En banc 2nd Circuit to clarify when computer seizures are unconstitutional

July 1, 2015

(Reuters) – The 2nd U.S. Circuit Court of Appeals seems to be eager to decide when, if ever, the federal government has the right to retain and search computer records seized in one investigation but later found to be relevant in another.

On Monday, the court granted the Justice Department’s petition to reconsider a three-judge panel’s 2014 decision in U.S. v. Ganias to suppress evidence from a computer search the panel deemed to be a violation of Ganias’ Fourth Amendment rights. It’s news whenever the 2nd Circuit agrees to hear a case en banc because that is such an infrequent occurrence; on Tuesday, 2nd Circuit clerk Catherine O’Hagan Wolfe told my Reuters colleague Joseph Ax that the court hasn’t heard an en banc appeal since September 2013.

But even by 2nd Circuit standards, the en banc grant in the Ganias case was unusual. For one thing, the Justice Department asked only for reconsideration by the original three-judge panel that heard the case – not for review by the entire en banc court. And for another, the 2nd Circuit decided to hear a much broader appeal than the government asked it to take. The Justice Department’s petition for rehearing did not challenge the original panel’s determination that the search of Ganias’ records was unconstitutional but requested rehearing just of the panel’s holding that government agents acted in bad faith so the evidence must be suppressed.

Instead, the 2nd Circuit said it would review both the government’s good faith and the Fourth Amendment considerations that come into play when the government clones computer hard drives that contain information beyond the scope of search warrants, holds onto those extraneous files and later obtains a new warrant to search them. It also invited amicus briefing on these questions. (I owe thanks to Orin Kerr at Volokh Conspiracy, whose coverage of the Ganias case helped me understand its significance.)

Ganias’ story bring the constitutional issues into focus. Back in 2003, the U.S. Army got a tip that a Connecticut contractor was stealing supplies and overbilling for its work. Ganias was the contractor’s accountant, and the Army obtained a warrant to seize all of his computer records related to the contractor and one of its customers. Instead of taking possession of Ganias’ computers, Army investigators created forensic images of his hard drives which, in turn, were copied onto DVDs.

Those records, of course, included files outside the scope of the search warrant, including Ganias’ personal finance files. But investigators from the Army and, eventually, the Internal Revenue Service, took care to isolate and extract the relevant files, reviewing only data covered by the 2003 search warrant.

They retained all of the DVDs containing Ganias’ computer files, though. In 2005, based on paper records obtained in the investigation of his contractor client, the government began to suspect that Ganias was underreporting his income to the IRS. IRS investigators knew, from their review of the previously seized computer files, that his personal financial records were in the government’s possession. They asked Ganias for permission to access the records. He did not respond.

So in 2006, the government obtained a second search warrant to grab Ganias’ personal records from the hard drive copies they created in the 2003 seizure. Based partly on those records, Ganias was indicted and convicted of tax evasion in federal court in New Haven, Connecticut.

Did the government violate Ganias’ Fourth Amendment rights when it retained records beyond the scope of the 2003 warrant and later seized incriminating files from the retained hard drive copies? A key point: Ganias had, in the words of the 2nd Circuit opinion, “altered the original files” after the 2003 seizure. So if the government had not held onto copies of his hard drive, the evidence it obtained in 2006 “would not have existed,” according to the 2nd Circuit.

The original 2nd Circuit panel, Judges Denny Chin and Peter Hall and U.S. International Trade Court Judge Jane Restani, concluded unanimously that the 2006 search of Ganias’ files was unconstitutional. “Fourth Amendment protections apply to modern computer files,” they wrote. “Like 18th Century ‘papers,’ computer files may contain intimate details regarding an individual’s thoughts, beliefs, and lifestyle, and they should be similarly guarded against unwarranted government intrusion. If anything, even greater protection is warranted.”

If the 2003 search warrant entitled investigators to hold onto Ganias’ computer records just in case they might later turn out to be useful in a criminal case, the 2nd Circuit said, “it would be the equivalent of a general warrant”: the same sort of search-and-seizure the Fourth Amendment specifically intended to prohibit.

The panel split on whether the evidence the government obtained in the illegal search should be suppressed. Judges Chin and Restani concluded investigators had acted in bad faith so the computer evidence must be stricken. Judge Hall, in a separate opinion, said Ganias’ personal finance files should not be suppressed because the government acted in good faith. According to Hall, IRS investigators had little guidance from case law on the retention of hard drive copies and tried to comply with precedent.

Apparently other judges on the 2nd Circuit were concerned enough about that lack of precedent that a majority voted to rehear all of the questions this case raises – even those that weren’t presented to the original panel, such as whether the government even has the right to copy hard drives containing files beyond the scope of a search warrant. The court’s holding will guide computer evidence collection in one of the country’s busiest circuits.

Ganias lead counsel Daniel Wenner of Day Pitney said he was unable to comment. In the defendant’s brief opposing rehearing, Day Pitney argued the government’s seizure “was egregious and patently unlawful-today, the day it occurred, and every other day over the last 250 years of Anglo-American legal history.”

For more of my posts, please go to WestlawNext Practitioner Insights

Follow me on Twitter

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/