United States v. Kanodia

• Decision Date: 06 June 2016
• Docket Number: Criminal Action No. 15-10131-NMG
• Citation: United States v. Kanodia, Criminal Action No. 15-10131-NMG (D. Mass. Jun 06, 2016)
• Parties: UNITED STATES OF AMERICA, Government, v. AMIT KANODIA, Defendant.
• Court: U.S. District Court — District of Massachusetts

UNITED STATES OF AMERICA, Government, v. AMIT KANODIA, Defendant.

Criminal Action No. 15-10131-NMG

United States District Court District of Massachusetts

June 6, 2016

MEMORANDUM & ORDER

GORTON, J.

DefendantAmit Kanodia("Kanodia" or "defendant") has been indicted for Conspiracy to Commit Securities Fraud (Count 1) for allegedly conspiring in 2013 to engage in insider trading of shares of Cooper Tire & Rubber Company("Cooper Tire"), all in violation of 15 U.S.C. § 78j(b)and78ff(a),18 U.S.C. § 371and17 C.F.R. § 240.10b-5("Rule 10b-5").Kanodia has also been indicted on 18 counts of securities fraud (Counts 2-19) in violation of 15 U.S.C. § 78j(b)and78ff(a),18 U.S.C. § 2andRule 10b-5.

Pending before the Court is Kanodia's motion to suppress evidence that the government obtained pursuant to a search warrant directed to Network Solutions, LLC("Network Solutions") for e-mail communications and account data associated with the e-mail address AK@LincolnVentures.com.For the reasons that follow, that motion will be denied.

I.Background

A.Parties

Kanodia is charged with engaging in insider trading after misappropriating material, nonpublic information that he obtained from his wife, the General Counsel of Apollo Tyres, Ltd.("Apollo"), concerning an anticipated merger between Apollo and Cooper Tire.Kanodia purportedly disclosed that information to co-defendantIftikar Ahmed("Ahmed" or "co-defendant") and family friend Steven Watson("Watson") with the understanding and intent that they use the inside information to trade in shares of Cooper Tire and share their profits with him.

The indictment alleges that Ahmed and Watson then began accumulating Cooper Tire shares and call options in April, 2013 and continued doing so until shortly before the public announcement of the merger in June, 2013.Ahmed and Watson allegedly sold their interests in Cooper Tire within a few days after the announcement and collectively garnered over one million dollars in proceeds.

In early August, 2013, Kanodia sent Ahmed an e-mail with the subject line of "Wire Instructions" from the AK@LincolnVentures.com e-mail account.He wrote:

Dear Ifty Bhai:

Hope all is well.Finally we have all the documents in place . . . The entity is:

Lincoln Charitable Foundation

Bank of America

Account # ********7712

ABA: *****9593

West 33rd Street, New York, NY Telephone 617 713 6301

The government explains that 1) the e-mail was signed "Salaam. amit", 2) "bhai" is an Indian term for "brother", 3) "salaam" is a salutation meaning "peace" and 4) both Kanodia and Ahmed had ties to India.

During its investigation, the government applied for a warrant to search the AK@LincolnVentures.com e-mail account for evidence, fruits and instrumentalities of wire fraud, securities fraud and conspiracy.The warrant application included an affidavit from a Federal Bureau of Investigation ("FBI") agent that 1) summarized the alleged insider trading scheme and the relationship between the participants, 2) described the August, 2013 e-mail that Kanodia sent to Ahmed from the account, 3) outlined the procedures for executing the search warrant and 4) identified the "Accounts and Files to Be Copied by Network Solutions Personnel" and the "Records and Data to [B]e Searched and Seized by Law Enforcement Personnel".Magistrate Judge Marianne B. Bowler approved and issued the search warrant in October, 2014.

An FBI agent served a copy of the warrant on Network Solutions.The government received a disk of materials from Network Solutions and produced a copy of those materials to Kanodia in discovery.

In February, 2016, Kanodia moved to suppress "any substantive communications, or any fruits of such evidence," that the government unlawfully seized pursuant to the Network Solutions search warrant.

II.Motion to suppress

A.Legal standard

The Fourth Amendment of the United States Constitution protects against unreasonable searches and seizures.U.S. CONST. AMEND. IV.Law enforcement officers must generally secure a warrant supported by probable cause before conducting a search or seizure.United States v. Gifford, 727 F.3d 92, 98(1st Cir.2013).Under the particularity requirement, a search warrant 1) must include sufficient information to guide and control the judgment of the executing officer in deciding where to search and what to seize and 2) cannot be overbroad or include items that should not be seized.United States v. Kuc, 737 F.3d 129, 133(1st Cir.2013).

