United States Court of Appeals
For the First Circuit
No. 93-1366
GEORGE C. WILLIAMS, ET AL.,
Plaintiffs, Appellants,
v.
RICHARD E. POULOS, ET AL.,
Defendants, Appellees.
No. 93-1367
GEORGE C. WILLIAMS, ET AL.,
Plaintiffs, Appellees,
v.
RICHARD E. POULOS, ET AL.,
Defendants, Appellees,
RALPH A. DYER
Intervenor, Appellant.
No. 93-1368
GEORGE C. WILLIAMS, ET AL.,
Plaintiffs, Appellees,
v.
RICHARD E. POULOS, ET AL.,
Defendants, Appellees,
RODNEY P. RODRIGUE
Defendants, Appellants.
No. 93-1680
GEORGE C. WILLIAMS, ET AL.,
Plaintiffs, Appellees,
v.
RICHARD E. POULOS, ET AL.,
Defendants, Appellants.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
Before
Selya and Stahl, Circuit Judges,
and Fuste,* District Judge.
Allen S. Rugg, with whom Ronald R. Massumi, Kutak, Rock &
Campbell, John S. Whitman, Richardson & Troubh, were on brief for
plaintiffs-appellants George C. Williams, Allied Capital Corporation,
Allied Investment Corporation, Allied Venture Partnership, Allied
Capital Corporation II, David P. Parker, David Gladstone, Brooks H.
Browne, Frederick L. Russell, Jr., and Thomas R. Salley, E. Stephen
Murray, with whom Murray, Plumb & Murray were on brief for intervenor-
appellant Ralph A. Dyer.
John A. McArdle, III, with whom Daniel G. Lilley and Daniel G.
Lilley Law Offices, P.A., were on brief for defendants/appellees/
cross-appellants Rodney P. Rodrique, Wayne E. Bowers, Sr. and John
Robichaud.
Peter J. DeTroy, III, with whom Norman, Hanson & DeTroy were on
brief for defendants/appellees/cross-appellants Richard E. Poulos,
John S. Campbell and Poulos & Campbell, P.A.
December 14, 1993
*Of the District of Puerto Rico, sitting by designation.
STAHL, Circuit Judge. Following a six-day civil
bench trial, the district court ruled that the former
principal owners of Consolidated Auto Recyclers, Inc.
("CAR"), defendants Wayne Bowers, Rodney Rodrigue, and John
Robichaud (hereinafter "the CAR defendants"), violated the
federal and Maine anti-wiretap statutes when they intercepted
and recorded telephone calls made by and to plaintiffs, who
were employees or former employees of Allied Capital
Corporation ("Allied") and certain of its subsidiaries and
affiliates.1 See 18 U.S.C. 2511(1)(a) and 15 M.R.S.A.
710(1).2 The court also held that counsel retained by the
CAR defendants, defendants Richard E. Poulos and the law firm
of Poulos, Campbell & Zendzian, P.A. (hereinafter "the Poulos
defendants"), violated 18 U.S.C. 2511(1)(c) and (d) and 15
M.R.S.A. 710(3)(A) and (B) when they disclosed and used the
1. For simplicity's sake, the term "Allied" should be
construed as encompassing all corporate and individual
plaintiffs, including intervenor Ralph A. Dyer.
2. 18 U.S.C. 2511(1)(a) is a provision of the federal
anti-wiretap statute, found at Title III of the Omnibus Crime
Control and Safe Streets Act of 1968, 18 U.S.C. 2510-2521.
In conjunction with other statutory provisions, it creates
criminal and civil liability for any person who
"intentionally intercepts, endeavors to intercept, or
procures any other person to intercept or endeavor to
intercept, any wire, oral, or electronic communication."
15 M.R.S.A. 710(1) is a provision of the Maine anti-
wiretap statute, found at 15 M.R.S.A. 709-713. In
conjunction with other statutory provisions, it creates
criminal and civil liability for any person who
"intentionally or knowingly intercepts, attempts to intercept
or procures any other person to intercept or attempt to
intercept, any wire or oral communication."
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recordings of the telephone calls at issue with the requisite
mens rea.3 As a result, the court enjoined all defendants
"from further using and disclosing information contained in
the subject interceptions except to obtain rulings regarding
3. 18 U.S.C. 2511(c) and (d), in conjunction with other
statutory provisions, create criminal and civil liability for
any person who
(c) intentionally discloses, or endeavors to
disclose, to any other person the contents of any
wire, oral, or electronic communication, knowing or
having reason to know that the information was
obtained through the interception of a wire, oral
or electronic communication in violation of this
subsection; or
(d) intentionally uses, or endeavors to use, the
contents of any wire, oral, or electronic
communication, knowing or having reason to know
that the information was obtained through the
interception of a wire, oral, or electronic
communication in violation of this subsection . . .
.
15 M.R.S.A. 710(3)(A) and (B), in conjunction with
other statutory provisions, create criminal and civil
liability for any person who
A. Intentionally or knowingly discloses to any
person the contents of any wire communication,
knowing that the information was obtained through
interception; or
B. Intentionally or knowingly uses or attempts to
use the contents of any wire or oral communication,
knowing that the information was obtained through
interception.
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4
admissibility in [an] underlying suit [brought by the CAR
defendants against plaintiffs]."4 See 18 U.S.C. 2520.5
Each of the three sides to this controversy has
appealed from various rulings made by the district court.
Both the CAR defendants and the Poulos defendants challenge
sundry factual findings and legal judgments, arguing
essentially that their respective actions did not run afoul
of Title III and the Maine anti-wiretap statute. Plaintiffs'
primary claim is that the court's injunction does not
sufficiently remedy the harm they have suffered and are
continuing to suffer. After carefully reviewing the record
and the parties' arguments, we affirm the judgment below.
4. In the underlying suit, Bowers v. Allied Capital Corp.,
Civ. No. 91-0021-B (D. Me. filed January 1991) (Brody, J.)
("Bowers"), which was stayed pending resolution of the
instant case, the CAR defendants assert causes of action
under the Racketeer Influenced and Corrupt Organizations Act
("RICO"), 18 U.S.C. 1961-68, the Securities Exchange Act
of 1934, 15 U.S.C. 78a-78kk, and a host of common law
theories. Essentially, they contend that Allied entities and
personnel brought about the demise of CAR through certain
acts primarily committed in the summer of 1990. The
particulars of the relationship between CAR and the Allied
entities and personnel will be discussed more fully infra.
5. Inter alia, 18 U.S.C. 2520 authorizes persons
victimized by violations of 18 U.S.C. 2511(1)(a),(c), and
(d) to recover, by means of a civil action, (1) appropriate
equitable or declaratory relief; (2) actual or statutory
damages; (3) punitive damages; and (4) litigation costs and a
reasonable attorney's fee.
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5
I.
BACKGROUND
The following detailed recitation is derived from
the factual findings made by the district court in
conjunction with Allied's motion for preliminary injunctive
relief, see Williams v. Poulos, 801 F. Supp. 867, 868-72 (D.
Me. 1992) ("Poulos I"), and after the conclusion of the bench
trial. See Williams v. Poulos, Civ. No. 92-0069-B, slip op.
at 3-10 (D. Me. February 4, 1993) ("Poulos II").6
This case is but one in a series of civil lawsuits
and bankruptcy proceedings which can be traced to the
collapse of CAR. CAR was founded in 1988 in order to
dismantle automobiles and resell used parts. By May 1990,
CAR employed approximately one hundred and forty people and
operated throughout New England and in the Atlantic provinces
of Canada. Twenty people worked in CAR's East Vassalboro,
Maine, headquarters, including Bowers, Rodrigue, and
Robichaud, the CAR defendants. These three owned 95% of
CAR's stock and were members of CAR's Board of Directors
("the Board"). In addition, Bowers was CAR's Chief Executive
Officer ("CEO") and Treasurer, while Rodrigue served as CAR's
President.
6. The order and memorandum of opinion on the bench trial
incorporates by reference the factual findings set forth in
the order and memorandum of opinion on the motion for a
preliminary injunction. See Poulos II, slip op. at 3.
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6
To finance its early growth and operations, CAR
developed a banking relationship with Casco Northern Bank.
In February 1990, Casco Northern refused to increase CAR's
lines of credit. As a result, CAR found itself in a serious
financial bind because it had already spent the additional
money it expected to receive. Accordingly, CAR turned to
Allied, a venture capital firm which had previously invested
in it. Allied responded with a large infusion of capital
that raised its total investment in CAR to approximately
$4,500,000.
Despite this additional funding, CAR was unable to
resolve its financial difficulties. On May 29, 1990, Casco
Northern declared CAR in default on its obligations. Two
days later, Allied followed suit. On June 28, 1990, in an
attempt to resolve the crisis, the CAR defendants entered
into an agreement with Allied which came to be known as the
"Midnight Agreement." Under its terms, Ralph A. Dyer was
made CAR's CEO and Chairman of the Board, three
representatives of Allied, plaintiffs George C. Williams,
David Gladstone, and Frederick Russell, Jr., became members
of the Board, and David Parker became an officer. The
Agreement also provided that the CAR defendants would remain
on the Board, that Bowers would retain his position as
Treasurer, and that Rodrigue would continue as President.
