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Second Circuit Pushes Overseas Data Beyond Feds’ Reach

July 18, 2016

On Thursday, July 14, 2016, the long arm of the law got substantially shorter.  Until Thursday, under the Stored Communications Act or “SCA,” 18 U.S.C. §§ 2701 et seq., the U.S. government was able to compel  domestically-based service providers to hand over content data stored exclusively overseas, pursuant to a valid warrant.  No more—the Department of Justice may no longer force the production of such information stored extraterritorially.

Passed in 1986 as part of the broader Electronic Communications Privacy Act, the SCA was enacted to protect user data by requiring the issuance of a warrant, requiring “pre-disclosure scrutiny of . . . requested search[es]” by a neutral third party, affording increased privacy protection within the United States.  In re Warrant to Search a Certain Email Account Controlled and Maintained by Microsoft Corp., No. 14-2985, 2016 U.S. App. LEXIS 12926 at *7 (2d Cir. July 14, 2016). 

Over time, however, as the internet has globalized in a way not anticipated by Congress in 1986, this warrant provision’s application had grown, becoming relied upon to force U.S.-based service providers to retrieve and produce content data stored extraterritorially—potentially in contravention of another sovereign nation’s own privacy policy.

Microsoft had been held in civil contempt by the Southern District of New York for failure to comply with an SCA warrant to produce consumer e-mail content data housed on a server in Ireland—for customers located outside of the United States, Microsoft generally stores only non-content data domestically. 

The government argued that SCA search warrants issued allowed access to the extraterritorial data of domestically-based companies; Chief Judge Preska of the Southern District of New York agreed, affirming a magistrate judge’s determination that the action compelled was located domestically, framing the question as one of the “control, not the location of the data.”  The government also voiced concerns that limiting the reach of SCA warrants would place a substantial burden on law enforcement.

Backed by more than 80 amicus briefs, including one submitted by the government of Ireland, Microsoft argued, in part, that the Supreme Court’s decision in Morrison v. Nat’l Australian Bank, 561 U.S. 247 (2010) instituted a presumption against the extraterritoriality of U.S. statutes.  The Second Circuit agreed.

Applying the Supreme Court’s presumption against extraterritoriality, the court determined the statute was intended to be domestic in nature, in the absence of a clear evincing of a contrary Congressional intent. The Second Circuit concluded that Congress (a) did not intend the SCA’s warrant provisions to have extraterritorial reach, and (b) intended the SCA to extend the Fourth Amendment’s privacy protections to electronic data, not enhance the power of law enforcement.  Accordingly, the Second Circuit ordered the district court to quash the warrant and vacated the order holding Microsoft in contempt.

For more information, please contact Ted Schaer at tmschaer@zarwin.com


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