Williams v. Poulos
Case Date: 12/14/1993
Court: United States Court of Appeals
Docket No: 93-1366
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United States Court of Appeals United States Court of Appeals For the First Circuit For the First Circuit ____________________ No. 93-1366 GEORGE C. WILLIAMS, ET AL., Plaintiffs, Appellants, v. RICHARD E. POULOS, ET AL., Defendants, Appellees. ____________________ No. 93-1367 GEORGE C. WILLIAMS, ET AL., Plaintiffs, Appellees, v. RICHARD E. POULOS, ET AL., Defendants, Appellees, ____________________ RALPH A. DYER Intervenor, Appellant. ____________________ No. 93-1368 GEORGE C. WILLIAMS, ET AL., Plaintiffs, Appellees, v. RICHARD E. POULOS, ET AL., Defendants, Appellees, ____________________ RODNEY P. RODRIGUE Defendants, Appellants. ____________________ No. 93-1680 GEORGE C. WILLIAMS, ET AL., Plaintiffs, Appellees, v. RICHARD E. POULOS, ET AL., Defendants, Appellants. ____________________ APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE [Hon. Morton A. Brody, U.S. District Judge] ___________________ ____________________ Before Selya and Stahl, Circuit Judges, ______________ and Fuste,* District Judge. ______________ ____________________ Allen S. Rugg, with whom Ronald R. Massumi, Kutak, Rock & _______________ ___________________ _______________ Campbell, John S. Whitman, Richardson & Troubh, were on brief for ________ ________________ ____________________ plaintiffs-appellants George C. Williams, Allied Capital Corporation, Allied Investment Corporation, Allied Venture Partnership, Allied Capital Corporation II, David P. Parker, David Gladstone, Brooks H. Browne, Frederick L. Russell, Jr., and Thomas R. Salley, E. Stephen __________ Murray, with whom Murray, Plumb & Murray were on brief for intervenor- ______ ______________________ appellant Ralph A. Dyer. John A. McArdle, III, with whom Daniel G. Lilley and Daniel G. _____________________ _________________ _________ Lilley Law Offices, P.A., were on brief for defendants/appellees/ __________________________ cross-appellants Rodney P. Rodrique, Wayne E. Bowers, Sr. and John Robichaud. Peter J. DeTroy, III, with whom Norman, Hanson & DeTroy were on _____________________ ________________________ brief for defendants/appellees/cross-appellants Richard E. Poulos, John S. Campbell and Poulos & Campbell, P.A. ____________________ December 14, 1993 ____________________ ____________________ *Of the District of Puerto Rico, sitting by designation. STAHL, Circuit Judge. Following a six-day civil ______________ bench trial, the district court ruled that the former principal owners of Consolidated Auto Recyclers, Inc. ("CAR"), defendants Wayne Bowers, Rodney Rodrigue, and John Robichaud (hereinafter "the CAR defendants"), violated the federal and Maine anti-wiretap statutes when they intercepted and recorded telephone calls made by and to plaintiffs, who were employees or former employees of Allied Capital Corporation ("Allied") and certain of its subsidiaries and affiliates.1 See 18 U.S.C. 2511(1)(a) and 15 M.R.S.A. ___ 710(1).2 The court also held that counsel retained by the CAR defendants, defendants Richard E. Poulos and the law firm of Poulos, Campbell & Zendzian, P.A. (hereinafter "the Poulos defendants"), violated 18 U.S.C. 2511(1)(c) and (d) and 15 M.R.S.A. 710(3)(A) and (B) when they disclosed and used the ____________________ 1. For simplicity's sake, the term "Allied" should be construed as encompassing all corporate and individual plaintiffs, including intervenor Ralph A. Dyer. 2. 18 U.S.C. 2511(1)(a) is a provision of the federal anti-wiretap statute, found at Title III of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. 2510-2521. In conjunction with other statutory provisions, it creates criminal and civil liability for any person who "intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication." 15 M.R.S.A. 710(1) is a provision of the Maine anti- wiretap statute, found at 15 M.R.S.A. 709-713. In conjunction with other statutory provisions, it creates criminal and civil liability for any person who "intentionally or knowingly intercepts, attempts to intercept or procures any other person to intercept or attempt to intercept, any wire or oral communication." -3- recordings of the telephone calls at issue with the requisite mens rea.3 As a result, the court enjoined all defendants ____ ___ "from further using and disclosing information contained in the subject interceptions except to obtain rulings regarding ____________________ 3. 18 U.S.C. 2511(c) and (d), in conjunction with other statutory provisions, create criminal and civil liability for any person who (c) intentionally discloses, or endeavors to disclose, to any other person the contents of any wire, oral, or electronic communication, knowing or having reason to know that the information was obtained through the interception of a wire, oral or electronic communication in violation of this subsection; or (d) intentionally uses, or endeavors to use, the contents of any wire, oral, or electronic communication, knowing or having reason to know that the information was obtained through the interception of a wire, oral, or electronic communication in violation of this subsection . . . . 