Sistok v. Northwestern Telephone Systems, Inc.

No. 14898
IN THE SUPREME COURT OF THE STATE OF MONTANA
1980

VICTOR SISTOK,
Plaintiff and Appellant,
VS .
NORTHWESTERN TELEPHONE SYSTEMS, INC.
Defendant and Respondent.

Appeal from: District Court of the Eleventh Judicial District,
Honorable Robert M. Holter, Judge presiding.
Counsel of Record:
For Appellant:
Hash, Jellison, O'Brien and Bartlett, Kalispell, Montana
James Bartlett argued, Kalispell, Montana
For Respondent:
Murphy, Robinson, Heckathorn & Phillips, Kalispell,
Montana
George Best argued, Kalispell, Montana

Submitted: April 15, 1980
Decided: July 221 1980

Filed: J ~ 2L 1980
3

Clerk
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
This appeal results from a directed verdict in an action
for invasion of privacy brought in the District Court of the
Eleventh Judicial District, in and for the County of Flathead.
Respondent is a telephone company or common communica-

tions carrier serving subscribers in Flathead County. Prior
to July 1975, respondent received several complaints from its

subscribers regarding problems on one of its party lines. The

problems complained of consisted partly of mechanical problems
and partly of personal abuses. The mechanical problems were
primarily crackling background noises on the party line. The
personal abuses were: (1) listening in on conversations; (2)

leaving the phone off the hook for extended periods of time
with a radio playing in the background; (3) crass and harass-
ing comments made during conversations; and (4) obscene
telephone calls. Complaints were received by respondent
throughout 1975. At trial respondent introduced evidence of
five written complaints it had received, and respondent's

personnel testified that other oral complaints were taken.
Several of the subscribers to the party line testified that
the problems with the line were continuous, but the exact dates
of the abuses could not be recalled. The party line provided

telephone service to eight subscribers, one of whom was ap-
pellant, Victor Sistock.

Respondent reacted to the complaints by sending letters
to each of the subscribers on the party line. Two kinds of
letters were sent. The first type urged the subscribers to
follow several rules of etiquette in using the party line.
Subscribers were told, for example, not to listen to other
parties' conversations or pick the phone up during the con-
versations. Respondent maintains that this letter was sent
almost monthly after it had received the first complaints in

July. The second type of letter sent informed the subscribers
that further complaints had been received and that the line
would be monitored by respondent if abusive practices did not
cease immediately. Without being sure as to the exact date,
respondent maintains that this letter was sent only once,

though several of the subscribers could not remember receiving
any letters.
On April 16, 1976, approximately ten months after the
first complaints had been received, respondent attached a re-
cording device to the party line. During its period of opera-

tion, the recorder emitted a "beep" tone at time intervals,
although several of the subscribers could not remember hearing
any sound. The decision to attach the recorder was made by

respondent's division manager. All conversation of phone calls
placed or received were recorded for a period of six days until

April 21, 1976, when the recorder was disconnected. The taped
conversations were immediately erased with a bulk eraser, and
no one ever listened to the tapes.
Appellant discovered the fact that respondent had recorded
conversations on the party line and filed a complaint for in-
vasion of privacy in 1976. In his complaint, appellant sought
general damages in the amount of $5,000 and punitive damages

of $10,000. The prayer was later amended, however, to seek
relief in the amount of $500,000 punitive damages. Trial by
jury began on May 29, 1979. During the trial, the District
Court refused to admit the testimony of appellant's witnesses
relating to the issue of punitive damages. At the closing of

appellant's case-in-chief, the District Court directed a

verdict for respondent. Appellant now contests the granting
of the directed verdict and the refusal to admit testimony re-
lating to punitive damages on this appeal.
The law with respect to directed verdicts is well settled

