9th Circuit Holds There is No Secondary Liability for Violation of ECPA's § 2702

August 8, 2006. The U.S. Court of Appeals (9thCir) issued its opinion [15 pages in PDF] in Freeman v. DirecTV, a class action alleging violation of the Electronic Communications Privacy Act (ECPA). The Court of Appeals affirmed the dismissal by the District Court, and held that there is no secondary liability for violation of §§ 2702 and 2707 of the ECPA, which bar an electronic communication service provider from divulging electronic communications, and provide a private right of action for violation of the bar.

Introduction. The Court of Appeals' opinion is based on a plain reading of the statute, which clearly imposes the bar on divulging communications only upon the electronic communication service provider. The Court of Appeals declined to infer any secondary liability.

This case involves a frivolous class action against DirecTV for obtaining from the operator of a satellite signal piracy message board, the contents of communications of that message board, following the bringing of a legal action, and pursuant to a court order authorizing seizure. Nevertheless, this case is far reaching. This opinion holds that there is no secondary liability under §§ 2702 and 2707. § 2702 also serves as the basis for criminal liability for divulging the contents of electronic communications.

Moreover, the Court of Appeals suggested in dicta that there is no secondary liability for violation of any section of the ECPA.

Preventing satellite signal pirates from brining frivolous class action suits against the companies from which they are stealing signals is hardly noteworthy. However, there are other circumstances in which someone might conspire with an electronic communication service provider to obtain the contents of communications for which there are strong policy arguments for imposing civil or criminal liability upon both the service provider and the conspirator. This holding precludes the imposition of such secondary liability.

It should also be noted that § 2702 is drafted differently from 18 U.S.C. § 2511, which bars both wiretapping and procuring another to wiretap, and then bars subsequent disclosure of the fruits of the wiretap. It provides criminal and civil liability for any person who "intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication" or who "intentionally discloses, or endeavors to disclose, to any other person the contents of any wire, oral, or electronic communication, knowing or having reason to know that the information was obtained through the interception of a wire, oral, or electronic communication in violation of this subsection".

Background. DirecTV is a direct broadcast satellite (DBS) service provider. It uses conditional access technology that encrypts its satellite transmissions. It then provides its paying customers with access cards that decrypt these satellite transmissions.

Numerous persons, who do not wish to pay for DBS service, use equipment, software, and programming codes to obtain pirated access to DBS service, which is barred by statute. DirecTV frequently takes legal action against distributors of these piracy technologies.

Lawrence Freeman, a plaintiff in the present action, has previously been sued by DirecTV for distribution of illegal signal theft devices.

Freeman also posted communications on electronic message boards operated by Daryl Gray in British Columbia, Canada. Gray operated web sites that provided an online meeting place for participants to discuss, exchange, and post DBS piracy technology information.

In a previous lawsuit, DirecTV sued Gray in Canada. DirecTV prevailed, obtaining both an injunction, and a civil writ of seizure. The Canadian writ allowed DirecTV to enter Gray's offices to "search for, examine, and remove or copy" evidence of piracy related activities including "the web sites, databases contained therein, electronic storage media and computer equipment." The writ also allowed DirecTV to remove or copy "any document, record, article, notes, information, instructions, correspondence, sent and received, electronic mail, howsoever stored, fixed, expressed or embodied". It further allowed DirecTV to designate an entity for this purpose. DirecTV designated ICG, which is also a party to the present appeal.

The order further allowed DirecTV to use "any and all evidence seized or delivered up pursuant to the order [to] be used in subsequent civil proceedings commenced by DirecTV against any third party, including, but not limited to proceedings against [Gray’s] customers, suppliers, members, and subscribers."

DirecTV obtained copies of Freeman's communications as a result of execution of this writ.

District Court Proceeding. Freeman filed a complaint in U.S. District Court (CDCal) against DirecTV and ICG, seeking class action status, alleging that DirecTV's seizure of his communications pursuant to the Canadian Court order violated the ECPA. An amended complaint identified Michael Scherer as a second named plaintiff.

