Opinion ID: 1440058
Heading Depth: 2
Heading Rank: 2

Heading: Telephone Equipment ... or Components Thereof

Text: To fall within the telephone exemption, and thus be used legally, the Racal recording device must be telephone ... equipment... or any component thereof. See Md.Code, § 10-401(4). Specific to this exemption, compelling legislative history exists, particularly from the amendments to the federal wiretapping laws upon which our State's amendments were based, see SENATE JUDICIAL PROCEEDINGS COMMITTEE, 1998 GENERAL ASSEMBLY OF MARYLAND, BILL ANALYSIS FOR SENATE BILL 679 (MD SEN. JUD. PRO. COMM. ANALYSIS-BILL 679), which specifies that the wiretapping laws, including the telephone exemption, were amended in light of dramatic changes in new computer and telecommunications technologies. See U.S. SENATE REPORT NO. 99-541 at 1 (1986)(S.REP. NO. 99-541); see also 1988 Md Laws. ch. 607. Congress passed the Electronic Communications Privacy Act (ECPA) in 1986 for the primary purpose of extending privacy protections given the new technology that had developed since the original enactment. See S. REP. NO. 99-541 at 1. In 1988, the Maryland General Assembly followed suit and adopted legislation which conformed to the Federal Act. See MD SEN. JUD. PROC. COMM. ANALYSIS-BILL 679 (stating that the Maryland amendments were based upon the Model Act developed by the Department of Justice for the states to use in preparing and enacting conforming Electronic Surveillance Legislation). The reasons for these changes and the discussion surrounding the respective adoptions at the Federal and State level provide great insight into the purpose and scope of the telephone exemption. The Federal ECPA was drafted in response to new and developing technologies which appeared to impact an individual's privacy interests and in response to the change in the economic or market structure for communications providers: [Title III] has not kept pace with the development of communications and computer technology. Nor has it kept pace with changes in the structure of the telecommunications industry. S. REP. NO. 99-541 at 2. Thus, ECPA accomplished two things: (a) it modified who could supply telephone equipment or telecommunications services and, (b) it made Title III more restrictive because it expanded the scope of the prohibited interceptions to include electronic communications, rather than just wire or oral communications. The Maryland Bill accomplished equivalent tasks to bring it in line with ... new technological developments and changes in the structure of the telephonic communications industry. See MD SEN. JUD. PROC. COMM. ANALYSIS-BILL 679. First, with respect to modifying who could supply telecommunications equipment under the exemption, the federal amendments acknowledged the changes in the telecommunications industry by eliminating the communications common carrier language from the statute, and in its stead employed provider of wire or electronic communication service. S. REP. NO. 99-541 at 2-3, 55. Furthermore, the amendments undisputably recognized that equipment might be provided by institutions other than the providers of telecommunication services, as is seen by the addition of the alternative furnisher language in 18 U.S.C. 2510(5) and Maryland Code, § 10-401(4)(i). The Wiretap Act exemption now permits telephonic equipment to be furnished by the user/subscriber for connection to the communications service. See S. REP. NO. 99-541 at 55 (the exemption now applies to any telephone ... or any component thereof ... furnished by such subscriber or user for the connection to the facilities of such [wire or electronic communication] service and used in the ordinary course of its business); accord MD SEN. JUD. PROC. COMM. ANALYSIS-BILL 679. It is under this alternative that petitioners' claim proceeds. With respect to the scope of the equipment covered, the intent of Congress and the General Assembly was, to a certain extent, to make the telephone equipment exemption more restrictive because the definition of a prohibited interception now encompassed electronic communications as well as oral and wire communications. See 1988 Md. Laws ch. 607. While the telephone exemption was altered to include equipment or other facility for the transmission of electronic communications , this was, again, only in response to the changes in the telecommunications industry, i.e. the increased number of entities that may provide the increased types of communications services (telephone, email, etc.) and the increased means of communicating. [9] See id. Both Congress and the General Assembly specifically deleted the common communications carrier provision and in its place used providers of wire or electronic communication service and permitted that the equipment utilized to channel these services could be not only furnished by the providers of wire or electronic communication but also furnished by the subscriber