in the state:
"Upon a motion for a directed verdict by a
party, the evidence introduced by his op-
ponent will be considered in the light most
favorable to opponent. Thereupon, the con-
clusion sought by the moving party must
follow as a matter of law. Parrish v. Witt
(1976), Mont., 555 P.2d 741, 33 St.Rep. 999;
Dieruf v. Gollaher (1971), 156 Mont. 440,
481 P.2d 322; Pickett v. Kyger (1968), 151
Mont. 87, 439 P.2d 57.
"Generally, directed verdicts are not fa-
vored by the courts. LaVelle v. Kenneally
(1974), 165 Mont. 418, 529 P.2d 788. A
cause should never be withdrawn from the
jury unless the conclusions from the facts
advanced by the moving party follows neces-
sarily, as a matter of law, that recovery
can, as here, or cannot be had under any
view which can be reasonably drawn from the
facts which the evidence tends to establish.
In Re Estate of Hall v. Milkovich (1972),
158 Mont. 438, 492 P.2d 1388; Shields v.
Murray (1971), 156 Mont. 493, 481 P.2d 680;
Johnson v. Chicago, M & St. P. Ry. Co.
(1924), 71 Mont. 390, 230 P.2d 52. A cocol-
lary rule is that where reasonable men might
differ as to the conclusions of fact to be
drawn from the evidence, viewed in the light
most favorable to the party against whom the
motion is made, a jury question is presented,
and resolution by way of directed verdict is
improper. Parini v Lanch (1966), 148 Mont.
.
188, 418 P.2d 861." Lawlor v. Flathead
County (1978), 177 Mont. 508, 582 P.2d 751,
754, 35 St.Rep. 884.
The record in this case indicates that appellant's cause
of action was tried on the basis of federal statutes regulating
electronic surveillance and t h ~
interception of wire or oral
communications, codified at sections 2510 through 2520 of
Title 18 of the United States Code and commonly known as Title
I11 of the Omnibus Crime Control and Safe Streets Act. Under
these statutes, it is illegal as a general rule for any person
to intercept any wire or oral communication. For violations
thereof, a civil cause of action is authorized on behalf of
any person whose conversation has been illegally intercepted.
Section 2511 makes it a crime, with certain specified sxcep-
tions, for any person to willfully intercept, endeavor to
intercept, or procure any other person to intercept or en-
deavor to intercept, any wire or oral communication. Exempted
from this crime, however, are certain activities of telephone
companies or common communication carriers:
"It shall not be unlawful under this chap-
ter for an operator of a switchboard, or an
officer, employee, or agent of any communi-
cations common carrier, whose facilities
are used in the transmission of a wire com-
munication, to intercept, disclose, or use
that communication in the normal course of
employment while engaged in any activity
which is necessary incident to the rendi-
tion of his service or to the protection of
the rights or property of the carrier of
such communication: Provided, That said
communication common carriers shall not
utilize service observing or random moni-
toring except for mechanical or service
quality control checks." 18 U.S.C. 2511(2)
(a)(i).
For violations of section 2511, a civil action providing
for the recovery of actual damages, punitive damages, costs
and reasonable attorneys fees is authorized. Section 2520
provides:
"Any person whose wire or oral cormunication
is intercepted, disclosed, or used in viola-
tion of this chapter shall (1) have a civil
cause of action ... and (2) be entitled to
recover from any such person--
" (a) actual damages but not less than li-
quidated damages computed at the rate of $100
a day for each day of violation or $1,000,
whichever is higher;
" (b) punitive damages; and
" (c) a reasonable attorney's fee and other
litigation costs reasonably incurred."
At trial respondent defended against appellant's cause of
action by contending, among other things, that it conducted
monitoring or recording which fell within the statutory ex-

ception to section 2511. Respondent argued, in moving for a
directed verdict, that the evidence showed only that the

telephone company, by recording the conversations, was taking
necessary steps to render service to its subscribers and
protect its property. Appellant contended, however, that
respondent's recording did not fall within section 2511(2)
(a)(i), because the exception was strictly construed and be-
cause the evidence demonstrated that the recording was ex-

cessive. The trial court, however, applied the exception
and concluded, after reviewing appellant's case, that the
type of recording which was conducted by respondent was a
necessary incident to the rendition of services and the pro-

tection of its property. In effect, the trial court ruled that
the recording could not have been conducted less extensively
and that the telephone company could not have employed other
reasonable measures to deal with the abusive practices.

