Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Posts Tagged ‘Subpoenas’
Feb 18
2015

The Government’s [Subpoena] Power is Not Infinite

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It’s not every day that a federal court likens an Assistant U.S. Attorney’s argument to that “of a grade schooler seeking to avoid detention.” But, in a recent opinion, Judge Emmet G. Sullivan of the D.C. District Court did just that. In so doing, he reminded us that—despite the government’s (admitted) routine abuse of its subpoena power—the privacy rights of inmates matter, and a standard practice is not tantamount to a legal basis.

The overall case, one involving an alleged conspiracy to commit visa fraud, had taken some rare procedural twists before landing in Judge Sullivan’s courtroom: for example, the government had effectively incarcerated Ms. Truc Huynh (a former co-defendant) to postpone her deportation to Vietnam and ensure her availability to testify at a deposition against a remaining co-defendant. The primary issue addressed in Judge Sullivan’s recent ruling, however, was whether the U.S. Attorney’s Office violated the law when it issued subpoenas to the Central Treatment Facility (a local jail) for Ms. Huynh’s visitation logs, call logs, and recorded telephone calls—without notifying the Court, Ms. Huynh, or the defendant against whom Ms. Huynh was set to testify.

As a general matter, Rule 17 governs the issuance of subpoenas in criminal cases and allows the government to subpoena a witness to testify at a hearing or trial and may require the concurrent production of documents. It does not, however, allow for pretrial fishing expeditions for potentially relevant information. But that is precisely what the government had done in this case by “inviting” the jail to comply with the subpoena by promptly providing the requested documents directly to the Assistant U.S. Attorney handling the case. Within a matter of days, the jail complied with the production of 200 recordings, which were in Ms. Huynh’s native Vietnamese.

After having initially agreed to the defendants’ request for English language transcripts, the government later argued that compliance would be unduly burdensome because (upon review) the calls appeared to be irrelevant to the case. In so doing, the government showed its hand: the Assistant U.S. Attorneys had, essentially, used the Court’s subpoena power to conduct a fishing expedition into Ms. Huynh’s private phone calls without specific reason to believe that the calls would be admissible at trial.

To make matters worse, a similar subpoena had been issued for the remaining defendant’s jailhouse calls. When defense counsels moved to quash the subpoenas, the Assistant U.S. Attorneys failed to offer any legal authority in support of their actions—arguing instead that this was their general practice and they didn’t know of any authority saying they couldn’t. Fortunately for the defendants, Judge Sullivan—known for holding the government to account (see, e.g., his handling of the Ted Steven’s trial and the IRS scandal)—was not inclined to excuse such behavior. At oral argument, the Judge pushed back, “So that’s your authority: There’s nothing that says we can’t do it?” and the Assistant U.S. Attorney responded: “Right … That’s my authority.” The Court was not persuaded.

In his written opinion, Judge Sullivan held that the government had, indeed, overstepped Rule 17 by “inviting” the subpoena recipient to provide pretrial production of the documents requested. The government’s assertion—that an “invitation” for pretrial discovery did not obligate pretrial discovery—was of no moment, neither were its arguments that defendants lacked standing. Judge Sullivan made clear that “[b]ecause subpoenas are issued with the Court’s seal and backed by the threat of court-posed sanctions, the mere fact that an attorney abuses the subpoena power directly implicates the court itself and creates an embarrassment for the institution.”

In the end, Judge Sullivan boldly vindicated the privacy interests of these individual defendants. It remains to be seen, however, if his opinion will stymie the government’s practice of “inviting” pretrial discovery without court approval.  If nothing else, perhaps the Assistant U.S. Attorneys appearing before Judge Sullivan will think twice before doing so.

Mar 29
2013

Judge Strikes Down FBI’s Use of ‘National Security Letters’

In a recent decision, U.S. District Judge Susan Illston of the Northern District of California struck down the FBI’s use of National Security Letters (NSLs) as unconstitutional. Unbeknownst to most Americans, the FBI has been issuing thousands of NSLs every year. The letters demand that recipients, such as banks and telephone companies, provide customers’ information such as their transactional records, phone numbers dialed, and email addresses mailed to and from. This doesn’t involve the content of the phone calls or emails but does involve the names of addressees or participants. One reason most Americans didn’t know about these letters is because more than 95 percent of them contain gag orders, barring the recipient from disclosing their content or even their existence.

