Case report – eBay’s request for stay of PowerSeller production order rejected by FCA

On April 17th, the Federal Court of Appeal rejected an application for a stay of an order that requires eBay to provide the Minister of National Revenue with the names, basic account information and gross annual sales of eBay’s Canadian resident “PowerSellers” for 2004 and 2005.

The information was ordered to be produced under the authority of section 231.2 of the Income Tax Act, which authorizes third-party production orders that allow the MNR to seek information about persons or ascertainable groups of persons where the order is made to verify compliance with the ITA.  After last November when the Federal Court of Appeal held in Greater Montreal Real Estate Board that this provision did not require the MNR to establish that each and every one of the individuals targeted to be the subject of a “genuine and serious inquiry,” Hughes J. of the Federal Court affirmed the eBay production order.

The Federal Court of Appeal rejected eBay’s motion for a stay of Hughes J.’s order pending its appeal based on an application of the R.J.R.-MacDonald three-part test.  Sharlow J.’s key finding was that eBay did not prove irreparable harm. Although she acknowledged that information cannot be undisclosed, she held that harm to individual eBay account holders rather than eBay itself could not justify a stay.  This somewhat remarkable finding was despite “some material” on the record about eBay’s contractual relationship to account holders.

The record contains some material from which it could be inferred that eBay Canada has contractual obligations to eBay Inc. not to disclose certain confidential information without the consent of eBay Inc. It is not clear that the information sought by the Minister about PowerSellers is confidential information as contemplated in those contracts. Even if the information about PowerSellers is confidential information under those contracts, it is not clear that eBay Canada’s obligation not to disclose confidential information would or could be breached by the disclosure of information pursuant to a court order (even a court order that is under appeal). And, even if such a breach would or could result from such a disclosure, there is no evidence that any harm would come to eBay Canada as a result.

Coincidentally, the application for leave to appeal to the Supreme Court of Canada in Greater Montreal Real Estate Board was just dismissed on April 24th.

eBay Canada Limited v. Canada (National Revenue), 2008 FCA 141 (CanLII).

 

Information Roundup – April 28, 2008

Spring has sprung in Toronto eh? We always seem to time our holidays so we totally miss the winter-summer and summer-winter transitions. If this sounds intriguing, it only takes two weeks of well-timed vacation to generate this special experience.

Here’s what I’ve been into recently during balmy evenings on the back porch.

Case Report – Companion sniffer dog cases establish reasonable suspicion search standard

On April 25th, the Supreme Court of Canada released two decisions involving Charter challenges to sniffer dog searches. Very briefly, R. v. Kang-Brown was about the search of an individual traveller’s luggage at a bus station based on a police officer’s observation of suspicious behavior. R. v. A.M. was about a routine sniffer dog search at a public school. In both cases, the Court found a violation of section 8 of the Charter and held that the evidence found should be excluded.

The two cases are primarily about about the legal rules for police use of sniffer dogs and, to some extent, “snooping technologies” that facilitate scanning for crimes outside of a targeted investigation.

On the key issue, the Court split 4-4, with Bastarache J. writing a swing judgement on his own. Lebel J. (with Fish, Abella and Charron JJ. on this point) held that the police have no common law authority to use sniffer dogs outside of an investigation based on reasonable and probable cause. Binnie J. (with McLachlin C.J. and Deschamps and Rothstein JJ. on this point) held that the police possess a common law power to search using sniffer dogs on the basis of a Charter compliant standard of “reasonable suspicion.” Bastarache J. held that the police posses a common law power to search using drug sniffer dogs on the basis of a Charter compliant standard of “generalized suspicion.” Bastarache J. also endorses the reasonable suspicion standard, so it appears the police may continue to use sniffer dogs without statutory enactment based on the reasonable suspicion standard.

Police powers and Charter constraints – reasonable suspicion standard prevails

On the main issue, A.M. is a better example of what was at stake. Binnie J. characterizes the sniffer dog search in A.M. as one used in a “routine criminal investigation.” Calling what happened in A.M. an “investigation” seems a slight misnomer because there was really no crime under investigation at all. The sniffer dog search was used by the police in A.M. as a type of surveillance tactic, with its purpose rooted in keeping the peace and preventing crime. “Routine criminal inspection” might be a more accurate description of how sniffer dogs were used in A.M., though the word “inspection” is ordinarily used to describe regulatory rather than police activity.

