United States Court of Appeals, Ninth Circuit.

No. 01-15899.

Gary KREMEN, an individual, Plaintiff-Appellant, and Online Classifieds, Inc., a Delaware Company, Plaintiff, v. Stephen Michael COHEN, an individual; Ocean Fund International, Ltd., a for­eign company; Sand Man Interna­cional Ltd., a foreign company; Sport­ing Houses Management Corporation, a Nevada company; Sporting Houses of America, a Nevada company; Sporting Houses General Inc., a Neva­da company; William Douglas, Sir, an individual; VP Bank (BVI) Limited, a foreign company; Andrew Keuls, an individual; Montano Properties LLC, a California Limited Liability Compa­ny; Ynata Ltd., Defendant, and Network Solutions, Inc., a Delaware company, Defendant-Appellee.

Submitted July 25, 2003.

Argued Aug. 13, 2002.

Before: KOZINSKI and McKEOWN, Circuit Judges, and FITZGERALD,** District Judge.

James M. Wagstaffe, Kerr & Wagstaffe LLP, San Francisco, CA, argued for the appellant. Pamela Urueta and Alex K. Grab joined him on the briefs.

Kathryn E. Karcher, Gray Cary Ware & Freidenrich LLP, San Diego, CA, argued for the appellee. David Henry Dolkas and Mira A. Macias joined her on the briefs.

Professor Brian E. Gray, San Francisco, CA, amicus curiae in support of the appel­lant.

William H. Bode, Bode & Grenier, Washington, D.C., for amicus curiae Amer­ican Internet Registrants Association in support of the appellant.

Robin D. Gross, Electronic Frontier Foundation, San Francisco, CA, amicus cu­riae in support of the appellant.

**

The Honorable James M. Fitzgerald, Senior United States District Judge for the District of Alaska, sitting by designation.

KOZINSKI, Circuit Judge.

We decide whether Network Solutions may be liable for giving away a regis­trant’s domain name on the basis of a forged letter.

Background

“Sex on the Internet?,” they all said. “That’ll never make any money.” But computer-geek-turned-entrepreneur Gary Kremen knew an opportunity when he saw it. The year was 1994; domain names were free for the asking, and it would be several years yet before Henry Blodget and hordes of eager NASDAQ day traders would turn the Internet into the Dutch tulip craze of our times. With a quick e­mail to the domain name registrar Net­work Solutions, Kremen became the proud owner of sex.com. He registered the name to his business, Online Classifieds, and list­ed himself as the contact.1

Con man Stephen Cohen, meanwhile, was doing time for impersonating a bank­ruptcy lawyer. He, too, saw the potential of the domain name. Kremen had gotten it first, but that was only a minor impedi­ment for a man of Cohen’s boundless re­source and bounded integrity. Once out of prison, he sent Network Solutions what purported to be a letter he had received from Online Classifieds. It claimed the company had been “forced to dismiss Mr. Kremen,” but “never got around to chang­ing our administrative contact with the internet registration [sic] and now our Board of directors has decided to abandon the domain name sex.com.” Why was this unusual letter being sent via Cohen rather than to Network Solutions directly? It explained:

Because we do not have a direct connec­tion to the internet, we request that you notify the internet registration on our behalf, to delete our domain name sex.com. Further, we have no objections to your use of the domain name sex.com and this letter shall serve as our authori­zation to the internet registration to transfer sex.com to your corporation.2

Despite the letter’s transparent claim that a company called “Online Classifieds” had no Internet connection, Network Solutions made no effort to contact Kremen. In­stead, it accepted the letter at face value and transferred the domain name to Co­hen. When Kremen contacted Network Solutions some time later, he was told it was too late to undo the transfer. Cohen went on to turn sex.com into a lucrative online porn empire.

And so began Kremen’s quest to recover the domain name that was rightfully his. He sued Cohen and several affiliated com­panies in federal court, seeking return of the domain name and disgorgement of Co­hen’s profits. The district court found that the letter was indeed a forgery and ordered the domain name returned to Kremen. It also told Cohen to hand over his profits, invoking the constructive trust doctrine and California’s “unfair competi­tion” statute, Cal. Bus. & Prof.Code § 17200 et seq. It awarded $40 million in compensatory damages and another $25 million in punitive damages.3

Kremen, unfortunately, has not had much luck collecting his judgment. The district court froze Cohen’s assets, but Co­hen ignored the order and wired large sums of money to offshore accounts. His real estate property, under the protection of a federal receiver, was stripped of all its fixtures—even cabinet doors and toilets—in violation of another order. The court commanded Cohen to appear and show cause why he shouldn’t be held in con­tempt, but he ignored that order, too. The district judge finally took off the gloves—he declared Cohen a fugitive from justice, signed an arrest warrant and sent the U.S. Marshals after him.