This case began nearly two years ago, in May 2011, when a nonprofit advocacy group, the Electric Frontier Foundation (EFF), filed suit on behalf of an unnamed telecom company that had received an NSL. In defense of the NSLs, the government argued that this level of secrecy is necessary to protect the nation against potential security threats. NSLs were designed in the 1970s as a means to gather information on suspected foreign spies during terrorism and espionage investigations. However, the Patriot Act greatly expanded their reach to allow the FBI to secretly compel companies to provide data on American citizens.

The constitutionality of NSLs is dubious for two distinct reasons. Not only does the nondisclosure clause infringe on their recipients’ free speech, but, unlike a standard subpoena or search warrant, the NSLs do not have to be authorized by a judge. Accordingly, Illston concluded that NSLs and their nondisclosure provisions violate the First Amendment and separation of powers principles, and she ordered the FBI to stop issuing NSLs and cease enforcing all gag provisions. That said, we are uncertain whether Illston’s order will ever go into effect. Due to the gravity of the First Amendment and national security issues at stake, Illston issued a 90-day stay, giving the government time to appeal her decision to the U.S. Court of Appeals for the 9th Circuit.

Although the lawsuit was filed anonymously, various media sources have suggested that the unnamed defendant may be Credo Mobile, a phone provider that supports progressive causes. The day after the ruling was released, Credo’s CEO Michael Kieschnick released the following statement:

“This decision is notable for its clarity and depth. From this day forward, the US government’s unconstitutional practice of using national security letters to obtain private information without court oversight and its denial of the first amendment rights of national security letter recipients have finally been stopped by our courts.”

According to Matt Zimmerman, an EFF attorney, the NSL gags “have truncated the public debate on these controversial surveillance tools,” and his unnamed client “looks forward to the day when it can publicly discuss the issue.”

As we await the higher court’s ruling, which we hope leaves Illston’s decision in place, one thing has already been accomplished of a positive nature. A federal district judge has shined some light on a little-known and highly dubious federal law enforcement technique.

Jun 21
2012

Obama Escalates ‘Fast and Furious’ Battle With Congress by Claiming Executive Privilege

On June 20, 2012, President Barack Obama escalated a battle with the GOP-controlled House of Representatives by claiming executive privilege for 1300 executive-branch documents that relate to the White House and the Justice Department’s response to subpoenas about the botched Fast and Furious gun-trafficking operation.

The House Oversight and Government Reform Committee, chaired by Rep. Darrell Issa (R-Calif.) then voted immediately along party lines to approve a contempt of Congress finding against Attorney General Eric Holder Jr. That recommendation is expected to go to the full House next week.

The committee asserts that it needs the documents in its investigation of Fast and Furious and of a possible executive-branch cover-up of that operation. The White House replies that handing over the documents would hamper the ability of government officials to discuss policy matters frankly and without fear that their deliberations would become public.

Confrontations between the President and Congress over documents and over claims of executive privilege are not new. In fact, executive privilege has been claimed by every president since President John F. Kennedy, and the roots of the doctrine go back to actions by President George Washington in 1792.

The privilege to withhold documents from a congressional committee is not found in the Constitution. It is, however, based on the constitutional principle of separation of powers, which provides that the three branches operate independently of each other. Although the Supreme Court rejected the application of executive privilege in 1974 when President Richard Nixon claimed it in relation to a criminal subpoena for Watergate tapes, there is no question that the privilege exists and can be properly claimed under some circumstances.

The problem is that Obama and Holder are claiming the privilege broadly, for all 1300 pages of documents, without specifying why each document or group of documents is privileged.