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7
Meanwhile, in May 1990, the CAR defendants had
commissioned Michael Leighton, who owned Probe Investigating
Service, Inc. ("Probe"), to provide a system for
electronically monitoring employee phone calls.7 The CAR
defendants felt that a surveillance system was needed (1) to
reduce CAR's telephone bills, and (2) decrease employee
theft. At the time they installed the system, the CAR
defendants apparently received impromptu advice from Attorney
Nicholas Lanzilotta that "monitoring would not be illegal if
notice was first given to the monitored employees."
After examining CAR's telephone system, Leighton
concluded that he lacked the skill and expertise to create an
appropriate monitoring system. He therefore sought
assistance from Jonathan Broome. Broome's principal business
was repairing consumer electronics; he was not an authorized
telephone system technician. Although Broome considered the
project to be unusual, Leighton assured him of its legality.
On or about June 17, 1990, Broome, working after
hours along with CAR security officer David Fisher, installed
a custom-designed monitoring system8 in CAR's East
7. Leighton and Probe were also named as defendants in this
action. At the close of trial, the district court granted
their oral motions for judgment as a matter of law.
Plaintiffs have not appealed these rulings.
8. Apparently, there was no commercially available system
which could perform the intercepting and recording functions
desired by the CAR defendants.
-8-
8
Vassalboro headquarters. In its findings of fact, the
district court described the system as follows:
The system . . . consisted of small
alligator clips attached to a microphone
cable at one end and a "punch-down" at
the other. The wires to all the
extension lines in CAR's offices were
assembled on the punch-down. Calls could
be intercepted by attaching the alligator
clips and microphone wire to a designated
extension line on the punch-down. The
system could only monitor one extension
at a time.
The monitoring system designed by
Broome also involved an interface
connecting the microphone cable to a VCR
and a video camera. The VCR allowed the
system to record calls for up to eight
hours. The video camera recorded the
view meter on the VCR, allowing a person
to fast forward the VCR tape until the
meter indicated the presence of audio
information. The VCR, video camera and
interface were mounted together on a
plywood board and set up in an unused
bathroom next to the area containing the
punch-down. Connecting wires were run
through and over a suspended ceiling.
Poulos II, slip op. at 4-5.
At some point in June 1990, Rodrigue informed the
managers at CAR that all telephone calls at CAR's offices
would be subject to random monitoring and recording. He also
instructed the managers to inform their subordinates of the
new monitoring policy. At about the same time, Rodrigue
directed employees to record long distance phone calls on
provided telephone logs. The employees were told that the
logging system was to be used in conjunction with the
monitoring system to reduce costs. On June 29, 1990,
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9
Rodrigue told the new CEO, Dyer, that CAR had a system in
place to deter employee phone abuse by randomly monitoring
employee phone calls.
David Fisher learned how to operate the monitoring
system. At first, he was instructed by the CAR defendants to
monitor the extension lines randomly. After a short time,
however, the CAR defendants told him which lines to
intercept. Fisher was further instructed to deliver the
tapes of recorded conversations to Wayne Bowers each day.
Bowers then made cassette tapes of those telephone
conversations he wished to save.
On June 21, 1990, Fisher was instructed to monitor
the telephone line of CAR Chief Financial Officer Richard
Lee, who had been hired on Allied's recommendation.
Apparently, Rodrigue and Bowers doubted Lee's loyalty to CAR.
A few weeks later, however, the monitoring system was
attached to the phone line of Jim Starr, an accountant from
an outside firm who had been assigned to audit CAR. The CAR
defendants suspected that Starr was misusing the telephone
system.
During this same general time period, Dyer's
relationship with the CAR defendants, which had been strained
from the beginning, was rapidly deteriorating. By July 10,
1990, Rodrigue and Robichaud were openly feuding with him.
On July 12, 1990, Dyer fired Rodrigue and Robichaud. About
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10
a week after the firing, Dyer obtained a temporary
restraining order barring Rodrigue and Robichaud from the CAR
premises and prohibiting them from conducting any business on
the company's behalf. Meanwhile, on July 17 or 18, 1990,
Dyer began occupying Starr's office and using Starr's
telephone line. Between July 18, 1990, and July 25, 1990, a
number of Dyer's telephone calls were intercepted and
recorded. The CAR defendants admit that, by July 19, 1990,
they were specifically targeting Dyer's conversations.9
On July 21, 1990, the CAR defendants met with
attorneys Richard E. Poulos, John S. Campbell, and Paul F.
Zendzian, the partners of Poulos, Campbell & Zendzian, P.A.,
to discuss possible legal representation in matters involving
CAR, Allied, and Dyer.10 At that meeting, the existence of
a tape containing recorded telephone conversations between
Dyer and Allied employees and representatives was disclosed
to the Poulos defendants. The Poulos defendants made no
inquiry into either how the tape was obtained or whether
9. Although not mentioned in the district court's findings
of fact, the record reflects that telephone conversations
involving Brooks Browne, an Allied employee working at CAR in
late July 1990, also were intercepted and recorded. These
conversations took place while Browne was using Dyer's
telephone.
10. Zendzian was not named as a defendant in this action.
Campbell, who was a defendant below, was adjudged by the
trial court not to have violated either Title III or the
Maine anti-wiretap statute. Plaintiffs have not appealed
from this ruling.
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11
there was employee notice or consent. They did, however,
advise the CAR defendants to boycott a Board meeting that was
scheduled for July 23, 1990. That meeting, which was held
telephonically so that the out-of-town Allied employees could
participate, was taped by the CAR defendants.
All monitoring and taping of telephone
conversations at CAR's headquarters was discontinued on July
25, 1990. On that same date, audio cassettes of some of the
conversations that had been taped were delivered to the
Poulos defendants, who soon thereafter agreed to represent
the CAR defendants in the Bowers lawsuit. See supra note 4.
Over the following six weeks, paralegals from the Poulos firm
prepared transcripts of the tapes.
On July 27, 1990, pursuant to a certificate filed
by Dyer with the United States Bankruptcy Court, a Chapter 11
bankruptcy proceeding was initiated on behalf of CAR.
Anthony Swenson was appointed Chapter 11 trustee for CAR on
August 10, 1990. On August 14, 1990, Swenson fired Dyer and
rehired Bowers, Rodrigue, and Robichaud. Subsequently, the
bankruptcy proceeding was converted to Chapter 7.
In early August 1990, Poulos asked Stuart W.
Tisdale, an associate attorney in his office, to prepare a
memorandum concerning the legality of intercepting wire
communications. In discussing the research assignment with
Tisdale, Poulos stated that Dyer knew about the taping in
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question. After reading Tisdale's memorandum, Poulos and
Campbell were satisfied that at least some of the information
from the tapes might be admissible as evidence or would be
otherwise useful in the case against Allied. In the district
court's view, however, they did not "follow through on their
research on the issue of consent and the legality of the
interceptions." Poulos II, slip op. at 8. Nor did they
"make an effort to determine directly whether Dyer and the
other Allied employees whose conversations were intercepted
knew of or consented to the monitoring." Id. Finally, the
Poulos defendants "did not consult with bar counsel or advise
any court of the existence and use of the information derived
from the telephone conversations." Id.
On September 3 and 4, 1990, Poulos read the
transcripts of most of the recorded conversations that had
been preserved. On October 31, 1990, he disclosed contents
of the tapes to Daniel Amory and David Crocker, counsel to
the CAR Chapter 11 trustee. In so doing, Poulos told Amory
and Crocker that the tapes he possessed might have been
criminally obtained. He also asked them to keep the
existence and contents of the tapes strictly confidential.
In November and December of 1990, Poulos again reviewed the
tapes.
In September, October, and early November of 1990,
the Poulos defendants obtained a large number of documents
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13
previously delivered by Allied to CAR's Chapter 11 trustee.
The documents were produced without any involvement of the
Poulos defendants and without any connection to the existence
of the taped telephone conversations. These documents
included notes, memoranda, and other written records of
telephone conversations that had been taped on July 18, 19,
20, and 23, 1990.
In January 1991, the CAR defendants filed the
Bowers lawsuit, seeking $63,000,000 in damages from Allied,
Dyer, and Leo Madden, a business associate of Dyer's. After
the complaint was filed, all discovery was stayed until
December 5, 1991. During January 1992, shortly after the
discovery stay was lifted, Poulos took the depositions of
Williams, Parker, Dyer, and Madden. Poulos used both the
discovery documents pertaining to the taped conversations and
the tapes of the conversations themselves in preparing for
the aforementioned depositions. Following these depositions,
Poulos revealed the existence of the tapes to counsel for
Madden and Dyer. In so doing, he (1) told counsel that the
tapes proved that Madden and Dyer had lied during their
depositions, and (2) offered to settle with them. No
settlement was reached between the parties, and the present
lawsuit was filed by Allied on April 17, 1992.
II.
STANDARD OF REVIEW
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14
Insofar as the parties are challenging
determinations made by the district court prior to and in
conjunction with the bench trial, our standard of review is
familiar. Claimed errors of law are, of course, reviewed de
novo. E.g., Dedham Water Co., Inc. v. Cumberland Farms
Dairy, Inc., 972 F.2d 453, 457 (1st Cir. 1992); LoVuolo v.
