Kenneth Herbert Hanna and Nathan Modell, Appellants, v. United States of America, Appellee, 393 F.2d 700 (5th Cir. 1968)

This appeal is from judgments of conviction on counts one, four and five of a five-count indictment. Count one was directed against the defendant Hanna, and charged him with violating 18 U.S.C. § 1343 (wire fraud). Counts four and five were directed against both defendants, Hanna and Modell, and charged them with violating 18 U.S.C. § 1084 (wagering by wire) and Sec. 1952 (using the telephone in interstate commerce to promote an unlawful activity). The defendants were convicted as charged in the three counts, and each was sentenced to six months' imprisonment followed by five years' probation. Hanna was also fined ten thousand dollars. The sentences were to run concurrently.

There was no dispute about the facts, and we adopt (with the exception noted in footnotes 1, 2 & 3, infra) the statement contained in the Government's brief:

'In the twenty-seven day period from November 24, 1965, to December 21, 1965 over 500 telephone calls were placed from defendant Hanna's phone to a distant information operator (e. g. 1-area code-555-1212) (R. 35). This was discovered during an investigation of Hanna's phone conducted solely by the American Telegraph and Telephone (sic) Company and its subsidiary, Southern Bell Telegraph and Telephone (sic) Company. Hanna's phone had become the focus of an investigation by the telephone company after an official of the company in New York detected an unusual condition on Miami phone number 945-9723. He notified Gerard Doyle, Security Manager of Southern Bell Telegraph and Telephone (sic) Company, of this unusual condition and that the condition indicated that in all likelihood a device known as a 'blue box'¹  was being

used on the line. (R. 34, 295). Doyle investigates toll frauds for the telephone company. Doyle knew from experience that bookmakers use these devices. (R. 40-42, 295). So when he discovered that 945-9723 was subscribed to by Kenneth Hanna, whom Doyle knew to be a local bookmaker (R. 40, 295), he instructed company engineer, Ray Fowler, to determine if the unusual condition was a 'blue box'. On November 24, 1965 Fowler attached a piece of electronic equipment to Hanna's line capable of sensing a 2600 cycle tone originating at the subscriber's telephone. (R. 42).²  It was attached

to Hanna's line before the line reached the toll network. (R. 66). Each time the detection unit sensed a 2600 cycle tone it activated a 'peg counter meter' which is simply a counting device for totalling the number of times a 2600 cycle tone is perceived by the detection unit. (R. 42, 80, 41).

'That night Fowler called Doyle and indicated that the counter was registering. (R. 43). Doyle then advised him to put a tape recorder on Hanna's line to record the sounds made by the 'blue box'. (R. 43, 80, 82). The tape recorder was unattended and was set to cut off automatically 35-45 seconds after being activated by the 2600 cycle tone on the subscriber's line. (R. 43, 44).³  Fowler was certain that a 'blue

box' was being used and notified Doyle. (R. 45, 46, 83, 84). The detection unit, counter and unattended recorder remained on Hanna's line sporadically for twenty-three of the next twenty-six days until on December 21, 1965, Doyle received a subpoena directing him to produce all the recordings before a Federal Grand Jury in Philadelphia, Pa. (R. 46-49, 296). He appeared the following day and turned the tapes over to the Grand Jury. (R. 57). This is the first time anyone in the Federal Government had knowledge that Hanna's line was being monitored. (R. 50).² Attorneys for the United States Department of Justice handling the Philadelphia Grand Jury turned the tapes over to the Federal Bureau of Investigation. The tapes were in turn given to Special Agent William Heist in Miami who contacted Doyle on December 30, 1965. (R. 61). This is the first time Doyle was ever contacted by an agent of the Federal Government relating to this matter (R. 50, 51, 61, 94) and he never did tell anyone outside the Grand Jury what was on the tapes. (R. 57).'³

