consequently, needed the "district court's further consideration in light of Van Alstyne's lower degree of success."
Thus, none of the awards in favor of Van Alstyne were affirmed.
Implications for the Future
Time will tell how SCA litigation will evolve, but the Fourth Circuit's ruling on statutory damages would seem to substantially reduce their litigation value. In those cases where a plaintiff can show a violation caused his or her actual damages, it would seem unlikely that those actual damages would have a value less than the $1,000 statutory damages amount. Where no actual damages are perceived, future SCA suits necessarily must focus on the pursuit of punitive damages. How that will evolve seems unpredictable at this juncture.