This was the problem. In fact, a concern about the use of search powers for keeping the peace (as opposed to investigating crime) arguably drives Lebel J.’s judgement. In both cases, he held that the police only have a common law power to engage in a search that is based on reasonable and probable cause. Although he does not reject the permissibility of search powers for purposes that will naturally involve less targeted suspicions, he says that such policing powers ought to based in statute, not the common law.

Binnie J. held that a requirement for reasonable and probable cause would render a longstanding law enforcement tool unusable, so the Court ought to recognize the power and subject the reasonable suspicion standard to Charter scrutiny. In Kang-Brown, he said:

… the “leave it to Parliament” approach ducks a practical and immediate problem facing law enforcement. Sniffer dogs have been in common use by police forces in Canada for the last 30 years or more. If the police have lawful authority to use sniffer dogs only when they already have reasonable grounds to believe contraband is present, sniffer dogs would be superfluous and unnecessary, i.e. because ex hypothesi the police already have the grounds to obtain a search warrant and would not require the confirmatory evidence of a dog.

He held sniffer dog searches are Charter compliant when they meet the reasonable suspicion standard, characterizing a search with a well-trained and accurate dog as relatively unintrusive.

While Binnie J. states in Kang-Brown that the reasonable suspicion standard contemplates a suspicion “in relation to one or more members of a group of people closely linked in proximity to the crime,” in both cases Bastarache J. endorses a standard that is de-linked from individuals – the generalized suspicion standard. He says this standard is justifiable in environments such as public terminals and schools where there is a reduced expectation of privacy. In Kang-Brown, he explains:

In my view, it is, in some circumstances, appropriate for police to conduct random searches using sniffer dogs on the basis of generalized suspicion. Allowing this type of search recognizes the important role sniffer dogs can play not only in detecting crime but also in preventing and deterring crime. Given the accuracy and efficiency of sniffer-dog searches, it is reasonable to conclude that their known presence, or potential presence, at particular locations would have a significant preventative effect. Allowing random searches in certain situations also has the benefit of avoiding inappropriate profiling and reducing any embarrassment which may be associated with a targeted search. I agree with the finding in Simmons that there is no stigma attached “to being one of the thousands of travellers who are daily routinely checked” at border crossings (p. 517), and believe that that lack of stigma results in large part from the random nature of the search process.

School searches

A.M. was not resolved in a manner that significantly alters or speaks to the law regarding searches conducted by school boards themselves. When police search schools using sniffer dogs or conduct similar premises searches, it is now clear they must meet the reasonable suspicion standard. When school officials physically search individual students, based on the Supreme Court of Canada’s 1998 decision in M.R.M., they must meet a similar relaxed standard (which Binnie J. interestingly characterizes as the reasonable suspicion standard, though that term was not used in M.R.M.). Whether school boards (acting on their own and not through the police) can engage in routine searches of school premises is not yet clear.

A.M. does not speak to a school board’s own power to search school premises because it was clear that the search under review was initiated by the police. Despite this, Deschamps J. (with Rothstein J. on this point) held that the search in question did not affect a reasonable expectation of privacy such that it engaged a section 8 right to be free from unreasonable search. She stressed the difficult challenge school boards face in maintaining safety and order, that the search was supported by policy that was known to students and parents and the relatively unintrusive nature of a sniffer dog search. The other judges’ position seems to be represented by Binnie J., who rejects Deschamps J.’s argument by stating that it fails to recognize the difference between a school board exercising its authority to maintain a safe and orderly school environment and a police search. Without endorsing routine school board searches, Binnie J. reinforces the different function of a school board and implicitly leaves open the possibility that properly constructed and executed routine or generalized suspicion searches by school boards may be lawful. School boards should nonetheless be very cautious in embarking upon any such initiatives and should seek legal advice before proceeding.

