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Microsoft Corp. v. United States Department of Justice

United States District Court, W.D. Washington, Seattle

February 8, 2017



          JAMES L. ROBART United States District Judge.


         Before the court is Defendant United States Department of Justice's (“the Government”) motion to dismiss Plaintiff Microsoft Corporation's first amended complaint. (Mot. (Dkt. # 38).) Microsoft opposes the Government's motion. (Resp. (Dkt. # 44).) The court has considered the Government's motion, Microsoft's opposition to the Government's motion (Resp. (Dkt. # 44)), the Government's reply (Reply (Dkt. # 92)), the filings of amici (Amici Br. (Dkt. ## 43, 48, 49, 56, 57, 58, 61, 66, 71)), the relevant portions of the record, and the applicable law. In addition, the court heard argument from the parties on January 23, 2017. (1/23/17 Min. Entry (Dkt. # 105).) Being fully advised, the court GRANTS IN PART and DENIES IN PART the Government's motion for the reasons set forth below.


         A. Statutory Background

         The Electronic Communications Privacy Act of 1986 (“ECPA”), 18 U.S.C. § 2510, et seq., “addresses various areas of electronic surveillance, including wiretaps, tracking devices, stored wire and electronic communications, pen registers, and trap and trace devices.” See United States v. Anderson, No. 2:15-cr-00200-KJD-PAL, 2016 WL 4191045, at *7 (D. Nev. Apr. 27, 2016). ECPA addresses “electronic communications services (e.g., the transfer of electronic messages, such as email, between computer users) and remote computing services (e.g., the provision of offsite computer storage or processing of data and files).” In re Zynga Privacy Litig., 750 F.3d 1098, 1103 (9th Cir. 2014). Under ECPA, an electronic communications service provider (“ECS provider”) is an entity that offers “any service which provides to users thereof the ability to send or receive wire or electronic communications, ” 18 U.S.C. § 2510(15), and a remote computing service provider (“RCS provider”) is an entity that provides “to the public . . . computer storage or processing services by means of an electronic communications system, ” 18 U.S.C. § 2711(2). A subscriber is a person who uses one or more of those services. See, e.g., In re Application of the U.S. for an Order Pursuant to 18 U.S.C. § 2705(b), 131 F.Supp.3d 1266, 1268 (D. Utah 2015).

         Title II of ECPA-the Stored Communications Act (“the SCA”), 18 U.S.C. § 2701, et seq.-governs the government's access to “electronic information stored in third party computers.” In re Zynga, 750 F.3d at 1104; see also Stephen Wm. Smith, Gagged, Sealed & Delivered: Reforming ECPA's Secret Docket, 6 Harv. L. & Pol'y Rev. 313, 324 (2012) [hereinafter “Reforming ECPA's Secret Docket”] (“Title II of the ECPA . . . prescribes requirements and procedures under which the government can obtain court orders (known as § 2703(d) orders) compelling access to stored wire and electronic communications, as well as related subscriber and customer account information.”). Two sections of the SCA, 18 U.S.C. § 2703 and 18 U.S.C. § 2705, “regulate relations between a government entity which seeks information; a service provider which holds information; and the subscriber of the service who owns the information and is therefore a target of investigation.” In re Application of the U.S., 131 F.Supp.3d at 1268. The information sought from ECS and RCS providers may contain “content” or “non-content” data. Id. Content includes items such as emails and documents, while non-content data includes things like email addresses and IP addresses. See, e.g., Req. for Int'l Judicial Assistance from the Turkish Ministry of Justice, No. 16-mc-80108-JSC, 2016 WL 2957032, at *1 (N.D. Cal. May 23, 2016); Integral Dev. Corp. v. Tolat, No. C 12-06575 JSW (LB), 2013 WL 1389691, at *1 (N.D. Cal. May 30, 2013).

         Section 2703 of the SCA authorizes the government to acquire a subscriber's information from a service provider when the subscriber is a “target” of the government's information request. See 18 U.S.C. § 2703. The provision “establishes a complex scheme pursuant to which a governmental entity can, after fulfilling certain procedural and notice requirements, obtain information from [a service provider] via administrative subpoena or grand jury or trial subpoena.” Crispin v. Christian Audigier, Inc., 717 F.Supp.2d 965, 974-75 (C.D. Cal. 2010) (citing 18 U.S.C. § 2703(b)). Section 2703 requires the government to give notice to subscribers that it has obtained their information from a service provider in some but not all circumstances. See 18 U.S.C. § 2703(a)-(c) (describing various notice requirements for communication contents and records in electronic storage and remote computing services).