The plaintiffs asserted that the ECPA was violated because of the manner in which the seized material was divulged and held. They assert that it is significant that when the servers and hard drives were seized, they were placed in the custody, not of DirecTV's attorneys, but an independent solicitor.

The District Court dismissed for failure to state a claim, on the grounds that 18 U.S.C. § 2702 does not provide a basis for asserting conspiracy and aiding and abetting claims. See, order [PDF].

Statute. 18 U.S.C. § 2702(a)(1) provides the general prohibition. It states that "Except as provided in subsection (b) -- (1) a person or entity providing an electronic communication service to the public shall not knowingly divulge to any person or entity the contents of a communication while in electronic storage by that service".

18 U.S.C. § 2707(a) provides a private right of action for violation of the prohibition. It states that "Except as provided in section 2703(e), any provider of electronic communication service, subscriber, or other person aggrieved by any violation of this chapter in which the conduct constituting the violation is engaged in with a knowing or intentional state of mind may, in a civil action, recover from the person or entity, other than the United States, which engaged in that violation such relief as may be appropriate."

The statute prohibits a provider of an electronic communication service from divulging communications. In the present case, Gray is the provider of the electronic communications service. He is not the defendant. DirecTV and ICG are not the providers of the electronic communications service. But, they are the named defendants. They are the deep pockets.

Court of Appeals. The Court of Appeals affirmed.

Freeman's argument is that DirecTV is liable under the statute for aiding and abetting the violation of the statute by Gray. Yet, neither § 2702(a)(1) nor § 2702(a)(1) contains a reference to either "conspiracy", "aiding and abetting", or similar conduct.

The Court of Appeals wrote that "There is no explicit provision in §§ 2702 and 2707 or anywhere else in the ECPA, providing for secondary liability. Accordingly, it is reasonable to conclude that Congress knew what it was doing by not including such claims." The Court of Appeals wrote that it would not infer secondary liability.

The Court of Appeals held that "that the unambiguous language of 18 U.S.C. §§ 2702 and 2707 limits liability to providers of electronic communication services that knowingly divulge the contents of those communications while being stored by that provider. We reject Freeman and Scherer's to read implicitly into these statutory provisions claims for conspiracy or aiding and abetting. In addition to being contrary to the plain language of §§ 2702 and 2707, such an implied interpretation is not supported by legislative history or case law."

The Court of Appeals added that "Even if we were to accept Freeman and Scherer's invitation to consider the policy goals and legislative history, there is nothing about those goals or history that contradicts our determination that Congress intended to limit liability to providers of electronic communication services. Freeman and Scherer’s argument that the ECPA aims to protect the privacy of electronic communications is true, but inconsequential. Such broad goals tell us nothing about how Congress decides to accomplish a particular task."

Hence, the Court of Appeals affirmed the judgment of the District Court dismissing the complaint for failure to state a claim.

There are other issues not addressed in the present opinion. For example, DirecTV also argued that Freeman's "claims were barred under the Noerr-Pennington doctrine". The Court of Appeals wrote that since it affirmed the judgment of the District Court on the grounds relied upon by the District Court, "DirecTV and ICG’s alternative arguments are not necessary."

Also, there is no mention in the Court of Appeals opinion regarding where this case arose. The provider of the electronic communication service (Gray) was in Canada, as were his servers. The order authorizing seizure of the communications was issued by a Canadian court. The seizure of the communications took place in Canada.

This case is Lawrence Freeman and Michael Scherer v. DirecTV, Inc. and ICG, Inc., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-56500, an appeal from the U.S. District Court for the Central District of California, Judge Gary Klausner presiding, D.C. No. CV-04-02374-RGK. Judge Stephen Trott wrote the opinion of the Court of Appeals, in which Judges Stephen Reinhardt and Margaret McKeown joined.

The plaintiffs are represented by Jeffrey Wilens, of the Lakeshore Law Center, who has filed other complaints against DirecTV, seeking class action status, under a variety of legal theories. See, for example, RICO complaint [PDF] and unfair competition complaint [PDF]. See also, Wilens' DirecTV web page.

The defendants are represented by Michael Williams of the Los Angeles office of the law firm of Quinn Emanuel.