California Court of Appeal: Probation Officers Can Search Smart Phones

Today the First Appellate District of the Court of Appeal of California issued a decision, In re C.A., No. A153686, 2018 Cal. App. Unpub. LEXIS 6523 (Cal. Ct. App. Sept. 25, 2018), ruling on a juvenile criminal defendant's challenge to the electronic search conditions imposed on his probation. The conditions allowed a probation officer to search the electronic storage and communication devices of the Defendant without consent, a search warrant, or probable cause. C.A. was required to disclose his passwords and could only possess portable communication devices with the consent of the probation officer. He was also forbidden to use social media sites and the probation officer, school officials and his parents were allowed to monitor his internet usage.

The Court of Appeal ruled that the Defendant forfeited any constitutional challenge to the conditions by failing to object to them when they were imposed. The challenge was a fact based one based on the nature of his offenses and his personal situation, and so could be forfeited, unlike a challenged based on a question of law.

The Court also rejected the Defendant's claim of ineffective assistance counsel, since there was an alternative to the electronic search conditions. C.A. could have been confined at a special camp during his probation.

N.D. Cal.: Symantec Has Knowledge That Norton Software Unpacked Files to Operating System Core

On Friday, Judge Edward Chen issued a decision in Beyer v. Symantec, Corp., 18-cv-02006-EMC, 2018 U.S. Dist. LEXIS 162166 (N.D. Cal. Sept. 21, 2018) granting in part and denying in part the Defendant’s Motion to Dismiss. The Plaintiff alleged that Symantec’s Norton security software had critical defects. Google’s Project Zero found vulnerabilities in the antivirus software. The AntiVirus Decomposer Engine unpacked executable files to the operating system's core, which has unrestricted access to the computer's files. The Symantec software failed to practice 'sandboxing' which involves opening files in an isolated, secure area.

The Court denied the Defendant's Motion to Dismiss for lack of standing to bring class actions for purchasers of Enterprise products (marketed to businesses). While Beyer only used the Norton products marketed to consumers, Judge Chen concluded that, "[t]he ability to centrally manage security data does not gainsay the fundamental defect in the way the Symantec products were designed. The same alleged defects exist in both lines of products." Id. at *8.

The Court denied a motion to dismiss the fraud claims because Symantec was found to have known how its Norton 360 Premier worked. Despite the fact that the software was purchased in 2009, and Project Zero revealed its defects in 2016, Judge Chen found that, "the complaint sufficiently alleges knowledge, because it alleges that Symantec designed and produced the software in question. It plausibly follows from this fact that Symantec knew how the Second Software functioned,including that the software unpacked potentially malicious files in a high-privilege environment. It also plausibly follows that Symantec knew it had used third party code and knew it did not patch that code when updates were released by the third parties." Id. at 29.

The Court also declined to dismiss an unfairness claim made under the California Unfair Competition Law and a claim for unjust enrichment. Judge Chen did dismiss claims made with respect to Norton software purchased from Best Buy, because claims about the software's capabilities were not attributable to Symantec.

Kroll's Advanceview and Inview Not Exempt from Minnesota Sales Tax

This past Friday, Judge Joanne Turner granted the Defendant's Motion for Summary Judgment in Ontrack v. Comm'r of Revenue, No. 8977-R, 2018 Minn. Tax LEXIS 50 (Minn. T.C. Sept. 14, 2018). This case before the Minnesota Tax Court for the County of Hennepin concerned whether Kroll's Advanceview and Inview systems were "used primarily to electronically transmit results retrieved by a customer of an online computerized data retrieval system," under Minn. Stat. § 297A.68 which makes such systems exempt from sales tax. Kroll also sought a refund for sales tax paid on electricity used to produce personal property.

Advanceview is early case assessment software which is used to narrow down raw data sets of 100 GBs down often by 50% or more by filtering by file types and keywords. Inview is a document review platform which can automatically categorize and prioritize documents. Inview includes the ability to prepare electronic files for production as either tiff images or native files.

Kroll filed a refund claim for more than $1 million for cost of its capital equipment which the Commission denied in full. Judge Turner noted that subdivision 5(d)(8) of Minn. Stat. § 297A.68 specifies that the information on a data retrieval system must be equally accessible and available to all users of the system. Her opinion states that, "a customer of the Kroll system can access only the database of documents it has uploaded to and stored on the Kroll system and cannot access the database of documents uploaded and stored by other customers", and so cannot be considered a data retrieval system under the statute. Ontrack, 2018 Minn. Tax LEXIS 50 at *12. Judge Turner rejected Kroll's argument that only the search tools used in Advanceview and Inview need to be accessible to all customers.

The Court also held Kroll did not engage in the industrial production of personal property. "Kroll describes itself here as in the business of providing'technology-driven services.' Kroll makes no mention of providing its client with products, or anything resembling personal property as defined in Minn. Stat. §297A.61, subd. 10(a)." Id. at *18. Kroll did not qualify for a sales tax refund for its electrical bills.