R. v. Kang-Brown, 2008 SCC 18.

R. v. A.M., 2008 SCC 19.

SCC releases school search decision

The Supreme Court has just dismissed the appeal in R. v. A.M., a significant decision on school searches.

The case is significant for school boards because it may involve a re-visitation of a 1997 Supreme Court of Canada case called “M.R.M.”, where a majority of the Supreme Court recognized that teachers and principals must be able to react quickly to problems that arise in schools and, hence, should have greater search powers than those enjoyed by the police.

The facts in the A.M. case are very different from those in M.R.M. The search in A.M. was a police search, not a school board search as in M.R.M., and the facts in A.M. are quite extreme because the a sniffer dog search is both random (as it pertains to individuals) and routine (i.e. there was no specific incident which gave rise to a justification for the search).

In A.M., a principal extended an open invitation to police to come onto school property and conduct sniffer dog searches. On the day in question, the police called the principal and received permission to enter the school. Students were told to remain in their classrooms while the police conducted the search. While searching a gymnasium, a sniffer dog identified “A’s” backpack. The police opened it and found narcotics and drug paraphernalia. A was arrested and charged with possession for the purpose of trafficking.

At trial, the principal admitted that he did not have any reason to believe that drugs would be found in the gymnasium. He could only testify to a general suspicion that drugs would likely be found somewhere in the school.

A Youth Justice Court judge held that A’s right to be secure from unreasonable search and seizure was violated, and this finding was unanimously upheld by the Ontario Court of Appeal. The Court of Appeal held that the search was unlawful because it was a warrantless and unreasonable police search – i.e. since the police initiated the search the lower standard established by the Supreme Court in M.R.M. did not apply. However, the Court of Appeal also stated that the search would have been unlawful if conducted by the principal himself because the Education Act does not give principals (or other school board officers) the power to conduct random searches:

As set out above, counsel for the Crown asserts that the Education Act, the provincial Code of Conduct, the St. Clair Catholic School Board Policy and the school’s zero-tolerance policy provide the authority for a warrantless search in this case. This submission is premised on the ground that the search was a search by school authorities conducted through the agency of the police. However, even if this was a search by school authorities through the agency of the police, there is nothing in the Education Act and the subsidiary policies articulated in the other documents that gives the required authority to conduct such a search.

Though the facts in A.M. are extreme and the statement above is technically obiter (meaning it was a passing comment), the Supreme Court may also choose to make a comment on a school board’s power of search and its student’s expectation of privacy.

The award is 97 pages. I’ll read it and provide a summary on the weekend.

Case Report – Employer uses spyware to forward its case but has Anton Piller set aside

The Ontario Superior Court of Justice issued an order setting aside an Anton Piller order on April 8th. The judgement is another stressing the extreme burden on parties who seek such orders.

The Anton Piller was initially granted in 2006 in support of a departing employee claim that included allegations of fraud and breach of confidence. The Court it aside because the plaintiff failed to fully and frankly disclose material facts and failed to make reasonable inquiries into material facts. More specifically, it held the plaintiff:

  • failed to ask customers whose business it claimed was lost or threatened due to the individual defendant’s actions whether they had been approached by the individual defendant;
  • failed to disclose that a customer relationship on which it relied was responsible for only a 2% portion of its gross profit; and
  • despite raising the difficulty in seeking production of the individual defendant’s MS Hotmail (which resided in the United States), failed to disclose that it had launched an action in Texas against the individual defendant’s new employer concurrently with its Ontario action, that it had sent a preservation letter to the new employer in conjunction with the action and that it had an agreement from Microsoft to retain the individual defendant’s MS Hotmail e-mails indefinitely.

The Court also criticized the execution of the order and, in particular, a search conducted of the purse of the individual defendant’s wife (also named). The Court said:

[The plaintiffs] were authorized to search for paper documents and electronic data related to Factor’s business, the business of Lanxess and Jean’s potential use of documents from Factor to promote his own and Bigler’s business interests. I question whether any of this material was reasonably likely to be found in Margaret Jean’s purse.

