Second Circuit Criminal Law Blog

En Banc Ruling Avoids Complicated Fourth Amendment Question

In United States v. Stavros Ganias, 12-240, the Second Circuit, in a rare en banc ruling jointly written by Judges Livingston and Lynch, sidestepped a complicated Fourth Amendment issue related to the government’s retention of files from a hard drive outside the scope of a warrant, and instead affirmed the defendant’s conviction on the ground that, regardless of whether there was a Fourth Amendment violation, the government reasonably relied in good faith on a later warrant to search those files.  The en banc holding reversed the decision of a divided Second Circuit panel that came down nearly a year ago, which reversed the district court’s denial of the motion to suppress and vacated the judgment of conviction.  All of the judges on the Court, except for Judge Chin, either joined in the opinion or concurred in the result.  The novel and important question raised in this appeal—whether the government can retain electronic files collected pursuant to a search warrant and later search those files for a separate purpose, pursuant to a second search warrant—will need to be addressed in another case or by Congress. 

The defendant in the case, Stavros Ganias, was a former IRS agent who conducted business as Taxes International.  When the government received a tip that one of Ganias’s clients had engaged in fraud on the government, an agent of the U.S. Army Criminal Investigation Division ( “Army CID”) obtained a warrant to search the offices of Taxes International.  At the time, Ganias himself was not suspected of any criminal activity.  The warrant authorized the seizure of Taxes International files, including hardware and software, related to the two targets of the investigation: Industrial Property Management (“IPM”) and American Boiler, Inc. (“AB”).  Given the impracticality of sorting through responsive and nonresponsive data on site, agents created mirror images of all of the data stored on three computers so that the data could be segregated and reviewed off-site, with minimal disruption to Taxes International.  This is a typical practice when search warrants for electronic data are executed.  

There was no question that, in making mirror images of the three computers, agents seized data that did not pertain to IPM or AB and thus were outside the scope of the warrant.  Nevertheless, the government never deleted the files that were not responsive to the warrant.  According to the defendant (and the dissent), the responsive documents had been segregated by the end of 2004.[1]  As the investigation progressed, agents began to suspect that Ganias himself was involved in tax fraud.  Agents subpoenaed his bank records and obtained his income tax returns and by July 2005, Ganias became a target of the investigation. 

In February 2006, Ganias and his lawyer met with agents involved in the investigation for a proffer session.  The agents asked Ganias for his consent to access his personal Quickbook files and those of Taxes International that were present on the forensic mirrors obtained from the computers (but which were outside the scope of the 2003 warrant and therefore had not been reviewed by the agents).  By April 2006, Ganias had not responded to the government’s request and the government sought a search warrant to search the mirrored drives again.  In the search warrant affidavit, the government explained that it wished to search the mirror images obtained in November 2003 from Taxes International but that it could not do so because of the limited scope of the original warrant.  The magistrate judge issued the warrant and Ganias was eventually indicted for tax evasion.  Before trial, Ganias moved to suppress the evidence acquired from the 2006 search warrant.  The U.S. District Court for the District of Connecticut (Thompson, J.) denied the motion and a jury convicted Ganias of two counts of tax evasion.  Ganias was sentenced by the district court to two terms of 24 months’ imprisonment, to be served concurrently.

Ganias appealed and a unanimous panel of the Second Circuit (Chin, Hall, Restani) concluded that Ganias’s Fourth Amendment rights were violated when the government retained documents outside the scope of the 2003 search warrant for a year and half after they had been segregated from the responsive documents.  The panel held that absent “some independent basis for its retention of those documents in the interim, the Government clearly violated Ganias’s Fourth Amendment rights by retaining the files for a prolonged period of time and then using them in a future criminal investigation.”  United States v. Ganias, 755 F.3d 125, 138 (2d Cir. 2014).  The panel divided, however, as to whether the evidence should have been suppressed, with the majority concluding that the agents “effected a widespread seizure of files beyond the scope of the warrant” and failed to act in good faith by retaining those records.  Id. at 140. 