or user for connection to the facilities of the service and used in the ordinary course of its business. Id.; see also S. REP. NO. 99-541 at 2-3, 55. Except in its need to make allowances for the changes in the telecommunications industry, Congress did not otherwise increase the scope of the equipment subject to the exemption. [10] Thus, in the case sub judice, we proceed with the understanding that the goals of Congress and the General Assembly were to bring Title III and the Maryland Wiretap Act, respectfully, in step with the increased technological changes and the new risks of intrusion these changes bring. See S. REP. NO. 99-541 at 2 (stating that the new methods of communication and devices for surveillance has expanded dramatically the opportunity for [privacy] intrusions). Contrary to respondent's arguments, we do not believe that legislative history of the amendments to the Wiretap Acts, both Federal and State, indicate any intention, whatsoever, to extend the telephone exemption to encompass the wiretapping instruments used by the respondent. As the United States Court of Appeals for the First Circuit similarly stated in Williams v. Poulos, 11 F.3d 271 (1st Cir.1993), [t]he 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. 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. Id. at 280 n. 13 (internal citations omitted)(emphasis in original). We are also mindful that this is a case of first impression in Maryland; we have not examined whether the use of recording equipment to monitor employees who interact with customers by telephone is a violation of the Maryland Wiretap Act. As such, case law from jurisdictions which have considered the permissibility of using similar equipment pursuant to similarly enacted wiretapping laws may help guide our ultimate conclusion, the caveats being, as we stated previously, that the legislative intent for the wiretapping statutes is sufficiently discernable and that Maryland has professed a heightened interest in the privacy of its citizens, as witnessed by the more restrictive nature of our Wiretap Act. Our Court's protections of the privacy sought by the Legislature should similarly be regarded. Courts have employed various methods of defining or discerning that which is encompassed by the term telephone equipment. Some courts have focused on the entity that designed or sold the add-on equipment, see e.g. Epps v. St. Mary's Hosp. of Athens Inc., 802 F.2d 412, 415-16 (11th Cir.1986)(dispatch console installed by telephone company considered telephone equipment); James v. Newspaper Agency Corp., 591 F.2d 579, 581 (10th Cir.1979)(monitoring device installed by telephone company was implicitly considered telephone equipment), and some have focused on the degree of integration, see e.g. Deal v. Spears, 980 F.2d 1153, 1157-58 (8th Cir.1992)(recording device was not telephone equipment within the meaning of the exemption because it was not purchased from the telephone company and it was connected to an extension phone and not directly to the telephone line); O'Sullivan v. NYNEX Corp., 426 Mass. 261, 687 N.E.2d 1241, 1245 (Mass.1997)(recording system designed for and used by telephone company did not require connections to an extra telephone line); Dillon v. Massachusetts Bay Transp. Auth., 49 Mass.App.Ct. 309, 729 N.E.2d 329, 335 (2000), cert. denied, 432 Mass. 1105, 733 N.E.2d 1067 (Mass.2000)(recording devices directly integrated into phone lines on which they depended in order to function were telephone equipment). To a certain extent, these factors may assist a court in determining whether the devices qualify as telephone equipment; overall, however, we believe these factors are unsatisfactory. We agree with courts that have taken a more functional approach to this determination. That is, to be deemed telephone equipment, the equipment must further the use of or functionally enhance the telecommunications system. See Sanders v. Bosch Corp., 38 F.3d 736, 740 (4th Cir.1994)(stating that [t]he voice logger in no way furthers the plant's communication system); Williams, 11 F.3d at 280 (monitoring system is precisely the type of intercepting device Congress intended to regulate heavily when it enacted Title III). The utility of the add-on equipment must have some relation to the enhancement of the communication system. The United States District Court for the District of New Jersey succinctly described the type of add-on equipment that would functionally enhance the telecommunications system as instruments [which have] a positive impact on the efficiency, clarity, cost, or any other factor by which one would measure the effects on a communications system. See Pascale v. Carolina Freight Carriers Corp., 898 F.Supp. 276, 281 (D.N.J.1995). Thus, we measure the applicability of the exemption by the functional utility of the equipment and its ability to further the use of the telecommunications system. This is consistent with our