California Court of Appeals Takes Bite Out Of Apple's Attempts To Subpoena E-mails

Case: O'Grady v. Superior Court (Apple Computer, Inc. Real Party in Interest), (Cal. Ct. App. - 6th District Case No. H028579 - decided 5/26/06)

The One Sentence Summary: The California Court of Appeals ruled that third-party subpoenas directed to publishers of web sites carrying news about Apple products and companies that hosted their email accounts which commanded the production of the contents of e-mails should be quashed because: (1) ordering production of the e-mails would compel the email providers to violate the federal Stored Communications Act; and (2) the web sites' communications with their sources were protected by California's reporter's shield laws.


What They Were Fighting About: In November 2004 two online web sites devoted to news and information about Apple Computers, "PowerPage" and "Apple Insider", published several articles concerning a rumored new Apple product. The articles included unreleased product information concerning the target price and target introduction date, and the web sites published several technical drawings attributed to a "Bob Borris," and a "Paul Scates" whose email address was provided in the article.

On December 13, 2004 Apple filed suit against several "Doe" defendants, whom it described as unidentified persons or entities, alleging that the defendants had misappropriated and disseminated confidential information about the unreleased products. Apple also filed ex parte applications for commissions and orders empowering it to serve subpoenas on several companies and entities, including Powerpage.org and Appleinsider.com, and any Internet service providers identified in the information and testimony produced by those entities. The stated basis for the application was that the true identities of the defendants in the action could not be ascertained without the subpoenas.

The trial court granted the application for discovery. The publishers moved for a protective order to prevent any such discovery, and the trial court denied the motion on the ground that the publishers had involved themselves in the unlawful misappropriation of a trade secret. The publishers moved for a writ of mandate or prohibition from the Court of Appeal to compel the trial court to set aside its denial of the motion for a protective order. The Court of Appeal issued a writ of mandate directing the trial court to set aside its order denying the motion for a protective order, and to enter a new order granting the motion.

Court of Appeals Holdings:

• The subpoena to the email service providers could not be enforced under the plain terms of the federal Stored Communications Act, 18 U.S.C. Sections 2701-2712 ("the SCA"). Compelling compliance with the subpoenas would force the e-mail providers to violate the SCA, which would offend the principle of federal supremacy, and thus the subpoenas should have been quashed. The SCA declares that, subject to certain conditions and exceptions, "a person or entity providing an electronic communication service to the public shall not knowingly divulge to any person or entity the contents of a communication while in electronic storage by that service," and "a person or entity providing remote computing service to the public shall not knowingly divulge to any person or entity the contents of any communication which is carried or maintained on that service . . . ." The Court of Appeals noted that responding to a civil subpoena was not among the enumerated exceptions in the SCA.
• The Court of Appeals refused to create an implied exception to the SCA for civil discovery - holding that Congress demonstrated that it knew quite well how to make exceptions, chose not to make one for civil discovery, and the court should not create such an implied exception. The Court noted that it would be far from irrational for Congress to conclude that one seeking disclosure of the contents of email, like one seeking old-fashioned written correspondence, should direct his or her effort to the parties to the communication and not to a third party who served only as a medium and neutral repository for the message.
• Any subpoenas seeking unpublished information from the publishers would be unenforceable through contempt proceedings in light of the California reporter's shield (Cal. Const. Art. I, Section 2, subd (b) and California Evidence Code Section 1070. Article 1, Section 2, subdivision (b) of the California Constitution provides, "A publisher, editor, reporter, or other person connected with or employed upon a newspaper, magazine, or other periodical publication . . . shall not be adjudged in contempt . . . for refusing to disclose the source of any information procured while so connected or employed for publication in a newspaper, magazine or other periodical publication, or for refusing to disclose any unpublished information obtained or prepared in gathering, receiving or processing of information for communication to the public." The Court of Appeal held that the publishers were engaged in the function of gathering news, like any newspaper or magazine. "They operated enterprises whose raison d'etre was the dissemination of a particular kind of information to an interested readership." The operators of the web sites were "publishers" for purposes of the California Constitution, and the web sites were "newspapers, magazines, or other periodical publications" within the meaning of the California Constitution. The shield law applies to media that are not paper-based as well as print publications. The web-sites were highly analogous to printed publications, even though they were not published at regular time intervals, but rather, added new stories as they developed.
• Discovery of the sources was also barred on the record by the conditional constitutional privilege against compulsory disclosure of confidential sources enumerated by the California Supreme Court in Mitchell v. Superior Court 37 Cal. 3d 268 (1984). In light of the Court of Appeals' conclusion that it could see "no sustainable basis to distinguish petitioners from the reporters, editors, and publishers who provide news to the public through traditional print and broadcast media," the web-publishers fell within the conditional privilege enunciated in the Mitchell case. That case requires the court to weigh (1) the nature of the litigation and whether the reporter is a party; (2) the relevance of the information sought to plaintiff's cause of action; (3) the extent to which the party seeking disclosure of confidential sources has exhausted all alternative sources of obtaining the needed information; (4) the importance of protecting confidentiality in the case at hand; and (5) whether the plaintiff had made a prima facie case that the challenged statements were false (or in the case of trade secret theft, whether it appears likely that the journalist had indeed committed a tort against the plaintiff). The Court of Appeals weighed these factors at length and concluded that none of the factors favoring disclosure possessed sufficient weight on the record to over-balance the countervailing factors, particularly the inadequacy of Apple's showing that it exhausted alternative avenues of investigation.