Then things started getting really bi­zarre. Kremen put up a “wanted” poster on the sex.com site with a mug shot of Cohen, offering a $50,000 reward to any­one who brought him to justice. Cohen’s lawyers responded with a motion to vacate the arrest warrant. They reported that Cohen was under house arrest in Mexico and that gunfights between Mexican au­thorities and would-be bounty hunters seeking Kremen’s reward money posed a threat to human life. The district court rejected this story as “implausible” and denied the motion. Cohen, so far as the record shows, remains at large.

Given his limited success with the boun­ty hunter approach, it should come as no surprise that Kremen seeks to hold some­one else responsible for his losses. That someone is Network Solutions, the exclu­sive domain name registrar at the time of Cohen’s antics. Kremen sued it for mis­handling his domain name, invoking four theories at issue here. He argues that he had an implied contract with Network So­lutions, which it breached by giving the domain name to Cohen. He also claims the transfer violated Network Solutions’s cooperative agreement with the National Science Foundation—the government con­tract that made Network Solutions the .com registrar. His third theory is that he has a property right in the domain name sex.com, and Network Solutions committed the tort of conversion by giving it away to Cohen. Finally, he argues that Network Solutions was a “bailee” of his domain name and seeks to hold it liable for “conversion by bailee.”

The district court granted summary judgment in favor of Network Solutions on all claims. Kremen v. Cohen, 99 F.Supp.2d 1168 (N.D.Cal.2000). It held that Kremen had no implied contract with Network Solutions because there was no consideration: Kremen had registered the domain name for free. Id. at 1171-72. It rejected the third-party contract claim on the ground that the cooperative agreement did not indicate a clear intent to grant enforceable contract rights to registrants. Id. at 1172.

The conversion claims fared no better. The court agreed that sex.com was Bre­men’s property. It concluded, though, that it was intangible property to which the tort of conversion does not apply. Id. at 1173. The conversion by bailee claim failed for the additional reason that Net­work Solutions was not a bailee. Id. at 1175.

Kremen appeals, and we consider each of his four theories in turn.

Breach of Contract

Kremen had no express contract with Network Solutions, but argues that his registration created an implied con­tract, which Network Solutions breached. A defendant is normally not liable for breach of contract, however, if he prom­ised to do something for free. The party claiming breach must show that, in return for the promise, it conferred some benefit the other party was not already entitled to receive, or suffered some prejudice it was not already bound to endure. Cal. Civ. Code § 1605.4 The adequacy of consider­ation doesn’t matter, but it must be “some­thing of real value.” Herbert v. Lankersh­im, 9 Cal.2d 409, 475, 71 P.2d 220 (1937) (internal quotation marks omitted).

Kremen did not pay Network Solutions or exchange some other property in return for his domain name. Nor did his regis­tration increase the amount of money Net­work Solutions received from the National Science Foundation; under the cooperative agreement, Network Solutions was paid on a fixed-fee basis. The cooperative agree­ment did contemplate that Network Solu­tions might one day charge fees. Kremen seizes on this fact and claims he conferred a benefit on Network Solutions by becom­ing a customer “at a time when [it] was eager to expand its customer base.”

The problem with this theory is that Kremen was a nonpaying customer, so his status as a registrant was valuable only because of the possibility he might stick around if Network Solutions started charging fees. Kremen was under no obli­gation to do so. He was in the same position as one who promises to do some­thing but reserves the right to change his mind. See, e.g., County of Alameda v. Ross, 32 Cal.App.2d 135, 143-44, 89 P.2d 460 (1939); 1 Witkin Contracts § 234. He might have become a paying customer or he might not; the choice was up to him once Network Solutions started charging fees. As many Internet investors found out the hard way, ’’[mere] ... hope of profit is not consideration.” Williams v. Hasshagen, 166 Cal. 386, 390, 137 P. 9 (1913).

Kremen argues that he gave Network Solutions valuable marketing data by sub­mitting his contact information when he registered the domain name. But there is no evidence that Network Solutions sought the data as part of its benefit of the bar­gain. See Bard v. Kent, 19 Cal.2d 449, 452, 122 P.2d 8 (1942). It collected only information reasonably necessary to com­plete the registration process. Any mar­keting value it had was an incidental con­sequence of the process. This is not a case where a party’s actions can only be explained as a gimmick to collect customer information; Network Solutions was giving away domain names because the National Science Foundation was paying it to do so. Knowledge of the recipient’s identity is a nearly inevitable consequence of any gift. Absent evidence it was actually something the donor bargained for, it is not consider­ation.

Kremen did not give consideration for his domain name, so he had no contract with Network Solutions. Cf. Oppedahl & Larson v. Network Solutions, Inc., 3 F.Supp.2d 1147, 1160-61 (D.Colo.1998).