15 M.R.S.A. 710(3)(A) and (B), in conjunction with other statutory provisions, create criminal and civil liability for any person who A. Intentionally or knowingly discloses to any person the contents of any wire communication, knowing that the information was obtained through interception; or B. Intentionally or knowingly uses or attempts to use the contents of any wire or oral communication, knowing that the information was obtained through interception. -4- 4 admissibility in [an] underlying suit [brought by the CAR defendants against plaintiffs]."4 See 18 U.S.C. 2520.5 ___ Each of the three sides to this controversy has appealed from various rulings made by the district court. Both the CAR defendants and the Poulos defendants challenge sundry factual findings and legal judgments, arguing essentially that their respective actions did not run afoul of Title III and the Maine anti-wiretap statute. Plaintiffs' primary claim is that the court's injunction does not sufficiently remedy the harm they have suffered and are continuing to suffer. After carefully reviewing the record and the parties' arguments, we affirm the judgment below. ____________________ 4. In the underlying suit, Bowers v. Allied Capital Corp., ______ _____________________ Civ. No. 91-0021-B (D. Me. filed January 1991) (Brody, J.) ("Bowers"), which was stayed pending resolution of the ______ instant case, the CAR defendants assert causes of action under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. 1961-68, the Securities Exchange Act of 1934, 15 U.S.C. 78a-78kk, and a host of common law theories. Essentially, they contend that Allied entities and personnel brought about the demise of CAR through certain acts primarily committed in the summer of 1990. The particulars of the relationship between CAR and the Allied entities and personnel will be discussed more fully infra. _____ 5. Inter alia, 18 U.S.C. 2520 authorizes persons _____ ____ victimized by violations of 18 U.S.C. 2511(1)(a),(c), and (d) to recover, by means of a civil action, (1) appropriate equitable or declaratory relief; (2) actual or statutory damages; (3) punitive damages; and (4) litigation costs and a reasonable attorney's fee. -5- 5 I. I. __ BACKGROUND BACKGROUND __________ The following detailed recitation is derived from the factual findings made by the district court in conjunction with Allied's motion for preliminary injunctive relief, see Williams v. Poulos, 801 F. Supp. 867, 868-72 (D. ___ ________ ______ Me. 1992) ("Poulos I"), and after the conclusion of the bench ________ trial. See Williams v. Poulos, Civ. No. 92-0069-B, slip op. ___ ________ ______ at 3-10 (D. Me. February 4, 1993) ("Poulos II").6 _________ This case is but one in a series of civil lawsuits and bankruptcy proceedings which can be traced to the collapse of CAR. CAR was founded in 1988 in order to dismantle automobiles and resell used parts. By May 1990, CAR employed approximately one hundred and forty people and operated throughout New England and in the Atlantic provinces of Canada. Twenty people worked in CAR's East Vassalboro, Maine, headquarters, including Bowers, Rodrigue, and Robichaud, the CAR defendants. These three owned 95% of CAR's stock and were members of CAR's Board of Directors ("the Board"). In addition, Bowers was CAR's Chief Executive Officer ("CEO") and Treasurer, while Rodrigue served as CAR's President. ____________________ 6. The order and memorandum of opinion on the bench trial incorporates by reference the factual findings set forth in the order and memorandum of opinion on the motion for a preliminary injunction. See Poulos II, slip op. at 3. ___ _________ -6- 6 To finance its early growth and operations, CAR developed a banking relationship with Casco Northern Bank. In February 1990, Casco Northern refused to increase CAR's lines of credit. As a result, CAR found itself in a serious financial bind because it had already spent the additional money it expected to receive. Accordingly, CAR turned to Allied, a venture capital firm which had previously invested in it. Allied responded with a large infusion of capital that raised its total investment in CAR to approximately $4,500,000. Despite this additional funding, CAR was unable to resolve its financial difficulties. On May 29, 1990, Casco Northern declared CAR in default on its obligations. Two days later, Allied followed suit. On June 28, 1990, in an attempt to resolve the crisis, the CAR defendants entered into an agreement with Allied which came to be known as the "Midnight Agreement." Under its terms, Ralph A. Dyer was made CAR's CEO and Chairman of the Board, three representatives of Allied, plaintiffs George C. Williams, David Gladstone, and Frederick Russell, Jr., became members of the Board, and David Parker became an officer. The Agreement also provided that the CAR defendants would remain on the Board, that