Middlebrooks v. United States (In re Hipaa Subpoena (Patient Servs., Inc.), No. 19-1424

• Decision Date: 05 June 2020
• Docket Number: No. 19-1424
• Citation: 961 F.3d 59
• Parties: IN RE: HIPAA SUBPOENA (Patient Services, Inc.) J. Arthur Wood; Karen Middlebrooks; Michael Herbert ; Amy Ollett, Petitioners, Appellants, v. United States, Respondent, Appellee.
• Court: U.S. Court of Appeals — First Circuit

961 F.3d 59

IN RE: HIPAA SUBPOENA (Patient Services, Inc.)

J. Arthur Wood; Karen Middlebrooks; Michael Herbert ; Amy Ollett, Petitioners, Appellants,

v.United States, Respondent, Appellee.

No. 19-1424

United States Court of Appeals, First Circuit.

June 5, 2020

Frank A. Libby, Jr., with whom Brian J. Sullivan and LibbyHoopes, P.C. were on joint brief, for appellant Wood.

Bruce A. Singal, with whom Lauren E. Dwyer and Barrett & Singal, PC were on joint brief, for appellants Middlebrooks, Herbert, and Ollett.

Gregg Shapiro, Assistant United States Attorney, with whom Andrew E. Lelling, United States Attorney, and Abraham R. George, Assistant United States Attorney, were on brief, for appellee.

Before Torruella, Boudin, and Kayatta, Circuit Judges.

TORRUELLA, Circuit Judge.

Intervenors-Appellants J. Arthur Wood, Karen Middlebrooks ("Middlebrooks"), Michael Herbert, and Amy Ollett (collectively "Appellants") appeal the district court's order reversing a magistrate judge's quashing of an administrative subpoena duces tecum. The magistrate judge found that Patient Services, Inc. ("PSI"), Appellants' employer, began recording telephone conversations from Middlebrooks's extension during the course of her employment as a Program Manager in PSI's call center, which was located on the second floor (where calls were regularly recorded), and intentionally continued recording Middlebrooks's calls after her promotion and subsequent transfer to the third floor (where calls were not regularly recorded), in violation of Title III of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. §§ 2510 - 2522 ("Title III"). The Government timely objected to the magistrate judge's ruling pursuant to 28 U.S.C. § 636(b)(1)(A), arguing that the magistrate judge's finding that the recordings violated Title III "was clearly erroneous because proof of a Title III violation requires evidence of intent," and Appellants had presented no evidence that PSI intended to continue intercepting and recording telephone conversations from Middlebrooks's extension after she relocated to the third floor. The district court sustained the Government's objection, finding that the magistrate's opinion was contrary to law because he had inappropriately shifted the burden of proof to the Government. The district court held that Appellants bore the burden of proving that PSI's interception of calls from Middlebrooks's extension after her move to the third floor was intentional, and that they failed to meet their burden. Accordingly, the court reversed the magistrate's order that had quashed the subpoena. Appellants timely appealed. After careful consideration, we affirm.

I. BACKGROUND

A. Factual Background¹

PSI is a non-profit organization operating in Midlothian, Virginia. It provides financial assistance to patients suffering from life-threatening diseases who are not otherwise fully covered by their insurance plans. PSI employs Patient Service Representatives, who handle over-the-phone inquiries from patients about financial assistance applications. PSI also employs Assistant Program Managers, who manage the Patient Service Representatives, as well as Program Managers, who supervise both Assistant Program Managers and Patient Service Representatives. Patient Service Representatives, Assistant Program Managers, and Program Managers work in the call center, which is located on the second floor of PSI's three-story building; the third floor is reserved mostly for executive-level employees.

In or about May 2011, PSI purchased a new telephone system from NEC Corporation that allowed PSI to record telephone calls made to and from certain extensions. Cottrell Communications Corporation ("Cottrell") installed the system. PSI purchased recording licenses for each telephone extension from which it wished to record conversations. The recording licenses, which were manually assigned to specific extensions, operated through a "Record and Evaluate" software system. The system only recorded calls from the telephones connected to extensions with an assigned recording license. Each employee had a telephone extension assigned, which originated from the telephone jack located in the employee's office, rather than from the telephone itself. Thus, the recording licenses followed the employees' extensions rather than the telephones.

