This year, the Supreme Court will hear the United States v. Microsoft case, concerning the reach of search warrants to overseas data. The justices agreed to decide whether an email provider who has been served with a warrant must provide the federal government with emails, even when the email records are stored outside the U.S. And Microsoft argued that the Stored Communications Act (SCA) does not apply in this case as the emails were stored overseas.

In the case, Microsoft refused to give the U.S. government emails from an alleged drug dealer because the emails were stored on servers in Ireland based on Microsoft’s reliance on Irish law, not the 1986 SCA. The style of the 2013 lawsuit in the Southern District of New York was In the Matter of a Warrant to Search a Certain E‐Mail Account Controlled and Maintained by Microsoft Corporation, which makes the dispute somewhat clear.

Peter Vogel and Eddie Block, with Gardere, recently sat down with Inside Counsel to discuss the case in detail. According to Vogel and Block, the district court ruled that Microsoft should produce the emails, relying on the SCA, and found Microsoft in contempt, and on appeal the Second Circuit reversed the district court, relying on Irish law. Microsoft, like all other internet service providers (ISPs) claim that emails are on servers in the U.S. are regulated by the SCA, so if the emails are held by the ISP, then the owner of the emails must assent to releasing them.

However, the emails in controversy were stored on a Microsoft server in Ireland, and thus Microsoft claims that Irish law applies rather than the SCA, which was established in 1986 by Congress to allow or restrict access of telephone records (not emails) with, or without, permission of the owner of the telephone records.

“So, if the telephone records were maintained by a telephone company (like Ma Bell) then the telephone company will only release those telephone records with the consent of the owner,” they explained. “However, if the telephone records are not stored by telephone company, like stored on an employer’s own telephone system, then no consent of the owner is required.”

Fast forward to the mid 1990s and email. ISPs relied on the SCA to allow or restrict access of emails so if the email is held by Google (Gmail), Microsoft (Hotmail, Office 365), or AOL, then the owner must give permission to release the emails. However, if the emails are housed on the owners’ server then the use of a subpoena is sufficient without permission of the owner, per Vogel and Block.

“The Supreme Court has never really addressed how the SCA applies to ISPs and certainly not emails, including failing to mention the SCA in the 2010 case of Quon v. City of Ontario, in which the 9-0 ruling concluded that employees that use employers’ devices to access remote emails and text messages are not entitled to constitutional privacy,” explained Vogel and Block. “So, this Microsoft case appears to have significance as to how the Supreme Court views ownership and possession of emails (and text messages). Some critics suggest that depending on the ruling from the Supreme Court, Congress may take on an effort to reform or replace the SCA.”

Today, almost all businesses rely on cloud email services, and fewer business maintain their own servers and a result what country the email server is located is critical. But few businesses take the time to consider where the cloud email servers are located, and whether the country outside the U.S. will abide by law to control access to emails. One ramification of the Supreme Court’s ruling could be that all U.S. businesses must have cloud email hosted in the U.S., which may be impractical, or more costly depending on the cloud email service providers. Given the pending May 2018 radical change of privacy laws driven by the General Data Protection Regulation, the Supreme Court’s ruling may make management of emails more complicated than ever.

They added, “Privacy laws outside the EU and U.S. are also complicated, so the Supreme Court ruling may have very a complicated impact on cloud email services. A revamped or replaced SCA at this point is very unpredictable, but Congress could easily make things more complicated and require judicial interpretation.”

Amanda G. Ciccatelli is a Freelance Journalist for Corporate Counsel and InsideCounsel, where she covers intellectual property, legal technology, patent litigation, cybersecurity, innovation, and more.