Bowers would retain his position as Treasurer, and that Rodrigue would continue as President. -7- 7 Meanwhile, in May 1990, the CAR defendants had commissioned Michael Leighton, who owned Probe Investigating Service, Inc. ("Probe"), to provide a system for electronically monitoring employee phone calls.7 The CAR defendants felt that a surveillance system was needed (1) to reduce CAR's telephone bills, and (2) decrease employee theft. At the time they installed the system, the CAR defendants apparently received impromptu advice from Attorney Nicholas Lanzilotta that "monitoring would not be illegal if notice was first given to the monitored employees." After examining CAR's telephone system, Leighton concluded that he lacked the skill and expertise to create an appropriate monitoring system. He therefore sought assistance from Jonathan Broome. Broome's principal business was repairing consumer electronics; he was not an authorized telephone system technician. Although Broome considered the project to be unusual, Leighton assured him of its legality. On or about June 17, 1990, Broome, working after hours along with CAR security officer David Fisher, installed a custom-designed monitoring system8 in CAR's East ____________________ 7. Leighton and Probe were also named as defendants in this action. At the close of trial, the district court granted their oral motions for judgment as a matter of law. Plaintiffs have not appealed these rulings. 8. Apparently, there was no commercially available system which could perform the intercepting and recording functions desired by the CAR defendants. -8- 8 Vassalboro headquarters. In its findings of fact, the district court described the system as follows: The system . . . consisted of small alligator clips attached to a microphone cable at one end and a "punch-down" at the other. The wires to all the extension lines in CAR's offices were assembled on the punch-down. Calls could be intercepted by attaching the alligator clips and microphone wire to a designated extension line on the punch-down. The system could only monitor one extension at a time. The monitoring system designed by Broome also involved an interface connecting the microphone cable to a VCR and a video camera. The VCR allowed the system to record calls for up to eight hours. The video camera recorded the view meter on the VCR, allowing a person to fast forward the VCR tape until the meter indicated the presence of audio information. The VCR, video camera and interface were mounted together on a plywood board and set up in an unused bathroom next to the area containing the punch-down. Connecting wires were run through and over a suspended ceiling. Poulos II, slip op. at 4-5. _________ At some point in June 1990, Rodrigue informed the managers at CAR that all telephone calls at CAR's offices would be subject to random monitoring and recording. He also instructed the managers to inform their subordinates of the new monitoring policy. At about the same time, Rodrigue directed employees to record long distance phone calls on provided telephone logs. The employees were told that the logging system was to be used in conjunction with the monitoring system to reduce costs. On June 29, 1990, -9- 9 Rodrigue told the new CEO, Dyer, that CAR had a system in place to deter employee phone abuse by randomly monitoring employee phone calls. David Fisher learned how to operate the monitoring system. At first, he was instructed by the CAR defendants to monitor the extension lines randomly. After a short time, however, the CAR defendants told him which lines to intercept. Fisher was further instructed to deliver the tapes of recorded conversations to Wayne Bowers each day. Bowers then made cassette tapes of those telephone conversations he wished to save. On June 21, 1990, Fisher was instructed to monitor the telephone line of CAR Chief Financial Officer Richard Lee, who had been hired on Allied's recommendation. Apparently, Rodrigue and Bowers doubted Lee's loyalty to CAR. A few weeks later, however, the monitoring system was attached to the phone line of Jim Starr, an accountant from an outside firm who had been assigned to audit CAR. The CAR defendants suspected that Starr was misusing the telephone system. During this same general time period, Dyer's relationship with the CAR defendants, which had been strained from the beginning, was rapidly deteriorating. By July 10, 1990, Rodrigue and Robichaud were openly feuding with him. On July 12, 1990, Dyer fired Rodrigue and Robichaud. About -10- 10 a week after the firing, Dyer obtained a temporary restraining order barring Rodrigue and Robichaud from the CAR premises and prohibiting them from conducting any business on the company's behalf. Meanwhile, on July 17 or 18, 1990, Dyer began occupying Starr's office and using Starr's telephone line. Between July 18, 1990, and July 25, 1990, a number of Dyer's telephone calls were intercepted and recorded. The CAR defendants admit that, by July 19, 1990, they were specifically targeting Dyer's conversations.9 