Breach of Third-Party Contract

We likewise reject Kremen’s ar­gument based on Network Solutions’s co­operative agreement with the National Sci­ence Foundation. A party can enforce a third-party contract only if it reflects an “express or implied intention of the parties to the contract to benefit the third party.” Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206, 1211 (9th Cir.­1999). “The intended beneficiary need not be specifically or individually identified in the contract, but must fall within a class clearly intended by the parties to benefit from the contract.” Id. When a contract is with a government entity, a more stringent test applies: “Parties that benefit ... are generally assumed to be incidental benefi­ciaries, and may not enforce the contract absent a clear intent to the contrary.” Id. The contract must establish not only an intent to confer a benefit, but also “an intention ... to grant [the third party] enforceable rights.” Id.

Kremen relies on language in the agree­ment providing that Network Solutions had “primary responsibility for ensuring the quality, timeliness and effective man­agement of [domain name] registration services” and that it was supposed to “fa­cilitate the most effective, efficient and ubiquitous registration services possible.” This language does not indicate a clear intent to grant registrants enforceable con­tract rights. We accordingly reject Kremen’s claim. Cf. Oppedahl & Larson, 3 F.Supp.2d at 1157-59.

Conversion

Kremen’s conversion claim is an­other matter. To establish that tort, a plaintiff must show “ownership or right to possession of property, wrongful disposi­tion of the property right and damages.” G.S. Rasmussen & Assocs., Inc. v. Kalitta Flying Serv., Inc., 958 F.2d 896, 906 (9th Cir.1992). The preliminary question, then, is whether registrants have property rights in their domain names. Network Solutions all but concedes that they do. This is no surprise, given its positions in prior litigation. See Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 529 S.E.2d 80, 86 (2000) (“[Network Solutions] acknowledged during oral argument before this Court that the right to use a domain name is a form of intangible personal prop­erty.”); Network Solutions, Inc. v. Clue Computing, Inc., 946 F.Supp. 858, 860 (D.Colo.1996) (same).5 The district court agreed with the parties on this issue, as do we.

Property is a broad concept that includes “every intangible benefit and prerogative susceptible of possession or disposition.” Downing v. Mun. Court, 88 Cal.App.2d 345, 350, 198 P.2d 923 (1948) (internal quotation marks omitted). We apply a three-part test to determine whether a property right exists: “First, there must be an interest capable of pre­cise definition; second, it must be capable of exclusive possession or control; and third, the putative owner must have estab­lished a legitimate claim to exclusivity.” G.S. Rasmussen, 958 F.2d at 903 (footnote omitted). Domain names satisfy each cri­terion. Like a share of corporate stock or a plot of land, a domain name is a well-­defined interest. Someone who registers a domain name decides where on the Inter­net those who invoke that particular name—whether by typing it into their web browsers, by following a hyperlink, or by other means—are sent. Ownership is ex­clusive in that the registrant alone makes that decision. Moreover, like other forms of property, domain names are valued, bought and sold, often for millions of dol­lars, see Greg Johnson, The Costly Game for Net Names, L.A. Times, Apr. 10, 2000, at Al, and they are now even subject to in rem jurisdiction, see 15 U.S.C. § 1125(d)(2).

Finally, registrants have a legitimate claim to exclusivity. Registering a domain name is like staking a claim to a plot of land at the title office. It informs others that the domain name is the registrant’s and no one else’s. Many registrants also invest substantial time and money to de­velop and promote websites that depend on their domain names. Ensuring that they reap the benefits of their investments reduces uncertainty and thus encourages investment in the first place, promoting the growth of the Internet overall. See G.S. Rasmussen, 958 F.2d at 900.

Kremen therefore had an intangible property right in his domain name, and a jury could find that Network Solutions “wrongful[ly] dispos[ed] of" that right to his detriment by handing the domain name over to Cohen. Id. at 906. The district court nevertheless rejected Kremen’s con­version claim. It held that domain names, although a form of property, are intangi­bles not subject to conversion. This ratio­nale derives from a distinction tort law once drew between tangible and intangible property: Conversion was originally a remedy for the wrongful taking of anoth­er’s lost goods, so it applied only to tangi­ble property. See Prosser and Keeton on the Law of Torts § 15, at 89, 91 (W. Page Keeton ed., 5th ed.1984). Virtually every jurisdiction, however, has discarded this rigid limitation to some degree. See id. at 91. Many courts ignore or expressly re­ject it. See Kremen, 325 F.3d at 1045-46 n. 5 (Kozinski, J., dissenting) (citing cases); Astroworks, Inc. v. Astroexhibit, Inc., 257 F.Supp.2d 609, 618 (S.D.N.Y.2003) (holding that the plaintiff could maintain a claim for conversion of his website); Val D. Ricks, The Conversion of Intangible Property: Bursting the Ancient Trover Bottle with New Wine, 1991 B.Y.U. L. Rev. 1681, 1682. Others reject it for some intangibles but not others. The Restatement, for exam­ple, recommends the following test:

(1) Where there is conversion of a docu­ment in which intangible rights are merged, the damages include the value of such rights.