As Todd Gaziano, a former attorney in the Justice Department’s Office of Legal Counsel, which advises on executive privilege, wrote in the Heritage Foundation’s blog:

Even if properly involved, the Supreme Court has made clear that executive privilege is not absolute. DOJ must provide an explanation why all those documents fit one of the recognized categories of executive privilege. It is questionable whether they all are legitimately subject to executive privilege, for several reasons. First, the Supreme Court in United States v. Nixon (1974) held that executive privilege cannot be invoked at all if the purpose is to shield wrongdoing. . . . Congress needs to get to the bottom of that question to prevent an illegal invocation of executive privilege and further abuses of power. That will require an index of the withheld documents and an explanation of why each of them is covered by executive privilege—and more. Second, even the “deliberative process” species of executive privilege, which is reasonably broad, does not shield the ultimate decisions from congressional inquiry. Congress is entitled to at least some documents and other information that indicate who the ultimate decision maker was for this disastrous program and why these decisions were made.

At the very least, the Administration owes Congress and the American people a better explanation of what it is doing and why.

posted in:
Civil Remedies
Jul 20
2011

Journalist Challenges DOJ Subpoena, Claims Reporter’s Privilege

James Risen, an investigative journalist for The New York Times, is currently challenging a subpoena issued by the U.S. Department of Justice seeking testimony from him against a CIA agent accused of leaking classified information. The subpoena highlights a trend in which the government attempts to use journalists’ testimony against government employees who reveal information in exchange for anonymity. Risen, citing reporter’s privilege, is seeking to have the subpoena quashed, although federal prosecutors claim that his testimony “is directly relevant to, and powerful evidence of, facts that are squarely at issue in this trial—including the identity of the perpetrator.”

The subpoena in question was originally issued to Risen, but then abandoned, by the Bush administration. The Obama administration revitalized the subpoena, which would force Risen to testify in the whistleblower prosecution of Jeffrey Sterling, a former CIA agent. In December 2010, a federal grand jury in Alexandria, Va., indicted Sterling on 10 counts, including unauthorized disclosure of national defense information and obstruction of justice. Sterling is accused of leaking to Risen the story of a severely botched agency plot, from 11 years ago, to infiltrate Iran’s nuclear program. The story was published under the condition of anonymity in newspaper articles and in Risen’s 2006 book “State of War: The Secret History of the CIA and the Bush Administration.”

The DOJ now wants to force Risen to testify under oath about whether Sterling was his source. In a somewhat unusual move, the government filed a motion in limine — a tool typically used to focus the evidence to be used at trial — along with the subpoena. In its motion, the government argues that Risen is an eyewitness to the alleged crime and that no federal law exists that exempts a reporter from his or her obligation to testify. On July 7, 2011, the court entered a minute entry on the government’s motion in limine, noting that it was taking the motion under advisement.

Risen has categorically refused to reveal his source. Like other reporters in his situation, Risen is relying on the reporter’s privilege to avoid giving up his sources. Interestingly, Risen and four other reporters were held in contempt of court in 2004 for refusing to disclose confidential sources in a lawsuit against the government brought by former Los Alamos scientist Wen Ho Lee. There, the judge ordered a fine of $500 per day until the reporters complied with the order. In exchange for getting the contempt charges dropped, five news organizations—The New York Times, ABC News, The Associated Press, the Los Angeles Times and The Washington Post —eventually agreed to pay an unprecedented $750,000 as their share of a settlement.

Although 40 states and the District of Columbia have shield laws that exempt reporters from disclosing confidential sources, there is no such statute at the federal level. Some federal courts, however, have interpreted the Supreme Court’s 1972 decision in Branzburg v. Hayes — a landmark decision invalidating the use of the First Amendment as a defense for reporters summoned to testify before a grand jury —  as providing a qualified privilege shielding journalists from forced disclosure of confidential sources, especially in civil cases.

Sterling is the fifth known leaker prosecuted by the Obama administration. According to Risen, the Sterling prosecution and the accompanying subpoena to him represent an attempt by the government to chill the exercise of basic rights of whistleblowers and reporters who challenge government secrecy. Whether Risen can successfully challenge the government’s subpoena remains to be seen.

