8th Circuit Addresses When Insurance Policies Cover Governmental Actions for Privacy Violations

4/28. The U.S. Court of Appeals (8thCir) issued its opinion [10 pages in PDF] in State Farm v. NRCCUA, a case regarding an insurer's obligation to defend and indemnify its insured when governments take action against the insured for privacy violations.

The National Research Center for College and University Admissions (NRCCUA) surveyed survey high school students and distributed the results to colleges and universities for the purposes of recruitment and admissions. In addition, without disclosure to the students, the NRCCUA sold survey information to commercial entities for marketing purposes.

The Federal Trade Commission (FTC) and various state attorneys general investigated, and took action against the NRCCUA. See, FTC's administrative Complaint and Decision and Order. The NRCCUA and the FTC entered into a consent decree which provided that the NRCCUA was enjoined further undisclosed sale of survey information. However, the decree provided for no penalty, fine or other payment.

The state of Iowa, on behalf of a group of states, determined that the NRCCUA must pay them a total of $300,000 for privacy violations. The state of Missouri demanded $20,000.

The NRCCUA had purchased a business liability policy from State Farm. This policy provided that State Farm "will pay those sums that the insured becomes legally obligated to pay as damages because of ... personal injury or advertising injury to which this insurance applies." The policy further defined this to include "oral or written publication of material that violates a person's right of privacy". The policy also provided that State Farm had a duty to defend its insured against such claims.

State Farm filed a complaint in U.S. District Court (WDMo) seeking a declaratory judgment that it has no duty under the policy to defend or indemnify the NRCCUA in the above described matters. The District Court granted summary judgment to State Farm on the grounds that none of the proceedings were claims for damages within the meaning of the policy. That is, government fines and penalties are not damages.

The Court of Appeals affirmed in part and reversed in part.

The Court of Appeals reasoned that the proceeding were claims for invasion of privacy within the meaning of the policy, but were not claims for damages. It held that "because the FTC did not seek compensatory relief, State Farm did not have a duty to defend against the FTC's claims." The Court also held that the payments in the Iowa proceeding were not damages. However, the Court held that some of the payments to Missouri were in the nature of damages, and hence, covered by the policy.

This case is State Farm Fire and Casualty Company v. National Research Center for College and University Admissions and Donald Munce, U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 05-1588, an appeal from the U.S. District Court for the Western District of Missouri.

Sensenbrenner and Grassley Introduce Bills to Create Judicial Branch Inspector General

4/27. Rep. James Sensenbrenner (R-WI) and Rep. Lamar Smith (R-TX) introduced HR 5219, the "The Judicial Transparency and Ethics Enhancement Act of 2006". Also on April 27, Sen. Charles Grassley (R-IA) introduced S 2678, the companion bill in the Senate.

These bills would create an Office of the Inspector General in the judicial branch. This OIG would have the power to take sworn testimony, issue subpoenas, and enforce subpoenas through civil actions.

Rep. Sensenbrenner (at right) is the Chairman of the House Judiciary Committee (HJC). Rep. Smith is the Chairman of the Subcommittee on Courts, the Internet, and Intellectual Property. Sen. Grassley is a senior member of the Senate Judiciary Committee.

Rep. Sensenbrenner stated in a release that "Integrity and accountability are the hallmarks of a public servant's trust with the public. It's my hope an independent Inspector General for the Judicial Branch will help restore some of this trust with the public that has been damaged by the actions of some Federal judges who have carelessly ignored the ethical guidelines established. In addition, an IG will serve as a public watchdog to root out waste, fraud, and abuse and ensure the Third Branch's taxpayer-funded resources are utilized in an appropriate manner, just as IGs do throughout the Executive Branch."

He added that this IG "will not have any authority or jurisdiction over the substance of a judge's opinions. Judicial independence of opinions is a sacred foundation of our constitutional form of government of checks and balances and separation of powers that must not be tampered with."

The Chief Justice of the United States would pick the head of this IG office.

There is also a whistleblower protection section in the bill. It provides that "No officer, employee, agent, contractor or subcontractor in the Judicial Branch may discharge, demote, threaten, suspend, harass or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee to provide information, cause information to be provided, or otherwise assist in an investigation regarding any possible violation of Federal law or regulation, or misconduct, by a judge or any other employee in the Judicial Branch, which may assist the Inspector General in the performance of duties under this chapter."