An application for a search warrant must establish

probable cause to believe that (1) a crime has been committed - the "commission" element, and (2) enumeratedevidence of the offense will be found at the place to be searched - the so-called "nexus" element.

United States v. Feliz, 182 F.3d 82, 86(1st Cir.1999).With respect to the nexus element, the magistrate judge must consider the totality of the circumstances and make a "practical, common-sense decision" as to whether there is a "fair probability" that evidence of a crime will be found in a particular place.Id.The party seeking the warrant must present facts that would "warrant a man of reasonable caution to believe that evidence of a crime will be found" but need not show that such a belief is correct or more likely true than false.Id.

A reviewing court must treat with "considerable deference" the determination of the magistrate judge that the warrant application established probable cause.Id.The proper inquiry on review is whether the magistrate judge had a "substantial basis for concluding that probable cause existed."Id.(internal quotation marks omitted).The reviewing court should resolve doubtful or marginal cases in favor of the magistrate judge's finding of probable cause.United States v. Barnard, 299 F.3d 90, 93(1st Cir.2002).

If the reviewing court determines that the magistrate judge issued the warrant without probable cause, the evidence collected pursuant to the warrant will be suppressed.SeeGifford, 727 F.3d at 98.

B.Application

Kanodia seeks to suppress the evidence obtained from the Network Solutions search warrant because he claims that the warrant 1) was issued outside of the territorial scope of the magistrate judge's authority, 2) was not supported by probable cause, 3) did not identify the items to be seized with particularity and 4) did not set forth a search protocol to minimize the risk of collecting materials that fell outside the scope of the warrant.

1.Judicial authority

Kanodia first contends that Magistrate Judge Bowler exceeded her judicial authority when she issued the Network Solutions warrant which authorized a search and seizure of electronic data located in the Middle District of Florida.

The Federal Magistrates Act provides magistrate judges with

all powers and duties conferred or imposed upon United States commissioners by law or by the Rules of Criminal Procedure for the United States District Courts . . . .

28 U.S.C. § 636(a)(1).Fed. R. Crim. P. 41 regulates the issuance of search warrants and authorizes magistrate judges to issue search warrants for property 1) within the district, 2) within the district at the time of issuance but possibly outside of the district at the time of execution, 3) in connection with a terrorism investigation or 4) outside of the district but within any United States a) territory, possessionor commonwealth or b) diplomatic or consular residences or premises in a foreign state.Fed. R. Crim. P. 41(b)(1)-(3), (5).

Kanodia asserts that none of the Rule 41(b) provisions permits a magistrate judge, sitting in the District of Massachusetts, to issue a search warrant for property located in Florida at the time of the issuance and execution of the warrant.He claims that suppression is required because Magistrate Judge Bowler did not have the judicial authority to issue the Network Solutions search warrant for out-of-state property.

Kanodia's argument overlooks the fact that Rule 41(b) does not apply in this case because the rule, on its face, does not modify any statute regulating the issuance or execution of a search warrant in special circumstances.Fed. R. Crim. P. 41(a)(1).

Here, the government applied for the Network Solutions warrant pursuant to Rule 41 and the Electronic Communications Privacy Act("ECPA"), 18 U.S.C. § 2703.That statute permits the government to obtain warrants requiring providers of remote computing services to disclose electronic communications if the warrants are

issued using the procedures described in the Federal Rules of Criminal Procedure . . . by a court of competent jurisdiction.

§ 2703(b)(1)(A).The statute defines a "court of competent jurisdiction" as including any district court of the United States, including a magistrate judge of such a court, with jurisdiction over the investigated offense.18 U.S.C. § 2711(3)(A)(i).

Section 2703(b)(1)(A) thus authorizes a magistrate judge to issue a particular kind of warrant in cases over which his or her district court has jurisdiction.That grant of judicial authority is not modified by Rule 41(b) because 1) section 2703(b)(1)(A) refers to the procedures in Rule 41and2) the Rule 41(b) provisions are substantive, rather than procedural, in that they territorially restrict the judicial authority of magistrate judges to issue warrants.See§ 2703(b)(1)(A);Fed. R. Crim. P. 41(b).Indeed, Rule 41(b) stands in contrast to other subsections of that rule which set forth specific procedures and methods for obtaining, issuing, executing and returning a search warrant.SeeFed. R. Crim. P. 41(d)-(f).

The Court concludes that § 2703 affords Magistrate Judge Bowler authority to issue the Network Solutions warrant and that the Rule 41(b) provisions do not apply to this case.SeeUnited States v. Berkos, 543 F.3d 392, 397-98(7th Cir.2008)(internal quotation marks omitted)(finding that "Rule 41(b) deals with substantive judicial authority — not procedure — and thus does not apply to § 2703(a) . . . [which] authorize[es] district...