Dec 15
2010

ISPs Take Note: Court Rules E-mails Have Full 4th Amendment Protection

The U.S. Court of Appeals for the 6th Circuit has just issued a trail-blazing opinion that is good news for anyone who has ever sent an e-mail – and that needs to be carefully read and adhered to by all Internet service providers (ISPs).

We noted six months ago that ISPs have been all too ready to satisfy prosecutors’ requests for access to customer e-mails stored on their servers. We said that prosecutors are routinely using subpoenas, rather than search warrants, to obtain e-mails from ISPs, and that subpoenas can be issued under a much lower standard than the probable cause standard used for search warrants. They require, rather than probable cause, only a reasonable possibility that the materials or testimony sought will produce information relevant to the general subject of the investigation.

The ISPs’ attitude, we said, meant that anyone who uses the Internet risks intrusion from unlawful government surveillance practices.

Now, in a thoughtful and unanimous opinion in United States v. Warshak, the 6th Circuit has written a ringing affirmation of the principle that e-mail must be treated like a letter or a phone call under the Fourth Amendment. Prosecutors can get hold of a suspect’s or witness’s e-mail from an ISP, but only if they first go before a judge and obtain a search warrant.

In Warshak, the U.S. attorney obtained 27,000 private e-mails sent to and from the defendant, Steven Warshak, after a warrantless search directed at Warshak’s ISP. Warshak was convicted of a great many fraud and money-laundering-related counts and challenged his conviction, seeking a ruling that the e-mails should have been excluded from evidence, among other arguments.

The appeals court wrote, “If we accept that an e-mail is analogous to a letter or a phone call, it is manifest that agents of the government cannot compel a commercial ISP to turn over the contents of an e-mail without triggering the Fourth Amendment. An ISP is the intermediary that makes e-mail communication possible. E-mails must pass through an ISP’s servers to reach their intended recipient. Thus, the ISP is the functional equivalent of a post office or a telephone company. As we have discussed above, the police may not storm the post office and intercept a letter, and they are likewise forbidden from using the phone system to make a clandestine recording of a telephone call—unless they get a warrant, that is.”

The court noted that “e-mail requires strong protection under the Fourth
Amendment; otherwise, the Fourth Amendment would prove an ineffective guardian of private communication, an essential purpose it has long been recognized to serve.” An e-mail is no less private, by tradition and practice, than a letter or phone call.

In the Warshak case, the court declined to exclude the e-mails from evidence, finding that the prosecutors had acted in good faith reliance on provisions of the Stored Communications Act.

But as a matter of broad constitutional principle, the 6th Circuit has set forth a convincing case that e-mails are entitled to Fourth Amendment protection. The Supreme Court has not ruled on the issue, but even in the absence of a high court ruling, it is time for ISPs to resolutely refuse to provide customer e-mails to law enforcement unless a warrant has been obtained.

Aug 23
2010

Magistrate Finds Proper Purpose for FTC Subpoena in Generic Drug Case

Late last month, we noted a highly unusual decision by U.S. Magistrate Judge Alan Kay in the District of Columbia to order the Federal Trade Commission to respond to interrogatories about a subpoena it had issued to Paul Bisaro, the CEO of Watson Pharmaceuticals, in a generic-drug investigation.

Normally, that sort of inquiry into the motivations behind an FTC subpoena is off limits. The only exception, which is rarely invoked, is that limited discovery can be ordered to ensure that enforcement of the subpoena would not amount to an abuse of process.

Kay’s inquiry seems to have found nothing terribly amiss in the FTC’s motivations for the subpoena, as he has just recommended to U.S. District Judge Colleen Kollar-Kotelly that the subpoena to Bisaro should be enforced. Judge Kollar-Kotelly had referred the dispute to Kay, and his findings can now be appealed to Judge Kollar-Kotelly.

Kay said that the case law requires that the court enforce the subpoena, as long as the FTC could show a proper purpose for it, even though there were allegations that the subpoena also had an improper purpose.

Watson had contended that the FTC was using its investigative powers improperly. The commission says it is looking into whether there was a possibly anti-competitive agreement that could have kept a generic form of a sleep disorder drug off the market for a substantial period of time, thus harming consumers.