         Section 2705 of the SCA addresses when the government may withhold notice that is otherwise required under Section 2703. See 18 U.S.C. § 2705(a)-(b); In re Application of the U.S., 131 F.Supp.3d at 1268. Under Section 2705(a), the government may delay giving notice to the subscriber that the government has collected the subscriber's information if certain requirements are met. Id. at 1267. Under Section 2705(b), the government may apply for “a preclusion-of-notice order.” Id. Such an order “command[s] a provider of electronic communications service or remote computing service not to notify any person of the existence of a grand jury subpoena [or other acceptable court order under the SCA] which the Government has served on the provider.” Id.; see also Reforming ECPA's Secret Docket at 325 (“The SCA does authorize the court to issue a gag order (called ‘preclusion of notice') to service providers, commanding them not to notify any other person of the existence of the court order.”). A court may issue such a “preclusion-of-notice order” if the court

determines that there is reason to believe that notification of the existence of the warrant, subpoena, or court order will result in (1) endangering the life or physical safety of an individual; (2) flight from prosecution; (3) destruction of or tampering with evidence; (4) intimidation of potential witnesses; or (5) otherwise seriously jeopardizing an investigation or unduly delaying a trial.

18 U.S.C. § 2705(b). “The combined effect of [Sections 2703] and 2705(b) is that the subscriber may never receive notice of a warrant to obtain content information from a remote computing service and the government may seek an order under § 2705(b) that restrains the provider indefinitely from notifying the subscriber.” In re Application of the U.S., 131 F.Supp.3d at 1271.

         Since Congress passed the SCA in 1986, the technological landscape has changed considerably. See Orin Kerr, The Next Generation Communications Privacy Act, 162 U. Pa. L. Rev. 373, 375 (2014) (“In recent years, ECPA has become widely perceived as outdated.”); see also Id. at 376 (noting that at the time Congress passed ECPA, “[a]ccess to stored communications was a lesser concern, ” but “[s]ervice providers now routinely store everything, and they can turn over everything to law enforcement”). As technology changes, the public has vigorously debated the appropriate reach of the government's electronic surveillance of its citizens. See, e.g., Reforming ECPA's Secret Docket at 313-14; Jonathan Manes, Online Service Providers & Surveillance Law Technology, 125 Yale L.J. F. 343, 346 (Mar. 3, 2016) (“Over the past two-and-a-half years, we have had the most robust public discussion about surveillance in a generation.”). As former Magistrate Judge Paul S. Grewal noted, “[w]arrants for location data, cell phone records[, ] and especially email rule the day.” In Matter of Search Warrant for [Redacted], 74 F.Supp.3d 1184, 1185 (N.D. Cal. 2014). And according to Magistrate Judge Stephen Wm. Smith, the “ECPA docket . . . handles tens of thousands of secret cases every year.” Reforming ECPA's Secret Docket at 313.

         The public debate has intensified as people increasingly store their information in the cloud[1] and on devices with significant storage capacity. See In re Grand Jury Subpoena, JK-15-029, 828 F.3d 1083, 1090 (9th Cir. 2016) (quoting United States v. Cotterman, 709 F.3d 952, 964 (9th Cir. 2013)) (noting that “electronic storage devices such as laptops ‘contain the most intimate details of our lives: financial records, confidential business documents, medical records[, ] and private emails, '” which “‘are expected to be kept private'”). Government surveillance aided by service providers creates unique considerations because of the vast amount of data service providers have about their customers. For example, “[i]nternet service providers know the websites we have viewed. Google keeps records of our searches. Facebook keeps records of our ‘friends, ' our communications, and what we ‘like.'” Online Service Providers & Surveillance Law Technology at 349. These developments have led several courts to conclude that certain material stored with providers deserves constitutional protection. See, e.g., In re Grand Jury Subpoena, 828 F.3d at 1090 (“[E]mails are to be treated as closed, addressed packages for expectation-of-privacy purposes.”); Search of Info. Associated with Email Addresses Stored at Premises Controlled by Microsoft Corp., ___ F.Supp.3d ___, 2016 WL 5410401, at *8 (D. Kan. Sept. 28, 2016) (“In considering the email context specifically, courts have held an individual enjoys a right to privacy in his or her emails.”); United States v. Warshak, 631 F.3d 266, 288 (6th Cir. 2010) (holding that “a subscriber enjoys a reasonable expectation of privacy in the contents of emails”).

