E-Commerce Law Week, Issue 418

Federal Court Finds NSA Warrantless Wiretaps Unconstitutional
In another blow to the Administration's broad assertions of executive power, the United States District Court for the Eastern District of Michigan ruled on August 17 that the National Security Agency's warrantless interception of international telephone and Internet communications is unconstitutional, violating the First and Fourth Amendments and the separation of powers. The court granted partial summary judgment to the plaintiffs, led by the ACLU, and issued a permanent injunction barring the government from "directly or indirectly utilizing the Terrorist Surveillance Program in any way." The court also denied the government's motion to dismiss the plaintiffs' challenge to the wiretapping program on the ground of the state secrets privilege. The court did, however, grant the government's motions to dismiss the challenge to the government's alleged collection of non-content call records on the ground that the government had not acknowledged the existence of that program. While likely to be applauded by many critics of the NSA surveillance program, the court's decision is rather sloppily reasoned. The court seems to have rushed to issue its decision to avoid having this case consolidated with the other, similar challenges to the NSA surveillance programs (see next item). The important thing, though, is that the plaintiffs have won their first challenge to the program on the merits. The government immediately filed a notice of appeal, and both parties agreed to delay enforcement of the injunction until a hearing on September 7.

NSA Surveillance Cases Consolidated in California, While EU Authories Pledge to Investigate Financial Monitoring
On August 9, the federal Judicial Panel on Multidistrict Litigation decided to consolidate 17 pending cases challenging the National Security Agency's warrantless wiretapping and alleged data mining programs. Verizon, AT&T, Bell South, and the U.S. government had sought to have all the cases transferred to federal district court in Washington, D.C. While they got their wish for consolidation, they did not get their choice of venue. The Panel decided to transfer the cases to Judge Vaughn Walker in the Northern District of California, who has been presiding over the case of Hepting v. AT&T. Since Judge Walker last month denied both the government's and AT&T's motions to dismiss claims arising from the wiretapping program, the transfer of these cases to him is at least an important tactical victory for the plaintiffs. But many procedural hurdles remain. Meanwhile, European Union authorities announced their intention to investigate whether SWIFT's provision of bank wire transfer information to the Treasury Department violated EU data protection laws.

Investor Liability for Internet Gambling:  Will DoJ Soon Be Chasing the Money?
The Justice Department's prosecution of BETonSPORTS PLC seems to have had its intended effect. BETonSPORTS announced that it will shut down its services for American gamblers, which are based in Costa Rica and Antigua, and focus on markets in Asia and Europe. And the effects have also apparently been felt by other online gambling companies, with executives reportedly avoiding travel to the U.S. lest they end up as cellmates of former BETonSPORTS CEO David Carruthers. But the prosecution is unlikely to stem the flow of billions of dollars from American bettors to casinos based offshore that take bets online or over the phone. That's part of the reason DoJ is pushing for legislation making it easier to go after financial payment companies that process transactions between bettors and casinos. But one issue that has gone almost entirely unexamined is the potential liability of U.S. investors in Internet gambling businesses either to criminal prosecution or civil forfeiture of their money. With investment banks, mutual funds, and private equity companies holding large stakes in privately held or publicly traded online gambling companies, this issue could have serious ramifications.

Employees Lack Privacy Rights in Some Work Computers, Court Rules
Corporations increasingly feel compelled to monitor employees' communications and computer usage for both business and legal reasons. Accordingly, many companies are notifying employees that workplace computers and email systems are the property of the company and that communications may be monitored. One unintended result of such policies, though, is that employees may no longer have Fourth Amendment protections against government searches of their computers, since they have no reasonable expectation of privacy in the computer. That, at least, is what the Ninth Circuit held on August 8 in United States v. Ziegler. As a result, the government did not need a warrant to search an employee's workplace computer.  Left unclear is what rights the employer has, and whether the government would need a warrant to conduct a search for evidence against the company.

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