Watson and Bisaro had asserted that the FTC was using its investigative tools to try to pressure Watson, a generic-drug company, to enter into a deal with a third party and to relinquish its statutory rights to exclusivity for the drug.

However, Kay wrote in his August 17, 2010, report to Judge Kollar-Kotelly that Bisaro may still have information that would be relevant to a legitimate inquiry by the FTC and that “enforcement of a subpoena is called for as long as a proper purpose does exist.”

Kay did call the FTC’s approach “questionable” but said it is the business of the legislature, not the judiciary, to look into the practices of regulatory agencies.

It appears that a direct challenge to the FTC’s practices has been averted. However, the commission may feel chastened by the fact that a federal magistrate chose to order interrogatories to flesh out the purpose behind a subpoena.

Watson might have done better to try to resolve the issue with the FTC after the first, favorable ruling, rather than letting the matter go back to Magistrate Kay for another ruling, especially after he too knew that a legitimate enforcement purpose existed.

For further thoughts on this matter, see the Washington Legal Foundation’s Legal Pulse commentary on this case.

Jul 26
2010

In Rare Ruling, Court Permits Discovery Into Motives Behind FTC Subpoena

When a U.S. magistrate judge in the District of Columbia issued his ruling in Federal Trade Commission v. Bisaro on July 13, 2010, permitting limited discovery of certain FTC officials regarding an agency subpoena, it had been more than three decades since the D.C. Circuit had found that “extraordinary circumstances” were present that warranted discovery in a subpoena enforcement action.

Subpoena enforcement proceedings are typically “summary procedures.” However, upon a finding that extraordinary circumstances exist, the court may order limited discovery to ensure that enforcement of the subpoena would not amount to an abuse of process.

In opposing the FTC’s petition to enforce a subpoena requiring him to testify under oath, Paul M. Bisaro, CEO of Watson Pharmaceuticals, moved to compel limited discovery on whether the FTC was acting with an improper purpose in issuing the subpoena. Bisaro argued that the FTC had acted outside the scope of its regulatory and enforcement authority by using the subpoena to pressure Watson to enter a deal with another generic pharmaceutical company.

U.S. Magistrate Judge Alan Kay found the facts in Bisaro “extraordinary enough to grant very limited discovery.”

In a finding that will no doubt be embarrassing to the Commission, Kay found that the FTC may have exceeded its authority by using its investigative power to pressure Watson to enter into a business deal that the FTC considers desirable. Citing the U.S. Supreme Court’s 1964 decision in United States v. Powell, Kay said it is an abuse of process to enforce an agency summons that “had been issued for an improper purpose, such as to harass the [recipient] or to put pressure on him to settle a collateral dispute.” Kay ordered the FTC to answer interrogatories but stopped short of requiring a key agency official, Markus Meier, to sit for a deposition.

The case will likely fuel the debate as to just how far the FTC will go to achieve a ban on so-called reverse-payment patent settlements between generic and branded drug firms. Bisaro argued that Meier, the assistant director of the FTC’s Bureau of Competition’s Health Care Division, expressly warned Watson’s counsel that failure to pursue the FTC’s suggested course would likely cause the FTC “Front Office” to initiate an investigation.

Kay found this credible and noted that the FTC had admitted, “If Watson had just agreed to [do what the FTC wanted] it never would have pursued this investigation.”

Kay rejected the FTC’s argument that “an administrative subpoena must be enforced whenever a valid purpose appears, even if an otherwise improper purpose also appeared.”

Prior to the Bisaro decision, the D.C. Circuit had only found one instance where extraordinary circumstances existed to warrant discovery. See United States v. Fensterwald, 553 F.2d 231, 232 (D.C. Cir. 1977) (finding limited discovery into IRS audit selection procedure appropriate where lawyer who headed a committee investigating the IRS was then selected for special audit).