2nd Circuit Rules Against IRS on Excise Tax on Phone Service

4/27. The U.S. Court of Appeals (2ndCir) issued its short per curiam opinion [PDF] in Fortis v. USA, affirming the judgment of the District Court, and following the precedent of three other circuits, regarding the Internal Revenue Service's (IRS) illegal collection of excise taxes on certain telecommunications services, in violation of Sections 4251 and 4252 of the Internal Revenue Code.

The Court of Appeals wrote that "At issue is whether the federal excise tax statute, 26 U.S.C. § 4251, et seq., applies to the telephone services used by Fortis during that time, and in particular, whether the provision of that statute that defines taxable toll telephone service as a ``telephonic quality communication for which (a) there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication and (b) the charge is paid within the United States´´".

The Court of Appeals did not bother itself to refute, or even mention, the legal arguments advanced by the IRS.

It concluded in a few brief paragraphs that the District Court, which granted summary judgment to the taxpayer, wrote "thorough and well-reasoned opinions", and that 11th, 6th, and D.C. Circuits have already reached the same conclusion "for substantially the same reasons".

See, full story.

GAO Reports on Possibility of Collapse of Doha Round

4/27. The Government Accountability Office (GAO) released a report [47 pages in PDF] titled "World Trade Organization: Limited Progress at Hong Kong Ministerial Clouds Prospects for Doha Agreement".

It states that "Between mid-2004 and the eve of the WTO’s Hong Kong ministerial conference in December 2005, WTO members made little progress toward their goal of making the major decisions in six core areas that would be needed to set the stage for final negotiations in 2006: (1) agriculture, (2) nonagricultural (or industrial) market access, (3) services, (4) trade facilitation (simplification of customs procedures), (5) development issues, and (6) WTO rules (including antidumping and subsidies)." (Parentheses in original.)

It concludes that "the trade-offs required to finalize the agreement will need to be made when political events such as elections are taking place, which will constrain key countries. Moreover, even if a breakthrough is achieved, many difficult and time-consuming steps must be completed before entering an agreement. Thus, the ability to meet the 2006 deadlines with an ambitious outcome -- one that would result in a strengthened and measurably freer global trade environment -- is in doubt. While holding out some hope for a satisfactory outcome, several experts in fact warn that outright collapse, substantial delay, or a minimal outcome are possible."

Rep. Conyers Introduces Bill to Create National Commission on Surveillance

4/27. Rep. John Conyers (D-MI) and other Democrats introduced HR 5223, the "Surveillance Activities Commission Act of 2006", a bill to establish a legislative commission titled the "National Commission on Surveillance Activities and the Rights of Americans".

The bill provides that "There is established in the legislative branch the National Commission on Surveillance Activities and the Rights of Americans to conduct an investigation and to study governmental operations with respect to warrantless surveillance conducted inside the United States and intelligence activities, and the extent, if any, to which illegal, improper, or unethical activities were engaged in by any Federal, State, or local government agency or any person employed by a Federal, State, or local government."

The purpose of the Commission would primarily be to investigate and report on "warrantless surveillance conducted inside the United States that occurred after September 11, 2001, by the National Security Agency". However, its purposes would also be to investigate "any warrantless surveillance conducted inside the United States" and to "investigate and report on any violation of the Foreign Intelligence Surveillance Act ..., or any other applicable law".

This would not be an executive branch commission, the members of which would be appointed by the President. Rather, it would be legislative, with members appointed by various House and Senate Republicans and Democrats. There would be 14 members, with an equal number being appointed by members of each party. Moreover, no member of the Commission could be a member of the executive branch.

The Congress has already created a Privacy and Civil Liberties Oversight Board. This was created by Section 1061 of the Intelligence Reform and Terrorism Prevention Act of 2004, pursuant to the recommendations contained in the report of National Commission on Terrorist Attacks Upon the United States. This bill was S 2845 in the 108th Congress. It is now Public Law No. 108-458. See also, story titled "Bush Names Members of Privacy and Civil Liberties Oversight Board" in TLJ Daily E-Mail Alert No. 1,151, June 10, 2005.

The powers of the Commission would be to investigate and write reports. It would have the power to hold hearings, issue subpoenas for testimony and records, enforce subpoenas by judicial action, and administer oaths.