'Based on the conversations contained in the tapes, Heist and Special Agent Maurice Roussell obtained a search warrant for Hanna's home and an arrest warrant for his person. (R. 91). Heist also determined that defendant Modell was one of the people called by Hanna in New York City. (R. 87, 92, 160). Because the conversations between Hanna and Modell revealed they were engaged in the use of interstate facilities in aid of bookmaking, as they later admitted by stipulation, arrest and search warrants were also issued against defendant Modell and his apartment. On January 8, 1966, agents of the Federal Bureau of Investigation executed the warrants and bookmaking paraphernalia was seized at both places. The 'blue box' was seized at Hanna's residence. (R. 100).'

We adopt also the further statement contained in the brief for appellants:

'* * * The tape recordings and gambling paraphernalia constituted all the evidence against the defendants in the instant case (R. 294).

'The defendants filed a pre-trial motion to suppress the tape recordings, bookmaking, paraphernalia and the 'blue box' on the ground that they were obtained in violation of 47 U.S.C. § 605, and the Fourth Amendment to the United States Constitution (R. 178-179.) The lower court denied the motion and filed a written opinion which is now recorded at 260 F. Supp. 430 (S.D. Fla. 1966) (R. 292-293, 294, 306). The lower court adjudged the defendants guilty based on the evidence sought to be suppressed in this case (R. 314-315).

'The defendant Hanna moved to dismiss the first count of the indictment on the ground that it failed to state an offense under 18 U.S.C. § 1343 (R. 227-228). The lower court denied the motion (R. 293).'

In accordance with Fifth Circuit Rule 24-2(b), the appellants filed the following:

'SPECIFICATION OF ERRORS RELIED UPON

'I

'THE LOWER COURT ERRED IN DENYING THE DEFENDANTS' MOTION TO SUPPRESS (a) THE TAPE RECORDING OF THE DEFENDANTS' MONITORED TELEPHONE CONVERSATIONS AND (b) GAMBLING PARAPHERNALIA FOUND IN CONSEQUENCE THEREOF, ON THE GROUND THAT THE EVIDENCE WAS SECURED IN VIOLATION OF 47 U.S.C. § 605.

'II

'THE LOWER COURT ERRED IN DENYING THE DEFENDANT HANNA'S MOTION TO DISMISS COUNT ONE OF THE INDICTMENT ON THE GROUND THAT SAID COUNT OF THE INDICTMENT FAILED TO STATE A CRIME UNDER 18 U.S.C. § 1343.'

The second specification may be disposed of summarily. If the first specification is sustained, both judgments of conviction must be reversed entirely. If the first specification is not sustained, the judgments must be affirmed. Since the sentences were to run concurrently, it is not necessary to consider questions raised with respect to any one count.⁴ 

Thus our consideration is limited to the question of whether the defendants' motion to suppress the tape recordings, bookmaking paraphernalia and the 'blue box' should have been sustained because they were obtained in violation of 47 U.S.C. § 605.⁵  That question may be further limited to: 'Was the evidence obtained as a result of violating 47 U.S. Sec. 605?'⁶ 

Four other district courts have held that similar evidence was not obtained in violation of the statute.⁷  Of two very recent cases at the appellate level, one has agreed with the district courts while the other has held the evidence inadmissible.⁸  We agree with most, but not all, of the opinion of the Ninth Circuit in Bubis, infra note 8, and we think that its decision that the evidence was inadmissible is in accord with the opinions of the Supreme Court cited in footnote 6, supra.

The Bubis opinion follows the dichotomy of section 605 employed in the first Nardone opinion:

'Section 605 of the Federal Communications Act provides that no person who, as an employe, has to do with the sending or receiving of any interstate communication by wire shall divulge or publish it or its substance to anyone other than the addressee or his authorized representative or to authorized fellow employes, save in response to a subpoena issued by a court of competent jurisdiction or on demand of other lawful authority; and 'no person not being authorized by the sender shall intercept any communication and divulge or publish the existence, contents, substance, purport, effect or meaning of such intercepted communication to any person.' Section 501 penalizes wilful and knowing violation by fine and imprisonment.

