E-Commerce Law Week, Issue 414

DoJ Plays Texas Hold 'em, with $4.5 Billion in the Pot
The Department of Justice (DoJ) last month indicted BETonSPORTS PLC, a British Internet gambling company, and affiliated companies and individuals, charging them with various gambling violations, fraud, tax evasion, and Racketeer Influenced and Corrupt Organizations (RICO) conspiracy and seeking forfeiture of $4.5 billion. But the feds kept the indictment under seal until July 17, after they were able to put the cuffs on BETonSPORTS's CEO David Carruthers in the Dallas/Fort Worth International Airport as he was transiting the U.S. on his way from the U.K. to Costa Rica. The indictment and arrest, and a surprisingly broad temporary restraining order in a parallel civil suit, have left online gambling establishments and their investors on edge, as they contemplate where DoJ might strike next. Two key questions are: (1) whether DoJ would be able to enforce a forfeiture judgment against foreign assets, in places where online gambling is perfectly legal, and (2) whether Internet providers, telecommunications companies, banks, and other service providers will be dragged to the table next. Right now, DoJ is dealing. But it's not clear how strong its hand really is.

Court Rejects "States Secret" Assertion in NSA Wiretapping Case
It's been a tough few weeks for the Administration's broad assertions of executive power. First, the Supreme Court held in Hamdan v. Rumsfeld that the plan to use military tribunals to try detainees held in Guantanamo Bay violated the Geneva Convention and U.S. law. Then, on July 20, a federal district court in California rejected the government's motion to dismiss, on grounds of the "state secrets" privilege, claims against AT&T for allegedly cooperating with the National Security Agency's warrantless wiretapping program. The court also rejected AT&T's separate motion to dismiss for lack of standing and on the ground of various immunities. Still, even though the Administration has suffered another blow to its claims of Executive prerogative over national security issues, the fight's far from over. An interlocutory appeal to the Ninth Circuit seems virtually certain. And even if the plaintiffs manage to prevail there, they will face continual battles over specific discovery requests. So plaintiffs are a long way from getting any meaningful discovery in this case.

California Law Governs Phone Monitoring From Other States, Court Rules
California has long been a trendsetter when it comes to privacy law. But a July 13 ruling by the California Supreme Court could make the state not only an exemplar that other states follow, but effectively the lawmaker for the rest of the nation -- at least when it comes to conduct that affects the privacy of California residents. The Court ruled, in Kearney v. Salomon Smith Barney, Inc., that California law, not Georgia law, governed a suit involving calls with California residents that were recorded by persons in Georgia. California law prohibits recording phone calls unless all parties to the call consent, while Georgia requires the consent of only one of the parties. Given the substantial number of companies that operate outside of California but have phone calls with customers in the Golden State, the court's decision could have widespread impact. More broadly, the court's choice-of-law analysis could affect how courts treat cases involving company monitoring of employees' email and Internet usage, which could prove even more problematic for employers.

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