The bill was referred to the House Intelligence Committee and House Judiciary Committee.

The original cosponsors of the bill are all Democrats: Rep. Robert Wexler (D-FL), Rep. Raul Grijalva (D-AZ), Rep. Bernie Sanders (D-VT), Rep. Jim McDermott (D-WA), Rep. Jan Schakowsky (D-IL), Rep. Pete Stark (D-CA), Rep. Michael Capuano (D-MA), Rep. Betty McCollum (D-MN), Rep. Tammy Baldwin (D-WI), Rep. Mike Honda (D-CA), Rep. Carolyn Maloney (D-NY), Rep. Chris Van Hollen (D-MD), Rep. Sam Farr (D-CA), and Rep. Barbara Lee (D-CA).

People and Appointments

4/27. President Bush announced his intent to appoint Susan Dell, wife of Michael Dell, Chairman of Dell Inc., to the President's Council on Physical Fitness and Sports. See, White House release.

More News

4/27. The Copyright Office published a notice in the Federal Register that announces, describes, recites, and sets comments deadlines for, its proposed rule changes governing the submission of royalty fees to the CO. The CO proposes to require such payments to be made by electronic funds transfer. Initial comments are due by June 12, 2006. Reply comments are due by July 11, 2006. See, Federal Register, April 27, 2006, Vol. 71, No. 81, at Pages 24829-24831.

4/27. The Department of Justice (DOJ) released a report [37 pages in PDF] titled "A Review of the FBI’s Investigative Activities Concerning Potential Protesters at the 2004 Democratic and Republican National Political Conventions".

4/27. The Department of Justice (DOJ) announced that five more individuals have been charged with criminal copyright infringement as a part of ongoing operations named "FastLink" and "Site Down". The DOJ stated in a release that "The five defendants charged today are alleged to have been leading members in the illegal software, game, movie, and music trade online..." It adds that these organized groups "act as ``first-providers´´ of copyrighted works to the Internet -- the so-called ``release´´ groups that are the original sources for a majority of the pirated works distributed and downloaded via the Internet." The DOJ further stated that once these groups prepare a stolen work for distribution, the material is distributed in minutes to secure, top-level servers throughout the world, and that "within a matter of hours, the pirated works are distributed globally, filtering down to peer-to-peer and other public file sharing networks accessible to anyone with Internet access."

4/27. The Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA) stated in a release that they sent letters to 40 university presidents regarding online infringement of intellectual property rights in music and movies via the universities' local area networks (LAN).

Amendment by Amendment Summary of Full Committee Mark Up of COPE Act

4/26. The House Commerce Committee (HCC) amended and approved the "Communications Opportunity, Promotion, and Enhancement Act of 2006", or COPE Act. This bill has not yet been introduced in the House. Hence, there is no bill number. There is also no bill sponsor. However, Rep. Joe Barton (R-TX) identifies himself as the sponsor, and Rep. Bobby Rush (D-IL) as a cosponsor.

The HCC's Subcommittee on Telecommunications and the Internet amended and approved the COPE Act on April 5, 2006. See, stories titled "House Subcommittee Approves COPE Act", "House Subcommittee Rejects Network Neutrality Amendment", and "Amendment by Amendment Summary of Subcommittee Mark Up of COPE Act" in TLJ Daily E-Mail Alert No. 1,344, April 6, 2006.

See also, March 27, 2006, committee print [34 pages in PDF]. The Subcommittee approved numerous amendments on April 5, 2006, which were incorporated into the April 26, 2006, committee print [50 pages in PDF]. This was the base bill for the April 26, 2006, mark up by the full Committee.

The Committee proceeded Title by Title. It first considered amendments to Title I of the bill, which establishes a national cable franchise. Amendments 1 through 18 pertained to Title I.

The Committee then considered one amendment (19) to Title II, which provides that the Federal Communications Commission (FCC) is authorized to enforce its August 2005 policy statement [3 pages in PDF] regarding network neutrality through case by case adjudicatory proceedings.

The Committee then considered amendments (20 through 23) to Title III, which extends the E-911 regulatory regime, and other legacy regulatory regimes, to voice over internet protocol (VOIP) service. See, Title III, as amended.

The Committee then considered amendments (24 and 25) to Title IV, which provides that state and local entities may provide any telecommunications, information or cable service. See, Title IV, as amended.

