September 30, 2022

Legal Consensus of Warrantless Cellphone Searches Is Elusive

A Rhode Island judge threw out cellphone evidence that led to a man being charged with the murder of a 6-year-old boy, saying the police needed a search warrant. A court in Washington compared text messages to voice mail messages that can be overheard by anyone in a room and are therefore not protected by state privacy laws. In Louisiana, a federal appeals court is weighing whether location records stored in smartphones deserve privacy protection, or whether they are “business records” that belong to the phone companies.

“The courts are all over the place,” said Hanni Fakhoury, a criminal lawyer with the Electronic Frontier Foundation, a San Francisco-based civil liberties group. “They can’t even agree if there’s a reasonable expectation of privacy in text messages that would trigger Fourth Amendment protection.”

The issue will attract attention on Thursday when a Senate committee considers limited changes to the Electronic Communications Privacy Act, a 1986 law that regulates how the government can monitor digital communications. Courts have used it to permit warrantless surveillance of certain kinds of cellphone data. A proposed amendment would require the police to obtain a warrant to search e-mail, no matter how old it was, updating a provision that currently allows warrantless searches of e-mails more than 180 days old.

As technology races ahead of the law, courts and lawmakers are still trying to figure out how to think about the often intimate data that cellphones contain, said Peter P. Swire, a law professor at Ohio State University. Neither the 1986 statute nor the Constitution, he said, could have anticipated how much information cellphones are privy to, including detailed records of people’s travels and diagrams of their friends.

“It didn’t take into account what the modern cellphone has — your location, the content of communications that are easily readable, including Facebook posts, chats, texts and all that stuff,” Mr. Swire said.

Courts have also issued divergent rulings on when and how cellphones can be inspected. An Ohio court ruled that the police needed a warrant to search a cellphone because, unlike a piece of paper that might be stuffed inside a suspect’s pocket and can be confiscated during an arrest, a cellphone may hold “large amounts of private data.”

But California’s highest court said the police could look through a cellphone without a warrant so long as the phone was with the suspect at the time of arrest.

Judges across the country have written tomes about whether a cellphone is akin to a “container” — like a suitcase stuffed with marijuana that the police might find in the trunk of a car — or whether, as the judge in the Rhode Island murder case suggested, it is more comparable to a face-to-face conversation. That judge, Judith C. Savage, described text messages as “raw, unvarnished and immediate, revealing the most intimate of thoughts and emotions.” That is why, she said, citizens can reasonably expect them to be private.

There is little disagreement about the value of cellphone data to the police. In response to a Congressional inquiry, cellphone carriers said they responded in 2011 to 1.3 million demands from law enforcement agencies for text messages and other information about subscribers.

Among the most precious information in criminal inquiries is the location of suspects, and when it comes to location records captured by smartphones, court rulings have also been inconsistent. Privacy advocates say a trail of where people go is inherently private, while law enforcement authorities say that consumers have no privacy claim over signals transmitted from an individual mobile device to a phone company’s communications tower, which they refer to as third-party data.

Delaware, Maryland and Oklahoma have proposed legislation that would require the police to obtain a warrant before demanding location records from cellphone carriers. California passed such a law in August after intense lobbying by privacy advocates, including Mr. Fakhoury’s group. But Gov. Jerry Brown, a Democrat, vetoed the bill, questioning whether it struck “the right balance between the operational needs of law enforcement and individual expectations of privacy.”

Similar legislation has been proposed in Congress.

Lacking a clear federal statute, the courts have been unable to reach a consensus. In Texas, a federal appeals court said this year that law enforcement officials did not need a warrant to track suspects through cellphones. In Louisiana, another federal appeals court is considering a similar case. Prosecutors are arguing that location information is part of cellphone carriers’ business records and thus not constitutionally protected.

The Supreme Court has not directly tackled the issue, except to declare, in a landmark ruling this year, that the police must obtain a search warrant to install a GPS tracking device on someone’s private property.

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F.C.C. Is Again Examining Looser Cross-Ownership Rules

WASHINGTON — The Federal Communications Commission appears to be close to adopting rules that would relax a longstanding ban on ownership of both a newspaper and a television or radio station in large metropolitan media markets.

Julius Genachowski, the F.C.C. chairman, has circulated to the agency’s four other commissioners a proposal “to streamline and modernize media ownership rules, including eliminating outdated prohibitions on newspaper-radio and TV-radio cross-ownership,” said a spokesman for the commission, Justin Cole, in a statement.

The order is likely to be taken up at the F.C.C.’s December meeting.

This would be the third time in a decade that the F.C.C. has tried to loosen the rules, which have long prohibited the ownership of multiple media outlets in one area. Supporters of the rules say they are necessary to provide for a diversity of voices in a community.