The question confronting us on this appeal, then, is

whether, viewing the evidence in a light most favorable to
appellant, reasonable men might have differed with regard to
the factual conclusions reached by the trial court. Was re-
spondent's recording "reasonably necessary" to protect its
property? All of this assumes, of course, that respondent
could avail itself of the benefits or protection of the
statutory exception. Was section 2511(2) (a)(i) intended to
operate as a defense in proceedings such as this one and allow
the kind of recording that occurred under the circumstances
of this case? To provide a background from which we can view
the evidence and facts of this case and thereby come to grips
with these questions, we turn now to a brief consideration of
the legislative history of section 2511 (2)(a)(i) and the courts'
treatment of cases under the statutory exception.

A legislative history of section 2511(2) (a)(i) indicates
that the "protection of property" exception was passed by Con-
gress in 1968 in recognition of the already existing right of
a telephone company to conduct investigations into wire fraud
by monitoring or interception. The Senate Report to Title I11

states that section 2511 (2)(a)(i) was intended to reflect
"existing law," as exemplified by the case of United States v.
Beckley (D. Ga. 1965), 259 F.Supp. 567. See S. Rep. No. 1097,
90th Cong., 2d Sess. 93 (1968), U.S. Code Cong. & Admin. News
1968 at 2112. In Beckley, two defendants used the services
of a corrupt telephone employee to make long distance calls

without charge so that regular bookkeeping procedures of the
telephone company were bypassed. The telephone company moni-

tored defendants' calls and discovered the scheme to defraud.
The court held that the telephone company could monitor these
conversations to protect its property without violating Fourth
Amendment rights.

Subsequent to the passage of Title 111, in accordance

with this expression of Congressional intent, the applicability
of section 2511 (2)(a)(i) has generally been limited by most
courts to wirefraud cases. Most of these have involved the
fraudulent circumvention of telephone company billing pro-
cedures through the use of such devices as "blue boxes." See,
e.g., United States v. Goldstein (9th Cir. 1976), 532 F.2d
1305, 1311; United States v. Freeman (7th Cir. 1975), 524 F.2d
337, 340, cert. den. 424 U.S. 920, 96 S.Ct. 1126, 47 L.Ed.2d
327 (1976); United States v. Glanzer (9th Cir. 1975), 521 F.2d
11, 12; United States v. Clegg (5th Cir. 1975), 509 F.2d 605,

613. "Blue boxes" emit multi-frequency tones used to activate
long distance lines. The caller uses the device by calling a
toll free number and then generating the required tones to
place the long distance call. As far as the billing system is

concerned, the call is coming from the toll free number. Under
these circumstances, telephone companies have been allowed to
intercept and conduct recording.
Where other contexts have been discussed, such as the

right of a telephone company to use electronic surveillance

devices to investigate the making of obscene telephone calls,
there has been little authority to suggest a broadening or an
expansion of the statutory exception. One court has indicated,
in relation to other federal statutes, a refusal to give

telephone companies protection in these circumstances. Hodge
v. Mountain States Tel. & Tel. Co. (9th Cir. 1977), 555 F.2d
254. In that case, Judge Merril, agreeing with Judge Renfrew,

stated in a concurring and dissenting opinion :
"When S605 was amended in 1968, Congress pre-
served (in 18 U.S.C. S2511(2) (a)(i)) the ju-
dicially created exception for telephone
company investigations of fraud against its
property. United States v. Clegg, 509 F.2d
605, 613 (5th Cir. 1975). Congress did not
further encourage telephone companies to con-
duct self-authorized criminal investigations.
To expand this limited exception to 8605 to
include investigations of misuse of company
facilities by obscene telephone calls would
invite including investigations of misuse by
extortion, threat or other crimes directed
against a telephone subscriber. The statu-
tory exception should not, in my view, be
broadened to include areas other than those
in which the company is acting in self-
defense .. ." Hodge, 555 F.2d at 269.
In the same case, however, the opposite view was also ex-
pressed..Judge Hufstedler, speaking for the minority and be-
lieving that telephone companies should have the right to
protect their customers against obscene telephone calls,
stated:
 ". .
. While making obscene telephone calls
may be a crime, it also threatens the quality
of the telephone company's delivery of ser-
vice (i,e., a victim may, as a result of re-
ceiving such calls, refuse to pick up his
telephone or may discontinue his service al-
together). Thus, in contrast to those
situations where the use of the telephone
merely supplies the jurisdictional component
for the application of a federal criminal
statute, a telephone company has an interest
to protect when a telephone is used to make
obscene telephone calls . . ." Hodge,
555 F.2d at 265, n. 5.
The extent to which courts have allowed telephone companies
in wirefraud cases to monitor or record conversations of their
subscribers has varied. See United States v. Cornfeld (9th