On July 21, 1990, the CAR defendants met with attorneys Richard E. Poulos, John S. Campbell, and Paul F. Zendzian, the partners of Poulos, Campbell & Zendzian, P.A., to discuss possible legal representation in matters involving CAR, Allied, and Dyer.10 At that meeting, the existence of a tape containing recorded telephone conversations between Dyer and Allied employees and representatives was disclosed to the Poulos defendants. The Poulos defendants made no inquiry into either how the tape was obtained or whether ____________________ 9. Although not mentioned in the district court's findings of fact, the record reflects that telephone conversations involving Brooks Browne, an Allied employee working at CAR in late July 1990, also were intercepted and recorded. These conversations took place while Browne was using Dyer's telephone. 10. Zendzian was not named as a defendant in this action. Campbell, who was a defendant below, was adjudged by the trial court not to have violated either Title III or the Maine anti-wiretap statute. Plaintiffs have not appealed from this ruling. -11- 11 there was employee notice or consent. They did, however, advise the CAR defendants to boycott a Board meeting that was scheduled for July 23, 1990. That meeting, which was held telephonically so that the out-of-town Allied employees could participate, was taped by the CAR defendants. All monitoring and taping of telephone conversations at CAR's headquarters was discontinued on July 25, 1990. On that same date, audio cassettes of some of the conversations that had been taped were delivered to the Poulos defendants, who soon thereafter agreed to represent the CAR defendants in the Bowers lawsuit. See supra note 4. ______ ___ _____ Over the following six weeks, paralegals from the Poulos firm prepared transcripts of the tapes. On July 27, 1990, pursuant to a certificate filed by Dyer with the United States Bankruptcy Court, a Chapter 11 bankruptcy proceeding was initiated on behalf of CAR. Anthony Swenson was appointed Chapter 11 trustee for CAR on August 10, 1990. On August 14, 1990, Swenson fired Dyer and rehired Bowers, Rodrigue, and Robichaud. Subsequently, the bankruptcy proceeding was converted to Chapter 7. In early August 1990, Poulos asked Stuart W. Tisdale, an associate attorney in his office, to prepare a memorandum concerning the legality of intercepting wire communications. In discussing the research assignment with Tisdale, Poulos stated that Dyer knew about the taping in -12- 12 question. After reading Tisdale's memorandum, Poulos and Campbell were satisfied that at least some of the information from the tapes might be admissible as evidence or would be otherwise useful in the case against Allied. In the district court's view, however, they did not "follow through on their research on the issue of consent and the legality of the interceptions." Poulos II, slip op. at 8. Nor did they _________ "make an effort to determine directly whether Dyer and the other Allied employees whose conversations were intercepted knew of or consented to the monitoring." Id. Finally, the ___ Poulos defendants "did not consult with bar counsel or advise any court of the existence and use of the information derived from the telephone conversations." Id. ___ On September 3 and 4, 1990, Poulos read the transcripts of most of the recorded conversations that had been preserved. On October 31, 1990, he disclosed contents of the tapes to Daniel Amory and David Crocker, counsel to the CAR Chapter 11 trustee. In so doing, Poulos told Amory and Crocker that the tapes he possessed might have been criminally obtained. He also asked them to keep the existence and contents of the tapes strictly confidential. In November and December of 1990, Poulos again reviewed the tapes. In September, October, and early November of 1990, the Poulos defendants obtained a large number of documents -13- 13 previously delivered by Allied to CAR's Chapter 11 trustee. The documents were produced without any involvement of the Poulos defendants and without any connection to the existence of the taped telephone conversations. These documents included notes, memoranda, and other written records of telephone conversations that had been taped on July 18, 19, 20, and 23, 1990. In January 1991, the CAR defendants filed the Bowers lawsuit, seeking $63,000,000 in damages from Allied, ______ Dyer, and Leo Madden, a business associate of Dyer's. After the complaint was filed, all discovery was stayed until December 5, 1991. During January 1992, shortly after the discovery stay was lifted, Poulos took the depositions of Williams, Parker, Dyer, and Madden. Poulos used both the discovery documents pertaining to the taped conversations and the tapes of the conversations themselves in preparing for the aforementioned depositions. Following these depositions, Poulos revealed the existence of the tapes to counsel for Madden and Dyer. In so doing, he (1) told counsel that the tapes proved that Madden and Dyer had lied during their depositions, and (2) offered to