Gunning, 925 F.2d 22, 25 (1st Cir. 1991). Findings of fact,
however, will not be set aside unless they are demonstrated
to be clearly erroneous. Fed. R. Civ. P. 52(a); Dedham
Water, 972 F.2d at 457. In other words, we will give such
findings effect unless, after carefully reading the record
and according due deference to the trial court's superior
ability to judge credibility, we form "`a strong, unyielding
belief that a mistake has been made.'" Dedham Water, 972
F.2d at 457 (quoting Cumpiano v. Banco Santander Puerto Rico,
902 F.2d 148, 152 (1st Cir. 1990)). As a result, where there
are two permissible views of the evidence, the interpretation
assigned by the lower court must be adopted. Rodriguez-
Morales v. Veterans Admin., 931 F.2d 980, 982 (1st Cir. 1991)
(citing Anderson v. Bessemer City, 470 U.S. 564, 574 (1985)).
The clearly erroneous standard also ordinarily
applies when we review a trial court's resolution of mixed
questions of law and fact. E.g., LoVuolo, 925 F.2d at 25;
Henry v. Connolly, 910 F.2d 1000, 1003 (1st Cir. 1990). In
such situations, however, we are obligated to determine
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whether the court's resolution was infected by legal error.
See LoVuolo, 925 F.2d at 25. And, "`if a trial court bases
its findings upon a mistaken impression of applicable legal
principles, the reviewing court is not bound by the clearly
erroneous standard.'" Id. (quoting Inwood Labs., Inc. v.
Ives Labs., Inc., 456 U.S. 844, 855 n.15 (1982)).11
With regard to Allied's attack upon the nature and
extent of the injunction issued by the district court, our
framework for review is equally well-established. Just as a
trial court's decision on whether to exercise its equitable
powers is committed to its sound discretion, Taino Lines,
Inc. v. M/V Constance Pan Atlantic, 982 F.2d 20, 24 (1st Cir.
1992), so too is its choice of equitable remedies, Rosario-
Torres v. Hernandez-Colon, 889 F.2d 314, 323 (1st Cir. 1989)
(en banc). Thus, our role is to review only for an abuse of
that discretion. Taino, 982 F.2d at 24. Underlying this
deferential standard is a recognition that, in exercising its
equitable powers, the district court "`has had first-hand
11. In a recent case, we explained our review standard for
mixed questions in a slightly different manner: "The
standard of review applicable to mixed questions usually
depends upon where they fall along [a] degree-of-deference
continuum: the more fact dominated the question, the more
likely it is that the trier's resolution will be accepted
unless shown to be clearly erroneous." In re Extradition of
Howard, 996 F.2d 1320, 1328 (1st Cir. 1993) (reviewing
findings made at extradition hearing) (citing United States
v. Mariano, 983 F.2d 1150, 1158-59 (1st Cir. 1993); Roland M.
v. Concord Sch. Comm., 910 F.2d 983, 990-91 (1st Cir. 1990),
cert. denied, 111 S. Ct. 1122 (1991)).
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exposure to the litigants and the evidence and is in a
considerably better position to bring the scales into balance
than an appellate tribunal.'" Hiraldo-Cancel v. Aponte, 925
F.2d 10, 13 (1st Cir.) (quoting Rosario-Torres, 889 F.2d at
323) (ellipses omitted)), cert. denied, 112 S. Ct. 637
(1991). Nonetheless, we will reverse if the court committed
a clear error of law. See In re Boston and Maine Corp., 719
F.2d 493, 495 (1st Cir. 1983), cert. denied, 466 U.S. 938
(1984); see also Feinstein v. Space Ventures, Inc., 989 F.2d
49, 51 (1st Cir. 1993) (reviewing preliminary injunction).
It is against this backdrop that we evaluate the
parties' claims.
III.
DISCUSSION
On appeal, the CAR and Poulos defendants together
contend (1) that the court erred in rejecting their arguments
that two statutory exceptions -- the "business extension" and
"consent" exceptions -- shielded them from liability; and (2)
that the court erroneously refused to admit certain expert
testimony. In addition, the Poulos defendants alone assert
(1) that the court erred in ruling that plaintiffs' claims
for equitable relief against them were not moot; (2) that the
court erred in determining that Poulos had acted with
sufficient knowledge to have violated Title III and the Maine
anti-wiretap statute; (3) that the court erred in rejecting
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their claim that the statutory "good faith" defense relieved
them of liability; and (4) that the court erred in denying
them a jury trial on these latter two issues.
Plaintiffs' complaints essentially are (1) that the
court made mistakes of law in fashioning equitable relief for
the violations it found; (2) that the court erred in denying
their Fed. R. Civ. P. 59(e) motion to amend judgment; (3)
that the court erred in ruling that statutory damages under
18 U.S.C. 2520 are legal, and not equitable, in nature; and
(4) that the court erred in holding that the CAR defendants
were not liable for use and disclosure violations under 18
U.S.C. 2511(1)(c) and (d).
We discuss each of these arguments in turn.
A. Defendants' Arguments
1. Statutory Exceptions
As both the CAR and Poulos defendants point out,
not all aural acquisitions of wire, oral, and electronic
communications are illegal and give rise to liability under
Title III and the Maine act. In fact, these statutes
specifically delineate certain acquisitions that do not give
rise to such liability. Defendants argue that the district
court erred in ruling that two of these defined exceptions --
the business extension and consent exceptions -- did not
apply. Our review, however, persuades us that the court's
rulings are supported by the record.
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a. The Business Extension Exception12
a. The Business Extension Exception12
The business extension exception, often called the
"extension telephone" exception, see, e.g., Campiti v.
Walonis, 611 F.2d 387, 392 (1st Cir. 1979), places outside
the reach of Title III the monitoring of communications
carried out by certain types of equipment and done in the
ordinary course of business. It derives from 18 U.S.C.
2510(4) and (5). Section 2510(4) defines the term
"interception" as "the aural or other acquisition of the
contents of any wire, electronic, or oral communication
through the use of any electronic, mechanical, or other
device." (Emphasis supplied). Section 2510(5), insofar as is
relevant, then defines "electronic, mechanical, or other
device" in the following manner:
(5) "electronic, mechanical, or other device"
means any device or apparatus which can be used to
intercept a wire, oral, or electronic communication
other than --
(a) any telephone or telegraph
instrument, equipment or facility, or any
component thereof, (i) . . . furnished by
[a] subscriber or user for connection to
the facilities of [a wire or electronic
communication] service and used in the
ordinary course of its business[.]
(Emphasis supplied). Thus, if the monitoring conducted by
the CAR defendants had been effectuated by means of a
12. The business extension exception is found only in the
federal act. Thus, we confine our discussion in this section
of the opinion to federal law.
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"telephone or telegraph instrument, equipment or facility, or
any component thereof" which was both furnished by CAR for
connection to the facilities of its communication service and
used in the ordinary course of its business, defendants'
actions would not constitute an interception and would be
beyond the reach of Title III.
The district court determined that the business
extension exception did not apply for two reasons: (1)
because "the subject conversations were intercepted and
recorded by a device configured by someone other than a
provider of electronic communication service"; and (2)
because "a legitimate business purpose did not exist at the
time the subject conversations were intercepted." See Poulos
II, slip op. at 17. Perhaps recognizing the amount of
deference owed to the court's resolution of this paradigmatic
mixed question of law and fact, defendants do not expend a
great amount of energy attacking the factual findings
underpinning the court's conclusions. Instead, they argue
that the court's ruling was infected by erroneous legal
reasoning. More specifically, defendants assert that, with
regard to its first stated reason, the court misapprehended
the technical requirements of the statute, and, with regard
to its second stated reason, the court misconstrued the term
"ordinary course of business."
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We agree with defendants that, in concluding that
the business extension exception did not apply, the court
erred in its reasoning. Section 2510(5)(a) does not require
that the acquisition device be configured by a provider of
electronic communication service. Nor does it direct courts
to conduct an inquiry into whether a "legitimate business
purpose" for monitoring exists at the time of the challenged
aural acquisition.
Nonetheless, we believe the district court's
ultimate determination, that the business extension exception
does not apply, is sustainable. Simply put, we are at a loss
to see how the monitoring system used here, consisting as it
did of "alligator clips attached to a microphone cable at one
end" and an "interface connecting [a] microphone cable to a
VCR and a video camera" on the other, can be considered to be
a "telephone or telegraph instrument, equipment or facility,
or a[] component thereof."13 In so stating, we note that
13. In support of its position that the CAR device should be
so considered, defendants advance three arguments that are,
at best, unpersuasive. First, defendants assert that the
record evidence demonstrates that the monitoring device was
comprised of standard electronic components which are
"commonly used in telephone systems." Upon close scrutiny,
however, it is clear that this assertion is premised solely
upon an outrageous mischaracterization of the testimony of
Jonathan Broome. Broome did not testify, as defendants
suggest, that the components of the CAR system "are commonly
used in telephone systems." (Emphasis supplied). Instead,
he answered the question, "So, these wires were not uncommon
parts or components for use in various ways with the [sic]
telephone systems, were they?" by responding, "No. It was
all -- you don't usually use balanced shielded audio cable
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the CAR system is factually remote from the telephonic and
telegraphic equipment courts have recognized as falling
within the exception at 18 U.S.C. 2510(5)(a). See, e.g.,
Epps v. St. Mary's Hosp., 802 F.2d 412, 415-16 (11th Cir.
