Lavabit and its owner Ladar Levison today lost an appeal in the US Court of Appeals for the Fourth Circuit of contempt sanctions against the company found by a district court last year.
Lavabit was a secure email service which purported to encrypt all communications and store no messages, making it a good solution for those hyper-concerned with privacy. In this way Edward Snowden came to use the service for communications. When the FBI found out of Snowden's involvement in the NSA leaks and went to Lavabit for help he was uncooperative. The FBI demanded the private keys of the service so that they could monitor Snowden's communications on the service. Levison argued that he could not supply the keys because it would compromise the privacy of all his users.
The FBI brought Lavabit to US District Court. The court found for the government and issued several orders to Lavabit, none of which it complied with. The court imposed a fine of $5,000 a day until Lavabit agreed to hand over the key in digital form (as opposed to the paper printout in 4-point-type it had provided). Lavabit handed over the key, but only after shutting down the service.
When Lavabit appealed the judgment to the Fourth Circuit it raised new issues, challenging the right of the government to subpoena its key because 1) it would be "abusive" and "oppressive" and conflict with Lavabit's anti-government business model; 2) they argued that the "Pen Register" statute under which the subpoena was brought did not authorize it to subpoena keys; 3) that the keys don't meet the requirements of the Stored Communications Act; and 4) that under the Fourth Amendment to the US Constitution the keys cannot be subpoenaed because they are not themselves "evidence."
But the appeals court examined none of these claims because Lavabit failed to make them in district court. A different standard, fundamental or plain error review, would have applied, but Lavabit failed to make the case for it on appeal.
The contempt citation and fines were therefore upheld and Lavabit is left without either legal case or a business.