Attorney General of Canada on behalf of the United States of America v. Equinix Inc.

[Indexed as: United States of America v. Equinix Inc.]

Ontario Reports

Court of Appeal for Ontario

Hoy A.C.J.O., Doherty and B.W. Miller JJ.A.

March 31, 2017

137 O.R. (3d) 529 | 2017 ONCA 260

Case Summary

Criminal law — Mutual legal assistance — FBI alleging that appellant was facilitating copyright infringement through several websites — Minister approving U.S. request for application for search warrant for computer servers leased by appellant in Toronto — RCMP seizing servers which allegedly contained both relevant and irrelevant information — Application judge having jurisdiction under s. 15(2) of Mutual Legal Assistance in Legal Matters Act to make order directing that servers be examined by FBI "clean team" which had no involvement in investigation and which would sort material and draft report to assist sending judge in deciding what material should be sent to U.S. — Application judge erring in failing to consider effect on appearance of fairness of having entity closely associated with one of adversaries examining material and preparing report — Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4th Supp.), s. 15(2).

The Intellectual Property Rights Unit of the FBI alleged that the appellant was facilitating copyright infringements and related money laundering transactions through several websites which it owned and operated. When they learned that the appellant leased computer servers in Toronto, the investigators asked the minister to obtain a search warrant authorizing the seizure of the servers. The minister approved the request and a Superior Court judge issued a search warrant authorizing the RCMP to seize the servers. The minister applied for an order under s. 15 of the Mutual Legal Assistance in Criminal Matters Act directing that the servers be sent to the United States. The appellant submitted that much of the information on the servers was the property of third parties and had no relevance to the U.S. investigation, and argued that irrelevant information could not be sent under s. 15 of the Act. On an application for directions, the application judge granted an order under s. 15(2) of the Act directing that the servers be examined by an FBI "clean team" which had no involvement in the investigation and which would sort the material and draft a report to assist the sending judge in deciding what material to send to the U.S. The appellant appealed.

Held, the appeal should be allowed.

The application judge had jurisdiction to make the order under s. 15(2) of the Act, which provides that at the hearing under s. 15(1), "the judge may require that a record or thing seized in execution of the warrant be brought before him". The power to direct that the material be brought before the judge includes, by implication, the power to make the orders necessary for the judge to carry out her role in assessing the material under s. 15(1). However, the application judge erred in failing to consider the proposed order's effect on the appearance of fairness and, in particular, the appearance of the sending judge's impartiality. It was offensive to the appearance of fairness and the appearance of judicial impartiality to have an entity closely associated with one of the adversaries provide the judge with the necessary report. The order should be set aside.

Other Cases Referred To

R. v. Gladwin, [1997] O.J. No. 2479, 101 O.A.C. 116, 116 C.C.C. (3d) 471, 45 C.R.R. (2d) 67, 35 W.C.B. (2d) 204 (C.A.); United States of America v. Equinix Inc., [2013] O.J. No. 63, 2013 ONSC 193, 104 W.C.B. (2d) 848 (S.C.J.)

Statutes Referred To

Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4th Supp.), ss. 12 [as am.], (2), (3), (4) [as am.], 15 [as am.], (1) [as am.], (2), 35 [as am.]

Appeal

APPEAL from the order of M.G. Quigley J., [2015] O.J. No. 6696, 2015 ONSC 7803 (S.C.J.) made under s. 15(2) of the Mutual Legal Assistance in Criminal Matters Act.

Matthew Gourlay, for appellant Megaupload Inc.

Monika Rahman and Nancy Dennison, for respondent.

The judgment of the court was delivered by

Judgment

[1] DOHERTY J.A.:

This appeal comes to the court pursuant to leave to appeal granted by Feldman J.A. under s. 35 of the Mutual Legal Assistance in Criminal Matters Act, R.S.C. 1985, c. 30 (4th Supp.) (the "Act").

The Issues

[2]

The appeal raises two questions.

(1) Did the application judge have the jurisdiction under s. 15(2) of the Act to make an order directing that the seized material be examined by an FBI "clean team" for the purposes of preparing a report to assist the court in determining what order, if any, should be made under s. 15(1) of the Act?

(2) If the application judge had that jurisdiction, did he err in exercising it by allowing the FBI "clean team" to examine the material?

The Act

[3]

Before turning to the facts of this case and the issues raised on appeal, a brief primer on the operation of the Act is helpful.