1986) (dispatch console installed by telephone company
considered telephone equipment); Watkins v. L.M. Berry & Co.,
704 F.2d 577, 582-84 (11th Cir. 1983) (standard extension
telephone implicitly considered telephone equipment); Briggs
v. American Air Filter Co., Inc., 630 F.2d 414, 416-20 (5th
Cir. 1980) (same); James v. Newspaper Agency Corp., 591 F.2d
579, 581 (10th Cir. 1979) (monitoring device installed by
for telephone, but it is quite acceptable to." (Emphasis
supplied). In other words, rather than testifying that the
components are commonly used in telephone systems, Broome
stated that, though it was unusual, the components could
acceptably be used with telephone systems. In our view, such
testimony is not helpful to defendants.
Second, defendants claim that certain 1986 amendments to
the federal anti-wiretap statute were intended to broaden the
meaning of 18 U.S.C. 2510(5)(a) so as to include equipment
such as the CAR monitoring device. This argument flagrantly
misconstrues the purpose of the congressional action. The
legislative history makes it apparent that the 1986
amendments were aimed at strengthening the statute by
updating it to reflect nearly twenty years of
telecommunications advances. See generally S. Rep. No. 99-
541, 99th Cong., 2d Sess. 1-11, reprinted in 1986
U.S.C.C.A.N. 3555-65. Despite defendants' contrary urgings,
there is absolutely no evidence in this history suggesting
that Congress meant to expand the parameters of the business
extension exception so as to embrace almost all wiretapping
equipment.
Finally, defendants seem to argue that the First
Circuit, in Campiti, 611 F.2d at 392, read the "any telephone
or telegraph instrument, equipment or facility, or any
component thereof" provision out of 2510(5)(a). We think
it sufficient to state without elaboration that Campiti, when
fairly read in context, does no such thing.
-22-
22
telephone company implicitly considered telephone equipment).
Indeed, we think it self evident that the CAR system, far
from being the type of exempt equipment contemplated by the
authors of the business extension exception, is precisely the
type of intercepting device Congress intended to regulate
heavily when it enacted Title III.
We recognize that it is not ordinarily the province
of appellate courts to make findings of fact or to resolve,
in the first instance, mixed questions of law and fact. Yet,
where only one resolution of a predominantly factbound
question would, on a full record, be sustainable, courts of
appeals can, and often should, decline to remand where there
has been an error committed. See Dedham Water, 972 F.2d at
463; see also In re Two Appeals Arising Out of the San Juan
Plaza Hotel Fire Litigation, 994 F.2d 956, 968-69 (1st Cir.
1993) (appellate courts may eschew remand where remanding
would be an empty exercise); Societe Des Produits Nestle,
S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 642 (1st Cir.
1992) (where trial court "supportably `made the key findings
of fact' but applied the wrong rule of law, the court of
appeals ha[s] the power, in lieu of remanding, simply to
regroup the findings `along the proper matrix'") (quoting
United States v. Mora, 821 F.2d 860, 869 (1st Cir. 1987)).
Here, given the trial court's findings regarding the nature
of the monitoring device, the only sustainable ruling would
-23-
23
be that the device was not a "telephone or telegraph
instrument, equipment or facility, or a component thereof,"
and therefore not within the parameters of the business
extension exception. Accordingly, we reject the argument
that defendants are protected by this exception.14
b. The Consent Exception
Both the federal and Maine acts specifically exempt
from their prohibitions the interceptions of telephone calls
where one or more of the conversants has consented to or, in
the case of the Maine act, previously authorized the
interception. See 18 U.S.C. 2511(2)(d) and 15 M.R.S.A.
709(4)(C).15 As we have made clear, consent under Title
14. In their brief, the CAR defendants conclude their
argument that the business extension exception applies with a
very short equitable argument that their "good faith"
reliance on the advice of others, including counsel, in
installing the monitoring system should absolve them from
liability. They do not, however, adduce any authority in
support of this novel proposition. Moreover, in the course
of rebuffing defendants' business extension exception
argument, the district court supportably found that the
interceptions here at issue were not effectuated to further
the original purpose of the monitoring system. Defendants do
not, and cannot, seriously contest this finding. Thus, the
alleged good faith of the CAR defendants in originally
installing the system is irrelevant.
15. In relevant part, 18 U.S.C. 2511(2)(d) provides:
It shall not be unlawful under this chapter for a
person not acting under color of law to intercept a
wire, oral, or electronic communication where . . .
one of the parties to the communication has given
prior consent to such interception . . . .
Similarly, 15 M.R.S.A. 709(4)(C) excludes from the
reach of the statute those interceptors "given prior
-24-
24
III16 need not be explicit; instead, it can be implied.
See Griggs-Ryan v. Smith, 904 F.2d 112, 116 (1st Cir. 1990).
Implied consent is not, however, constructive consent. Id.
"Rather, implied consent is `consent in fact' which is
inferred `from surrounding circumstances indicating that the
party knowingly agreed to the surveillance.'" Id. at 116-17
(quoting United States v. Amen, 831 F.2d 373, 378 (2d Cir.
1987), cert. denied, 108 S. Ct. 1573 (1988)) (brackets
omitted) (emphasis supplied). In light of the prophylactic
purposes of Title III, implied consent should not be casually
inferred. See id. at 117.
Here, the record reflects and the district court
found that Ralph Dyer was told of the "monitoring" of CAR
employee telephone calls.17 The record is not clear,
however, as to whether Dyer was informed (1) of the manner --
i.e., the intercepting and recording of telephone
authority by the sender or receiver."
16. Because the "consent" standard under Title III is
certainly no more stringent than the "prior authority"
standard set forth in 15 M.R.S.A. 709(4)(C), see supra note
15, and because, as will be demonstrated below, we rule that
the district court did not clearly err in finding that the
consent standard had not been met, we need only discuss the
federal act in this section of the opinion.
17. Defendants' consent arguments involve only the actions
of Ralph Dyer, and are not directed at the district court's
summary judgment ruling that the consent exception does apply
to the conversations involving Brooks Browne. Accordingly,
we limit our discussion to whether Dyer consented to
interceptions of his telephone conversations.
-25-
25
conversations -- in which this monitoring was conducted; and
(2) that he himself would be subjected to such monitoring.
There was testimony tending to indicate that he was so
informed, which the district judge apparently chose not to
credit, and testimony tending to indicate that he was not.
In our view, the latter testimony, far from being incredible,
was highly plausible.18 Thus, there is no basis for us to
conclude that the district court clearly erred in finding
that Dyer was not told of the manner in which the monitoring
was conducted and that he himself would be monitored. Cf.
Rodriguez-Morales, 931 F.2d at 982 (district court's finding
should not be disturbed where there are two permissible views
of the evidence). And, without at least this minimal
knowledge on the part of Dyer, we do not see how his consent
in fact to the monitoring could be inferred from this record.
Cf. Griggs-Ryan, 904 F.2d at 117 (implied consent inferred
where defendant was informed (1) that all incoming calls, (2)
on a particular line, (3) would be tape recorded).
Accordingly, we reject the contention that the court erred in
finding that defendants are not protected by the consent
exception.
2. Refusal to Admit Expert Testimony
18. It is difficult to believe that the newly-installed CEO
and Chairman of the Board would have assented to the
intercepting and recording of his conversations by
subordinates with whom he was engaged in a struggle for
power.
-26-
26
Defendants also assert that the court erred in
refusing to admit, pursuant to Fed. R. Evid. 702, the
testimony of their expert, G. Robert Blakey.19 This
argument does not require extended discussion.
Rule 702 provides: "If scientific, technical, or
other specialized knowledge will assist the trier of fact to
understand the evidence or to determine a fact in issue, a
witness qualified as an expert by knowledge, skill,
experience, training, or education, may testify thereto in
the form of an opinion or otherwise." It is settled that
"`the admission of expert testimony under [Rule] 702 is
within the discretion of the district court and will be
reversed only for an abuse of that discretion.'" Navarro de
19. Blakey, described by the CAR defendants as "one of the
drafters and architects" of Title III, would, in defendants'
words, "[have] address[ed] the many mixed questions of law
and fact which [arose] in this action . . . ." Indeed, a
review of the Poulos defendants' offer of proof regarding
Blakey reveals that, if he had been allowed to testify,
Blakey would have opined on virtually all of the mixed
questions of law and fact in this litigation. Specifically,
Blakey would have testified, inter alia, (1) that the CAR
defendants' monitoring equipment was not a "device" as
defined by 18 U.S.C. 2510(5)(a) or 15 M.R.S.A. 709(3);
(2) that the monitoring equipment "was telephone `equipment
or facility'" [sic], see 18 U.S.C. 2510(5)(a); (3) that the
monitoring at issue was done "within the ordinary course of
[CAR's] business," see id.; (4) that the actions and
activities of the Poulos defendants "were carried out in a
good faith reliance on a statutory authorization within the
terms of 18 U.S.C. 2520(d)"; and (5) that "under all the
relevant facts and circumstances, attorneys in the position
of the Poulos defendants . . . would not have had `reason to
know' that the [intercepted] information was obtained in
violation of law."
-27-
27
Cosme v. Hospital Pavia, 922 F.2d 926, 931 (1st Cir. 1991)
(quoting Forrestal v. Magendantz, 848 F.2d 303, 305 (1st Cir.