settle with them. No settlement was reached between the parties, and the present lawsuit was filed by Allied on April 17, 1992. II. II. ___ STANDARD OF REVIEW STANDARD OF REVIEW __________________ -14- 14 Insofar as the parties are challenging determinations made by the district court prior to and in conjunction with the bench trial, our standard of review is familiar. Claimed errors of law are, of course, reviewed de __ novo. E.g., Dedham Water Co., Inc. v. Cumberland Farms ____ ____ ________________________ _________________ Dairy, Inc., 972 F.2d 453, 457 (1st Cir. 1992); LoVuolo v. ___________ _______ Gunning, 925 F.2d 22, 25 (1st Cir. 1991). Findings of fact, _______ however, will not be set aside unless they are demonstrated to be clearly erroneous. Fed. R. Civ. P. 52(a); Dedham ______ Water, 972 F.2d at 457. In other words, we will give such _____ findings effect unless, after carefully reading the record and according due deference to the trial court's superior ability to judge credibility, we form "`a strong, unyielding belief that a mistake has been made.'" Dedham Water, 972 _____________ F.2d at 457 (quoting Cumpiano v. Banco Santander Puerto Rico, ________ ___________________________ 902 F.2d 148, 152 (1st Cir. 1990)). As a result, where there are two permissible views of the evidence, the interpretation assigned by the lower court must be adopted. Rodriguez- __________ Morales v. Veterans Admin., 931 F.2d 980, 982 (1st Cir. 1991) _______ _______________ (citing Anderson v. Bessemer City, 470 U.S. 564, 574 (1985)). ________ _____________ The clearly erroneous standard also ordinarily applies when we review a trial court's resolution of mixed questions of law and fact. E.g., LoVuolo, 925 F.2d at 25; ____ _______ Henry v. Connolly, 910 F.2d 1000, 1003 (1st Cir. 1990). In _____ ________ such situations, however, we are obligated to determine -15- 15 whether the court's resolution was infected by legal error. See LoVuolo, 925 F.2d at 25. And, "`if a trial court bases ___ _______ its findings upon a mistaken impression of applicable legal principles, the reviewing court is not bound by the clearly erroneous standard.'" Id. (quoting Inwood Labs., Inc. v. ___ ___________________ Ives Labs., Inc., 456 U.S. 844, 855 n.15 (1982)).11 ________________ With regard to Allied's attack upon the nature and extent of the injunction issued by the district court, our framework for review is equally well-established. Just as a trial court's decision on whether to exercise its equitable powers is committed to its sound discretion, Taino Lines, _____________ Inc. v. M/V Constance Pan Atlantic, 982 F.2d 20, 24 (1st Cir. ____ __________________________ 1992), so too is its choice of equitable remedies, Rosario- ________ Torres v. Hernandez-Colon, 889 F.2d 314, 323 (1st Cir. 1989) ______ _______________ (en banc). Thus, our role is to review only for an abuse of that discretion. Taino, 982 F.2d at 24. Underlying this _____ deferential standard is a recognition that, in exercising its equitable powers, the district court "`has had first-hand ____________________ 11. In a recent case, we explained our review standard for mixed questions in a slightly different manner: "The standard of review applicable to mixed questions usually depends upon where they fall along [a] degree-of-deference continuum: the more fact dominated the question, the more likely it is that the trier's resolution will be accepted unless shown to be clearly erroneous." In re Extradition of ____________________ Howard, 996 F.2d 1320, 1328 (1st Cir. 1993) (reviewing ______ findings made at extradition hearing) (citing United States ______________ v. Mariano, 983 F.2d 1150, 1158-59 (1st Cir. 1993); Roland M. _______ _________ v. Concord Sch. Comm., 910 F.2d 983, 990-91 (1st Cir. 1990), __________________ cert. denied, 111 S. Ct. 1122 (1991)). _____ ______ -16- 16 exposure to the litigants and the evidence and is in a considerably better position to bring the scales into balance than an appellate tribunal.'" Hiraldo-Cancel v. Aponte, 925 ______________ ______ F.2d 10, 13 (1st Cir.) (quoting Rosario-Torres, 889 F.2d at ______________ 323) (ellipses omitted)), cert. denied, 112 S. Ct. 637 _____ ______ (1991). Nonetheless, we will reverse if the court committed a clear error of law. See In re Boston and Maine Corp., 719 ___ ____________________________ F.2d 493, 495 (1st Cir. 1983), cert. denied, 466 U.S. 938 _____ ______ (1984); see also Feinstein v. Space Ventures, Inc., 989 F.2d ___ ____ _________ _____________________ 49, 51 (1st Cir. 1993) (reviewing preliminary injunction). It is against this backdrop that we evaluate the parties' claims. III. III. ____ DISCUSSION DISCUSSION __________ On appeal, the CAR and Poulos defendants together contend (1) that the court erred in rejecting their arguments that two statutory exceptions -- the "business extension" and "consent" exceptions -- shielded them from liability; and (2) that the court erroneously refused to admit certain expert testimony. In addition, the Poulos defendants alone assert (1) that the court erred in ruling that plaintiffs' claims for equitable relief against them were not moot; (2) that the court erred in determining that Poulos had acted with sufficient knowledge to have violated Title III and the Maine anti-wiretap statute; (3) that the court erred in rejecting -17- 17 their claim that the statutory "good faith" defense relieved them of liability; and (4) that the court erred in denying them a jury trial on these latter two issues. Plaintiffs' complaints essentially are (1) that the court made mistakes of law in fashioning equitable relief for the violations it found; (2) that the court erred in denying their Fed. R. Civ. P. 59(e) motion to amend judgment; (3) that the court erred in ruling that statutory damages under 18 U.S.C. 2520 are legal, and not equitable, in nature; and (4) that the court erred in holding that the CAR defendants were not liable for use and disclosure violations under 18 U.S.C. 2511(1)(c) and (d). We discuss each of these arguments in turn. A. Defendants' Arguments A. Defendants' Arguments _________________________ 1. Statutory Exceptions 1. Statutory Exceptions ________________________ As both the CAR and Poulos defendants point out, not all aural acquisitions of wire, oral, and electronic communications are illegal and give rise to liability under Title III and the Maine act. In fact, these statutes specifically delineate certain acquisitions that do not give ___ rise to such liability. Defendants argue that the district court erred in ruling that two of these defined exceptions -- the business extension and consent exceptions -- did not apply. Our review, however, persuades us that the court's rulings are supported by the record. -18- 18 a. The Business Extension Exception12 a. The Business Extension Exception12 ______________________________________ The business extension exception, often called the "extension telephone" exception, see, e.g., Campiti v. ___ ____ _______ Walonis, 611 F.2d 387, 392 (1st Cir. 1979), places outside _______ the reach of Title III the monitoring of communications carried out by certain types of equipment and done in the ordinary course of business. It derives from 18 U.S.C. 2510(4) and (5). Section 2510(4) defines the term "interception" as "the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other _______ ___ ___ __ ___ __________ __________ __ _____ device." (Emphasis supplied). Section 2510(5), insofar as is ______ relevant, then defines "electronic, mechanical, or other device" in the following manner: (5) "electronic, mechanical, or other device" means any device or apparatus which can be used to intercept a wire, oral, or electronic communication other than -- _____ ____ (a) any telephone or telegraph instrument, equipment or facility, or any component thereof, (i) . . . furnished by [a] subscriber or user for connection to the facilities of [a wire or electronic communication] service and used in the ordinary course of its business[.] (Emphasis supplied). Thus, if the monitoring conducted by the CAR defendants had been effectuated by means of a ____________________ 12. The business extension exception is found only in the federal act. Thus, we confine our discussion in this section of the opinion to federal law. -19- 19 "telephone or telegraph instrument, equipment or facility, or any component thereof" which was both furnished by CAR for connection to the facilities of its communication service and used in the ordinary course of its business, defendants' actions would not constitute an interception and would be beyond the reach of Title III. The district court determined that the business extension exception did not apply for two reasons: (1) because "the subject conversations were intercepted and recorded by a device configured by someone other than a provider of electronic communication service"; and (2) because "a legitimate business purpose did not exist at the time the subject conversations were intercepted." See Poulos ___ ______ II, slip op. at 17. Perhaps recognizing the amount of __ deference owed to the court's resolution of this paradigmatic mixed question of law and fact, defendants do not expend a great amount of energy attacking the factual findings underpinning the court's conclusions. Instead, they argue that the court's ruling was infected by erroneous legal reasoning. More specifically, defendants assert that, with regard to its first stated reason, the court misapprehended the technical requirements of the statute, and, with regard to its second stated reason, the court misconstrued the term "ordinary course of business." -20- 20 We agree with defendants that, in concluding that the business extension exception did not apply, the court erred in its reasoning. Section 2510(5)(a) does not require that the acquisition device be configured by a provider of electronic communication service. Nor does it direct courts to conduct an inquiry into whether a "legitimate business purpose" for monitoring exists at the time of the challenged aural acquisition. Nonetheless, we