Jul 22
2010

EFF Challenges Subpoenas to ISPs for Identities of Anonymous Posters

On July 14, 2010, the Electronic Frontier Foundation (EFF), a group that defends the privacy and online rights of computer and Internet users, served a motion to quash two dragnet subpoenas issued by the plaintiffs in a high-profile New York state court case to Internet service providers (ISP’s) Google and Yahoo. The subpoenas demanded the identities of a wide range of anonymous online critics who posted comments on various blogs and websites.
The subpoenas stem from a state lawsuit instituted by New York couple Michael and Miriam Hersh, alleging a “sweeping conspiracy led by family members and their acquaintances to accuse the Plaintiffs of mistreating their children and to cause a public controversy.” The couple made headlines in 2008 when news reports were published saying that they had their then 16-year-old son, Isaac, forcibly taken to a privately owned Jamaican boot camp known for its abuse and harsh conditions. The story created a public outcry of support for Isaac, who was ultimately released from the Jamaican institution with the help of members of the Jewish community.
The couple’s complaint alleges various causes of action, including tortious interference with contract and intentional inflection of emotional distress. Specifically targeted in their subpoenas to Google and Yahoo are the identities of users of 10 e-mail accounts, the operators of 30 blogs and a website, and potentially hundred of users who posted comments on those sites. In addition to identity-related information, the plaintiffs seek the content of stored communications with an ISP or electronic communications facility.
EFF’s motion to quash urges the court to protect the privacy and anonymity of these online critics, noting that “[u]nder the broad protections of the First Amendment, speakers have not only a right to publicly express criticism but also the right to do so anonymously.” The motion further argues that the First Amendment requires those who see to unmask the identities of online speakers must balance the right to speak versus their legitimate need to pursue a claim. According to EFF, the plaintiffs showed no such need in issuing their broad subpoenas.
The New York state court’s decision on EFF’s motion to quash will test how far the concept of free speech should be extended. In a post-9/11 world, there are certainly extenuating circumstances — such as life-threatening situations — that would justify unmasking the identities of anonymous bloggers. However, absent such a need, litigants shouldn’t be able to engage in fishing expeditions as to the identities of entire communities of online speakers simply because they are curious or simply because people said things about them that they didn’t like.
Even if litigants could demand the identities of anonymous posters, unmasking those identities may not always be feasible. Some blogs and websites don’t require posters to verify their email addresses, and some posters prevent blogs from tracking them via IP address by using different Internet connections. Tracking the identities of those posters may prove costly or impossible.
Anonymous posting is not only an option for online speakers, but a way of life in today’s blogosphere. Simply disagreeing with an anonymous poster’s viewpoint is not enough to overcome the First Amendment protections afforded to these posters or to change the way in which online outlets operate.

posted in:
Internet Law
Jun 07
2010

Is Google Ready to Protect Our Legal Rights?

Is the government reading your e-mail messages? A routine law enforcement technique of using subpoenas instead of search warrants to obtain e-mail from internet service providers (ISPs) means that literally anyone who uses the Internet risks intrusion from unlawful government surveillance practices.

Subpoenas can be issued under a much lower standard than the probable cause standard used for search warrants. They require only a reasonable possibility that the materials or testimony sought will produce information relevant to the general subject of the investigation.

Unfortunately, it often seems ISPs are only too pleased to satisfy the random government inquiry. Although precise data is difficult to obtain, ISPs receive hundreds of subpoenas of this type each month. Rather than comply at once, an ISP that receives a subpoena should seek immediate legal advice to avoid handing over data that the government isn’t legally entitled to or that the provider is legally forbidden from disclosing. There is no way to know how many subpoena recipients have opted for the path of least resistance and remained silent while simply handing over data that the government wasn’t actually entitled to receive.

Perhaps the tide of ISP complacency is turning. Recently, privacy groups, Internet companies and industry coalitions joined Yahoo! in asking a federal court in Colorado to block the Justice Department’s attempts to access the contents of a Yahoo! e-mail account without a search warrant. DOJ sought the e-mails as part of a case that is under seal, arguing that because the e-mail had been opened by the user, it is no longer in “electronic storage” under the Stored Communications Act (SCA) and therefore did not require a warrant.