The Committee then considered amendments (26 through 29) to Title V, which pertains to broadband as a stand alone service. The Committee then considered further amendments to the bill (30 through 33). See, Title V, as amended, and the new Title VI, titled "Seamless Mobility".

See, full story.

House Commerce Committee Approves COPE Act

4/26. The House Commerce Committee (HCC) amended and approved HR __, a yet to be introduced bill titled the "Communications Opportunity, Promotion, and Enhancement Act of 2006", or COPE Act. The final vote was 42 to 12. The HCC also rejected an amendment that would have expanded the network neutrality mandates in the bill, by a vote of 22 to 34.

All Republicans who voted, except Rep. Heather Wilson (R-NM), voted against the network neutrality amendment, and for final approval.

21 of 26 Democrats voted for the network neutrality amendment, and 15 of 26 voted for final approval.

Title I of the bill provides that certain cable operators may obtain a national cable franchise. The HCC approved a manager's amendment that contains numerous changes, but rejected numerous amendments offered by Democrats that would have imposed build out requirements, barred various forms of discrimination, and/or given more enforcement authorities to local governments. (The bill already contains anti-discrimination language.) These amendments failed on nearly straight party line votes, with Republicans unanimously opposing the amendments, and most, but not all, Democrats supporting the amendments.

The bill contains network neutrality language. Title II provides that the Federal Communications Commission (FCC) is authorized to enforce its August 2005 policy statement [3 pages in PDF] regarding network neutrality through case by case adjudicatory proceedings.

The HCC rejected an amendment offered by Rep. Ed Markey (D-MA) and others that would have imposed a more rigorous network neutrality mandate. It failed, as did a similar amendment during the Subcommittee markup session earlier this month.

The HCC's Subcommittee on Telecommunications and the Internet amended and approved the COPE Act on April 5, 2006. See, stories titled "House Subcommittee Approves COPE Act", "House Subcommittee Rejects Network Neutrality Amendment", and "Amendment by Amendment Summary of Subcommittee Mark Up of COPE Act" in TLJ Daily E-Mail Alert No. 1,344, April 6, 2006.

Proponents of a stricter network neutrality mandate made some progress between the Subcommittee and full Committee mark ups. On both votes all Republicans, except Rep. Wilson, supported the hard mandate amendments. On April 5, 7 of 13 Democrats voted for the amendment. On April 26, 21 of 26 Democrats voted for the amendment. Two Democrats who voted against the April 5 amendment voted for the April 26 amendment -- Rep. Eliot Engel (D-NY) and Rep. Bart Stupak (D-MI). Two Democrats who are members of the Subcommittee who did not vote on April 5 voted for the April 26 amendment -- Rep. Sherrod Brown (D-OH) and Rep. Bart Gordon (D-TN). Of the 11 Democrats who are members of the full Committee, but not the Telecom Subcommittee, all but one voted for the amendment on April 26 -- Rep. Gene Green (D-TX).

The bill also extends the E-911 regulatory regime to voice over internet protocol (VOIP) service. It also provides that state and local entities may provide any telecommunications, information or cable service.

TLJ anticipates publishing more detailed information about this mark up session in the Friday edition.

FCC to Consider CALEA Statute on May 3

4/26. The Federal Communications Commission (FCC) released an agenda [3 pages in PDF] for its event titled "Open Meeting", scheduled for Wednesday, May 3, 2006. This agenda includes consideration of further administrative amendments to the 1994 Communications Assistance for Law Enforcement Act (CALEA).

On August 5, 2005, the FCC adopted, but did not release, an Order and Further Notice of Proposed Rulemaking (FNPRM). That item provided that facilities based broadband service providers and interconnected VOIP providers are subject to requirements under the CALEA. See, story titled "FCC Amends CALEA Statute" in TLJ Daily E-Mail Alert No. 1,191, August 9, 2005.

The FCC released the text [59 pages in PDF] of this item on September 23, 2005. It is FCC 05-153 in ET Docket No. 04-295 and RM-10865.

The FCC's agenda for its May 3 event states that it "will consider a Report and Order and Memorandum Opinion and Order regarding implementation of the Communications Assistance for Law Enforcement Act". The FCC's agenda provides no details regarding the content of this item.