1988)).
Here, the court granted plaintiffs' motion to
exclude Blakey by stating: "I'm satisfied with regard to
expert witnesses in this case that expert witnesses are not
appropriate, . . . and I have excluded both the plaintiffs'
and the defendants' experts by appropriate action on their
respective motions." Thus, it appears that the court, as
factfinder, concluded that it could "understand the evidence
[and] determine [the] fact[s] in issue" without the
assistance of experts. Our review of this record persuades
us that the court acted well within its discretion in so
concluding.20 Accordingly, we reject defendants'
contention that the court erred in excluding Blakey's
testimony.
3. Mootness
The Poulos defendants assert that plaintiffs'
claims against them became moot when plaintiffs amended their
20. The court's decision rests upon especially firm ground
with regard to Blakey. The Poulos defendants' offer of
proof, see supra note 19, reveals that virtually all of
Blakey's testimony would have been opinion testimony
regarding (1) the state of mind of the Poulos defendants, and
(2) the applicability of certain statutory provisions to the
facts of this case. Leaving aside overall admissibility
concerns, it is apparent that such testimony is not based
upon "scientific, technical, or . . . specialized knowledge"
likely to be lacking in the able district judge who conducted
this bench trial.
-28-
28
complaint so as to drop their claims for monetary
damages.21 In so doing, they point to the fact that, as
the CAR defendants' attorneys, they would be bound by any
injunction or restraining order issued against the CAR
defendants alone. See Fed. R. Civ. P. 65(d).22 In the
Poulos defendants' view, the fact that they would be so
bound, when combined with the fact that the trial was solely
for equitable relief, means that complete relief could have
been afforded to plaintiffs without their presence as named
defendants. Thus, the argument concludes, after the damages
claims were dropped, there was no longer a case or
controversy between plaintiffs and themselves. We cannot
agree with the Poulos defendants' argument.
Among its infirmities, this argument fails to
recognize that plaintiffs sought from the Poulos defendants
two forms of relief other than an injunction. First,
plaintiffs sought a declaration that the Poulos defendants
themselves, irrespective of their relationship with the CAR
21. In their original complaint, plaintiffs sought
declaratory and injunctive relief; actual, statutory, and
punitive damages; and attorneys' fees. Eventually, however,
plaintiffs amended their complaint so as to dismiss all their
damages claims. As a result, the case was reduced to a
completely equitable proceeding tried only before the
district court.
22. The part of Rule 65(d) upon which the Poulos defendants
rely states: "Every order granting an injunction and every
restraining order . . . is binding only upon the parties to
the action, their officers, agents, servants, employees, and
attorneys . . . ."
-29-
29
defendants, had violated, inter alia, the disclosure and use
provisions of Title III and the Maine act.23 And second,
plaintiffs sought from the Poulos defendants the attorneys'
fees they had incurred in the course of protecting their
statutorily created rights. Thus, even if we were to endorse
for the sake of argument the dubious premise upon which the
Poulos defendants' argument rests, we are still compelled to
conclude that there was a very live case and controversy
between plaintiffs and the Poulos defendants. Accordingly,
we reject the contention that plaintiffs' claims against the
Poulos defendants were mooted when they dropped their damages
claims.24
4. Poulos's Knowledge
23. Despite the fact that it is specifically made available
by 18 U.S.C. 2520(b)(1), the Poulos defendants contend that
such a declaration, standing alone, would be "completely
inappropriate" because it would have no future application.
We are not persuaded by this argument. The Poulos defendants
are the attorneys of record for the CAR defendants in the
Bowers litigation. Surely a declaration that the Poulos
defendants had disclosed and used the contents of intercepted
communications, relevant to the Bowers lawsuit, in violation
of Title III and the Maine act would be useful to plaintiffs
in any motion they might file to disqualify the Poulos
defendants in that case.
24. The Poulos defendants also assert that the injunction
issued against them was improper because plaintiffs were not
in danger of suffering "actual or imminent, not `conjectural'
or `hypothetical'" harm from them. See Whitmore v. Arkansas,
495 U.S. 149, 155 (1990) (elaborating upon Article III's
"case or controversy" requirement) (quoting City of Los
Angeles v. Lyons, 461 U.S. 95, 101-02 (1983)). In light of
the imminence of Bowers and the fact that the Poulos
defendants may still participate in it, we find this line of
argument entirely unconvincing.
-30-
30
The Poulos defendants next contend that the
district court clearly erred when, in determining that they
had violated the disclosure and use provisions of Title III,
it found that Richard Poulos knew or had reason to know that
the interceptions at issue had been effectuated in violation
of Title III. See 18 U.S.C. 2511(c) and (d), supra note
3.25 More particularly, they argue that the judge clearly
erred in implicitly deciding that plaintiffs had met their
burden of proving that Poulos knew or had reason to know that
the statutory business extension and consent exceptions did
not apply to the interceptions. After carefully considering
this argument, we are not convinced.
It is settled that a person has not committed a
disclosure or use violation under Title III unless s/he "knew
or had reason to know that the interception [by which the
25. In the course of so ruling, the court also found that
the Poulos defendants had violated the disclosure and use
provisions of the Maine act. See 15 M.R.S.A. 710(3)(A) and
(B), supra note 3. The Poulos defendants also contest this
finding, arguing (1) that the Maine act required the court to
find that they had disclosed and used the intercepted
information "actually knowing" that it had been illegally
obtained, and (2) that the evidence could not support such a
finding. This argument is built on a faulty legal
foundation. Section 710(3)(A) and (B) do not require
knowledge that the information was illegally intercepted;
they merely require knowledge "that the information was
obtained through interception [as that term is defined by the
Maine act]." See supra note 3. Accordingly, because of its
defective premise, and because a thorough review of the
record convinces us that the court did not clearly err in
implicitly finding that the Poulos defendants knew that the
information they disclosed and used had been "obtained
through interception," we reject this argument.
-31-
31
information which was disclosed or used had been obtained]
itself was in violation of Title III." United States v.
Wuliger, 981 F.2d 1497, 1501 (10th Cir. 1992); see also
Thompson v. Dulaney, 970 F.2d 744, 749 (10th Cir. 1992). In
other words, "knowledge or reason to know of the illegality
is an element of the offense." Wuliger, 981 F.2d at 1501.
Thus, in a civil action, a plaintiff must demonstrate "1) the
information used or disclosed came from an intercepted
communication, and 2) sufficient facts concerning the
circumstances of the interception such that the defendant
could, with presumed knowledge of the law, determine that the
interception was prohibited in light of Title III."
Thompson, 970 F.2d at 749; see also Cheek v. United States,
498 U.S. 192, 199-200 (1991) (making clear that the common
law presumption that every person knows the law ordinarily
applies when courts construe criminal statutes). This
demonstration includes a showing that any statutory
exceptions asserted by a defendant do not, in fact, apply.
See Thompson, 970 F.2d at 749.
Here, we perceive no clear error in the district
court's implicit findings that the statutory defenses did not
apply. Insofar as the Poulos defendants are challenging the
court's finding regarding the business extension exception,
we again observe that the exception applies only when, inter
alia, the aural acquisition at issue is effectuated by means
-32-
32
of a "telephone or telegraph instrument, equipment or
facility, or a component thereof." See 18 U.S.C.
2510(5)(a), supra at 19. As noted earlier, we think it
evident that the monitoring equipment used by the CAR
defendants cannot be so characterized. Moreover, there is no
suggestion that Poulos misapprehended the nature of the
equipment the CAR defendants used to monitor plaintiffs'
calls. Given these facts, we discern no basis for upsetting
the court's finding that Poulos knew or had reason to know
that the business extension exception would not apply to the
intercepted calls.
Similarly, insofar as the Poulos defendants are
contesting the court's finding regarding the consent
exception, we again note that consent, even if implied, must
be "`consent in fact.'" See Griggs-Ryan, 904 F.2d at 116-17
(quoting Amen, 831 F.2d at 378). As observed earlier, there
is record evidence tending to indicate that Dyer26 never
was informed (1) of the manner in which the monitoring was
being conducted; and (2) that he himself would be subjected
to such monitoring. Moreover, there is record evidence from
which a rational factfinder could have found, under a
preponderance of the evidence standard, that Poulos was not
26. See supra note 17.
-33-
33
laboring under the assumption that Dyer had been so
informed.27 Thus, we can discern no clear error in the
district court's finding that Poulos knew or had reason to
know that the consent exception would not apply to the
intercepted calls.
Accordingly, we reject the Poulos defendants'
challenge to the court's finding that Poulos knew or had
reason to know that the interceptions violated Title III.
5. The Poulos Defendants' Good Faith Defense
The Poulos defendants' next argument, that the good
faith defense provided for in 18 U.S.C. 2520(d)28
exonerates them, is a variation on this same theme. In
essence, the Poulos defendants claim that Poulos, in good
faith, believed that the business extension and consent
exceptions applied and were "statutory authorization[s]" for
the wiretapping that occurred. Thus, they assert, they have
a complete defense against plaintiffs' civil claims. Again,
we do not agree.