         B. This Lawsuit

         Against this statutory and technological backdrop, Microsoft[2] filed this suit on April 14, 2016 (Compl. (Dkt. # 1)), and later amended its complaint on June 17, 2016 (FAC (Dkt. # 28)). Microsoft seeks declaratory relief. (See Id. ¶¶ 33, 41.) The gravamen of Microsoft's complaint is that Section 2705(b) is unconstitutional under the First and Fourth Amendments and that Section 2703 is unconstitutional under the Fourth Amendment “to the extent it absolves the government of the obligation to give notice to a customer whose content it obtains by warrant, without regard to the circumstances of the particular case.” (Id. ¶ 35.) In Microsoft's view, “the government has increasingly adopted the tactic of obtaining the private digital documents of cloud customers not from the customers themselves, but through legal process directed at online cloud providers like Microsoft.” (Id. ¶ 4.) The government then “seeks secrecy orders under 18 U.S.C. § 2705(b) to prevent Microsoft from telling its customers (or anyone else) of the government's demands” for that information. (Id.) According to Microsoft, “[t]he vast majority of these secrecy orders relate[] to consumer accounts and prevent Microsoft from telling affected individuals about the government's intrusion into their personal affairs; others prevent Microsoft from telling business customers that the government has searched and seized the emails of individual employees of the customer.” (Id. ¶ 16.) Microsoft alleges that federal courts have issued “more than 3, 250 secrecy orders” over a 20-month period ending in May 2016, and that nearly two-thirds of those orders are for an indefinite length of time. (Id. ¶ 5.)

         Microsoft contends that Section 2705(b) is unconstitutional facially and as applied because it violates the First Amendment right of a business to “talk to [the business's] customers and to discuss how the government conducts its investigations.” (Id. ¶ 1.) Specifically, Microsoft contends that Section 2705(b) is overbroad, imposes impermissible prior restraints on speech, imposes impermissible content-based restrictions on speech, and improperly inhibits the public's right to access search warrants. (Id. ¶¶ 23-26.)

         Microsoft also alleges that Sections 2705(b) and 2703 are unconstitutional facially and as applied because they violate the Fourth Amendment right of “people and businesses . . . to know if the government searches or seizes their property.” (Id. ¶ 33.) Microsoft contends that the statutes are facially invalid because they allow the government to (1) forgo notifying individuals of searches and seizures, and (2) obtain secrecy orders that “prohibit providers from telling customers when the government has accessed their private information” without constitutionally sufficient proof and without sufficient tailoring. (Id. ¶ 35.) Microsoft further alleges that Sections 2703 and 2705(b) are unconstitutional as applied because “[t]he absence of a government notice obligation, combined with the imposition of secrecy orders on Microsoft, has resulted, and will continue to result, in unconstitutional delay of notice to Microsoft's customers, in violation of their Fourth Amendment rights.” (Id. ¶ 40.) Microsoft asserts that it has third-party standing to vindicate its customers' rights to notice of search and seizure under the Fourth Amendment. (Id. ¶¶ 38-39.)

         The Government moves to dismiss Microsoft's first amended complaint for lack of standing and failure to state a claim. (See Mot.)


         A.Legal Standards

         1. Motion to Dismiss Under Rule 12(b)(1)

         “Article III of the Constitution limits federal courts' jurisdiction to certain ‘Cases' and ‘Controversies.'” Clapper v. Amnesty Int'l USA, ___ U.S. ___, 133 S.Ct. 1138, 1146 (2013). The case or controversy requirement demands that a plaintiff have standing. See id.; see also Spokeo, Inc. v. Robins, ___ U.S. ___, 136 S.Ct. 1540, 1547 (2016) (“Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy.”). To establish standing, a plaintiff must demonstrate three elements: (1) a “concrete, particularized, and actual or imminent” injury that is (2) “fairly traceable to the challenged action” and (3) “redressable by a favorable ruling.” Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 149 (2010). These requirements are more succinctly referred to as injury, causation, and redressability. Nw. Immigrant Rights Project v. United States Citizenship & Immigration Servs., ___ F.R.D. ___, 2016 WL 5817078, at *6 (W.D. Wash. Oct. 5, 2016).

