In Securities and Exchange Commission v. Huang, the district court held that the Fifth Amendment protected two former employees against having to disclose their personal passcodes for company-issued smartphones to government officials. The decision, likely subject to appellate review, exemplifies the competing interests at play as individuals increasingly use company-issued smartphones for business and personal use.
Angel Diaz
Supreme Court Invalidates Los Angeles Law Authorizing Warrantless Searches of Hotel Records
In City of Los Angeles v. Patel, the Supreme Court invalidated a Los Angeles law that allowed law enforcement officials to inspect hotel and motel guest registries at any time, without a warrant or administrative subpoena. The Court ruled that the law violated hotel owners’ Fourth Amendment rights because it “penalizes them for declining to turn over their records without affording them any opportunity for pre-compliance review.”
In reaching its decision, the Court also announced two findings with implications for future lawsuits brought under the Fourth Amendment:
- Facial challenges to statutes are permitted under the Fourth Amendment
- Hotels and motels do not fall under the “pervasively regulated” exception to the warrant requirement
Courts Address the Level of Security Banks Must Provide to Business Accounts
Big or small, all bank accounts are susceptible to hijacking and fraudulent wire transfers. Banks ordinarily bear the risk of loss for unauthorized wire transfers. Two independent frameworks exist to govern these transfers: the Electronic Fund Transfer Act (“EFTA”) for consumer accounts, and Article 4A of the Uniform Commercial Code (“UCC”) for business accounts.
While the EFTA will ordinarily shield consumers from having to pay for most unauthorized charges as long as they provide notice to their bank, UCC §4A-202 shifts the risk of loss to the customer if the bank can show that (1) a commercially reasonable security procedure was in place and (2) the bank accepted the payment order in good faith and in compliance with the security procedure and any other written agreement or customer instruction.
The commercial reasonability of a security procedure is a question of law, and courts will consider several factors, including:
- Customer instructions expressed to the bank
- The bank’s understanding of the customer’s situation, including the size, type, and frequency of payment orders ordinarily issued
- Alternative security procedures offered to the customer
- Security procedures in general use by similarly situated banks and customers.
In addition, a security procedure will be found commercially reasonable if the customer selected it after refusing a security procedure that was commercially reasonable for the customer’s needs.
Native Advertisers Face Closer Scrutiny From Industry Self-Regulatory Bodies
With paywalls and premium subscriptions finding only modest success, paid advertisements remain the primary means of generating revenue from online content. Native advertising has emerged as a leader in the competition for ad impressions and brand engagement. Expected to grow from $7.9 billion in spending this year to $21 billion by 2018, native advertising is lauded as the future of online advertising.