Also interesting, though it was neither challenged nor part of the Court’s consideration: the plaintiff discovered significant evidence of wrongdoing and determined the relevance of the individual defendant’s MS Hotmail account by installing spyware on his computer while he was employed.

Factor Gas Liquids Inc. v. Jean, 2008 CanLII 15900 (ON S.C.).

Case Report – Propriety of border crossing laptop search affirmed on appeal

Yesterday, the Ninth United States Circuit Court of Appeals overturned much-discussed order to suppress evidence obtained in a border crossing laptop search.

The case involves a traveller named Michael Arnold, who was routinely selected for secondary questioning after returning from a three week vacation in the Philippines. A border agent turned on Arnold’s computer and discovered photos of two nude women in folders on his desktop.  She called in other officials, who then questioned Arnold and examined his computer some more, and ultimately seized the computer after finding what they believed was child pornography.  Based on these facts, in 2006 a district court judge granted Arnold’s motion to suppress on a finding that there was no reasonable suspicion for the search.

The appeal from the lower court’s order centered on whether the Fourth Amendment requires the United States government to meet a “reasonable suspicion” standard in conducting border crossing laptop searches because laptops are different than other closed containers.  The Court’s description of Arnold’s argument nicely highlights its significance:

Arnold argues that “laptop computers are fundamentally different from traditional closed containers,” and analogizes them to “homes” and the “human mind.” Arnold’s analogy of a laptop to a home is based on his conclusion that a laptop’s capacity allows for the storage of personal documents in an amount equivalent to that stored in one’s home. He argues that a laptop is like the “human mind” because of its ability to record ideas, e-mail, internet chats and web-surfing habits.

This was similar to an argument rejected by the Fourth Circuit Court of Appeals in a 2006 border crossing laptop search case called Ickes and reserved on by the Ninth Circuit Court of Appeals in a 2006 border crossing laptop search case called Romm. 

In Arnold’s case, the Ninth Circuit Court of Appeals flatly rejected the laptop argument as contrary to United States Supreme Court jurisprudence, which it read as weighing against any analysis that would differentiate between the types of property searched at border crossings.  In short, it held that property is property. It also held that Arnold had not adduced any evidence to support a finding that the search fit within the “exceptional damage to property” or “particularly offensive manner” exceptions to the United States government’s broad power to search property at its borders.

Law.com reports that an appeal may be in order.

United States v. Arnold, 08 C.D.O.S. 4533.

 

 

 

Outer Banks to Toronto in four podcasts all about information

We had a great vacation in the Outer Banks, and I highly recommend going there in the off-season if you want to decompress and relax with family and friends. On the last full day we got a great swell and I surfed all day. Now I feel relaxed, grateful for family, friends and good health and am ready to get back to work.

On my last road trip I did this podcast feature that went over well, so let’s try it again. Once again, I dropped Seanna and Hugs at the airport (this time in Norfolk) and soloed it home. I continued my self-study program on the press and information flows by listening to the following.

  • UC Berkeley, “The Consequences of Confidential Sources: Jail?” A very interesting panel discussion that features Judith Miller, just before the United States Supreme Court declined to hear an appeal of a finding she was in contempt for refusing to testify before a grand jury that was investigating the leak of Valarie Plame’s identity as a covert CIA agent. From 2005.
  • Stanford University, “Anonymous Sources: Leaks, Accountability and the First Amendment.” Criticizes the Wen Ho Lee privacy claim shortly before it was settled. Highly objective and informative thanks to Professor Kathleen Sullivan and Walter Pincus. Mr. Pincus of the Washington Post (also subpoenaed in the Plame affair) actually speaks against a statutory “shield law” for confidential sources in favour of a more nuanced common law approach. Ms. Sullivan says the press should not “over-claim.” From May 2006.
  • Stanford University, “How Will We Pay for the Journalism We Need?” This is business-focused, but there is a good discussion of how the “What is journalism?” question has been a challenge to newspapers’ business planning processes. David Talbot, founder of Salon.com, takes a perspective critical of traditional newspapers’ management that keeps the dialogue lively. From 2007.
  • Lawyer 2 Lawyer, “The Federal Shield Law.” Nice and current, and about the policy behind the proposed American federal “shield law” – i.e. a statute-based law that, if passed, will protect journalists’ confidential sources. A pro-shield but fair and supremely-qualified slate of guests. From April 2008.