(2) One who effectively prevents the ex­ercise of intangible rights of the kind customarily merged in a document is subject to a liability similar to that for conversion, even though the document is not itself converted.

Restatement (Second) of Torts § 242 (1965) (emphasis added). An intangible is “merged” in a document when, “by the appropriate rule of law, the right to the immediate possession of a chattel and the power to acquire such possession is repre­sented by [the] document,” or when “an intangible obligation [is] represented by [the] document, which is regarded as equivalent to the obligation.” Id. cmt. a (emphasis added).6 The district court ap­plied this test and found no evidence that Kremen’s domain name was merged in a document.

The court assumed that California fol­lows the Restatement on this issue. Our review, however, revealed that “there do not appear to be any California cases squarely addressing whether the ‘merged with’ requirement is a part of California law.” Kremen, 325 F.3d at 1042. We invoked the California Supreme Court’s certification procedure to offer it the op­portunity to address the issue. Id. at 1043; Cal. Rules of Court 29.8. The Court declined, Kremen v. Cohen, No. S112591 (Cal. Feb. 25, 2003), and the question now falls to us.

We conclude that California does not follow the Restatement’s strict merger re­quirement. Indeed, the leading California Supreme Court case rejects the tangibility requirement altogether. In Payne v. Elli­ot, 54 Cal. 339, 1880 WL 1907 (1880), the Court considered whether shares in a cor­poration (as opposed to the share certifi­cates themselves) could be converted. It held that they could, reasoning: “[T]he action no longer exists as it did at common law, but has been developed into a remedy for the conversion of every species of per­sonal property.” Id. at 341 (emphasis added). While Payne’s outcome might be reconcilable with the Restatement, its ra­tionale certainly is not: It recognized con­version of shares, not because they are customarily represented by share certifi­cates, but because they are a species of personal property and, perforce, protected. Id. at 342.7

Notwithstanding Payne’s seemingly clear holding, the California Court of Ap­peal held in Olschewski v. Hudson, 87 Cal.App. 282, 262 P. 43 (1927), that a laun­dry route was not subject to conversion. It explained that Payne’s rationale was “too broad a statement as to the applica­tion of the doctrine of conversion.” Id. at 288, 262 P. 43. Rather than follow binding California Supreme Court precedent, the court retheorized Payne and held that cor­porate stock could be converted only be­cause it was “represented by” a tangible document. Id.; see also Adkins v. Model Laundry Co., 92 Cal.App. 575, 583, 268 P. 939 (1928) (relying on Olschewski and holding that no property right inhered in “the intangible interest of an exclusive privilege to collect laundry”).

Were Olschewski the only relevant case on the books, there might be a plausible argument that California follows the Re­statement. But in Palm Springs-La Quinta Development Co. v. Kieberk Corp., 46 Cal.App.2d 234, 115 P.2d 548 (1941), the court of appeal allowed a conversion claim for intangible information in a customer list when some of the index cards on which the information was recorded were de­stroyed. The court allowed damages not just for the value of the cards, but for the value of the intangible information lost. See id. at 239, 115 P.2d 548. Section 242(1) of the Restatement, however, allows recovery for intangibles only if they are merged in the converted document. Cus­tomer information is not merged in a docu­ment in any meaningful sense. A Rolodex is not like a stock certificate that actually represents a property interest; it is only a means of recording information.

Palm Springs and Olschewski are rec­oncilable on their facts—the former in­volved conversion of the document itself while the latter did not. But this dis­tinction can’t be squared with the Re­statement. The plaintiff in Palm Springs recovered damages for the value of his intangibles. But if those intangibles were merged in the index cards for pur­poses of section 242(1), the plaintiffs in Olschewski and Adkins should have re­covered under section 242(2)—laundry routes surely are customarily written down somewhere. “Merged” can’t mean one thing in one section and something else in the other.

California courts ignored the Restate­ment again in A & M Records, Inc. v. Heilman, 75 Cal.App.3d 554, 142 Cal.Rptr. 390 (1977), which applied the tort to a defendant who sold bootlegged copies of musical recordings. The court held broad­ly that “such misappropriation and sale of the intangible property of another without authority from the owner is conversion.” Id. at 570, 142 Cal.Rptr. 390. It gave no hint that its holding depended on whether the owner’s intellectual property rights were merged in some document. One might imagine physical things with which the intangible was associated—for exam­ple, the medium on which the song was recorded. But an intangible intellectual property right in a song is not merged in a phonograph record in the sense that the record represents the composer’s intellec­tual property right. The record is not like a certificate of ownership; it is only a medium for one instantiation of the artistic work.8

Federal cases applying California law take an equally broad view. We have applied A & M Records to intellectual property rights in an audio broadcast, see Lone Ranger Television, Inc. v. Program Radio Corp., 740 F.2d 718, 725 (9th Cir.­1984), and to a regulatory filing, see G.S. Rasmussen, 958 F.2d at 906-07. Like A & M Records, both decisions defy the Re­statement’s “merged in a document” test. An audio broadcast may be recorded on a tape and a regulatory submission may be typed on a piece of paper, but neither document represents the owner’s intangi­ble interest.