The F.C.C.’s last effort, which began in 2007, was overturned by a federal appeals court last year. The court ruled that the commission had not provided adequate notice and opportunity for public comment before instituting the rules. In June, the United States Supreme Court declined to hear the case.

But the media landscape has changed significantly in recent years. With increasing numbers of people obtaining their news online, newspapers have suffered financially, and many have shut down. Supporters of a relaxed ownership rule believe that broadcasters might offer financial support to newspapers in some markets if the two could share resources.

The F.C.C. outlined new proposals in December. Media companies have been furiously lobbying the agency since then. It is not known how Mr. Genachowski’s current proposal differs, if at all, from the December outline. And the new proposal could change based on comments from other commissioners.

The December proposals would provide for exemptions from the ban on combinations between stations and newspapers in the top 20 media markets. Combinations in smaller media markets would still be limited, as would mergers between any of the four largest broadcasters in a given market and a newspaper or radio station. Mergers would be allowed only if there remained at least eight “major media voices” in that market.

“While the media marketplace is in transition,” Mr. Cole said in the statement, “broadband and new media are not yet available as ubiquitously as traditional broadcast media, and certain protections therefore remain important to promoting competition, diversity and localism.”

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Court Rules Against Finra on Enforcement Actions

A federal appeals court in Manhattan ruled on Wednesday that Finra, an important regulator of Wall Street for more than 70 years, does not have the right to take its members to court to enforce its disciplinary actions.

The surprise decision curbs the powers of Financial Industry Regulatory Authority, formerly the National Association of Securities Dealers, at a time when it has been under pressure to impose greater accountability on its licensed brokers and brokerage firms.

The ruling came after a 14-year fight waged by Fiero Brothers, a tiny penny-stock brokerage firm, and its owner, John J. Fiero. In December 2000, after legal disputes that lasted several years, Finra accused Mr. Fiero and his firm of violating federal fraud statutes — specifically, engaging in a manipulative activity known as naked short-selling. Besides expelling the firm, the regulator imposed a $1 million fine.

The firm was shuttered and its owner was barred from the market — but both refused to pay the fine and, ultimately, Finra wound up in federal court trying to collect the money.

But Finra had no right to do that, according to a three-judge panel of the United States Court of Appeals for the Second Circuit, which encompasses Wall Street.

In an opinion written by Judge Ralph K. Winter Jr., the panel unexpectedly overturned a lower court and ruled that neither the nation’s foundational securities laws, adopted in 1934, nor a “housekeeping” rule adopted by Finra in 1990 gave it the right to pursue its monetary sanctions in court.

“The principal issue is whether the Financial Industry Regulatory Authority Inc. has the authority to bring court actions to collect disciplinary fines,” Judge Winter wrote. “We hold that it does not and reverse.”

T. Grant Callery, Finra’s general counsel, said the organization would “continue to review the ruling and weigh our options.” But he insisted the decision would not affect the self-regulatory group’s “ability to enforce Finra rules and securities laws, to discipline firms or protect investors.”

But some securities law experts predicted that the ruling could have both practical and psychological effects.

“The decision neuters Finra,” said John C. Coffee Jr., a securities law professor at Columbia who has been a consultant both to regulatory agencies and to private defendants appearing before them. “It has been trying to show that it has teeth and could hold its members more accountable — now, those teeth have been surgically removed.”

Martin H. Kaplan, a lawyer for Mr. Fiero and his firm, agreed that the ruling “changes the regulatory landscape in a profound way.” He said the decision vindicated those who had complained for years that Finra was exceeding its statutory power and abusing the rule-making process.

“Not only did the court find that Finra/N.A.S.D. never had authority to enforce fines using the courts, but it also highlighted Finra/N.A.S.D.’s failure to follow rule-making procedures and its frustration of Congressional intent,” Mr. Kaplan said.

At a practical level, Finra still retains its most potent weapon: the power to suspend or expel misbehaving brokers from the financial industry, what the appeals court called a “draconian” power.

But Susan Merrill, a securities lawyer and a former head of enforcement at Finra, said the decision cast an adverse light on the process Finra used to adopt the 1990 rule and, potentially, other “housekeeping” rules.

The court said the 1990 rule should have been given a more formal review, with an opportunity for public comment, because it did not deal with mere housekeeping matters. Rather, the rule “affected the rights of barred and suspended members to stay out of the industry and not pay the fines imposed on them in prior disciplinary proceedings.”

Analyzing whether other Finra rules may be affected by the decision is something “people will be wrestling with in days to come,” Ms. Merrill said.