This legal theory –- that opened e-mail is entitled to less privacy protection than unread e-mail — has been flatly rejected by the one federal circuit court to address it. In challenging DOJ’s request, Yahoo! argued that the SCA and the Fourth Amendment require the government to get a search warrant before compelling Yahoo! to disclose the e-mail. The case was In Re Application of the United States of America for an Order Pursuant to 18 U.S.C. 2703(d)

The case presented a rare opportunity for the Court to address the application of the SCA and the Fourth Amendment to private information conveyed via modem communications technologies. However, consistent with its practice of evading court rulings on these issues, the government claimed that it no longer had an investigative need for the demanded e-mails and withdrew its motion. The practice of withdrawing its demand whenever an objection is raised is more reminiscent of the behavior of a schoolyard bully than a legitimate law enforcement technique

posted in:
Internet Law
May 22
2010

Is Craigslist Eligible for Immunity?

Connecticut Attorney General Richard Blumenthal and a coalition of 39 attorneys general have long accused Craigslist of furthering prostitution and human trafficking. Blumenthal’s May 3, 2010, subpoena to Craigslist has reignited the debate over the online bulletin board’s responsibility for prostitution ads posted on its site.

Craigslist is clearly fighting back. Its CEO, James Buckmaster, recently wrote on the official Craigslist blog, “As AG Blumenthal knows full well, craigslist [sic] has gone beyond fulfilling its legal obligations, far beyond classifieds industry norms, has more than lived up to any promises it made, and working together with its partners is in fact a leader in the fight against human trafficking and exploitation.”  This stands, however, in stark contrast to the picture painted by Rachel Lloyd, executive director of Girls Educational and Mentoring Services, who told the New York Times, “Craigslist has not given any indication that they are outraged and disturbed that their site is the primary way children are bought in the country.”

In a 2008 Joint Agreement between Craigslist and 40 attorneys general, Craigslist agreed to create new measures on the site designed to thwart ads for prostitution and human trafficking. It pledged to donate net revenues for the controversial ads to charity, and in 2009 implemented a telephone verification system for the “erotic services” section of the site, requiring a working phone number for advertisers, and enabling blacklisting of phone numbers for those who post inappropriate ads. Craigslist reported that phone verification resulted in an 80 percent reduction in ad volume and in significantly increased compliance with site guidelines.

Though the attorney generals initially claimed victory, some think the 2008 agreement actually backfired and allowed the company to profit further off sex ads. In May 2009, Craigslist announced that the “erotic services” category would be eliminated and replaced with an “adult services” category. Each posting to this new category will be manually reviewed before appearing on the site, to ensure compliance with Craigslist posting guidelines and terms of use. New postings will cost $10, but once approved, will be eligible for reposting at $5.

Recently published revenue projections estimating the controversial ads could bring in $36.3 million for Craigslist this year appear to have played a role in Blumenthal’s decision to issue a subpoena. Blumenthal cited these revenue reports in his press release announcing the subpoena into whether the Craigslist is doing enough to curb prostitution ads on the site and whether it is profiting from them. However, what is most interesting is what the attorney general does not say. He does not allege that Craigslist broke the law; instead he says that if they broke a promise, “it may be breaking the law.”

Craigslist has solid legal support for its position that it is not violating the law. While it is illegal for media outlets to facilitate prostitution by publishing advertisements, federal law actually immunizes Craigslist for content submitted to the site by users. The 1996 Communications Decency Act provides broad immunity for “interactive computer service(s)” such as Craigslist. Section 230 of the Act states that any “interactive computer service” is not a publisher of the content that third parties post, and thus is immune from lawsuits or prosecution based on the material its users post.

The immunity provided by the Communications Decency Act is very broad. In October 2009, a U.S. district judge in the Northern District of Illinois tossed a lawsuit filed by Cook County Sheriff Thomas Dart alleging that Craigslist was liable for the illegal ads posted by its users in its “erotic services” (now “adult services”) category. The court held that Section 230 of the Communications Decency Act immunized Internet intermediaries like Craigslist from civil liability for material posted by third parties.

However, one wonders if Craigslist policies of reviewing the ads prior to publication – and therefore have the opportunity to read and edit content before publishing it — could open it up to the charges that they are in fact a publisher and Section 230’s protection should not apply.

posted in:
Internet Law
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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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