Cir. 1977), 563 F.2d 967; United States v. Clegg, supra; United
States v. Freeman, supra; Bubis v. United States (9th Cir.
1967), 384 F.2d 643. The general rule for monitoring or inter-
cepting has been that the authority to monitor or intercept
is limited and that a telephone company may only record or
monitor to the extent "reasonably necessary" to protect its
property from fraud. Reasonable methods include the use of a

frequzncy recording device, such as a pen register, and the

limited use of a tape recorder to identify the offending par-
ties. United States v. Cornfeld, 563 F.2d at 970.
A pen register is a device which records only the numbers
dialed from a particular telephone. It does not disclose the

contents of any conversation, nor does it indicate whether
any calls were completed. A pen register is permissible be-

cause it is not capable of "interception" or "aural acquisition"
within the meaning of Title 111. See 18 U.S.C. 2510(4);
United States v. New York Tel. Co. (1977), 434 U.S. 159, 98

S.Ct. 364, 54 L.Ed.2d 376; Michigan Bell Telephone Co. v.
United States (6th Cir. 1977), 565 F.2d 385, 388.
In regard to tape recorders, courts have approved of in-
stances of recording under the exception where only the begin-
ning salutations were recorded to identify the parties, United
States v. Clegg, supra, and where the first two minutes of
conversations were recorded. United States v. Cornfeld, supra;
United States v Freeman, supra.
. Where, however, a telephone

monitored and recorded the entire contents of all calls placed
and received by a subscriber for a period of three months, it

has been held that such monitoring and recording was unrea-

sonable and unnecessary under the "protection of property"
exception, violating the subscriber's right of privacy. Bubis

v. United States, supra.
It is important to keep in mind here that several of the

above holdings and statements have been made in the context of
criminal prosecutions for wire fraud, where monitoring or re-
cording was conducted pursuant to court order. In this regard,
section 18 U.S.C. 2518(5) imposes a "minimization requirement"
for such monitoring or recording, which may or may not be
directly applicable to purely civil acts such as the instant
case.
This case, of course, does not involve any element of
wire fraud. Rather, it concerns the alleged misuse of tele-
phone company facilities by means of harassing, annoying and
obscene telephone calls. Assuming arguendo that the telephone
company could avail itself of the protection of the statutory
exception, we find that the trial court erred in directing a

verdict for respondent.
Respondent here conducted recording on the party line for
a period of six days. During this time, all phone calls
placed and received were intercepted and recorded. Considering
the nature and extent of this recording, and viewing it against
prior cases in which courts have set forth the limits of per-
missible recording in analogous situations, we find that
reasonable men could have drawn different conclusions as to

whether the recording was necessary to the protection of
property and the rendition of services. While some may have

found the recording reasonably necessary, others may have
found it intrusive. Different conclusions could have been
gathered from the evidence, and the factual conclusion ad-
vanced by respondent and reached by the trial court did not
follow as a matter of law. Therefore, the District Court
erred in directing the verdict for respondent, and we find it
necessary to remand this case for a new trial.