'Taken at face value the phrase 'no person' comprehends federal agents, and the ban on communication to 'any person' bars testimony to the content of an intercepted message. Such an application of the section is supported by comparison of the clause concerning intercepted messages with that relating to those known to employes of the carrier. The former may not be divulged to any person, the latter may be divulged in answer to a lawful subpoena.' (Emphasis added.) 302 U.S. at 380, 381,⁹  58 S. Ct. at 276.

To include telephone security personnel charged with the detection of fraud on the carrier within the class of employees receiving or transmitting communications would require too strained a construction. In a broad sense all telephone employees assist in receiving or transmitting communications, for that is the end result of the telephone company's business. But, as the first Nardone appeal indicates (see 302 U.S. 381, 58 S. Ct. 275), this first clause of section 605 has reference to those employees to whom the communications necessarily become known. In fact, here the communications were sent and received by means of direct dialing without the use of a telephone central or other employee. There were no employees or persons whose transmitting and receiving duties permitted them to learn the contents of the telephone conversations. The first clause of section 605 therefore has no application to the facts of this case.¹⁰ 

Parts of the telephone conversation were 'intercepted' and their admissibility must be determined by reference to the second clause of section 605. The second clause is in the most positive and explicit language: 'no person not being authorized by the sender shall intercept any communication and divulge or publish the existence, content, substance, purport, effect, or meaning of such intercepted communication to any person.' That clause simply means what it says and says what it means. The first Nardone case, supra note 6, refers to it as a 'plain mandate' (302 U.S. at 383, 58 S. Ct. at 275), and holds that 'no person' embraces federal agents engaged in the detection of crime. A fortiori that expression embraces the security personnel of a telephone company.

That is made more certain when we turn from the literal language of section 605 to its purpose and intent as stated in the first Nardone appeal:

'It is urged that a construction be given the section which would exclude federal agents since it is improbable Congress intended to hamper and impede the activities of the government in the detection and punishment of crime. The answer is that the question is one of policy. Congress may have thought it less important that some offenders should go unwhipped of justice than that officers should resort to methods deemed inconsistent with ethical standards and destructive of personal liberty. The same considerations may well have moved the Congress to adopt section 605 as evoked the guaranty against practices and procedures violative of privacy, embodied in the Fourth and Fifth Amendments of the Constitution.' 302 U.S. at 383, 58 S. Ct. at 277.

Again, the second Nardone case referred to the first, as follows:

'That decision was not the product of a merely meticulous reading of technical language. It was the translation into practicality of broad considerations of morality and public well-being. This Court found that the logically relevant proof which Congress had outlawed, it outlawed because 'inconsistent with ethical standards and destructive of personal liberty.' 302 U.S. 379, 383, 58 S. Ct. 275, 277, 82 L. Ed. 314.' 308 U.S. at 340, 60 S. Ct. at 267.

Adding to the language of the Supreme Court the italicized expressions enclosed in parentheses, we would say the 'Congress may have thought it less important that some offenders should go unwhipped of justice (and that the telephone company lose some long distance tolls) than that officers (or telephone company employees) should resort to methods deemed inconsistent with ethical standards and destructive of personal liberty.'

There is some suggestion that, by his illegal use of the telephone company facilities, Hanna impliedly 'authorized' the interception of any communication. That position is untenable. It would justify the violation of the secrecy of communication by the results obtained from the violation. By analogy to the search and seizure cases under the Fourth Amendment that is, of course, impermissible.¹¹  If sound, that suggestion need be but slightly modified to render admissible in evidence all intercepted telephonic communications having to do with the planning or effectuation of crime. In discussing the phrase 'authorized by the sender,' the Supreme Court has said: 'The Act contemplates voluntary consent and not enforced agreement to publication.' Weiss v. United States, supra note 6, 308 U.S. at 330, 60 S. Ct. at 272.