The Seventh Circuit interpreted Califor­nia law in FMC Corp. v. Capital Cit­ies/ABC, Inc., 915 F.2d 800 (7th Cir.1990). Observing that “‘[t]here is perhaps no very valid and essential reason why there might not be conversion of intangible property,” id. at 305 (quoting Prosser & Keeton, supra, § 15, at 92), it held that a defendant could be liable merely for de­priving the plaintiff of the use of his confi­dential information, id. at 304. In reject­ing the tangibility requirement, FMC echoes Payne’s holding that personal prop­erty of any species may be converted. And it flouts the Restatement because the intangible property right in confidential information is not represented by the doc­uments on which the information happens to be recorded.

Our own recent decision in Bancroft & Masters, Inc. v. Augusta National Inc., 223 F.3d 1082 (9th Cir.2000), is especially relevant. That case involved a domain name—precisely the type of property at issue here. The primary question was personal jurisdiction, but a majority of the panel joined the judgment only on the understanding that the defendant had committed conversion of a domain name, which it characterized as “tortious con­duct.” Id. at 1089 (Sneed & Trott, JJ., concurring); cf. Astroworks, Inc., 257 F.Supp.2d at 618 (holding that the plaintiff could maintain a claim for conversion of his website).

In short, California does not follow the Restatement’s strict requirement that some document must actually represent the owner’s intangible property right. On the contrary, courts routinely apply the tort to intangibles without inquiring whether they are merged in a document and, while it’s often possible to dream up some document the intangible is connected to in some fashion, it’s seldom one that represents the owner’s property interest. To the extent Olschewski endorses the strict merger rule, it is against the weight of authority. That rule cannot be squared with a jurisprudence that recognizes con­version of music recordings, radio shows, customer lists, regulatory filings, confiden­tial information and even domain names.9

Were it necessary to settle the issue once and for all, we would toe the line of Payne and hold that conversion is “a rem­edy for the conversion of every species of personal property.” 54 Cal. at 341. But we need not do so to resolve this case. Assuming arguendo that California retains some vestigial merger requirement, it is clearly minimal, and at most requires only some connection to a document or tangible object—not representation of the owner’s intangible interest in the strict Restate­ment sense.

Kremen’s domain name falls easily with­in this class of property. He argues that the relevant document is the Domain Name System, or “DNS”—the distributed electronic database that associates domain names like sex.com with particular com­puters connected to the Internet.10 We agree that the DNS is a document (or perhaps more accurately a collection of documents). That it is stored in electronic form rather than on ink and paper is im­material. See, e.g., Thrifty-Tel, 46 Cal.­App.4th at 1565, 54 Cal.Rptr.2d 468 (recog­nizing conversion of information recorded on floppy disk); A & M Records, 75 Cal.­App.3d at 570, 142 Cal.Rptr. 390 (same for audio record); Lone Ranger Television, 740 F.2d at 725 (same for magnetic tape). It would be a curious jurisprudence that turned on the existence of a paper docu­ment rather than an electronic one. Torching a company’s file room would then be conversion while hacking into its main­frame and deleting its data would not. That is not the law, at least not in Californ­ia.11

The DNS also bears some relation to Bremen's domain name. We need not delve too far into the mechanics of the Internet to resolve this case. It is suffi­cient to observe that information correlat­ing Kremen’s domain name with a particu­lar computer on the Internet must exist somewhere in some form in the DNS; if it did not, the database would not serve its intended purpose. Change the informa­tion in the DNS, and you change the web­site people see when they type “www.sex.com.”

Network Solutions quibbles about the mechanics of the DNS. It points out that the data corresponding to Kremen’s do­main name is not stored in a single record, but is found in several different places: The components of the domain name (“sex” and “com”) are stored in two differ­ent places, and each is copied and stored on several machines to create redundancy and speed up response times. Network Solutions’s theory seems to be that intan­gibles are not subject to conversion unless they are associated only with a single doc­ument.