[4]

Under the Act, countries that have the appropriate treaty with Canada, like the United States, can seek the assistance of the Minister of Justice (the "minister") in locating and obtaining evidence, believed to be in Canada, relevant to a criminal investigation in the foreign country. The minister can approve the use of various investigative techniques, including a search warrant. If the minister authorizes his agent to seek a search warrant, the application is made to the Superior Court. The judge may issue the warrant if the prerequisites in s. 12 of the Act are met.

[5]

The issuing judge must fix a date after the proposed execution of the warrant for a hearing to consider whether the warrant was properly executed and, if so, whether the seized material should be sent to the foreign jurisdiction (s. 12(3) of the Act). The peace officer who executes the warrant prepares a report for the judge to consider on the return date. The report includes a description of the things seized. The person from whom the material was seized and any other person who claims an interest in the material is entitled to notice of the hearing and to make submissions at the hearing (ss. 12(4), 15(1) of the Act).

[6]

At the hearing held under s. 15(1) of the Act, the judge must decide whether to order the seized material sent to the foreign jurisdiction. If the judge is not satisfied that the warrant was executed in accordance with its terms, or is satisfied that a sending order should not be made, the court may return the material to the person from whom it was seized, or to a person lawfully entitled to the material. If the judge is satisfied that the warrant was executed according to its terms and there is no reason why the order should not be made, the judge may order the material sent to the foreign jurisdiction: see R. v. Gladwin, [1997] O.J. No. 2479, 116 C.C.C. (3d) 471 (C.A.), at para. 8. A judge making a sending order under s. 15(1) may impose "any terms and conditions that the judge considers desirable".

[7]

Section 15(2), the focal point of this appeal, states:

15(2) At the hearing mentioned in subsection (1), the judge may require that a record or thing seized in execution of the warrant be brought before him.

[8]

Read literally, s. 15(2) allows the judge, before deciding whether to make a sending order under s. 15(1), to order a physical object or document, seized pursuant to the warrant, brought before him or her for examination. On this appeal, the court must decide whether the reach of s. 15(2) extends beyond that literal meaning.

Background and Prior Proceedings

[9]

In December 2011, the U.S. Department of Justice sought the minister's assistance in an ongoing investigation involving allegations of criminal breach of copyright. The U.S. investigators (the Intellectual Property Rights Unit of the FBI) alleged that the appellant and its officers and employees were facilitating criminal copyright infringements and related money laundering transactions, on a massive scale, through several websites operated and administered by the appellant. According to the investigators, the relevant websites had some 50 million daily users. Investigators estimated the copyright holders' losses at approximately $500 million over a given two-week period.

[10]

The investigators learned that the appellant leased computer servers in Toronto. They believed that these servers contained copyrighted content and other information relevant to the investigation. The U.S. authorities asked the minister to obtain a search warrant authorizing the seizure of the servers.

[11]

The minister approved the U.S. request and, on January 18, 2012, a Superior Court judge issued a search warrant authorizing the RCMP to search the business premises and seize the servers. The RCMP executed the warrant and seized 32 servers. They have been in the RCMP's possession since they were seized.

[12]

In January 2013, the minister applied for an order under s. 15 of the Act, directing that the 32 servers be sent to the United States. On the application, the appellant acknowledged that the warrant had been properly issued and that the search had been executed in accordance with the terms of the warrant. The appellant submitted, however, that the servers contained a mass of information, much of which was the property of third parties and had no possible relevance to the U.S. investigation. The appellant argued that information on the servers irrelevant to the U.S. investigation could not be sent to the United States under s. 15 of the Act.

[13]

Pardu J., as she then was, heard the application: United States of America v. Equinix Inc., [2013] O.J. No. 63, 2013 ONSC 193 (S.C.J.). She noted that the data on the servers was estimated to be the equivalent of the data found on 100 laptop computers. She further indicated that, under Canadian case law, a warrant authorizing a seizure of a computer did not necessarily authorize the seizure of everything stored on the computer. Pardu J. concluded that, before a sending order could be made, the court required assistance in separating the content on the servers relevant to the U.S. investigation from the irrelevant content. She said, at para. 16:

. . . [t]he appropriate balance of the state interest in gathering evidence and privacy interests in information can be struck by an order that the servers be brought before the court pursuant to s. 15(2) so that the court can make an order refining what is to be sent. By this, I do not mean that at this stage the servers must physically be delivered to the courthouse. The application for a sending order is adjourned without a fixed return date, returnable on 7 days' notice. If counsel are unable to agree as to how the scope of relevant material is to be defined then the matter may be brought back before a judge of this court for determination of that issue.

