A federal judge has dismissed Microsoft’s bid to quash a warrant for the search of a user’s email account information which is being held at a company-owned server in Ireland.

Though Microsoft insisted the warrant was an impermissible extraterritorial search and seizure, Southern District Chief Judge Loretta Preska (See Profile) agreed with Southern District prosecutors that the key matter in the closely-watched dispute was whether the domestically-based entity­—Microsoft—exerted control over the subject information.

The dispute came to “a question of control, not a question of location” said Preska, who ruled from the bench after about an hour and a half of oral arguments.

Microsoft argued that permitting the government’s data acquisition here could offend foreign countries, a claim the prosecution discounted as both speculation and a diplomatic issue that was beyond its concern. Microsoft said the prospect was real, noting that a European Commission spokesperson said the commission’s policy was that data should not be sent directly to U.S. law enforcement outside of formal channels like treaties.

But in her ruling, Preska called any consequences with foreign sovereigns “incidental at best.”

E. Joshua Rosenkranz, Microsoft’s attorney, argued that permitting the warrant would increase the likelihood that other countries would try to access information in the United States.

Rosenkranz said authorities in China had appeared at Microsoft offices there this week demanding a password to access material that the company stores in the United States.

Preska said the actions in China sounded “pretty scary to me” and asked for a response from Assistant U.S. Attorney Serrin Andrew Turner.

Turner said the possibility of retaliation by other nations existed, but that it was a diplomatic issue. He said Microsoft’s lawyers had cited no laws in Ireland that would forbid Microsoft from turning over the data.

Preska said that one provision of Restatement (Third) of Foreign Relations, §442(1)(a), was dispositive. That provision says a U.S. court or agency, when permitted by statute or rule of court, is authorized “to order a person subject to its jurisdiction to produce documents, objects or other information relevant to an action or investigation, even if the information or the person in possession of the information is outside the United States.”

“That’s precisely what’s required here,” Preska said.

Her ruling in Matter of a Warrant to Search a Certain Email Account Controlled and Maintained by Microsoft Corporation, 13-mj-2814, affirmed Magistrate Judge James Francis IV’s April ruling refusing to vacate the warrant (NYLJ, April 29).

Technology giants like Apple, Cisco Systems, Verizon and AT&T filed amicus briefs supporting Microsoft.

Preska agreed to stay the effect of her decision to give Microsoft time to appeal.

In a statement released after the ruling, Brad Smith, Microsoft general counsel said, “The only issue that was certain this morning was that the district court’s decision would not represent the final step in this process. We will appeal promptly and continue to advocate that people’s email deserves strong privacy protection in the U.S. and around the world.”

In December, prosecutors obtained the warrant from Francis for information about a particular email account.

The warrant was issued pursuant to the Stored Communications Act, which is part of the Electronic Communications Privacy Act. The government is seeking the information as part of an investigation of the international narcotics trade.

In response to the warrant, Microsoft produced non-content information and address book data that was located in the United States. But it did not turn over user content located on the server in Dublin.

Microsoft moved to quash the warrant insofar as it attempted to obtain information held in Ireland.

It said the warrant was governed by Federal Rule of Criminal Procedure 41, which prevented courts from issuing warrants for the search and seizure of property beyond U.S. borders.

Furthermore, it pointed to Morrison v. National Australia Bank Ltd., 561 U.S. 247, a 2010 U.S. Supreme Court ruling that said there was a presumption against the extraterritorial application of domestic laws that can only be overcome by a clear statement by Congress to the contrary.

When Francis denied Microsoft’s motion, the company appealed to Preska.

During oral arguments, Rosenkranz, a partner heading Orrick, Herrington & Sutcliffe’s Supreme Court and appellate litigation practice, acknowledged the warrant was “perfectly good” within U.S. borders.

But the question was whether the Electronic Communications Privacy Act was sufficiently explicit in permitting disclosure of information beyond U.S. borders. Not only was that not clearly stated, he said, there were “all indications” lawmakers never contemplated the current scenario when making the law.

Turner, arguing for the government, said the issue of extraterritorial application did not apply because Microsoft was based in the United States.

Besides, he said, it was incorrect to fixate on the location of the sought-after information

It would make “no sense for Congress to require the government to go on a wild goose chase … when the provider is sitting here,” he said.

Microsoft had argued that mutual legal assistance treaties were the proper channels for prosecutors to seek information. Turner called such procedures unnecessary “extra hoops.” And he said Microsoft had no answer for what prosecutors could do if seeking information located in a country without such a treaty.

He invoked In re Grand Jury Proceedings (Bank of Nova Scotia), 740 F.2d 817, a 1984 ruling from the U.S. Court of Appeals for the Eleventh Circuit. That case permitted the disclosure of records stored in the Bahamas and maintained by a Canadian bank with U.S. branches.

Throughout the arguments, Preska repeatedly pressed Rosenkranz on how the so-called Bank of Nova Scotia doctrine applied to Microsoft’s objections.

Rosenkranz said there was “a world of difference” between a bank being compelled to turn over its own records and Microsoft’s being compelled to produce a customer’s email correspondence.

An important question in the matter, Rosenkranz said, was “exactly how far [Bank of Nova Scotia] extends.”

Turner said Rosenkranz “conflate[d] ownership and control.” As he later put it, “they have control of the evidence, that’s what matters.”

Preska also pressed Rosenkranz on whether she had to presume that Congress knew of the 1984 holding when it enacted the Electronic Communications Privacy Act two years later.

When later ruling on the matter, she said lawmakers knew of the Bank of Nova Scotia precedent when enacting the law.