27. For example, in response to a question at trial
regarding a journal entry made by Dyer, Poulos testified:
"You people didn't know about and Dyer didn't know about the
wiretaps on August 25 or so and when he's talking about sue -
- [sic]." Also, when Poulos disclosed the contents of the
tapes to counsel for CAR's Chapter 11 trustee, he informed
them that the tapes might have been criminally obtained.
28. In relevant part, 18 U.S.C. 2520(d) states: "A good
faith reliance on . . . a statutory authorization . . . is a
complete defense against any civil or criminal action brought
under this chapter or any other law."
-34-
34
As we have stated, the district court sustainably
found that Poulos disclosed and used the contents of
intercepted communications despite, at the very least, having
had reason to know that the interception was effectuated in
violation of Title III. Therefore, even if we assume
arguendo that the term "statutory authorization" in 2520(d)
encompasses the business extension and consent exceptions (a
matter that we do not now decide), it is evident that any
belief on Poulos's part that these exceptions did apply could
have been premised only upon mistakes of law. And, as we
have held, nothing in 2520(d) supports a conclusion that
the good faith defense applies where a defendant mistakenly
believes that there exists a statutory authorization for the
wiretapping. See Campiti, 611 F.2d at 394-95 (mistaken
belief that statutory exceptions apply does not give rise to
a good faith defense);29 see also Heggy v. Heggy, 944 F.2d
1537, 1542 (10th Cir. 1991) ( 2520(d) does not embrace
mistake of law), cert. denied, 112 S. Ct. 1514 (1992).
29. The Poulos defendants point out that the term "statutory
authorization" was added to 2520(d) after Campiti was
handed down and assert, without any elaboration, that this
means that 2520(d) "may in fact now exempt a mistake of
law." Given the dearth of contexts where subjective mistakes
of law allow a defendant to avoid liability, see Cheek, 498
U.S. at 199-200, we find this perfunctorily made argument to
be highly suspect. At any rate, we deem it waived, see
United States v. Innamorati, 996 F.2d 456, 468 (1st Cir.
1993) (issues adverted to in a perfunctory manner and without
developed argumentation are deemed waived on appeal), cert.
denied, 62 U.S.L.W. 3320 (Nov. 1, 1993).
-35-
35
Accordingly, we reject as meritless the Poulos defendants'
argument that they are protected by the good faith defense of
2520(d).30
6. Entitlement to Jury Trial
Finally, in one sentence, the Poulos defendants
assert:
Due to the professional implications, the
exposure to substantial attorneys [sic]
fees, the [district] court's decision to
determine whether there was a use and
disclosure violation under both [Title
III] and the Maine Act, and the criminal
nature of the statute involved, [the
Poulos defendants] should have been
accorded a jury trial on the issues of
whether they used the tapes knowing or
with reason to know of the illegality and
the good-faith defense.
They do not, however, explain how the presence in this case
of "professional implications," an attorneys' fees request,
use and disclosure issues, and the fact that Title III also
contains criminal provisions renders this action an
essentially legal one. Nor do they cite to any authority
from which we can derive such an inference. As such, their
argument is perfunctory and we will not address it. See
Innamorati, 996 F.2d at 468.31
30. Because 2520(d) does not shield the Poulos defendants
from plaintiffs' Title III claims, it also obviously does
not, despite their argument to the contrary, shield them from
plaintiffs' claims under the Maine act.
31. The Poulos defendants do, without elaboration, advert to
authority which enunciates the settled rule that an action
for declaratory relief which is essentially legal in nature
-36-
36
B. Plaintiffs' Arguments
1. Scope of the Injunction
Plaintiffs' primary argument on appeal is their
complaint concerning the reach of the injunction issued by
the district court. The argument has three components: (1)
that the court abused its discretion in permitting defendants
to disclose and/or use the intercepted recordings in Bowers;
(2) that the court also abused its discretion in failing to
enjoin the Bowers litigation; and (3) that the court
erroneously thought itself restricted to the relief provided
for in 18 U.S.C. 251532 when it issued the injunction.
We address each branch of plaintiffs' argument in turn.
a. Disclosure and/or Use of the Recordings in
Bowers
The first aspect of plaintiffs' argument is not
difficult to comprehend. They contend that the court's
gives rise to the right to a jury trial. See, e.g., Simler
v. Conner, 372 U.S. 221, 223 (1963); Beacon Theatres, Inc. v.
Westover, 359 U.S. 500, 504 (1959). They do not, however,
make any attempt to demonstrate the applicability of this
authority to the facts of this case. Accordingly, we deem
their efforts insufficient to preserve this issue for
appellate review. See Innamorati, 996 F.2d at 468.
32. In relevant part, 18 U.S.C. 2515 provides:
Whenever any wire or oral communication has been
intercepted, no part of the contents of such
communication and no evidence derived therefrom may
be received in evidence in any trial, hearing, or
other proceeding in or before any court . . . if
disclosure of that information would be in
violation of this chapter.
-37-
37
injunction, insofar as it permits defendants to disclose
and/or use the contents of the tapes for admissibility
determinations in Bowers, must be reversed. In plaintiffs'
view, Title III33 simply does not allow for any disclosures
and/or use of illegally intercepted material in civil cases.
After careful consideration, we disagree with this position.
In making their argument, plaintiffs rely upon the
fact that Title III, without exception, makes criminal
"disclosures" and/or "uses" of illegally intercepted
material. In our view, however, there are at least two
reasons why the lack of any such explicit exception does not
dictate the conclusion reached by plaintiffs.
First, we think it important to note:
A statute is passed as a whole and not in
parts or sections and is animated by one
general purpose and intent.
Consequently, each part or section should
be construed in connection with every
other part or section so as to produce a
harmonious whole.
2A Norman J. Singer, Sutherland Statutory Construction,
46.05, at 103 (5th ed. 1992). Here, if we were to interpret
the criminal provisions of Title III in the manner suggested
by plaintiffs, we would render the statute unenforceable.34
33. Again here, the parties' discussion of the issue centers
around Title III. Therefore, we confine our analysis to
federal law.
34. After all, a court (or jury) would almost never be able
to determine whether an interception violated Title III
without having the interception "disclosed" in court and
-38-
38
Thus, we must reject plaintiffs' interpretation as violative
of a fundamental tenet of statutory construction.
Moreover, we think that Congress, in enacting
2515, see supra note 32, made clear its endorsement of
disclosures and/or uses of illegally intercepted material for
the adjudicatory purposes contemplated by the district court.
As noted, 2515 bans the introduction into evidence of both
illegally intercepted material and any evidence derived
therefrom. Implicit in this ban, we believe, are two
assumptions: (1) that the intercepted material will be
presented to a court or jury for an initial adjudication of
whether it was acquired illegally; and (2) that a court will
thereafter determine whether other evidence was derived from
the intercepted evidence. Simply put, we are at a loss to
see how these functions could be performed without the types
of adjudicatory "disclosures" and/or "uses" that plaintiffs
view as banned by Title III.
Accordingly, we reject the argument that the court
erred in permitting future disclosures and/or uses of the
recordings and transcriptions here at issue for the limited
purpose of aiding it in the making of admissibility
determinations in Bowers.
Despite the fact that the court's injunction
explicitly made reference only to disclosures and/or uses in
"using" this interception to inform its determination.
-39-
39
the context of admissibility determinations, the parties also
disagree over whether the tapes at issue can be used "for
purposes of impeachment" in Bowers. Because we believe that
this is an important issue certain to arise during the course
of that litigation, we address it at this time.
We start with the obvious. As we have observed,
Title III makes criminal the intentional disclosure and/or
use of information obtained through unauthorized
interceptions of wire, oral, or electronic communications
(when the discloser/user knows or has reason to know that the
interception was unauthorized). See 18 U.S.C. 2511(c) and
(d), supra note 3; see also Gelbard v. United States, 408
U.S. 41, 46 (1972). It also generally reserves as a remedy
to anyone subjected to an unlawful interception "such . . .
equitable or declaratory relief as may be appropriate." See
18 U.S.C. 2520(b), supra note 5. We think it apparent,
therefore, that, in order to provide aggrieved plaintiffs
with "appropriate" relief, courts ordinarily should
completely enjoin persons in possession of illegally
intercepted information from disclosing and/or using that
information.
With regard to how, if at all, illegally
intercepted communications may be disclosed and/or used as
evidence in court proceedings, Title III is more explicit.
As noted above, 2515 states that "no part of the contents
-40-
40
of such communication and no evidence derived therefrom may
be received in evidence . . . ." See supra note 32. Despite
the unequivocal nature of this statutory language, however,
several courts, including this one, have allowed the
government to disclose and use the contents of illegally
intercepted communications in order to impeach testifying
criminal defendants. See United States v. Vest, 813 F.2d
477, 484 (1st Cir. 1987); United States v. Winter, 663 F.2d
1120, 1154 (1st Cir. 1981), cert. denied, 460 U.S. 1011
(1983); see also, e.g., United States v. Echavarria-Olarte,
904 F.2d 1391, 1397 (9th Cir. 1990); United States v. Caron,
474 F.2d 506, 508 (5th Cir. 1973). In so doing, these
courts, either explicitly or implicitly, have relied upon a
passage in the legislative history of Title III which
indicates a congressional desire to incorporate, inter alia,
the impeachment exception of "search and seizure law"35
into the Title III calculus. See generally Caron, 474 F.2d
at 510 (interpreting the meaning of S. Rep. No. 1097, 90th
35. In criminal law, evidence obtained in violation of the
Fourth Amendment can be used for the limited purpose of
attacking a testifying defendant's credibility. Walder v.
