Indiana Business Lawyer Blog
On August 16, 2018, the U.S. Court of Appeals for the Seventh Circuit issued an opinion holding that the use of digital “smart meters” by a public utility constitutes a reasonable search under the Fourth Amendment of the U.S. Constitution as well as the Illinois Constitution.
After receiving a grant from the U.S. Department of Energy to modernize its electrical grid, the City of Naperville replaced analog residential energy meters with digital “smart meters.” Unlike analog meters, which typically provide a single lump figure of electricity usage once per month, smart meters record consumption information much more frequently, so the data shows the amount of electricity used in a home at the time it is used. A group of concerned citizens sued, arguing that the smart meters reveal intimate personal details of customers, such as when the customers are home, their sleeping routines, and so on, and that the city’s collection of such data constitutes an unreasonable search under the Fourth Amendment and the Illinois Constitution. The district court denied two of the group’s complaints, and the group requested leave to file a third complaint, but the district court denied the request because it found that the complaint would be futile because it could not plausibly allege a violation of either the Fourth Amendment or the Illinois Constitution. The Seventh Circuit Court of Appeals affirmed the district court’s denial of the leave to file a third complaint, holding that while the use of smart meters by Naperville constitutes a search, the search is reasonable and therefore permitted under the Fourth Amendment.
Upon appeal, the Court applied the Kyllo test, which dictates that when the government uses technology not in general public use to explore details of the home that would have been otherwise unknowable, that surveillance constitutes a search. The Court found that the use of smart meters constitutes a search under the Kyllo test because the smart meters yield sufficient data to draw inferences about the activities taking place within the home. Furthermore, the Court said that smart meters are only used by part of a highly specialized industry, and such technology is neither widely available nor routinely used by the public.
However, the Court held the search is reasonable because the search does not involve law enforcement, the search is minimally invasive, and the search includes little risk of related criminal consequences. The Court said that is a critical point that the energy use data is collected with no prosecutorial intent and law enforcement does not collect or review the information. Furthermore, the utility’s policy provides that it will not provide customer data to police or other third parties absent a warrant or a court order, so there are still privacy protections in place. Finally, the Court said there is a substantial government interest in using smart meters because they lower the cost for both utilities and consumers and increase grid stability.
The Court noted that Naperville could have avoided the controversy by giving residents the opportunity to consent to having smart meters installed. The Court also noted that if the smart meters collected data more frequently than every 15 minutes, or if law enforcement officials could access the data more easily, the Court’s holding might change.
Jeremy Fetty is a partner in the law firm of Parr Richey with offices in Indianapolis and Lebanon. Mr. Fetty is current Chair of the Firm Utility and Business Section and often advises businesses and utilities (for profit, non-profit and cooperative) on regulatory, compliance, and transactional matters.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.