The Government's main thesis is thus expressed in brief:

'The crux of this appeal is whether trespassers on the facilities of a communications common carrier and thieves of its services are entitled to the privacy afforded by Title 47, U.S.C. § 605. Common sense dictates that Congress did not intend to protect trespassers and thieves.'

That seems to be the basis of the Tenth Circuit's decision in Brandon, supra note 8, when that Court says:

'That provision was adopted by Congress for the protection of authorized users of telephonic or radio facilities; it was not intended as a refuge for the wrongdoer who uses the telephone in a scheme to violate the wire fraud statute.' 382 F.2d at 611.

We do not agree.

As the Supreme Court pointed out in both Nardone appeals, Congress intended to protect 'against practices and procedures violative of privacy,' and against 'methods deemed inconsistent with ethical standards and destructive of personal liberty.' (302 U.S. at 383, 58 S. Ct. at 277.) If the protection of the law abiding requires the protection of all telephonic users including 'trespassers and thieves' and other criminals, the answer is that it is for Congress to declare which is the more important policy.

The Government's attempted analogy between persons attempting to defraud the carrier of its long distance tolls and trespassers on land is patently unsound. The argument need be but slightly changed to treat as 'trespassers' all persons using or misusing the telephone to plan or effectuate crime. If not, the argument would result in attaching more importance to a minor fraud than to the most heinous felony. Such a construction would render the statute no longer 'a plain mandate.'¹²  The argument would permit telephone company personnel to conduct pervasive wire tapping invasive of the privacy of the lawless and law-abiding alike, and then to make use of the fruits of their conduct in those cases in which the results showed that one of the parties to the telephone conversation was attempting to commit a fraud on the telephone company.¹³  Incidentally, the Government's position takes no account of the user at the other end of the line who may be innocent of that particular type of criminality. In the present case, there is no evidence that Modell knew that Hanna was using a blue box.¹⁴ 

Basically, the Government's argument in this case is but a watered down version of its argument in Nardone and the subsequent cases cited in footnote 6, supra. The Supreme Court has consistently rejected the Government's position, and we can do no less.¹⁵ 

As indicated in footnote 14, supra, this opinion had been drafted and circulated among the Judges before the Supreme Court's decision on December 18, 1967 of Katz v. United States. That decision goes much further than to reinforce our view that the tape recordings were inadmissible against Modell. It makes clear that they were entirely inadmissible. There the Supreme Court definitely overruled Olmstead v. United States, 1928, 277 U.S. 438, 48 S. Ct. 564, 72 L. Ed. 944, which was the occasion for the enactment of the statute now carried forward as 47 U.S.C.A. Sec. 605.¹⁶ 

Olmstead being overruled, section 605 may not now appear necessary. Certainly the statute cannot authorize a violation of the Fourth Amendment as now declared in Katz, supra. Section 605 cannot authorize the telephone company employees to obtain evidence through surveillance which becomes under Katz standards an unconstitutional search; nor can the Government by subpoena duces tecum make use of such evidence. Katz, points out the constitutional procedure as the time-honored method of obtaining a search warrant.¹⁷  Moreover, the fact that a search warrant is not available to the telephone company¹⁸  adds emphasis to the illegality, indeed unconstitutionality, of its surveillance which amounted to a search without a warrant.

The district court erred in denying the defendants' motion to suppress the tape recordings of the defendants' monitored telephone conversations and the gambling paraphernalia found in consequence of those tape recordings. The judgment is therefore reversed with directions to render judgment discharging the defendants.

Reversed with directions.

GODBOLD, Circuit Judge (specially concurring):

I concur in the result.

As Judge Rives notes (footnote 2 of his opinion) the only reasonable inference is that prior to the issuance of the subpoena duces tecum the existence and some inkling of the contents of the communications were disclosed to the government by telephone company employees. Under no construction of Sec. 605 is this proper.