Even if Network Solutions were correct that there is no single record in the DNS architecture with which Kremen’s intangi­ble property right is associated, that is no impediment under California law. A share of stock, for example, may be evidenced by more than one document. See Payne, 54 Cal. at 342 (“[T]he certificate is only evi­dence of the property; and it is not the only evidence, for a transfer on the books of the corporation, without the issuance of a certificate, vests title in the shareholder: the certificate is, therefore, but additional evidence of title ....”); see also Phansal­kar v. Andersen Weinroth & Co., 175 F.Supp.2d 635, 640-42 (S.D.N.Y.2001) (cit­ing Payne). A customer list is protected, even if it’s recorded on index cards rather than a single piece of paper. See Palm Springs, 46 Cal.App.2d 234, 115 P.2d 548. Audio recordings may be duplicated, see A & M Records, 75 Cal.App.3d 554, 142 Cal.­Rptr. 390; Lone Ranger Television, 740 F.2d 718, and confidential information and regulatory filings may be photocopied, see FMC, 915 F.2d 300; G.S. Rasmussen, 958 F.2d 896. Network Solutions’s “single document” theory is unsupported.

Network Solutions also argues that the DNS is not a document because it is re­freshed every twelve hours when updated domain name information is broadcast across the Internet. This theory is even less persuasive. A document doesn’t cease being a document merely because it is often updated. If that were the case, a share registry would fail whenever share­holders were periodically added or dropped, as would an address file whenev­er business cards were added or removed. Whether a document is updated by insert­ing and deleting particular records or by replacing an old file with an entirely new one is a technical detail with no legal sig­nificance.

Kremen’s domain name is protected by California conversion law, even on the grudging reading we have given it. Ex­posing Network Solutions to liability when it gives away a registrant’s domain name on the basis of a forged letter is no differ­ent from holding a corporation liable when it gives away someone’s shares under the same circumstances. See Schneider v. Union Oil Co., 6 Cal.App.3d 987, 992, 86 Cal.Rptr. 315 (1970); Ralston v. Bank of Cal., 112 Cal. 208, 213, 44 P. 476 (1896). We have not “creat[ed] new tort duties” in reaching this result. Cf. Moore v. Regents of the Univ. of Cal., 51 Cal.3d 120, 146, 271 Cal.Rptr. 146, 793 P.2d 479 (1990). We have only applied settled principles of con­version law to what the parties and the district court all agree is a species of prop­erty.

The district court supported its contrary holding with several policy rationales, but none is sufficient grounds to depart from the common law rule. The court was re­luctant to apply the tort of conversion because of its strict liability nature. This concern rings somewhat hollow in this case because the district court effectively ex­empted Network Solutions from liability to Kremen altogether, whether or not it was negligent. Network Solutions made no ef­fort to contact Kremen before giving away his domain name, despite receiving a fa­cially suspect letter from a third party. A jury would be justified in finding it was unreasonably careless.

We must, of course, take the broader view, but there is nothing unfair about holding a company responsible for giving away someone else’s property even if it was not at fault. Cohen is obviously the guilty party here, and the one who should in all fairness pay for his theft. But he’s skipped the country, and his money is stashed in some offshore bank account. Unless Kremen’s luck with his bounty hunters improves, Cohen is out of the pic­ture. The question becomes whether Net­work Solutions should be open to liability for its decision to hand over Kremen’s domain name. Negligent or not, it was Network Solutions that gave away Kre­men’s property. Kremen never did any­thing. It would not be unfair to hold Network Solutions responsible and force it to try to recoup its losses by chasing down Cohen. This, at any rate, is the logic of the common law, and we do not lightly discard it.

The district court was worried that “the threat of litigation threatens to stifle the registration system by requiring further regulations by [Network Solutions] and po­tential increases in fees.” Kremen, 99 F.Supp.2d at 1174. Given that Network Solutions’s “regulations” evidently allowed it to hand over a registrant’s domain name on the basis of a facially suspect letter without even contacting him, “further reg­ulations” don’t seem like such a bad idea. And the prospect of higher fees presents no issue here that it doesn’t in any other context. A bank could lower its ATM fees if it didn’t have to pay security guards, but we doubt most depositors would think that was a good idea.

The district court thought there were “methods better suited to regulate the va­garies of domain names” and left it “to the legislature to fashion an appropriate statu­tory scheme.” Id. The legislature, of course, is always free (within constitutional bounds) to refashion the system that courts come up with. But that doesn’t mean we should throw up our hands and let private relations degenerate into a free-­for-all in the meantime. We apply the common law until the legislature tells us otherwise. And the common law does not stand idle while people give away the prop­erty of others.

The evidence supported a claim for con­version, and the district court should not have rejected it.

Conversion by Bailee

Kremen’s complaint finally alleges a sep­arate claim for “conversion by bailee.” The district court granted summary judg­ment, holding that Network Solutions was not a bailee of Kremen’s property.

