Federal investigators overstepped constitutional bounds by searching stored e-mails without a warrant in a fraud investigation, a federal appeals court ruled Monday.

In a case closely watched by civil-liberties advocates in the still-emerging field of Internet privacy, a three-judge panel of the 6th U.S. Circuit Court of Appeals found that e-mail users have a reasonable expectation of privacy.

"It goes without saying that like the telephone earlier in our history, e-mail is an ever-increasing mode of private communication, and protecting shared communications through this medium is as important to Fourth Amendment principles today as protecting telephone conversations has been in past," the appeals court said.

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Although surveillance of in-transit e-mails is restricted under wiretapping laws, the government had contended that e-mails stored with service providers could be seized without warrants. Monday's ruling counters that position and comes at a time service providers are offering ever-increasing storage space.

"This landmark decision answered a question that had been dangerously open," said Kevin Bankston, attorney for the Electronic Frontier Foundation, a civil-liberties group based in San Francisco.

The appeals court's unanimous ruling upholds a lower court ruling temporarily blocking investigators from additional e-mail searches without warrants. The panel said the government would have to either provide an account holder a chance to contest such a seizure or to prove that the holder had no expectation of privacy.

The ruling stems from a fraud investigation against Steven Warshak, owner and president of Berkeley Premium Nutraceuticals, an herbal supplement company known for its "Smiling Bob" ads.

Warshak, whose company markets supplements that include a "natural male enhancement" product called Enzyte, argued that his Fourth Amendment protections against unreasonable searches and seizures were violated when the government went after his e-mail records.

The appeals court said the lower court correctly reasoned that e-mails stored at a service provider "were roughly analogous to sealed letters, in which the sender maintains an expectation of privacy. This privacy interest requires that law enforcement officials obtain a warrant, based on a showing of probable cause."

Justice Department spokesman Dean Boyd in Washington said the decision was being reviewed. The government could appeal to the full 6th Circuit or the U.S. Supreme Court.

Warshak has pleaded not guilty to charges that he and his business defrauded customers and banks out of at least $100 million in an alleged scheme that included billing credit cards without authorization.

"I think it's a profoundly important decision applying the Fourth Amendment to electronic privacy rights of citizens," said Warshak's attorney, Martin Weinberg of Boston.

He declined comment on how the ruling could affect the government's fraud case against Warshak.

Government attorneys had contended that the service providers can filter against viruses, spam and pornography, but the appeals court compared those practices to postal workers screening mail for drugs or explosives.

"It's one thing to filter for spam or viruses," said Susan Freiwald, a University of San Francisco law professor who co-wrote a brief filed in support of Warshak. "Those are not the same thing as going in and reading people's e-mails."

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