The wiretap was installed on Hanna's telephone on November 24, 1965. It remained there to December 21, although the telephone company knew within a day or two of installation that Hanna was using a device to bypass the telephone company's long distance toll equipment. Whatever right the telephone company may have to determine the existence of communications¹  or the content of communications is limited by standards of reasonableness which were exceeded in this case. Bubis v. U. S., 384 F.2d 643 (9th Cir. 1967).

For these reasons, and these alone, I agree that these cases must be reversed.

HUGHES, District Judge (dissenting).

I respectfully dissent from the majority and would affirm the judgment of the trial court.

I agree with the majority that 'our consideration is limited to the question of whether the defendants' motion to suppress the tape recording, book-making paraphernalia and the 'blue box' should have been sustained because they were in violation of 47 U.S.C. § 605.' In my opinion the evidence was not obtained as a result of violating 47 U.S.C. § 605 and the trial court was correct in overruling defendants' motion to suppress.

By enacting the first clause of section 605, Congress recognized the special position of the carrier's employees. This clause does not proscribe the interception of communications by a '* * * person * * * assisting in receiving * * * or assisting in transmitting * * *.' Apparently, the majority interprets this phrase to include only employees who in actually placing the call obtain knowledge of the communication. In my view such a restrictive construction is contrary to the intent of Congress.

Section 605 was enacted in 1934, long before it was technically possible for toll-charge telephone calls to be completed without the assistance of some human agency. At that time an operator's 'interception' was necessary in order properly to assess toll charges for long distance calls. In recent years the company has developed a means of placing calls and assessing charges without the aid of an operator. The new system, while affording a greater measure of privacy to the user than the old system, provides less security to the telephone company, since by using a 'blue box' a caller may electronically circumvent the new billing system.

In an effort to combat this practice and thus be assured of compensation for the use of its lines, the telephone company has had to take certain security measures. Since the 'blue box' emits a 2600 cycle tone when in use, the company has developed a means of electronically sensing its emission. The frequent appearance of such a tone on a particular line is a strong indication that a 'blue box' is being used. Before any degree of certainty can be achieved, however, it is necessary to have more substantial evidence. This is obtained by the Company's security personnel attaching a tape recorder to the suspected line to verify that a 'blue box' is in fact being used.

I would interpret the first clause of section 605 to include security officers as well as other employees of the carrier who are engaged in keeping the business of telecommunications functioning properly. The operator is only one of many employees who in the proper exercise of their duties necessarily must 'intercept' transmissions. In view of recent inventions, it is irrational to differentiate the legal effect of the operator's function from that of the security personnel. To some extent the security officer has taken over the function of the operator in making certain that toll charges are properly assessed. Consequently, the statute should apply to him in the same way as it formerly did to the operator. Otherwise, the carrier, by using an electronic complex for the purpose of assessing charges, has lost the right of interception which formerly he had.

Since it is my opinion that a security officer, in the light of present day developments, should be included among company employees engaged in the transmission of communications, information obtained by him in the regular course of his duties with the telephone company can be divulged, if done in accordance with the conditions set forth in the first clause of the statute, viz. '* * * in response to a subpoena issued by a court of competent jurisdiction, or on demand of other lawful authority * * *.' The testimony in this case reveals that the manner of divulgence was in accordance with this provision of the statute, as is set forth in the statement of the facts in the majority opinion. Thus the first clause of section 605 does not prohibit the introduction into evidence of the tape recording.

The second clause of section 605 covers persons other than employees '* * * assisting in transmitting * * *.' It provides that '* * * no person not being authorized by the sender shall intercept * * * and divulge * * * the contents * * * of such intercepted communication.' In my opinion the transmissions here under scrutiny are not entitled to the protection of this clause of the statute.