We need not decide the issue be­cause Kremen’s “conversion by bailee” claim does not state a cause of action independent of his conversion claim. As we read California law, “conversion by bailee” is not a distinct tort, but merely the tort of conversion committed by one who is a bailee. See, e.g., Byer v. Can. Bank of Commerce, 8 Cal.2d 297, 300-01, 65 P.2d 67 (1987); Gonzales v. Pers. Stor­age, Inc., 56 Cal.App.4th 464, 476-77, 65 Cal.Rptr.2d 473 (1997); 4 Witkin Personal Property § 138; 5 Witkin Torts § 622. Kremen’s complaint does not allege any claim of bailee liability other than conversion. Cf., e.g., Windeler v. Scheers Jewel­ers, 8 Cal.App.3d 844, 850-52, 88 Cal.Rptr. 39 (1970) (negligent breach of the bailment contract). To prove “conversion by bailee,” Kremen must establish all the ele­ments of conversion but, having done so, he gains nothing by also showing that Net­work Solutions is a bailee.

Kremen had a viable claim for conver­sion. The judgment of the district court is reversed on this count, and the case is remanded for further proceedings.

AFFIRMED in part, REVERSED in part and REMANDED. No costs.

1

We assume basic familiarity with the Inter­net. Those just tuning in should read the helpful discussions in Kremen v. Cohen, 325 F.3d 1035, 1038-39 (9th Cir.2003) (order cer­tifying question), and Thomas v. Network So­lutions, Inc., 176 F.3d 500, 502-04 (D.C.Cir.­1999).

2

The letter was signed "Sharon Dimmick," purported president of Online Classifieds. Dimmick was actually Kremen’s housemate at the time; Cohen later claimed she sold him the domain name for $1000. This story might have worked a little better if Cohen hadn’t misspelled her signature.

3

We dismissed Cohen's appeal in an unpub­lished memorandum disposition. See Kremen v. Cohen, Nos. 01-15886 + , 2002 WL 2017073, 45 Fed.Appx. 746 (9th Cir. Aug. 30, 45 Fed.Appx. 746 (9th Cir. Aug. 30, 2002).

4

Neither party argued choice of law, so we apply California law throughout. See McGhee v. Arabian Am. Oil Co., 871 F.2d 1412, 1424 (9th Cir.1989).

5

Network Solutions does suggest in passing that we should distinguish domain names supported by contracts from those (like Kre­men’s) that are not. It also stresses that Kremen didn’t develop the sex.com site before Cohen stole it. But this focus on the particu­lar domain name at issue is misguided. The question is not whether Kremen's domain name in isolation is property, but whether domain names as a class are a species of property.

6

The Restatement does note that conversion “has been applied by some courts in cases where the converted document is not in itself a symbol of the rights in question, but is merely essential to their protection and en­forcement, as in the case of account books and receipts.” Id. cmt. b.

7

Intangible interests in real property, on the other hand, remain unprotected by conver­sion, presumably because trespass is an ade­quate remedy. See Goldschmidt v. Maier, 73 P. 984, 985 (Cal.1903) (per curiam) (“[A] leasehold of real estate is not the subject of an action of trover.”); Vuich v. Smith, 140 Cal.­App. 453, 455, 35 P.2d 365 (1934) (same). Some California cases also preserve the tradi­tional exception for indefinite sums of money. See 5 Witkin Torts § 614.

8

The California Court of Appeal addressed the issue most recently in Thrifty-Tel, Inc. v. Bezenek, 46 Cal.App.4th 1559, 54 Cal.Rptr.2d 468 (1996), which noted that courts had "tra­ditionally” refused to acknowledge conver­sion of intangibles "not merged with, or re­flected in, something tangible.” Id. at 1565, 54 Cal.Rptr.2d 468 (citing Olschewski and Adkins). The court declined to decide wheth­er that limitation was still good law and re­solved the case on other grounds. See id. at 1565-66, 54 Cal.Rptr.2d 468.

9

Witkin cites the Restatement favorably. See 5 Witkin Torts § 613. Notably, though, he points to only three cases rejecting conversion of intangibles: Olschewski (which disavowed binding California Supreme Court authority directly on point, see pp. 1031-32 supra); Vuich (which involved real estate and so was not within Paynes holding anyway, see n. 7 supra); and Italiani v. Metro-Goldwyn-Mayer Corp., 45 Cal.App.2d 464, 114 P.2d 370 (1941) (which denied protection to intellectual prop­erty rights and has been overtaken by later cases such as A & M Records and Lone Ranger Television, see p. 1032 supra).

10

Network Solutions complains about the absence of specific record evidence regarding the DNS. But whether domain names are a species of property to which conversion ap­plies is a question of law rather than of adju­dicative fact; we may consider record evi­dence but need not so restrict ourselves. See Fed.R.Evid. 201(a) advisory committee notes. Network Solutions has had ample opportunity to contest the nature of the DNS in both its answering brief on appeal and its response to amici. It has raised no material point of dispute.

