Designer Skin LLC v. S & L Vitamins, Inc., et al.
Fraser v. Nationwide Mut. Ins. Co.
135 F. Supp.2d 623 (E.D.Pa. March 27, 2001) aff'd. in part, remanded in part, 352 F.3d 107 (3rd Cir. 2003)
Court holds that insurance companies' review of email sent by one independent contractor working for company to another, after it had been reviewed by second independent contractor and stored on company server, did not violate either the Federal Wiretap or Stored Communications Acts, or their Pennsylvania state counterparts. The Wiretap Act protects against unauthorized interception of electronic communications. The court held that to constitute a violation of the Act, the email must be intercepted during its transmission, and before it is reviewed by the intended recipient. There was accordingly no violation of the Wiretap Act because the email in question was only reviewed by the insurance company after it had been reviewed by the intended recipient. The court also held that the insurance companies' review of the email did not constitute a violation of the Stored Communications Act. As interpreted by the court, that Act only provides protection to electronic communications while they are in transit from sender to intended recipient. While in transit, communications are protected by the Act if held in storage. However, once reviewed by the intended recipient, the communications are no longer in transit, or subject to the protection of the Stored Communications Act, even if they thereafter remain in storage. As the email in question had already been received by the intended recipient, it was no longer in transit, and not protected by the Stored Communications Act. It should be noted that this decision addresses a number of additional claims, including breach of contract, wrongful discharge, and violation of the Pennsylvania Constitution, arising out of the insurance companies' termination of its Agent's Agreement with plaintiff which will not be addressed in this summary.
Defendants ("Nationwide") are a family of insurance companies. In 1986, plaintiff signed an Agent Agreement with Nationwide, in which he agreed to become an exclusive insurance agent for that concern, selling its insurance policies. Pursuant to the terms of the Agent Agreement, plaintiff was an independent contractor. In January 1990, plaintiff entered into an Agency Office Automation Lease Agreement with Nationwide, pursuant to which he leased certain computer hardware and software for use in his business. The lease provided that this hardware and software remained the property of Nationwide. When plaintiff logged onto the Nationwide computer system with this equipment, he was greeted with a notice that stated "Please note: for everyone's mutual protection, [company] System use, including electronic e-mail, may be monitored to protect against unauthorized use."
Plaintiff became involved in an organization of Nationwide Insurance Independent Contractors which challenged Nationwide on a number of issues, including allegedly illegal activities Nationwide was undertaking, and the conditions under which Nationwide could terminate the Agent Agreements of its independent contractors.
In 1998, Nationwide decided to compete with its insurance agents, and allow policyholders to buy policies directly from the company. In response, plaintiff, on behalf of various insurance agents, drafted a letter to competitors of Nationwide, soliciting their interest in acquiring the policyholders of a number of Nationwide's agents. This letter was drafted in an attempt to get Nationwide to stop competing directly with the agents.
A copy of this letter was delivered to Nationwide. To find out if this letter had actually been sent to its competitors, Nationwide searched stored emails on Nationwide's electronic file server for email indicating that the letter had been sent. The company ultimately found an email from plaintiff to another Nationwide Insurance Agent, indicating that the letter had been sent to at least one competitor. This email was retrieved from that agent's "file of already received and discarded messages stored on the server." From the court's decision, it appears that this agent had elected to store the email after reviewing it (as opposed to attempting to delete it). Nationwide subsequently terminated plaintiff's Agent Agreement, and this lawsuit followed.
Plaintiff asserted that defendants' review of his email constituted a violation of both the Federal Wiretap and Stored Communications Act, as well as their Pennsylvania counterparts. The court disagreed, and granted defendants' motion for summary judgment, dismissing these claims.
The Wiretap Act protects against unauthorized "interception" of "electronic communications." Following the Fifth Circuit's decision in United States v. Turk, 526 F.2d 654 (5th Cir. 1976), cert denied 429 U.S. 823 (1976), a communication is intercepted for purposes of the Act only when it is acquired during the course of its transmission. In reaching this conclusion, the court relied on the common meaning of "intercept," which means "to stop, seize or interrupt in progress or course before arrival." The court further held that the fact that the communication was temporarily stored before receipt by its intended recipient did not alter the outcome - such a communication was still in transit, and still capable of interception within the meaning of the Act. Thus, mail stored in a mailbox, email stored in an email account, and voice communications waiting to be heard for the first time on an answering machine, are each communications in transit capable of interception within the meaning of the Act. Once reviewed by the intended recipient, however, each falls out of the protection of the Wiretap Act, whether or not they continue to be stored in the same mediums. Said the court:
As the email in question was only retrieved by Nationwide after it had been reviewed by its intended recipient, it was not intercepted within the meaning of the Wiretap Act. The court accordingly dismissed plaintiff's claim under the Wiretap Act.
The court similarly dismissed plaintiff's claim under the Stored Communications Act. Like the Wiretap Act, the court held that the Stored Communications Act "similarly provides protection for private communication only during the course of transmission."
According to the court, emails that are sent pass through two forms of temporary or intermediate storage before they reach their intended recipient. After an internal email is sent on a company system, the system stores the message in temporary or intermediate storage for the recipient. In addition, the system also stores a copy of the message in separate storage for backup protection in the event the system crashes before transmission is completed. Transmission of the message is complete when the individual logs on and retrieves his message from intermediate storage. After the message is retrieved by the intended recipient, it is placed in a third type of storage, which the judge called "post transmission storage."
The Act provides protection against unauthorized access to electronic communications that are in "electronic storage." Electronic Storage is defined in the Act as: "(a) any temporary, intermediate storage of a wire or electronic communication incidental to the electronic transmission thereof; and (b) any storage of such communication by an electronic communication service for purposes of backup protection of such communication." 18 U.S.C. Section 2510(17).
Thus, emails that are in either intermediate or backup storage (as defined above by the court) are protected by the Act provided they have not been read by the intended recipient. Once read, however, the communication is no longer protected by the Act, even if the recipient elects to save it in storage. "Retrieval of a message from post-transmission storage is not covered by the Stored Communications Act. The Act provides protection only for messages while they are in the course of transmission." Because the insurance company retrieved the email in question after it had been reviewed by the intended recipient, it did not violate the Stored Communication Act, even though the message when retrieved was in storage.
The court's decision addresses a number of additional claims raised by plaintiff as a result of the termination of his Agent Agreement, including breach of contract, wrongful termination, and violation of Article I, sections 7 and 20 of the Pennsylvania Constitution. These portions of the court's decision will not be discussed here.
The full text of the court's decision can be found on a web site maintained by the United States District Court for the Eastern District of Pennsylvania.