Blockchain: Reasonable Expectation of Privacy (Part II) | Criminal Tax Blog

Blockchain: Reasonable Expectation of Privacy (Part II)

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In Part I of this blog, we discussed the underlying requirements to trigger protections under the Fourth Amendment.  Notably, we detailed the seminal rules that define the term “search” under the Fourth Amendment. Katz v. United States, 389 U.S. 347 (1967).

The Katz standard is easy to apply in most cases, including the search of a home or business. It is clear that a homeowner has a reasonable expectation of privacy in the records and contents of his house.  However, the Katz standard becomes more complex when we leave the common search areas and enter into unique challenges to third party records and emerging investigative techniques.  In the latter situations, the Courts of Appeals must apply old, broad standards to new, complicated fact scenarios.  This post will analyze the seminal cases where the Katz standard has been applied to emerging investigative techniques.  The goal is to outline the logical path that ultimately arrives at the new appellate decisions involving the search of user transactions on a blockchain.

Pen Register – Establishing the Third Party Doctrine

In 1979, the Supreme Court analyzed whether law enforcement could install a pen register without a warrant. Smith v. Maryland, 442 U.S. 735 (1979).  A pen register was a new investigative technique that allowed law enforcement to determine the numbers dialed from any land line.

Any lawyer licensed since 1980 will undoubtedly remember the pen register case.  It is a seminal case taught in law schools across the country, and the decision provides the foundation for multiple cases that follow.  The following provides some factual background alongside the Court’s ruling.

In March of 1979, Patricia McDonough was robbed at gun point.  She called the police and gave officers a description of the suspect’s car and license plate.  After the robbery, Patricia began receiving threatening phone calls.  She relayed this information to police.

Using the license plate information, officers were able to identify the owner of the vehicle described at the crime scene.  Officers asked the telephone company to install a pen register on the suspect’s land line. The pen register would log every number dialed from the target phone. The pen register was installed without a warrant.

Through the pen register, officers determined the suspect called McDonough’s phone following the robbery.  That information was used to support a subsequent search warrant at the suspect’s home and probable cause to arrest the suspect for armed robbery.

At trial, the suspect challenged the admissibility of the pen register records.  The suspect argued the Fourth Amendment required officers to obtain a warrant prior to collecting the pen register data.

The Supreme Court was tasked with determining whether an officer’s installation of a pen register constituted a search under the Fourth Amendment.  Or more specifically, whether the suspect has a reasonable expectation of privacy in the numbers dialed from his land line under the Katz standard.

The Court looked at two separate areas when analyzing this issue:1) the physical installation of the pen register and 2) the information obtained through the pen register.  The physical installation of the pen register took place at a telephone company.  The officers did not enter the suspect’s property.  This first issue was curbed quickly with the Court determining the installation was not a search under the Fourth Amendment.

The Court then spent considerable time analyzing the second issue – whether the suspect had a subjective expectation of privacy in the numbers dialed and whether society would deem that expectation reasonable.

No Reasonable Expectation of Privacy in the Numbers Dialed

The Court determined the suspect could not have expected privacy in the numbers dialed.  They noted most citizens understand their phone companies have access to call log information and the information is stored in the company business records.  The Court found it doubtful that any person had a subjective expectation of secrecy in the numbers dialed from their land lines.

Additionally, the Court found that any subjective expectation of privacy in the numbers dialed would not be reasonable in the eyes of society.  Again, the Court reiterated the societal knowledge surrounding telephone company records.  They found that any expectation of privacy from the suspect was entirely unreasonable given the common knowledge.

The Smith decision gave life to a new doctrine in Fourth Amendment jurisprudence – the third-party doctrine.  Generally, a person has no reasonable expectation of privacy in any information voluntarily disclosed to a third-party.  This includes bank records, phone logs, emails to third parties, and all other business record evidence.

Conclusion

Smith provides the seminal decision for all third-party record cases within the United States.  As an overarching principle, a defendant cannot complain of a warrantless search when officers obtain voluntarily disclosed information from a third party.  If the officers had intercepted the contents of the conversations with Ms. McDonough, the analysis would be entirely different.  There is a distinct difference between privacy matters in the contents of a conversation and the numbers provided to a telephone company.  The latter does not qualify as a search and thus, the Fourth Amendment is not implicated.

Other cases using the third-party doctrine:

No reasonable expectation of privacy in bank records. United States v. Miller., 425 U.S. 435 (1976).

Cell Phone Location Data – Revisiting the Third-Party Doctrine in the Digital Age

The pen register was decided when most citizens had a land line within their home.  Technological advancements over the 40 years since the ruling in Smith have been both swift and vast.  Today, the United States has more smart phones in circulation than people within its borders.  Every home contains a computer.  Most homes have multiple ways to connect to the internet.  Many schools are now providing kids with laptops to efficiently deliver lesson plans.  It is rare to find a person with a landline at their home.

Smart phones serve many functions in our society.  They allow us to make to make phone calls, search the internet, and write emails. Additionally, they provide a network of applications that allow us to connect with friends or pass the time.  Most people use their cell phones hundreds of times a day to perform different tasks.  The vast majority of citizens have a working knowledge of their handheld devices.

