



COURT OF APPEAL FOR ONTARIO

CITATION: United States v. Equinix Inc., 2017 ONCA 260

DATE: 20170331

DOCKET: C61818

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

BETWEEN

Attorney General of Canada on behalf of the
    United States of America

Applicant / Moving Party (Respondent)

and

Equinix Inc.
*

Respondent (Appellant)

and

Megaupload Inc.

Respondent / Responding Party (Appellant)

Matthew Gourlay, for the appellant Megaupload Inc.

Monika Rahman and Nancy Dennison, for the respondent

Heard:  February 7, 2017

On appeal from the order of Justice Michael G. Quigley of
    the Superior Court of Justice, dated December 14, 2015, with reasons reported
    at 2015 ONSC 7803.

Doherty J.A.:

[1]

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), 116 C.C.C. (3d) 471 (Ont. 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:

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 Ministers
    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 50,000,000 daily users.  Investigators estimated the
    copyright holders losses at approximately $500,000,000 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 RCMPs 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 ONSC 193.  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 added.]

[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 Ministers 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 Ministers 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 appellants
    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 Crowns proposed order offensive to the principles of
    international comity and mutual cooperation.  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
    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
i
s 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 judges careful reasons, I think he erred
    in failing to consider the proposed orders effect on the appearance of
    fairness and, in particular, the appearance of the sending judges
    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.

Released: AH  MAR 31 2017

Doherty J.A.

I agree Alexandra Hoy A.C.J.O.

I agree Bradley W. Miller J.A.





*
Equinix Inc.
    did not participate in the appeal.