Now back to your regular programming!

Information Roundup – April 16, 2008

Still in NC, enjoying better than expcted surf. Here’s what I’ve been into lately.

  • Government of British Columbia, “E-Health Statute Increases Patient Access and Privacy.” The BC government has introduced legislation billed as enabling “e-health” systems that ensure patient privacy. Hat tip to Michael Geist.
  • Citzen Media Law Project, “Sykes v. Seidel.” Here’s a link to the Citzen Meida Law Project’s legal threats database entry on the Seidel subpoena. Kathleen Seidel publishes a blog called Neurodiversity on autism-related issues, and was subpoenad by plaintiffs in a austism lawsuit after posting a critique of the lawsuit and its handling. Seidel has moved to quash on a number of grounds and apparently has raised “journalists privilege.”
  • Associated Press, “Threatening Graffiti Leads College to Cancel Class.” A recent campus threat response news story from the United States. (New York Times)
  • Alice Mathias, “Fear and Learning on Campus.” Here is an editorial that was published in the NYT today on the Virginia Tech event’s more subtle impact on campus life. (New York Times)
  • James Alan Fox, “Topics in University Security: Lockdown 101.” This editorial, also published today, criticizes emergency planning overreaction.

This is the one year anniversary of the Virginia Tech shooting. I’ve been engaged to advice on managing the privacy issues and the threat of campus violence since then. My perspective is best summarized in the attachment to this post.

Enjoy!

Case Report – Plaintiffs can’t (yet) capitalize on loss of evidence seized on an Anton Piller

On March 25th, the Ontario Superior Court of Justice dismissed a motion brought by defendants after their documents and things seized under an Anton Piller order were lost by the supervising solicitor.

The disposition of the motion was strongly-driven by the defendants’ intent. The Court noted that their main reason for bringing a motion was not to attack the Anton Piller but, rather, was to seek a dismissal and damages for the plaintiffs’ role in the alleged unreasonable retention of evidence. This intent was highlighted by the defendants’ failure to attend the hearing at which the Anton Piller order was confirmed. As for the plaintiffs, their approach was to implicate an individual defendant in the loss of evidence by blaming him, for example, for failing to copy documents in accordance with an alleged agreement between the parties.

The Court held that the defendants’ had not established any basis for modifying or setting aside the Anton Piller order. It also held that the claim for damages and a dismissal of the action were premature and best resolved after a trial, except that the defendants could bring a summary judgement motion to forward their argument that the loss of evidence prejudiced their defence. On this point, it said:

The defendants therefore rely solely on the loss of the Evidence and their allegations that the plaintiffs are responsible for the loss in support of their request for a dismissal of the action. I think this is insufficient to succeed on such a motion. The loss of the Evidence by itself is not determinative of the issue of prejudice and the ultimate responsibility for the loss is irrelevant (unless the loss were due to the defendants’ actions). The important point is that there is no reason or evidence put forward by the defendants that suggests that the Evidence would have provided a defence to the plaintiffs’ allegations regarding the defendants’ business. Accordingly, the evidence before the Court on the issue of prejudice is not sufficient at this time to demonstrate prejudice that would entitle the defendants to the requested relief.

Bell ExpressVu Limited Partnership v. Echostar Satellite LLC, 2008 CanLII 12837 (ON S.C.).

Information Roundup – April 12, 2008

This Information Roundup comes to you from the Outer Banks in North Carolina, a special place for Seanna and me because we got married here a couple of years ago. Now we have Hugo, who’s on his second surf vacation in his first year, and might even get what’s going on as Seanna and I trade off on babysitting duties and on-water sessions.

Today, Seanna windsurfed at the “Canadian Hole” while Hugo and I experienced the wonders of sand. Then I windsurfed on the ocean-side downwind to our house in shoulder to head high waves. I am not the windsurfer I used to be, but had fun anyway and didn’t break anything.

Here are some things I’ve read on my vacation.

Enjoy!