While many understand smart phones from a usage perspective, most do not grasp the copious amounts of information being collected by various applications and the operating system.  Facebook is constantly logging information for marketing. Safari is noting every search to efficiently administer advertisements.  Various applications are monitoring a users’ location through the phones GPS system.

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All this data is held by a third party. These third-party providers log this information into their computer systems.  Similar to the telephone companies in Smith, these providers hold this information in their business records.  Though Smith’s third-party disclosure rule would seem to make this information available without a warrant, the information obtained through cell phone use is far more expansive.  We are no longer talking about the numbers dialed on a phone, but rather, a giant vat of information that cuts into unique areas of a person’s privacy.  Notably, search histories and location.

In 2018, the Supreme Court was asked to analyze the availability of this information without a warrant under Smith and its progeny.  The ultimate question was determining whether a user had an expectation of privacy in their cell phone location data and whether society would deem that expectation reasonable. The following will outline the facts and legal analysis under the Supreme Court’s decision in Carpenter v. United States, 138 S. Ct. 2206 (2018).

In 2011, officers arrested four men suspected of robbing Radioshacks in the Detroit area.  One of the suspects confessed to the crimes, stating there were fifteen other accomplices that took part in over nine different robberies.  The suspect provided the FBI with the cell phone numbers for many of the named accomplices.  Carpenter was one of the named accomplices.

The government applied for court orders to obtain cell phone data from the providers for Carpenter’s phone.  They moved under 18 U.S.C. 7203(d) which allows for the retrieval of telecommunications records when the government can establish reasonable grounds for their relevance to an ongoing criminal investigation.  The court granted the government’s application and the government received cell phone location data for Carpenter.

At trial, Carpenter attempted to suppress the cell phone records arguing the FBI had to obtain a warrant before retrieving the information.  The District Court denied the motion to suppress.  The government used the cell phone location records to place Carpenter near the crime scene in four of the robberies.  The cell phone location data combined with co-defendant testimony led to Carpenter’s conviction.  He was sentenced to over one-hundred years in prison.

Carpenter appealed the District Court’s denial of his motion to suppress.  The Sixth Circuit followed the logic in Smith finding Carpenter had no reasonable expectation of privacy in the data as he voluntarily disclosed the information to the third-party provider.  The Supreme Court granted certiorari to determine whether the “third-party” doctrine should apply to cell phone location data.  The question was whether a user has a reasonable expectation of privacy in his location data and whether that expectation is one society would deem reasonable.

The Supreme Court began its opinion addressing the problems presented by emerging technologies.  New investigative tactics allowed the government to intrude on privacy interests in ways that could not have been anticipated by the founding fathers.  For example, the Court discussed barring the use of thermal imaging to collect data from inside of a home.  The Court struggled to find a balance between protecting privacy interests and allowing law enforcement to efficiently perform their jobs.

The Court noted the difficulty presented by the data set at issue.  They acknowledged the third-party records cases before outlining the heightened privacy interest a citizen has in their location.  The Court compared the current facts with previous cases where the Court ruled a warrant was required before law enforcement could surveil a suspect using GPS trackers.  The Court was walking a tight rope where they must acknowledge past precedent while protecting the heightened intrusion that accompanies advanced investigative techniques.  There is a difference between using a GPS tracker to follow a car ten miles and surveilling a person for two years.  There is a difference between third party records that contain banking information and ones that contain a person’s location for every hour in the preceding five years.  These differences require a skillful analysis to protect citizen rights while not stepping on the prior rulings of the Court.

The Court ultimately determined a person has a legitimate expectation of privacy in their location and retrieval of comprehensive location data was a search under the Fourth Amendment.  Following Carpenter, law enforcement must obtain a warrant prior to retrieving cell phone location data from a suspect’s provider.  The Court carved out this subsect of records from the “third-party” doctrine relied upon in Smith and Miller.

Ultimately, the Court struggled to deliver coherency in this opinion.  The cleanest route would have involved strict adherence to the prior precedents delivered in Smith and Miller. Their decision to carve out cell phone location records creates a gray area in Katz’s progeny that will permeate through search analyses for decades to come.

The Court’s decision was clearly rooted in their reluctance to allow the government unfettered access to a comprehensive location pool.  If the Fourth Amendment did not provide protections for this information, there is little to restrict the government from subpoenaing and reviewing location data for any person within the United States.  There would be no need to develop probable cause.  No need to present information to a judge prior to executing the plan.  There would be very few checks to prevent Government overreach.

Going forward, it is difficult to predict how the Courts will handle future questions.  There is obviously a growing discomfort with applying 1970’s precedent to the types of information collected in 2022. It is easy to see the differences in available information, but I am not sure where the line is that separates the two.  Maybe location data is its very own subset that receives special treatment.  Or maybe, Smith and Miller will slowly erode as third-party records become more comprehensive and the data collected more intrusive.

In the next post, we will review the Fifth Circuit’s decision in Gratkowski where the Court applies Katz to the review of crypto transactions on a distributed ledger.