United States, 347 U.S. 62, 65 (1954). It can, however, only
be used to impeach on matters "plainly within the scope of
the defendant's direct examination." United States v.
Havens, 446 U.S. 620, 627 (1980). Moreover, the tainted
evidence can only be used to impeach the criminal defendant
him/herself; it cannot be used to impeach other witnesses,
even other defense witnesses. James v. Illinois, 493 U.S.
307, 313 (1990).
-41-
41
Cong., 2d Sess. at 96, reprinted in 1968 U.S.C.C.A.N. 2184-
85).36
Every federal court that has passed on the question
has, however, declined to extend this impeachment exception
to civil actions brought under Title III. See, e.g.,
Wuliger, 981 F.2d at 1506; Anthony v. United States, 667 F.2d
870, 879 (10th Cir. 1981), cert. denied, 457 U.S. 1133
(1982). In so doing, these courts, have taken note of (1)
the "overriding concern for protection of privacy . . .
[Title III] sets out," Wuliger, 981 F.2d at 1506, and (2) the
fact that 2515, by its terms, allows for no exceptions.
They, therefore, have proceeded from the premise that "`what
is not permitted [by the Act] is forbidden.'" Id. (quoting
Fultz v. Gilliam, 942 F.2d 396, 401 (6th Cir. 1991)). Then,
these courts have observed that the allowance of an
impeachment exception derives from the references in the
legislative history to "search and seizure law" and the
Supreme Court's decision in Walder. See S. Rep. No. 1097,
90th Cong., 2d Sess. at 96, reprinted in 1968 U.S.C.C.A.N. at
2184. Thus, because "[n]ormal search and seizure laws have
arisen in the context of the Fourth Amendment which is
directed against the government, not against private
36. The legislative history's reference to the impeachment
exception is made indirectly by means of an approving
citation to Walder, the case wherein the impeachment
exception was created. See supra note 35.
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42
individuals," Anthony, 667 F.2d at 879, and because the
Fourth Amendment does not apply in civil actions not
involving the government, see id., these courts have, as
stated above, declined to recognize an impeachment exception
to 2515 in civil proceedings, see id.; see also Wuliger,
981 F.2d at 1506.
We find this line of reasoning persuasive,37 and
accordingly limit the impeachment exception of 2515 to
criminal actions brought pursuant to Title III. Therefore,
it follows that the illegal interceptions (and their
transcriptions) at issue in this litigation cannot, pursuant
to the criminal impeachment exception, be introduced into
evidence for impeachment purposes in Bowers.
37. In an attempt to counteract this authority, the Poulos
defendants contend (1) that Walder and its progeny do not
explicitly state that the impeachment exception should be
available only in criminal cases, and (2) that the concerns
underlying the exception (e.g., the prevention of untruthful
testimony) are equally applicable in the civil context.
While this argument has some force, we think, in light of (1)
the unequivocal language of 2515, (2) the broad remedial
purposes of Title III, and (3) the restrictions the Supreme
Court has put on the impeachment exception, see supra note
35, that the exception we have read into 2515 must be
strictly construed. Cf. Vest, 813 F.2d at 480-84 (declining
to read the legislative history at issue as empowering courts
to read further excep-tions into 2515). As we have noted,
the exception derives from a specific reference to "search
and seizure law" and a citation to Walder, neither of which
is directly applicable in the civil context. Thus, any
application of the exception to civil cases would be based
upon extrapolation. In light of the three above-stated
factors which incline us towards a strict construction of the
exception, we simply do not believe that such an
extrapolation would be appropriate in this instance.
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43
b. Failure to Enjoin Bowers
The second component of plaintiffs' argument has
two parts: that, in failing to enjoin Bowers, the district
court (1) erroneously relied upon Fourth Amendment
"independent source" jurisprudence,38 and (2) erroneously
overlooked the fact that Title III "flatly" bans disclosures
and uses of illegally intercepted material.39 In our view,
plaintiffs misconstrue the approach taken by the district
court.
With respect to plaintiffs' first claim, the court
did not hold that the evidence derived from the illegal
interceptions would be admissible in Bowers pursuant to the
independent source rule.40 Instead, the court found that
38. The independent source rule "allows admission of
evidence that has been discovered by means wholly independent
of any constitutional violation." Nix v. Williams, 467 U.S.
431, 443 (1984); see also United States v. Silvestri, 787
F.2d 736, 739 (1st Cir. 1986), cert. denied, 487 U.S. 1233
(1988).
39. To be more specific, the second part of plaintiffs'
argument is that, to the extent that the court may have
"balanced the equities" in deciding not to enjoin Bowers, it
was in error. Cf. Burlington R.R. Co. v. Blair, 957 F.2d
599, 601-02 (8th Cir.) (indicating that, in considering the
propriety of injunctive relief, it is not the role of the
courts to balance the equities between the parties where
Congress has flatly banned the conduct sought to be
enjoined), cert. denied, 113 S. Ct. 69 (1992).
40. We recognize that the court did make reference to the
independent source rule in denying plaintiffs' Fed. R. Civ.
P. 59(e) motion to amend the judgment. We discuss the
propriety of this reference in the next section of this
opinion. See infra at 48-50.
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44
"the evidence presented at trial demonstrated the existence
of information upon which the allegations in Bowers v. Allied
could be based independent of the subject tapes." Poulos II,
slip op. at 29-30 (emphasis supplied). In other words, the
court found that evidence other than that which was on the
tapes (and "in no way attributable to the existence of the
subject tapes," see id. at 30) could support the lawsuit.
Thus, the independent source rule, which is a means for
admitting evidence springing from independent sources despite
the fact that the evidence replicates tainted evidence, was
not a basis for the district court's holding.
With regard to plaintiffs' second claim, we believe
it sufficient to state that the court's injunction does not
contravene the purposes of Title III.41 Contrary to
plaintiffs' assertions, Title III does not "flatly" ban all
disclosures and uses of illegally intercepted communications.
Instead, as we have explained, it generally bans such
disclosures and uses while, either explicitly or implicitly,
41. We are aware that plaintiffs' argument ties in with
their general concern, expressed throughout their brief, that
allowing Bowers to proceed will undermine the purposes of
Title III and the Maine act. If, however, there is
independent evidence upon which the allegations of Bowers are
premised, and if, as we shall explicitly urge it to do, see
infra at 48-50, the district court takes pains to ensure that
the contents of the illegally intercepted conversations, and
any evidence derived therefrom, are not used or disclosed in
the course of that litigation (other than in the course of
making admissibility determinations), we do not believe that
plaintiffs' concern will come to fruition.
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45
allowing for certain exceptions (i.e., an impeachment
exception in criminal cases, see supra at 40-41, and an
"adjudication" exception, see supra at 37-39, in all cases).
In our view, the court's injunction is consistent with this
statutory nuance.
Accordingly, we reject plaintiffs' assertion that
the court's failure to enjoin Bowers was infected by legal
error.
c. Erroneous Exclusive Reliance on Section 2515
The final facet of plaintiffs' argument, that the
court erroneously thought itself restricted to the relief
provided for in 18 U.S.C. 2515, see supra note 32, when it
declined to enjoin Bowers, does not require extended
discussion. While, as we shall discuss below, the court did
reveal a somewhat cramped view of the scope of its equitable
powers in denying plaintiffs' Fed. R. Civ. P. 59(e) motion to
amend judgment, see infra at 48-49, the record clearly
reveals that no such restrictive view impaired its treatment
of plaintiffs' initial request for injunctive relief. In
fact, contrary to plaintiffs' contention, the court's
injunction order explicitly states that the decision not to
enjoin Bowers was based upon the evidence, and not upon a
perceived lack of legal power to order the remedy requested.
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46
See Poulos II, slip op. at 30 ("The Court is satisfied that
the injunctive relief sought is beyond the scope warranted by
the evidence presented at trial.") (emphasis supplied).
Accordingly, we find this claim of legal error to be without
merit.
2. Motion to Amend Judgment
Plaintiffs next argue that the district court erred
in denying their Fed. R. Civ. P. 59(e) motion to amend
judgment. In this motion, plaintiffs averred that they were
seeking, inter alia, to "clarify" the court's previous
injunction order. In reality, however, as the district court
noted, plaintiffs' motion actually sought (1) "additional
relief" not requested at trial or in the amended complaint,
and (2) evidentiary rulings in Bowers. Because the court
acted well within its discretion in denying this relief, we
cannot agree with plaintiffs that the court erred in denying
their motion. Because, however, we do agree with plaintiffs
that the court's denial order evinced a misunderstanding of
(1) the scope of its powers, and (2) the requirements of
Title III, we do pause, albeit briefly, to add a few caveats.
The decision to grant or deny a Rule 59 motion is
committed to the wide discretion of the district court and
must be respected absent abuse. E.g., Fernandez v. Leonard,
963 F.2d 459, 468 (1st Cir. 1992). Of course, this
discretion attaches to a court's decision on whether to allow
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47
a party to argue new material or a new theory under Rule 59.
See Appeal of Sun Pipe Line Co., 831 F.2d 22, 25 (1st Cir.