The government then sought panel rehearing (not a rehearing en banc) on the question of whether the good faith exception applied to preclude suppression of the evidence.  But in a surprising twist, the Second Circuit elected to rehear the case en banc with respect to both whether a Fourth Amendment violation occurred and whether suppression was warranted.  And now, in yet another unexpected turn of events, the en banc panel has affirmed the judgment of the district court but passed on the unresolved question of whether a Fourth Amendment violation occurred, instead holding that, regardless, the good faith exception applied to prevent suppression of the evidence obtained pursuant to the 2006 search warrant.

In a majority opinion penned by Judge Livingston and Judge Lynch,[2] two Columbia Law School professors who have taught criminal law to countless students, the Court dedicated several pages to a discussion of the Fourth Amendment concerns implicated by the facts of the case and, in particular, the “reasonableness” of the search and seizure of electronic evidence in light of certain technological features unique to that form of data.  Without deciding the issue, the majority noted that the analogy to paper files is, in many respects, inapt because “a good deal of the information that a forensic examiner may seek on a digital storage device . . . does not even remotely fit into the typical user’s conception of a ‘file.’”  For example, the majority noted, forensic investigators may be searching for evidence that a file was deleted or evidence sufficient to recover a deleted file, metadata that reveals a user’s interaction with a particular file, or even evidence that something did not happen or is not present on a hard drive.

Furthermore, the majority noted, the way that digital evidence is stored means that any deletion of files from the mirror image can undermine the ability to preserve or authenticate the data for later use at trial.  And criminal defendants could benefit from the preservation of a full mirror image, allowing them the ability to perform a complete, independent forensic examination to challenge the accuracy or reliability of the evidence.  Although repeatedly emphasizing that it was not deciding the Fourth Amendment issue before it, the majority explained that it wanted to “highlight the complexity of the relevant questions for future cases and to underscore the importance, in answering such questions, of engaging with the technological specifics.”

Although the majority did not describe in detail the technological issues that informed its concerns about preservation and authentication, one oft-cited concern is the effect that altering a mirror image may have on the “hash values” associated with each file.  If the hash value of a copied file matches that on the original medium, it indicates that the file has not been altered in any way, thus permitting the parties, the court and the factfinder to verify the authenticity of the file and guard against tampering.  Any alteration to an imaged hard drive would change the hash values, making it more difficult to prove that the contents were not altered at some point after collection.[3] 

But the majority was also sympathetic to the privacy concerns of defendants, particularly in the age of electronically stored information, where “[t]he seizure of a computer hard drive, and its subsequent retention by the government, can give the government possession of a vast trove of personal information about the person to whom the drive belongs.”  Nevertheless, the majority commented, Ganias never sought recourse pursuant to Federal Rule of Criminal Procedure 41(g), which permits any person aggrieved by an unlawful or lawful deprivation of property to move for its return.  Although the majority did not decide whether Ganias’s failure to make such a motion forfeited any Fourth Amendment objection, it agreed with the district court that, “as a pragmatic matter,” such a motion would have given the district court the opportunity to balance the competing concerns and impose reasonable conditions intended to protect the privacy interests implicated here. 

In a call to Congress to act on this issue, the majority pointed to legislative action on wiretapping in the Omnibus Crime Control and Safe Streets Act of 1968 as a model of a statutory approach that helped balance privacy interests against the needs of law enforcement in the face of technological change.  The court commented that “Congress can and should be a partner in the process of fleshing out the contours of law-enforcement policy in a shifting technological landscape,” and that the “search and seizure of electronic media may, no less than wiretapping, merit not only judicial review but also legislative analysis; courts need not act alone.”[4]

Some observers – and apparently the dissent – may be surprised that, following re hearing en banc to grapple with the significant Fourth Amendment issues in this case, the court chose to pass on the opportunity.  But it seems that in light of the complex technological issues raised by the search, seizure, and retention of digital evidence, the majority did not feel prepared to draw bright lines around what must be deleted from the government’s files and felt strongly that legislative assistance and guidance would be valuable. 

Setting aside the important Fourth Amendment issues at play, the majority held that the agents handling this case reasonably relied in good faith on the 2006 search warrant to review the additional files on the mirror image for evidence of Ganias’s tax evasion.  The court found that the agents had no significant reason to believe that the retention of the entire mirror image was unconstitutional, as no court in the Second Circuit had ever found that such a retention violated the Fourth Amendment.  And because the magistrate judge who issued the 2006 search warrant was “apprised of the relevant conduct,” the agents could reasonably rely on it.