The FCC has scheduled consideration of this item for just two days before the date on which the Court of Appeals will hear oral argument in a challenge to the FCC's August 5, 2005 order.

On Friday, May 5, 2006, the U.S. Court of Appeals (DCCir) will hear oral argument in American Council on Education, et al. v. FCC and USA. See also, story titled "FCC CALEA Order Challenged" in TLJ Daily E-Mail Alert No. 1,240, Wednesday, October 26, 2005. See also, ACE brief [71 pages in PDF] and FCC brief [52 pages in PDF]. This oral argument will be held at 9:30 AM at the Prettyman Courthouse, 333 Constitution Ave., NW.

The FCC's event is scheduled for 9:30 AM on Wednesday, May 3, 2006 in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always consider all of the items on its published agenda. The FCC sometimes adds items to the agenda without providing the "one week" notice required 5 U.S.C. § 552b. The FCC does not always start its monthly meetings at the scheduled time. The FCC usually does not release at its meetings copies of the items that its adopts at its meetings.

The FCC's agenda also includes several other items.

It will consider a Declaratory Ruling and Notice of Proposed Rulemaking regarding interoperability of Video Relay Service. This is CG Docket No. 03-123. It will also consider a Further Notice of Proposed Rulemaking regarding fraudulent use of the internet based forms of Telecommunications Relay Service. This too is CG Docket No. 03-123.

Finally, the FCC will consider two requests for review of decisions of the Universal Service Administrator regarding the FCC's e-rate subsidy program.

Chertoff Defends Extrajudicial Surveillance of Electronic Communications

4/26. Secretary of Homeland Security Michael Chertoff spoke and answered question at an event at George Mason University in Fairfax, Virginia. He discussed, among other topics, the National Security Agency's (NSA) extrajudicial electronic surveillance of communications where one party in within the US and one party is outside. See, transcript.

He was asked, "How do you justify monitoring the email and phone communications of American citizens who are not suspected of any crime?"

Chertoff (at left) said, "Well, first of all, of course, all these things are guided by a very complicated set of laws.  In the case of monitoring the -- again, without getting into classified areas -- we're either dealing with things that come under FISA where you have warrants because you're dealing with people who we have some probable cause to believe are connected to terrorism; or we're dealing with international phone traffic, which traditionally has been an area where the government has a wide latitude because you're dealing with international travel and international communication."

He continued that "The bottom line here is this: In the 21st century, we don't have the kind of radar against terrorist bombs that we had in the 20th century against Soviet bombers. Our radar is intelligence. Our ability to detect people talking about plots is the only thing that allows us to disrupt those plots before Americans get killed. And if we don't use that radar, what we're going to see is more and more Americans getting killed. And frankly, what we'd be more likely to see is a real backlash."

He concluded that "So the use of these kinds of electronic surveillance as a way of warning ourselves to prevent terrorist acts is to my mind as valid and as reasonable as the use of radar to keep bombers out of the country in the 21st century."

People and Appointments

4/26. President Bush named Tony Snow to be his press secretary. He replaces Scott McClellan. See, White House release.

4/26. Jason Oxman will join the Law Media Group, a public policy consulting firm, on Monday, May 1. He is currently SVP for Legal and International Affairs at CompTel.

4/26. The Senate confirmed Patrick Joseph Schiltz to be a Judge of the U.S. District Court for the District of Minnesota.

More News

4/26. The House approved HR 5020, the "Intelligence Authorization Act for Fiscal Year 2007", by a vote of 327-96. See, Roll Call No. 108.

4/26. The Government Accountability Office (GAO) released a report [21 pages in PDF] titled "Export Promotion: Trade Promotion Coordinating Committee's Role Remains Limited".

4/26. The Progress and Freedom Foundation (PFF) published the transcript [30 pages in PDF] of its March 24, 2006, panel discussion titled "The White Space: What to Do With It". This program addressed the use of smart technology to allow advance wireless services to operate in the white spaces of the broadcast bands. The FCC has a open rulemaking proceeding. See, story titled "FCC Adopts NPRM Regarding Unlicensed Use of Broadcast TV Spectrum" in TLJ Daily E-Mail Alert No. 898, May 14, 2004. This NPRM is FCC 04-113 in ET Docket Nos. 04-186 and 02-380.

Go to News from April 21-25, 2006.