interpretation of electronic, mechanical or other device in Adams v. State, 289 Md. 221, 424 A.2d 344, (1981). In Adams, we considered whether a witness's telephonic identification of the defendant through the use of an extension phone in the police station violated the Maryland Wiretap Act. Id. at 222, 424 A.2d at 345. We held that the use of extension phones was exempted from the statute under the telephone exemption. Id. at 229, 424 A.2d at 348. While not explicitly so stating, we did consider the functional enhancement that resulted from an extension phone device. We stated that the extension phone was furnished to the subscriber in order that the same communication may be received or transmitted at the same time by more than one person, id. at 227, 424 A.2d at 347, and characterized the extension phone as similar in nature to a speaker phone, which would allow anyone in the room to hear the communication. See id. at 228-29, 424 A.2d at 348. Thus, a speaker phone and an extension phone further the use of the telecommunications equipment, in that they increase the ability of the phone equipment to accommodate more parties to the communication. Furthermore, in concluding that the extension phone was telephone equipment we noted that the extension phone was not an additional device attached to the telephone, and specifically, it  was not a device placed on the line in order to receive the communication during its transmission. Id. at 227, 424 A.2d at 347 (emphasis added). The Racal equipment, however, is such a device. In fact, it is precisely the type of device intended to be restricted under the wiretapping statutes. The respondent argued, and the Court of Special Appeals agreed, that the Racal monitoring and recording equipment was designed to support a function related to the effectiveness of the telecommunications system. 139 Md.App. at 489, 776 A.2d at 92. We disagree. The recording devices in no way increased the effectiveness of the telecommunications system; it may have increased the effectiveness of the monitoring and training of the IWIF employees in their interactions with the customers on the telephone, but the telecommunications equipment itself was not improved, enhanced, or furthered by the addition of the monitoring and recording devices. The efficiency, clarity and cost of the respondent's Meridian telephone system were not positively affected by the procurement and utilization of the Racal devices. The Court of Special Appeals erroneously emphasized certain factual characteristics of the Racal system in support of its conclusion that the Racal system qualified as telephone equipment. The intermediate appellate court found that the recorders were designed and manufactured for use as integrated components of a telecommunications system to provide monitoring and recording for that system. See Schmerling, 139 Md.App. at 488, 776 A.2d at 91. The court further emphasized that the Racal equipment was highly specialized, expensive hardware. Id. at 489, 776 A.2d at 91. That an intercepting device is manufactured to be an integrated component of a larger system, and that the device is highly technical and expensive does not, per se, establish that the equipment is telephone equipment under the Act. Similarly, simply because the recorders have no use outside of their integrated functioning in IWIF's system and their connections are indistinguishable from those for the other [IWIF] hardware, does not mean they automatically become telephone equipment or a component thereof. Id. at 489, 490, 776 A.2d at 92, 93. The equipment must enhance the functional use of the communications system rather than merely containing indistinguishable connections from the main system. Respondents believe that so long as a device is made and sold commercially, connected directly to the phone lines and deeply integrated into the users telephone system, it should be considered telephone equipment or a component thereof. See e.g. Sanders, 38 F.3d at 744 (Widener, J., concurring in part, dissenting in part). Such a standard, however, would render the first prong a virtual nullitythe only consideration would be whether the interception was for a valid business purpose. This is certainly not what the Legislature intended. Again, in considering the functionality of the device at issue, it is clear that the Racal system is only capable of monitoring telephone transmissions. By respondent's admission and the Court of Special Appeals's agreement therewith, the Racal system does nothing other than monitor and record, it does not enhance communication or advance the efficient use of the telecommunications. See Schmerling, 139 Md.App. at 479, 776 A.2d at 86. These devices cannot be considered telephone equipment because, simply put, the Racal recorders do not contribute to the functionality of the phone system in that they do not relate to the facilitation of communication; thus, the exemption cannot apply.