As the lone but passionate dissenter – and the author of the original Second Circuit decision vacating the conviction – Judge Chin would have reached the constitutional question and held that the Fourth Amendment was violated.  Citing the Fourth Amendment’s roots in fears about general warrants and overseizure of documents, Judge Chin had little difficulty concluding that the same protections against government intrusion apply with equal force in the context of digital evidence – perhaps even more so given the vast amount of personal information that is stored as electronic data.  Indeed, Judge Chin pointed out that all eight amici advocated for finding a Fourth Amendment violation and that the “prevailing scholarly consensus” was that the original panel’s holding was largely correct.

Judge Chin would have held that once the responsive files were “segregated and extracted, the retention of non-responsive documents is no longer reasonable” and the government is obliged “to return or dispose of the non-responsive files within a reasonable period of time.”  Judge Chin rejected the government’s arguments about the potential value of retaining non-responsive files, writing: “ Permitting the Government to keep non-responsive files merely to strengthen the evidentiary value of responsive files would eviscerate the Fourth Amendment.”  Furthermore, Judge Chin would have found that the good faith exception did not apply because the agents were aware of their responsibility to destroy files outside the scope of the warrant but failed to do so.

One wonders whether the Ganias appeal, even without a ruling on the underlying Fourth Amendment issue, will lead defense counsel or the government to handle these issues differently in subsequent cases.  For example, given the Court’s focus on the utility of Rule 41(g) motions for the return of property, it would be prudent for counsel who represents a client who has been subjected to a search warrant to make such a motion in order to prevent the government from harvesting more evidence in the future.  Also, one wonders if the government will exercise greater care in how it handles electronic data, perhaps by trying to develop a means of protecting the integrity of its evidence that does not raise the Fourth Amendment issues identified by the panel opinion.  The Court expressed some concern in a footnote about the absence of a government policy with respect to mirrored drives collected as part of the execution of a search warrant.

Given that technology is constantly evolving and data continues to shift toward electronic storage, it seems inevitable that this and similar Fourth Amendment questions will present themselves again before the Second Circuit.  It may be that, by that point, Congress has made movements toward passing legislation to balance the interests implicated, offering uniform guidance to courts around the country.

 

[1]  The majority disputed whether this fact was actually established by the evidence, but its decision did not turn on that question. There is also a dispute over whether the government was obligated to return or delete the nonresponsive files.  There was some testimony and argument that a complete set of the files needed to be retained in order to have a copy of the evidence preserved in the form in which it was taken.  Whether a concern for evidentiary integrity motivated the government agents seems unclear even to the majority, which stated that one agent’s explanation was “not a model of clarity.”

[2]  Chief Judge Katzmann and Judges Jacobs, Cabranes, Raggi, Wesley, Hall, Carney and Droney joined the majority opinion in full.  Although Judge Hall agreed with the original panel that the Fourth Amendment was violated here, following rehearing en banc, he joined in the majority opinion passing on the Fourth Amendment question and deciding the case on the narrower good faith exception ground.  Judges Pooler and Lohier concurred fully with the majority’s decision affirming the conviction on the ground that the good faith exception applied but declined to join in the portion of the majority’s opinion discussing (but not ruling upon) the underlying Fourth Amendment question.  Judge Chin dissented.   

[3]  It is worth noting that in his dissent, Judge Chin takes issue with this argument, pointing out that the authentication requirements do not present a high bar and that the government can easily call an agent to testify to the chain of custody to authenticate the data.  Furthermore, Judge Chin notes, the government acknowledged that it could “hash individual files” that it segregated as responsive to the warrant.

[4] Some commentators have suggested, given the high stakes at issue with the execution of search warrants in a white-collar context, that there should be a showing of necessity in order to obtain a search warrant, as there is for a wiretap order.  See Robert H. Hotz and Harry Sandick, “Search Warrants in White-Collar Crime Cases,” 45 Rev. Sec. & Commodities Reg. 133, 136 (Jun. 20, 2012).

-By Elena Steiger Reich and Harry Sandick