In order to record calls from a specific extension, someone at PSI needed to log into its "Record and Evaluate" system, open the screens that listed the purchased licenses, and then drag and drop the purchased recording license to a specific extension. Once this process was completed, the recording system would automatically record all calls made to and from the newly licensed extensions and store the recordings in the "Record and Evaluate" system server. NEC designed these recording licenses to continuously operate until the license was manually disabled through the same "Record and Evaluate" system that was used to assign them in the first place.

Few PSI employees were involved in installing the new telephone system. James Grifasi ("Grifasi"), a Network Engineer at PSI, and his assistant, Chip Saunders ("Saunders"), worked with Cottrell contractors to install the new system. Grifasi was the only person authorized to order the extensions rewired, and Grifasi, Saunders, and two Cottrell contractors were the only individuals authorized to physically rewire the extensions. Furthermore, Grifasi and Saunders were the only two PSI employees with the administrator privileges required to access the recorded conversations. Both Grifasi and Saunders could access the "Record and Evaluate" system and see which extensions had been assigned recording licenses. The recording system was installed with the intent of only recording the calls of the Patient Service Representatives, Assistant Program Managers, and Program Managers working in PSI's second-floor call center, as well as those of a select group of employees working on the other floors. Generally, the system was not intended to record calls made by the executives and other employees who worked on the third floor. Most administrative staff were also exempted from being recorded.

PSI hired Middlebrooks as a Patient Service Representative in 2004, and then promoted her to a Program Manager position within the call center in 2006. At some point in 2011, PSI assigned Middlebrooks the extension 1306, which had a recording license. According to the established protocol, the "Record and Evaluate" system recorded Middlebrooks's calls from that line. In late 2011 or early 2012, PSI promoted Middlebrooks to the position of Manager of Program Development and moved her to an office on the third floor, where calls are typically not recorded. Generally, when PSI moved an employee to a new office, the employee would be assigned the extension number connected to the phone jack in the new office. However, Middlebrooks and at least one other employee retained their extensions when they were relocated to new offices on different floors.²

PSI had to take several steps to move an employee's extension from one office to another. The wires from each phone jack led to a central panel, called a "110 punch/wiring block." To move an extension, the wires connecting a particular phone jack to the central panel needed to be removed and then re-installed to a new line on the punch panel. This rewiring process did not affect the recording license assigned to an extension. Instead, the recording license remained in place even if the extension itself was moved from one office to another. In order to stop recording a particular extension, Grifasi or Saunders needed to log into the "Record and Evaluate" system and manually remove the license from that extension. When Middlebrooks was promoted and relocated to the third floor, PSI successfully transferred her extension to her new office on the third floor, but no one at PSI manually terminated the recording license that had been assigned to her extension on the second floor. Thus, the system continued recording calls that were placed from and received by her extension. PSI recorded several telephone conversations between Middlebrooks and the other appellants in this case after Middlebrooks moved to the third floor.

B. Procedural Background

In July 2016, when investigating whether PSI had engaged in an illegal kickback scheme involving pharmaceutical manufacturers and Medicare beneficiaries, pursuant to 18 U.S.C. § 3486, the Government issued an administrative subpoena duces tecum to PSI for "[a]ll recorded conversations of PSI officers and employees." This appeal concerns only those conversations that were recorded on Middlebrooks's extension after she was promoted and moved to the third floor.³ PSI contends that it first learned about the recordings in question after it was served with the subpoena. Only when PSI commenced its efforts to comply with the subpoena did Appellants learn that their conversations with Middlebrooks had been recorded without their knowledge or consent. Consequently, Appellants moved as intervenors to quash the subpoena, alleging that PSI's recording of their telephone conversations should not be produced because they were obtained in violation of Title III. In October 2017, the district court referred the case to Magistrate Judge Donald L. Cabell.

After a motion hearing, on August 15, 2018, the magistrate judge issued an order granting Appellants' motion to quash. In re HIPAA Subpoena, No. 17-mc-91097 (D. Mass. Aug. 15, 2018). The magistrate judge noted that PSI had intentionally intercepted and recorded calls from Middlebrooks's extension while she worked in PSI's call center on the second floor. Id. at 4, 8. Then, after she was promoted, PSI intended to transfer her extension to her new office on the third floor. Id. at 5. The magistrate further noted that PSI knew that it needed to take a series of steps to successfully transfer her extension to the third floor, and...