On remand we leave several matters for the consideration
of the parties and the District Court. These matters include
the questions of whether respondent may avail itself of the

protection of the statutory exception, and whether, for that
matter, appellant may bring a section 2520 action in a state
court. In an annotation on the civil action under section
2520, it is stated:
". ..Relatively few cases have been re-
ported in which the statute is construed or
applied, and many questions about it are yet
unanswered. For example, while it has been
held that jurisdiction over a 52520 claim
may be had in the federal courts under 28
U.S.C. 1343(4) (84 infra), no federal case
has been found in which it has been deter-
mined whether a S2520 action may be main-
tained in state courts (see, however, SR No.
1097, 90th Cong 2d Sess (1968) 1968 USCCAN
p 2112, at 2196, wherein it is stated that
the scope of the [§2520] remedy is intended
to be comprehensive and exclusive, but there
is no intent to preempt parallel State
law') . . ." Annot. 25 A.L.R.Fed. 759, 761
(1975).
In this connection, we note that appellant may have an ac-
tion at common law for the invasion of his privacy. See Annot.,

11 A.L.R.3d 1296 (1967); Carr, The Law of Electronic Surveil-
lance, §8.04(3) at 496. Several jurisdictions have extended
the common law tort to the field of telecommunications.
Hamberger v. Eastman (1964), 106 N.H. 107, 206 A.2d 239;
LaCrone v Ohio Bell Tel. Co. (1961), 114 Ohio App. 299, 182
.

N.E.2d 15; Rhodes v. Graham (1931), 238 Ky. 225, 37 S.W.2d 46;
Billings v. Atkinson (Tex. 1973), 489 S.W.2d 858. While some
courts have indicated that a cause of this type would be
denied to party line subscribers such as appellant, LaCrone,
182 N.E.2d at 16, it has been stated in a related context
under federal statutes that although a party line user's pri-

vacy is obviously vulnerable, it does not necessarily follow
that telephone conversations are completely unprotected. Lee
v. State of Florida (1967), 392 U.S. 378, 88 S.Ct. 2096, 20
L.Ed.2d 1166. The elements of the cause of action are a
". . . wrongful intrusion inta one's private activities in
such a manner as to outrage or cause mental suffering, shame

or humiliation to a person of ordinary sensibilities."
LaCrone, 182 N.E.2d at 17; Housch v. Peth (1956), 165 Ohio
St. 35, 133 N.E.2d 340, 341.
Finally, in response to appellant's second issue, we note
that punitive damages under 18 U.S.C. 2520 are recoverable

only where malice is shown. Halperin v. Kissinger (D. D.C.
1977), 434 F.Supp. 1193, 1195; Campiti v. Walonis (D. Mass.
1979), 467 F.Supp. 464, 466; Jacobson v. Rose (9th Cir. 1978),
592 F.2d 515, 520. The transcript in this case indicates that
respondent's recording was conducted out of a good faith ef-

fort to solve the abuses of the party line after many com-
plaints had been received. Recordings were made only after
letters of notice had been sent regarding these problems and
the possibility of attaching a tape recorder to the party
line. No evidence of malice was present. Consequently, we
find that the trial court properly refused evidence relating

to punitive damages under these circumstances. If appellant
seeks to recover punitive damages on remand under a 82520
theory, evidence of malice need be shown.

Remanded to the District Court for further proceedings
consistent with this opinion.

/ I Justice

We concur:

Chief Justice
,

-
'J ' L /i / <
. ( L l

Justices
Mr. Justice John C. Sheehy concurring in part and dissenting
in part:

I concur with the foregoing opinion except I dissent

to that portion determining that punitive damages are not

recoverable here.
I believe that is a matter of fact to be decided on

retrial and that the determination by this Court on an incom-
plete record and before retrial, is premature.
Under the federal cases of Halperin v. Kissinger (D.D.C.
1977), 434 F.Supp. 1193, 1195; and Campiti v. Walonis (D. Mass.
1979), 467 F.Supp. 464, 466, it need only be shown to establish
malice under 18 U.S.C. 2520, that the defendant acted "wanton-
ly, reckless, or maliciously." This includes implied malice
as well as express malice. We could leave it to the jury to

determine whether or not there was express or implied malice
in this case, if the plaintiff otherwise prevails.