The court’s criticism will also sting a bit at the Securities and Exchange Commission. The commission oversees Finra’s rule-making, and the chairwoman and chief executive of Finra during much of the time it pursued the Fiero case in court was Mary L. Schapiro, the current head of the commission.

The Fiero case has been a colorful one since it began in the mid-1990s, and regulators blamed Mr. Fiero and other “naked shorts” for bringing down a small clearinghouse that served 41 other small brokerage firms. Clearinghouse failures are rare and potentially dangerous, since they can greatly magnify the consequences of a single firm’s failure.

Since banned brokers cannot return to the industry unless they pay any unpaid fines, it has been extremely rare for Finra to sue to recover unpaid penalties.

Until now, both Finra and its members assumed that it had the power to do so if necessary. If it does not, its misbehaving members need no longer fear that a stiff fine will follow them into Wall Street exile.

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Exxon to Face Lawsuit Over Rights Violations in Indonesia

A federal appeals court said on Friday that companies were not immune from liability under a 1789 law known as the Alien Tort Statute for “heinous conduct” committed by their agents in violation of human rights norms.

The 15 villagers contended in their lawsuit that family members were killed and that others were “beaten, burned, shocked with cattle prods, kicked and subjected to other forms of brutality and cruelty” amounting to torture in Indonesia’s Aceh province between 1999 and 2001, a period of civil unrest.

A divided panel of the United States Court of Appeals for the District of Columbia said Exxon Mobil should be forced to defend against such charges and sent the case back to the trial court.

Given that laws in civilized nations hold corporations responsible for lesser wrongs, “it would create a bizarre anomaly to immunize corporations from liability for the conduct of their agents in lawsuits brought for shockingly egregious violations of universally recognized principles of international law,” Judge Judith Rogers wrote for a 2-1 majority.

Friday’s decision reversed part of a ruling by the United States District Court in Washington.

It is also at odds with a landmark ruling last September by the Court of Appeals for the Second District in New York, raising the prospect that the case will reach the Supreme Court.

“The ruling basically says that corporations are not above the law,” said Jennifer Green, a University of Minnesota law professor and director of that school’s human rights litigation clinic, who submitted a brief on the plaintiffs’ behalf. “When corporations have knowledge that they are aiding and abetting human rights abuses, they can be held liable in a U.S. court.”

Exxon Mobil, based in Irving, Tex., said it was reviewing Friday’s decision, calling the plaintiffs’ claims “baseless.”

Patrick McGinn, a spokesman, said in a statement that Exxon “strongly condemns human rights violations in any form.”

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Court Rejects Suit on Net Neutrality Rules

WASHINGTON — A federal appeals court on Monday rejected as “premature” a lawsuit by Verizon and MetroPCS challenging the Federal Communications Commission’s pending rules aimed at keeping Internet service providers from blocking access to certain Web sites or applications.

While the decision, by the United States Court of Appeals for the District of Columbia circuit, is a first-round victory for the F.C.C. and its chairman, Julius Genachowski, the real battle over the agency’s attempt to regulate broadband providers has barely begun.

Several broadband companies, and some consumer advocacy and public interest groups, are likely to return to court this year to challenge aspects of the rules. Edward S. McFadden, a Verizon spokesman, said Monday that the company intended to refile its lawsuit this year.

The House will take up a joint resolution condemning the new Internet access rules this week. Though the House is likely to pass the resolution prohibiting the F.C.C. from putting the new rules into effect, it is doubtful that the resolution will go much further because many Senate Democrats and the Obama administration support the rules.

The Verizon lawsuit was dismissed as premature, the court said, because federal regulations dictate that a challenge to new F.C.C. rules must come within 10 days after a new rule is published in the Federal Register.

That publication has not taken place, although the F.C.C. approved its rules in December, because the regulations must be reviewed for compliance with the Paperwork Reduction Act. That F.C.C. review, which includes a 60-day public comment period, will be completed this month. Then, the Office of Management and Budget will conduct a review, with a 30-day comment period, before the rules are published.

A commission spokesman, Robert Kenny, said the agency was pleased by the court’s decision and believed its policy “preserves Internet freedom and openness and strikes the right balance for consumers and businesses across America.”

The new regulations, which the commission calls its Open Internet Order, are commonly known as net neutrality rules. They prohibit companies providing broadband Internet service to consumers from discriminating in granting access by customers to content providers.

Once the regulations are published in the Federal Register, any legal challenge filed in 10 days is entered in a lottery to determine the legal venue.

Verizon and MetroPCS tried to sidestep that provision by contending that the rules modified their licenses to operate wireless broadband networks. So, they said, the dispute was a licensing issue, not an appeal of a new rule, a position the court rejected.

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