believe the district court's ultimate determination, that the business extension exception does not apply, is sustainable. Simply put, we are at a loss to see how the monitoring system used here, consisting as it did of "alligator clips attached to a microphone cable at one end" and an "interface connecting [a] microphone cable to a VCR and a video camera" on the other, can be considered to be a "telephone or telegraph instrument, equipment or facility, or a[] component thereof."13 In so stating, we note that ____________________ 13. In support of its position that the CAR device should be so considered, defendants advance three arguments that are, at best, unpersuasive. First, defendants assert that the record evidence demonstrates that the monitoring device was comprised of standard electronic components which are "commonly used in telephone systems." Upon close scrutiny, however, it is clear that this assertion is premised solely upon an outrageous mischaracterization of the testimony of Jonathan Broome. Broome did not testify, as defendants suggest, that the components of the CAR system "are commonly ________ used in telephone systems." (Emphasis supplied). Instead, __ he answered the question, "So, these wires were not uncommon parts or components for use in various ways with the [sic] ____ telephone systems, were they?" by responding, "No. It was all -- you don't usually use balanced shielded audio cable -21- 21 the CAR system is factually remote from the telephonic and telegraphic equipment courts have recognized as falling within the exception at 18 U.S.C. 2510(5)(a). See, e.g., ___ ____ Epps v. St. Mary's Hosp., 802 F.2d 412, 415-16 (11th Cir. ____ _________________ 1986) (dispatch console installed by telephone company considered telephone equipment); Watkins v. L.M. Berry & Co., _______ ________________ 704 F.2d 577, 582-84 (11th Cir. 1983) (standard extension telephone implicitly considered telephone equipment); Briggs ______ v. American Air Filter Co., Inc., 630 F.2d 414, 416-20 (5th ______________________________ Cir. 1980) (same); James v. Newspaper Agency Corp., 591 F.2d _____ ______________________ 579, 581 (10th Cir. 1979) (monitoring device installed by ____________________ for telephone, but it is quite acceptable to." (Emphasis supplied). In other words, rather than testifying that the components are commonly used in telephone systems, Broome ________ __ stated that, though it was unusual, the components could _______ _____ acceptably be used with telephone systems. In our view, such ____ testimony is not helpful to defendants. Second, defendants claim that certain 1986 amendments to the federal anti-wiretap statute were intended to broaden the meaning of 18 U.S.C. 2510(5)(a) so as to include equipment such as the CAR monitoring device. This argument flagrantly misconstrues the purpose of the congressional action. The legislative history makes it apparent that the 1986 amendments were aimed at strengthening the statute by _____________ updating it to reflect nearly twenty years of telecommunications advances. See generally S. Rep. No. 99- ___ _________ 541, 99th Cong., 2d Sess. 1-11, reprinted in 1986 _________ __ U.S.C.C.A.N. 3555-65. Despite defendants' contrary urgings, there is absolutely no evidence in this history suggesting that Congress meant to expand the parameters of the business extension exception so as to embrace almost all wiretapping equipment. Finally, defendants seem to argue that the First Circuit, in Campiti, 611 F.2d at 392, read the "any telephone _______ or telegraph instrument, equipment or facility, or any component thereof" provision out of 2510(5)(a). We think it sufficient to state without elaboration that Campiti, when _______ fairly read in context, does no such thing. -22- 22 telephone company implicitly considered telephone equipment). Indeed, we think it self evident that the CAR system, far from being the type of exempt equipment contemplated by the authors of the business extension exception, is precisely the type of intercepting device Congress intended to regulate heavily when it enacted Title III. We recognize that it is not ordinarily the province of appellate courts to make findings of fact or to resolve, in the first instance, mixed questions of law and fact. Yet, where only one resolution of a predominantly factbound question would, on a full record, be sustainable, courts of appeals can, and often should, decline to remand where there has been an error committed. See Dedham Water, 972 F.2d at ___ ____________ 463; see also In re Two Appeals Arising Out of the San Juan ___ ____ _______________________________________________ Plaza Hotel Fire Litigation, 994 F.2d 956, 968-69 (1st Cir. ____________________________ 1993) (appellate courts may eschew remand where remanding would be an empty exercise); Societe Des Produits Nestle, ______________________________ S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 642 (1st Cir. ____ ____________________ 1992) (where trial court "supportably `made the key findings of fact' but