Source: https://case-law.vlex.com/vid/155-f-3d-1051-598157598
Timestamp: 2020-02-29 10:54:05
Document Index: 585423572

Matched Legal Cases: ['§ 10', '§ 78', '§ 240', '§ 1505', '§ 2515', '§ 2515', '§ 2515', '§ 2515', '§ 2701', '§ 2510', '§ 2701', '§ 2515', '§ 2510', '§ 2510', '§ 2510', '§ 2515']

155 F.3d 1051 (9th Cir. 1998), 97-50137, United States v. Smith - Federal Cases - Case Law - VLEX 598157598
Docket Nº: 97-50137.
Party Name: , 98 Cal. Daily Op. Serv. 6590, 98 Daily Journal D.A.R. 9127 UNITED STATES of America, Plaintiff-Appellee, v. Richard J. SMITH, Defendant-Appellant.
155 F.3d 1051 (9th Cir. 1998)
, 98 Cal. Daily Op. Serv. 6590,
98 Daily Journal D.A.R. 9127
In a series of transactions between June 10 and June 18, 1993, Smith liquidated his entire position in PDA. In addition to selling his own shares, Smith "sold short" 1 25,000 shares on July 8, and another 10,000 shares on July 20. Smith's parents also sold and sold short a total of 12,000 shares.
Hi, Angie, Rich.... I talked to Tom last night after I left you some messages and he and Lou discovered that there was about a million and a half dollar mistake in the budget, so now we're back at ground zero and we've got to scramble for the next few days. Anyway, finally I sold all my stock off on Friday and I'm going to short the stock because I know its going to go down a couple of points here in the next week as soon as Lou releases the information about next year's earnings. I'm more concerned about this year's earnings actually. 2
Unbeknownst to either Smith or Bravo, another Los Angeles-based PDA employee, Linda Alexander-Gore ("Gore"), guessed correctly Bravo's voicemail password and accessed Bravo's mailbox. When Gore encountered Smith's message, she forwarded it to her own mailbox. In order to retrieve it, she then called her own voicemail from her home telephone, played the message, and recorded it with a handheld audiotape recorder. 3 After recording the message, Gore approached a co-worker, Robert Phillips ("Phillips"). She informed him of the general nature of the communication and provided him with a copy of the recording.
Smith was indicted on eleven counts of insider trading in violation of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5, and on one count of obstruction of justice in violation of 18 U.S.C. § 1505. Smith moved to suppress the evidence supporting the eleven insider trading counts and to dismiss the indictment as a whole, including the obstruction-of-justice count. After an extensive hearing, the district court suppressed the voicemail message itself, but refused to exclude the remainder of the government's evidence, concluding that it was not "derived from" the initial illegal recording. Although the court granted Smith's motion to dismiss the obstruction count, 4 it denied his motion to dismiss with respect to the insider trading counts.
Smith's contentions on appeal are essentially these: (1) that the government's evidence of insider trading was "derived from" an illegal wiretap and, therefore, should have been excluded pursuant to 18 U.S.C. § 2515; (2) that the information he possessed was
forward-looking, or "soft," information, and hence was not "material" within the meaning of Rule 10b-5; and (3) that the district court erroneously instructed the jury that it could convict Smith based upon his mere possession, as opposed to his use, of inside information.
Prior to trial, the district court suppressed the tape of the voicemail message because it concluded that the tape had been illegally "intercepted" within the meaning of 18 U.S.C. § 2515. The court refused, however, to exclude the remainder of the government's evidence. Smith contends on appeal that all evidence produced by the government at trial should have been suppressed because it was "derived from" an illegal wiretap in violation of § 2515. The government counters on two fronts. In addition to its argument that the district court correctly rejected Smith's "derived from" argument, see infra Part II.B, the government maintains (as an alternative basis for affirmance 5) that the district court erred in concluding that § 2515 governs this case in the first place. The government contends that a separate section of Title 18-- § 2701--applies to situations like the one presented here and thus controls the evidentiary question. Because the government's alternative argument presents a threshold issue, we address it first.
When the Fifth Circuit observed that the Wiretap Act "is famous (if not infamous) for its lack of clarity," Steve Jackson Games, Inc. v. United States Secret Service, 36 F.3d 457, 462 (5th Cir.1994), it might have put the matter too mildly. Indeed, the intersection of the Wiretap Act (18 U.S.C. §§ 2510-2520) and the Stored Communications Act (18 U.S.C. §§ 2701-2710) is a complex, often convoluted, area of the law. This case turns, at least in part, on issues at the very heart of that intersection.
Smith insists that the Wiretap Act controls. The district court agreed. Section 2515 provides, in relevant part, that "[w]henever any wire ... 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." 18 U.S.C. § 2515 (emphasis added). Section 2510(1) defines "wire communication" as "any aural transfer made in whole or in part through the use of facilities for the transmission of communications by the aid of wire, cable, or other like connection" and expressly includes within its scope "any electronic storage of such communication." 18 U.S.C. § 2510(1) (emphasis added). 6 Section 2510(4) defines "intercept" as "the aural or other acquisition of the contents of any wire ... communication through the use of any electronic, mechanical, or other device." 18 U.S.C. § 2510(4).
In view of the rather broad definitions supplied in § 2510, Smith argues, the voicemail message Gore retrieved from Bravo's mailbox seems rather plainly to fit within the language of the exclusionary provision of § 2515. For starters, the message itself, which Smith left in the...
83 Mo. 424 (Mo. 1884), Yeoman v. Younger