1987), cert. denied, 486 U.S. 1055 (1988); but see FDIC v.
Meyer, 781 F.2d 1260, 1268 (7th Cir. 1986) (motion to alter
or amend judgment "cannot be used to raise arguments which
could, and should, have been made before the judgment
issued") (emphasis supplied).
Here, plaintiffs' Rule 59 motion sought relief not
requested in their amended complaint. For example,
plaintiffs asked the court to order, inter alia, (1) that
defendants "turn over for seal or destruction every illegal
tape and transcript, and any record of any sort containing
any contents of illegal interceptions"; (2) that the Poulos
defendants and Daniel Lilley and his law firm42 be enjoined
from further participation in Bowers; (3) that the
aforementioned attorneys be prohibited from communicating
with whatever attorney/s might replace them as counsel in
Bowers; (4) that the disclosure and/or use of depositions
taken by Poulos be enjoined; and (5) that defendants with
exposure to the intercepted recordings be prohibited from
testifying in Bowers. In their complaint, however,
plaintiffs requested no such relief as an alternative to the
enjoining of Bowers. Accordingly, insofar as the court
42. Mr. Lilley has represented the CAR defendants throughout
this litigation.
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48
denied plaintiffs' motion because the motion sought
"additional relief", we cannot say that it abused its
discretion.43
Nevertheless, we are concerned about certain dicta
contained in the district court's order. In the course of
denying plaintiffs' Rule 59 motion, the court indicated (1)
that 18 U.S.C. 2515, see supra note 32, and (2) the
independent source rule, see supra note 38, would constrain
its rulings in Bowers. We think that the court erred in so
indicating. First, we wish to emphasize that, as always, the
court has broad discretion, through discovery orders,
evidentiary rulings, and the like, in deciding how it will
manage that trial. See, e.g., Serrano-Perez v. FMC Corp.,
985 F.2d 625, 628 (1st Cir. 1993) (district court has broad
discretion in managing litigation). However, in Bowers, this
discretion must be tempered by the court's obligation,
flowing from the protections set forth in Title III and the
Maine act, to ensure that the illegally intercepted material,
and any evidence derived therefrom, not be disclosed or used
in that proceeding (other than for the purposes we have
already approved, see supra section III.B.1.a. of this
opinion). In our view, this discretion and concomitant
obligation will require the court to consider the possibility
43. Similarly, we cannot say that the court abused its
discretion in deferring the making of evidentiary rulings in
Bowers.
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of rulings that go beyond 2515, which is directed solely at
evidence. For example, in order to guard against the future
use of the intercepted material, as the term use is generally
understood, we believe that the court should consider matters
such as (1) the disqualification of counsel, and (2) the
prohibition of any communication between any disqualified
counsel and replacement counsel.
This leads to our second point. In making its
rulings, the court should be aware that, as a general rule,
Fourth Amendment doctrines like the independent source rule
do not apply in private civil actions implicating Title III.
As the Supreme Court has stated:
The purpose of the Fourth Amendment
is to prevent unreasonable governmental
intrusions into the privacy of one's
person, house, papers, or effects. The
wrong condemned is the unjustified
governmental invasion of these areas of
an individual's private life. That wrong
. . . is fully accomplished by the
original search without probable cause.
United States v. Calandra, 414 U.S. 338, 354 (1974) (allowing
a grand jury witness to be asked questions based on evidence
obtained in violation of Fourth Amendment, because such
questions "work no new Fourth Amendment wrong").
Title III, on the other hand, generally proscribes,
inter alia, the disclosure and/or use of illegally
intercepted material. In other words, it prohibits more than
just the initial wrongful invasion. See Gelbard, 408 U.S. at
-50-
50
51-52. Thus, under Title III, the disclosure and/or use of
information obtained through a wrongful invasion amounts to a
separate injury prohibited by statute, and makes a person
subjected to such a disclosure and/or use "a victim, once
again, of a federal crime." Id. at 52 (ruling that grand
jury witness may not be asked questions based on evidence
obtained by illegal wiretapping).
In sum, the court did not abuse its considerable
discretion in denying plaintiffs' Rule 59 motion. However,
in making discovery, evidentiary, or other rulings in Bowers,
the court should not (1) assume that it is limited to the
relief set forth in 2515, or (2) assume the applicability
of judicially developed Fourth Amendment jurisprudence.
3. Statutory Damages
Plaintiffs' third argument is that the court erred
in determining that the statutory damages provided for in 18
U.S.C. 2520(c), see supra note 5, are legal, rather than
equitable, in nature. Defendants respond that plaintiffs did
not preserve this argument for appellate review. We agree
with defendants that this issue is not properly preserved.
As noted earlier, see supra note 21, plaintiffs'
original complaint sought declaratory and injunctive relief;
actual, statutory, and punitive damages; and attorneys' fees.
As the trial date approached, however, plaintiffs apparently
determined that they did not wish to have a jury hear any
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portion of this case. Accordingly, they amended their
complaint so as to drop all but their statutory damages
claims. Then, in their final pretrial memorandum, plaintiffs
stated: "If the Court should decide that statutory damages
are a legal remedy so as to support the Defendants' jury
demand, then the Allied Plaintiffs will dismiss their claim
for statutory damages." Subsequently, the court ruled that
statutory damages are legal in nature. Thus, plaintiffs
further amended their complaint so as to omit their prayer
for statutory damages.
Plaintiffs now seek to resurrect their statutory
damages claim. This they cannot do. If plaintiffs wished to
preserve this issue, they should have presented their case
for statutory damages to a jury. Cf., e.g., Foley v. City of
Lowell, 948 F.2d 10, 22 (1st Cir. 1991) ("`It is black letter
law that it is a party's first obligation to seek any relief
that might fairly have been thought available in the district
court before seeking it on appeal.'") (quoting Beaulieu v.
IRS, 865 F.2d 1351, 1352 (1st Cir. 1989)). If they were
displeased with the results of the jury's deliberations,
plaintiffs next could have asked the court to set the jury's
determination aside. If they still were not satisfied,
plaintiffs then could have appealed the court's decision to
commit the statutory damages question to the jury in the
first instance.
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52
Plaintiffs' approach to this issue, if endorsed,
would undermine the efficient administration of justice. Had
plaintiffs presented their claim for statutory damages to a
jury, and had they received the award they sought (either
from the jury itself or from the court after a successful
Rule 50 motion for judgment as a matter of law), the need for
an appeal on this point would have been obviated. Moreover,
even if plaintiffs had not received the relief they were
seeking, the issues underlying the propriety of a statutory
damage award would have been fully litigated at the same time
as the other issues animating this litigation. Thus, we
would have been in a position, on a developed record, either
to resolve the question ourselves or to remand for what would
undoubtedly be a less involved process than the one
plaintiffs now seek.
In sum, when plaintiffs amended their complaint so
as to drop their claim for statutory damages, they
irrevocably waived their right thereto. Accordingly, we need
not reach the question of whether the court erred when it
determined, prior to plaintiffs' final amendment, that
statutory damages under 2520(c) are legal in nature.
4. Disclosure and Use Violations by the CAR Defendants
Finally, in one-half of one page of their fifty-one
page brief, plaintiffs contend that the district court
committed legal error in ruling that the CAR defendants did
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53
not violate the disclosure and use provisions of Title III
and the Maine act. The CAR defendants, utilizing just over
three-quarters of one page of their forty-eight page brief,
counter that any disclosures and uses on their part took
place within the confines of the attorney-client
relationship, and that such fact absolves them from liability
under the relevant statutory provisions. Plaintiffs, again
using less than one-half of one page of their forty-eight
page reply brief, characterize this argument as
"incomprehensible" and restate their position that the CAR
defendants committed disclosure and use violations. Neither
side, at any point, makes reference to any case law,
statutory authority, or legislative history.
The issue here adverted to is an interesting one on
which no federal appeals court has yet spoken: namely, do 18
U.S.C. 2511(c) and (d) (and, correspondingly, 15 M.R.S.A.
710(3)(A) and (B)), see supra note 3, which by their terms
prohibit the "disclos[ure] . . . to any other person" and the
"use" of illegally intercepted material, make it a crime to
disclose and use such material during the course of attorney
consultations?44 Certainly, reasonable arguments might be
44. At least one federal judge, recognizing the inherent
tension between the wording of the statute and the need for
effective trial preparation, has held that the disclosure of
the contents of intercepted recordings to counsel, for the
purpose of preparing a defense, is not a crime. See McQuade
v. Michael Gassner Mech. & Elec. Contractors, Inc., 587 F.
Supp. 1183, 1188-89 (D. Conn. 1984) (Cabranes, J.); see also
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54
made on both sides of this question of first impression.
And, in accordance with our usual practice, we do not wish to
decide it without the benefit of such argumentation and a
developed record. Accordingly, we deem the issue to have
been waived in this instance. See Innamorati, 996 F.2d at
468.
IV.
CONCLUSION
For the reasons herein stated, we affirm the
district court in all respects. Affirmed. No costs.
Affirmed. No costs.
Sound Unlimited, Inc. v. Video Shack Inc., 661 F. Supp. 1482,
1488 (N.D. Ill. 1987) (alluding to but not deciding issue);
cf. supra at 37-39 (disclosures and uses for purposes of
adjudication not banned by Title III).
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