applied the wrong rule of law, the court of appeals ha[s] the power, in lieu of remanding, simply to regroup the findings `along the proper matrix'") (quoting United States v. Mora, 821 F.2d 860, 869 (1st Cir. 1987)). _____________ ____ Here, given the trial court's findings regarding the nature of the monitoring device, the only sustainable ruling would -23- 23 be that the device was not a "telephone or telegraph instrument, equipment or facility, or a component thereof," and therefore not within the parameters of the business extension exception. Accordingly, we reject the argument that defendants are protected by this exception.14 b. The Consent Exception b. The Consent Exception _________________________ Both the federal and Maine acts specifically exempt from their prohibitions the interceptions of telephone calls where one or more of the conversants has consented to or, in the case of the Maine act, previously authorized the interception. See 18 U.S.C. 2511(2)(d) and 15 M.R.S.A. ___ 709(4)(C).15 As we have made clear, consent under Title ____________________ 14. In their brief, the CAR defendants conclude their argument that the business extension exception applies with a very short equitable argument that their "good faith" reliance on the advice of others, including counsel, in installing the monitoring system should absolve them from liability. They do not, however, adduce any authority in support of this novel proposition. Moreover, in the course of rebuffing defendants' business extension exception argument, the district court supportably found that the interceptions here at issue were not effectuated to further the original purpose of the monitoring system. Defendants do not, and cannot, seriously contest this finding. Thus, the alleged good faith of the CAR defendants in originally __ __________ installing the system is irrelevant. __________ ___ ______ 15. In relevant part, 18 U.S.C. 2511(2)(d) provides: It shall not be unlawful under this chapter for a person not acting under color of law to intercept a wire, oral, or electronic communication where . . . one of the parties to the communication has given prior consent to such interception . . . . Similarly, 15 M.R.S.A. 709(4)(C) excludes from the reach of the statute those interceptors "given prior -24- 24 III16 need not be explicit; instead, it can be implied. See Griggs-Ryan v. Smith, 904 F.2d 112, 116 (1st Cir. 1990). ___ ___________ _____ Implied consent is not, however, constructive consent. Id. ___ "Rather, implied consent is `consent in fact' which is inferred `from surrounding circumstances indicating that the party knowingly agreed to the surveillance.'" Id. at 116-17 _________ ______ ___ (quoting United States v. Amen, 831 F.2d 373, 378 (2d Cir. ______________ ____ 1987), cert. denied, 108 S. Ct. 1573 (1988)) (brackets _____ ______ omitted) (emphasis supplied). In light of the prophylactic purposes of Title III, implied consent should not be casually inferred. See id. at 117. ___ ___ Here, the record reflects and the district court found that Ralph Dyer was told of the "monitoring" of CAR employee telephone calls.17 The record is not clear, however, as to whether Dyer was informed (1) of the manner -- i.e., the intercepting and recording of telephone ____________________ authority by the sender or receiver." 16. Because the "consent" standard under Title III is certainly no more stringent than the "prior authority" standard set forth in 15 M.R.S.A. 709(4)(C), see supra note ___ _____ 15, and because, as will be demonstrated below, we rule that the district court did not clearly err in finding that the consent standard had not been met, we need only discuss the federal act in this section of the opinion. 17. Defendants' consent arguments involve only the actions of Ralph Dyer, and are not directed at the district court's summary judgment ruling that the consent exception does apply to the conversations involving Brooks Browne. Accordingly, we limit our discussion to whether Dyer consented to interceptions of his telephone conversations. -25- 25 conversations -- in which this monitoring was conducted; and (2) that he himself would be subjected to such monitoring. There was testimony tending to indicate that he was so informed, which the district judge apparently chose not to credit, and testimony tending to indicate that he was not. In our view, the latter testimony, far from being incredible, was highly plausible.18 Thus, there is no basis for us to conclude that the district court clearly erred in finding that Dyer was not told of the manner in which the monitoring was conducted and that he himself would be monitored. Cf. ___ Rodriguez-Morales, 931 F.2d at 982 (district court's finding _________________ should not be disturbed where there are two permissible views of the evidence). And, without at least this minimal __ _____ knowledge on the part of Dyer, we do not see how his consent in fact to the monitoring could be inferred from this record. Cf. Griggs-Ryan, 904 F.2d at 117 (implied consent inferred |