         Special standing considerations apply to a declaratory judgment action. “Declaratory judgment is not a corrective remedy and should not be used to remedy past wrongs.” Williams v. Bank of Am., No. 2:12-cv-2513 JAM AC PS, 2013 WL 1907529, at *5-6 (E.D. Cal. May 7, 2013). Accordingly, when a “plaintiff[] seeks declaratory and injunctive relief only, ” “there is a further requirement that [the plaintiff] show a very significant possibility of future harm” in addition to the three Article III standing elements. See San Diego Cty. Gun Rights Comm. v. Reno, 98 F.3d 1121, 1126 (9th Cir. 1996); see also Canatella v. California, 304 F.3d 843, 852 (9th Cir. 2002) (“In the particular context of injunctive and declaratory relief, a plaintiff must show that he has suffered or is threatened with a concrete and particularized legal harm . . . coupled with a sufficient likelihood that he will again be wronged in a similar way.” (citations and internal quotation marks omitted)); Sample v. Johnson, 771 F.2d 1335, 1340 (9th Cir. 1985) (“[P]laintiffs must demonstrate a credible threat exists that they will again be subject to the specific injury for which they seek injunctive or declaratory relief.” (internal quotations omitted)). In other words, a plaintiff may not “demonstrate only a past injury.” San Diego Cty. Gun Rights, 98 F.3d at 1126.

         “The plaintiff, as the party invoking federal jurisdiction, bears the burden of establishing these elements.” Spokeo, 136 S.Ct. at 1547. “Where . . . a case is at the pleading stage, the plaintiff must ‘clearly . . . allege facts demonstrating' each element, ” id. (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)), and “[t]he court analyzes standing claim by claim, ” Antman v. Uber Techs., Inc., No. 15-cr-01175-LB, 2015 WL 6123054, at *9 (N.D. Cal. Oct. 19, 2015). “When a motion to dismiss attacks subject-matter jurisdiction under Rule 12(b)(1) on the face of the complaint, the court assumes the factual allegations in the complaint are true and draws all reasonable inferences in the plaintiff's favor.” City of L.A. v. JPMorgan Chase & Co., 22 F.Supp.3d 1047, 1052 (C.D. Cal. 2014). “The jurisdictional question of standing precedes, and does not require, analysis of the merits” of the plaintiff's claims. Equity Lifestyle Props., Inc. v. Cty. of San Luis Obispo, 548 F.3d 1184, 1189 n.10 (9th Cir. 2007).

         2. Motion to Dismiss Under Rule 12(b)(6)

         When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court construes the complaint in the light most favorable to the nonmoving party. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). The court must accept all well-pleaded allegations of material fact as true and draw all reasonable inferences in favor of the plaintiff. See Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         B. First Amendment Claim

         The Government contends that Microsoft's First Amendment challenge fails on several grounds. The court addresses each of the Government's arguments in turn.

         1. Standing

         The Government first argues that Microsoft lacks standing to challenge Section 2705(b) under the First Amendment because Microsoft fails to identity a concrete and particularized injury or a favorable judgment that would redress Microsoft's alleged injury. (Mot. at 10-13.) Specifically, the Government argues that Microsoft has not identified a concrete and particularized injury and contends that a favorable judgment would not redress Microsoft's alleged injury. (See Id. at 10-12.)

         a. Injury in Fact and Likelihood of Future Injury

         “To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest' that is ‘concrete and particularized' and ‘actual or imminent, not conjectural or hypothetical.'” Spokeo, 136 S.Ct. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). An injury is particularized when it “affect[s] the plaintiff in a personal and individual way.” Lujan, 504 U.S. at 560 n.1. An injury is concrete when it actually exists. See Spokeo, 136 S.Ct. at 1548 (“A ‘concrete' injury must be ‘de facto'; that is, it must actually exist.”). In addition, because it seeks declaratory relief, Microsoft must allege a likelihood of future injury. See Canatella, 304 F.3d at 852.

         Microsoft alleges that Section 2705(b) impinges on its First Amendment rights because the statute allows court orders that imposes prior restraints and content-based restrictions on speech. (See FAC ¶¶ 24 (“The statute authorizes secrecy orders that prohibit, ex ante, providers such as Microsoft from engaging in core protected speech under the First Amendment, i.e., speech about the government's access to customers' sensitive communications and documents and its increased surveillance on the Internet.”), 25 (“Secrecy orders issued under Section 2705(b) also function as content-based restrictions on speech . . . .”).) Microsoft also asserts that orders issued under Section 2705(b) “improperly inhibit the public's right of access to search warrants under both the common law and the First Amendment.” (Id. ¶ 26.) In its response to the Government's motion, Microsoft contends that it has suffered “thousands of concrete, particularized injuries” in the form of “the secrecy orders to which Microsoft has been subject since 2014.” (Resp. at 12 (emphasis omitted) (citing FAC ¶ 16).) Microsoft further argues that “Section 2705(b) also inflicts economic injury on Microsoft by eroding customer confidence in its cloud services.” (Id. at 13 (citing FAC ¶¶ 5, 39)); see also San Diego Cty. Gun Rights, 98 F.3d at 1130 ...

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