(Emphasis in original)

[14]

The parties were unable to agree on a method of sorting the relevant material from the irrelevant material on the servers. They found themselves back before the court in April 2015 seeking directions. The minister proposed that an FBI "clean team" would sort the material and draft a report for the court. The application judge described the minister's proposal, at para. 6 of his reasons:

So, in order to virtually "bring" the servers before this court in accordance with Justice Pardu's endorsement, the clean team would examine that evidence forensically, and provide a written summary of it to this court. The clean team will be comprised of American FBI trained personnel who have had no involvement in the case for which the evidence is being sought. In their report, they would also describe whether and to what extent evidence on those servers is relevant to the charges that are being prosecuted in the United States.

[15]

The minister outlined a variety of conditions designed to ensure that the U.S. authorities investigating the alleged copyright infringements would not have access to any information on the servers until that information was ordered sent to the United States. The minister also provided a letter from the United States Department of Justice, indicating that U.S. justice authorities routinely used "clean teams" to review material that contained potentially privileged information before that material was turned over to investigators.

[16]

Counsel for the appellant agreed that some kind of process like that suggested by the minister was appropriate to help the judge in sorting out the relevant from the irrelevant material on the servers. Counsel submitted, however, that the process should not be done by an arm of the American government, and particularly not by the FBI, the same agency that was investigating the copyright allegations. Counsel submitted that there were independent experts who could perform the same function as the FBI "clean team", and that the court should require the minister to retain an independent expert to provide the necessary summary of the information contained on the servers.

[17]

The application judge accepted the minister's position and directed that the FBI "clean team" examine the servers and prepare a report to assist the sending judge in deciding what material should be sent to the United States. He placed several conditions on his order, intended to protect the integrity of the data on the servers, to ensure that the information on the servers did not find its way to the American investigators before a sending order was made, and to allow representatives of the appellant to oversee the process.

[18]

The application judge gave three reasons for accepting the submission that the "clean team" should examine the servers and prepare the report. First, he held that using a "clean team" would not compromise the privacy interests of the appellant or any third parties. On his analysis, at para. 17, the privacy interests stemming from the search and seizure of the servers was not the issue, as the parties were agreed that the warrant was valid. In his view, at paras. 14-18, the extent of any intrusion on privacy interests would depend, not on the involvement of the "clean team", but on the terms of any s. 15 sending order the judge might ultimately make.

[19]

Second, the application judge, at paras. 19-20, rejected the appellant's submission that the FBI "clean team" might share information with the U.S. investigators, or otherwise not comply with any order made. He found this rationale for rejecting the Crown's proposed order offensive to the principles of international comity and mutual co-operation. The application judge observed, at paras. 21-26, that the operation of the Act was premised on those principles and was intended to facilitate the effective investigation of international criminal activity.

[20]

Third, the application judge referred, at paras. 27-32, to the potential costs of examining the servers and preparing the necessary report. The parties' cost estimates suggested that the FBI "clean team" could do the necessary work at less cost than an independent expert. The estimates offered little insight as to the amount that would be saved by using the "clean team", but indications were that savings would not be significant. The application judge wrote, at para. 27, that the costs associated with examining the servers were "not a central consideration", but rather "part of the balancing exercise".

Issue #1: Did the Application Judge Have Jurisdiction to Make the Requested Order under Section 15(2) of the Act?

[21]

The jurisdictional question was not raised before Pardu J. or the application judge. Counsel accepted that a judge, acting under s. 15(2) of the Act, had the power to make the order sought by the minister. The jurisdictional question was raised on the leave application in this court. In raising the issue, the appellant relied on United States of America v. Bin, [2015] B.C.J. No. 2798, 2015 BCSC 2381, decided two days after the application judge released his reasons.

[22]

In Bin, U.S. investigators, specifically the FBI, sought Canadian assistance in an ongoing criminal investigation. The RCMP obtained a warrant under s. 12 of the Act. It seized various digital devices containing over 300,000 pages of documentation and data. Much of the information was in Chinese. Some of the information involved very technical matters relating to aircraft technology.

[23]

The RCMP sought an order under s. 15(2) of the Act allowing an FBI "clean team" to examine and translate the material and provide a report for the judge who would ultimately determine whether any of the material should be ordered sent to the United States under s. 15(1). For present purposes, the order sought in Bin is indistinguishable from the order under appeal. The judge in Bin held that he had no jurisdiction to make that order under s. 15(2).

