US Court of Appeals finds that the receipt and storage of customer e-mails by ISPs does not constitute “interception” under the

Plaintiff Peter Hall intended to promote via e-mail the premiere of his first produced movie “Delinquent” at the Chicago Underground Film Festival on August 13,1997. On August 5, 1997 the Defendant Earthlink was notified by UUNet (a backbone provider) that Hall’s account was sending mass junk mail, which led to the (i) termination of Hall’s access to the account; and (ii) placement of his e-mail address on “Net Abuse Report” – weblist of e-mail abusers. Two days before the premiere of the movie and after a series of exchanges between the parties, it was determined that Hall’s messages were not spam. Earthlink posted a retraction on the Net Abuse Report and forwarded to Hall the e-mails that were sent to his “blocked” Earthlink account over the past days.

A period of time continued to pass where the parties could not reach an agreement as to whether Hall would reactivate his Earthlink account. During that time Earthlink continued receiving and storing e-mails sent to Hall’s email address. Almost a year later, in July 1998, Earthlink forwarded to Hall the 591 stored e-mails.

On July 31, 1998 Hall filed a complaint against Earthlink in the District Court for the Second District of New York claiming: (i) violation of the Electronic Communications Privacy Act (ECPA); (ii) breach of contract; (iii) libel; (iv) breach of the covenant of good faith and fair dealing; (v) negligent appropriation of electronic communication; (vi) intentional interference with electronic communication; and (vii) prima facie tort. Following discovery, Earthlink moved for summary judgment.

The District Court dismissed the ECPA claim reasoning that Earthlink’s actions did not constitute an “intentional interception” under the ECPA. As for the breach of contract claim, the District Court found that without consequential damages (that were too speculative), Hall’s actual damages claim could not meet the jurisdictional amount for diversity jurisdiction of $75,000.00. The other claims made by Hall were also dismissed.

The U.S. Court of Appeals for the 2nd District review the district’s court summary judgment dismissal of Hall’s ECPA claim de novo in order to further clarify the issue.

ECPA claim
The Court of Appeals held that Earthlink’s continued reception of e-mails sent to Hall’s account did not constitute an “interception” under the ECPA because it was conducted as part of the “ordinary course of [Earthlink’s] business” (see 18 USC §2510(5)(a)). The Court reasons that excluding ISPs from the “ordinary course of business” exception of the ECPA would lead to an absurd result: ISPs constantly intercept communications under the ECPA because their basic services involve the “acquisition of the contents” of electronic communication (see 18 USC §2510(4)).

Further, the Court of Appeals held that it was not necessary to decide whether Earthlink’s actions were intentional – such scrutiny is only applicable if the actions were in violation of the ECPA (which was not the case).

Breach of Contract
Hall requested two forms of relief: consequential damages and actual damages. With respect to the consequential damages, the Court of Appeals agreed with the District Court citing California Law (Grupe v. Glick, 26 Cal. 2d. 680, 160P.2d 832, 840 (Cal 1945)): “anticipated profits [are] dependent upon future events… where their nature and occurrence can be shown by evidence of reasonable reliability”. Because Hall failed to present such evidence, the claim was dismissed.

The actual damage claim was also dismissed by the Court of Appeals.

Breach of the implied covenant of good faith and fair dealing
The Court of Appeals agreed with the District Court that this claim was duplicative of the breach of contract one.

Torts of negligent appropriation of electronic communication and intentional interference.
The dismissal by the District Court was affirmed because (i) Hall’s claims against Earthlink flowed from the contract and Hall has not shown that Earthlink owed him any additional duty that would justify a tort claim relief ; and (ii) Hall has not presented a reasonable showing that existing torts, such as a prima facie tort, are not adequate to protect his interests.