The telephone calls between Hanna and Modell were intrinsically illegal transmissions. It is not their content which made them so, but the fact that Hanna and Modell were fraudulently using the lines without paying for their use. The majority assumes that Congress intended to protect against the monitoring and divulgence of fraudulent transmissions as well as legal ones, but I am unable to make that assumption.

No worthwhile purpose is served by protecting the secrecy of such transmissions, and to do so would seriously inhibit their detection. It is difficult to believe that Congress intended that outlaw transmission should have protection. 'It is,' as stated in Brandon v. United States, 382 F.2d 607, August 29, 1967, 10th Circuit, 'contrary to common sense.'

The leading case which sustains the view that, if the use of a communication facility is illegal, the right of privacy does not exist and the matter may be divulged, is Sugden v. United States, 226 F.2d 281 (9th Cir. 1955) affirmed per curiam, 351 U.S. 916, 76 S. Ct. 709, 100 L. Ed. 1449.

Sugden involved the interception and monitoring of radio transmissions by federal agents. Information obtained in this manner was used as evidence in prosecuting defendants for violation of the immigration laws. Although defendants were not licensed operators and were not thus legally on the air, they sought to interpose section 605 in a motion to suppress the evidence. The trial court granted the motion and dismissed the indictment, but the Ninth Circuit reversed, holding that because the defendants were not legally using the station the statute had no application. The Court declared:

* * * To throw a mantle of protection provided by Section 605 over an outlaw broadcast is to abandon reason. * * * Giving the one who broadcasts without authority any protection under Section 605 could not tend to protect the means of communication.

The case of Brandon v. United States, supra, likewise sustains this view. In that case the defendants were accused of conspiring to defraud the Southwestern Bell Telephone Company in the use of long distance telephone service and facilities. The means of detection were similar to that used in the present case. The Court in holding that section 605 did not prohibit the use of information obtained by monitoring said:

(Section 605) * * * was adopted by Congress for the protection of authorized users of telephone or radio facilities; it was not intended as a refuge for the wrongdoer who uses the telephone in a scheme to violate the wire fraud state.

The majority suggests, assuming arguendo that the tapes are admissible against Hanna, that they cannot be introduced against Modell because there is no evidence that he participated in the wire fraud, citing Katz v. United States, 389 U.S. 347, 88 S. Ct. 507, 19 L. Ed. 2d 576, decided December 18, 1967, as controlling. However, I do not believe Katz to be analogous. That case censured eavesdropping by federal agents as constituting a violation of the defendant's Fourth Amendment rights against unlawful search and seizure. But the Fourth Amendment is no bar to eavesdropping by persons such as these telephone company employees; it applies only to acts of the government. Burdeau v. McDowell, 256 U.S. 465, 41 S. Ct. 574, 65 L. Ed. 1048. The evidence demonstrates that the government played no part in the 'interception' here complained of. Moreover, since I find no violation of Sec. 605 in obtaining and divulging the statements of Modell, there is no legal impediment to their admissibility against him.

For the reasons stated I would affirm.

ORDER GRANTING REHEARING

PER CURIAM:

The panel of this Court, before which this case was heard, on its study of the appellee's petition for rehearing en banc concludes to grant rehearing before said panel, to be submitted on briefs.

It is therefore ordered that rehearing before the panel of this Court which heard the case on original hearing is hereby granted, to be submitted on briefs; the appellee's brief to be filed within twenty (20) days from the date of the filing of this order and the appellants' brief to be filed within fifteen (15) days from the date of the receipt of copy of appellee's brief on rehearing. The Court suggests that the briefs to be filed may freely refer to briefs already on file and avoid unnecessary duplication. Briefs need not be printed but at least four (4) legible copies shall be filed with the Clerk.

Final generator. It enables a caller to by-pass the toll equipment of the telephone company and complete long distance calls without any record of the call being made. Thus, the caller avoids being billed for all calls placed while using a 'blue box'. (R. 35, 295).