[24]

In his factum, counsel for the appellant argued that this court should follow Bin. However, in oral argument, counsel did not rely on Bin and did not take the position that the order under appeal could not be made under s. 15(2) of the Act. Instead, counsel focused on his argument that the order permitting an FBI "clean team" to review the material should not have been made.

[25]

I think counsel was correct to abandon the jurisdictional argument. Section 15(2) exists to assist the judge in making a determination under s. 15(1). Sometimes, the determination will require an examination of the material. In cases like this one, an effective examination of the material can only be made by a judge who has the necessary technical and expert assistance. Physically bringing the material seized before the judge, without more, does not assist the judge in deciding what order should be made under s. 15(1). The power to direct that the material be brought before the judge includes, by implication, the power to make the orders necessary for the judge to carry out her role in assessing the material under s. 15(1). Counsel for the minister put it well in her factum, at para. 46:

If a sending hearing judge is entitled to examine the material at issue to fulfil his or her role under s. 15(1) . . . then the respondent submits that s. 15(2) must include the jurisdiction to order that voluminous contents of digital devices be brought before [the] court in a meaningful way that allows for a review.

[26]

I would add that, although I do not agree with the interpretation of s. 15(2) put forward in Bin, I do agree with the holding in Bin that the judge who issued the search warrant could have made a similar order under s. 12(2) of the Act. That section allows the judge who issues the warrant to impose conditions on the execution of the warrant. I see no inconsistency or interpretative impediment to a reading of the Act that allows both the judge who issued the warrant and the judge acting under s. 15 to enlist the appropriate technical and expert assistance needed to promote the effective operation of the Act.

Issue #2: Did the Application Judge Err in Making an Order Allowing the FBI "Clean Team" to Examine the Material?

[27]

The application judge exercised a discretion in making the order he did. This court can interfere with the exercise of that discretion only if the application judge failed to consider relevant principles, considered irrelevant principles or exercised his discretion in an unreasonable manner.

[28]

With respect to the application judge's careful reasons, I think he erred in failing to consider the proposed order's effect on the appearance of fairness and, in particular, the appearance of the sending judge's impartiality.

[29]

The judge had to decide what material, if any, should be ordered sent to the United States. The appellant and the American investigators, the FBI, stood in a strongly adversarial position with respect to the order that should be made. The judge, because of the nature of the seized material, needed help in determining what order should be made. The judge needed someone who could prepare a report outlining the nature of the material so that the judge could decide what part of the material, if any, should be sent to the United States.

[30]

The report inevitably would significantly influence the nature and scope of any order made by the judge. In my view, it is offensive to the appearance of fairness, and specifically the appearance of judicial impartiality, to have an entity closely associated with one of the adversaries provide the judge with the necessary report. In coming to that conclusion, I make no assumption that the FBI "clean team" would not comply with whatever conditions the court imposed. My concern is with the appearance of fairness and impartiality.

[31]

If a judge asked to make a s. 15(1) order needs assistance in examining the seized material, the judge should start from the premise that anyone retained for that purpose should be independent of the interested parties. If a party claims that an associated entity should be allowed to review the material and prepare a report for the judge, that party bears the onus to justify use of an associated entity.

[32]

For example, there could be cases in which the foreign investigative authorities have a particular and unique expertise that would be valuable in examining the seized material: see Bin, at para. 19. In that situation, it may be open to the judge to allow the expert associated with one of the parties to review the material and prepare the necessary report under the appropriate safeguards.

[33]

There is no suggestion that the FBI "clean team" brings any unique expertise to the task at hand. During oral argument, the court was advised that lawyers involved in discovery for complex litigation -- assembling and examining millions of electronically stored documents -- routinely engage entities to perform functions like those the FBI "clean team" proposes to provide in this case.

[34]

Cost considerations may be relevant in deciding who should be appointed to assist a judge in examining seized material. I agree with the application judge, however, that cost considerations cannot play a leading role. I would think that any cost difference, between using an entity affiliated with one of the parties and an independent entity, would have to be prohibitive before it could justify appointing the affiliated entity. The evidence in respect of costs placed before the application judge does not come close to justifying a departure from the presumption in favour of appointing an independent party to assist the judge in reviewing the documents.

Conclusion

[35]

I would set aside the order of the application judge. The parties are effectively back in the position they were after the order of Pardu J. If the parties cannot come to an agreement as to how to implement her order, they must seek further directions from the Superior Court. That court will have these reasons.

Appeal allowed.

*Equinix Inc. did not participate in the appeal.

End of Document