11

The Restatement requires intangibles to be merged only in a "document,” not a tangible document. Restatement (Second) of Torts § 242. Our holding therefore does not de­pend on whether electronic records are tangi­ble. Compare eBay, Inc. v. Bidder's Edge, Inc., 100 F.Supp.2d 1058, 1069 (N.D.Cal.­2000) ("[I]t appears likely that the electronic signals sent by [Bidder's Edge] to retrieve information from eBay’s computer system are ... sufficiently tangible to support a trespass cause of action.”), with Intel Corp. v. Hamidi, 30 Cal.4th 1342, 1 Cal.Rptr.3d 32, 47-48, 71 P.3d 296, (2003) (implying that electronic sig­nals are intangible).

United States District Court, E.D. New York.

No. CR-87-185.

UNITED STATES of America, Plaintiff, v. Jay L. TUROFF, Donald Sherman, and Ronald Sherman, Defendants.

Dec. 22, 1988.

Laurence A. Urgenson, Chief Asst. U.S. Atty., Brooklyn, N.Y., for plaintiff.

Edward Rappaport, New York City, for Jay L. Turoff.

Michael Rosen, New York City, for Don­ald Sherman.

Gerald L. Shargel, New York City, for Ronald Sherman.

MEMORANDUM AND ORDER

GLASSER, District Judge:

Defendants have moved to dismiss the indictment in this case on the ground that, under the holding in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), it fails to allege a viola­tion of the mail fraud statute, 18 U.S.C. § 1341.

For the reasons stated below, defend­ants’ motion is denied.

FACTS

The superseding indictment in this case charges that, between September 1980 and March 1986, defendants conspired

to use the mails and to cause the use of the mails for the purposes of executing a scheme and artifice:

(a) to defraud the [Taxi and Limousine Commission (“TLC”)] and the City of New York and to obtain by means of false and fraudulent pretenses, represen­tations and promises property of the TLC, namely 23 unauthorized taxi me­dallions in excess of the 100 Authorized Diesel Medallions (hereinafter “23 Unau­thorized Taxi Medallions”); and

(b) to defraud the TLC, the City of New York and its citizens of money and property lawfully due to the TLC, namely annual license renewal fees on the 23 Unauthorized Taxi Medallions.

Superseding Indictment [“the indictment”], 1112 (emphasis added).

According to the indictment, in late 1978, the TLC, which regulates the City’s medal­lion taxicabs, authorized the issuance of 100 temporary taxi medallions to a corpora­tion (“Research Cab Corporation”) to be formed by defendant Donald Sherman. The purpose of the temporary medallions was to test the feasibility of diesel engines in New York City taxicabs.

The indictment alleges that in late 1980, the TLC’s chairman, defendant Turoff, caused an additional 23 unauthorized me­dallions to be diverted to his codefendants and placed on gasoline- and diesel-powered taxicabs registered to Research Cab and to Tulip Cab Corporation. These taxicabs al­legedly operated in the City from late 1980 to early 1985. Defendants Donald and Ronald Sherman allegedly deposited the proceeds from those taxicabs, which ex­ceeded $500,000, in the bank account of a shell corporation (“Exdie Cab Corpora­tion”).

Allegedly, defendants never paid the TLC the annual license renewal fees for the unauthorized medallions. In connec­tion with the conspiracy, the defendant Turoff allegedly gave false and misleading information to the TLC Commissioners and the Mayor’s office, and destroyed TLC records on the Tulip Cab Corporation and all the defendants allegedly gave false and misleading information to the New York State Commission of Investigation. The indictment alleges fourteen instances in which the mails were used to effectuate the scheme.

DISCUSSION

I.

The mail fraud statute under which de­fendants have been indicted was first en­acted in 1872. In its present form, it now reads:

Whoever, having devised or intending to devise any scheme or artifice to de­fraud, or for obtaining money or proper­ty by means of false or fraudulent pre­tenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counter­feit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or ar­tifice or attempting to do so, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or takes or receives there­from, any such matter or thing, or know­ingly causes to be delivered by mail ac­cording to the direction thereon, or at the place at which it is directed to be deliv­ered by the person to whom it is ad­dressed, any such matter or thing, shall be fined not more than $1,000 or impris­oned not more than five years, or both.

Defendants move to dismiss the indict­ment on the ground that it does not state a cognizable violation of the mail fraud stat­ute as interpreted in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). In McNally, the Su­preme Court reversed the mail fraud con­victions of Charles J. McNally and James E. Gray on the ground that the mail fraud statute does not reach schemes which vio­late “the intangible right of the citizenry to good government.” Id., 107 S.Ct. at 2879. The case involved a scheme devised by Gray, who held two top government posts in the Kentucky state government, and Ho­ward P. “Sonny” Hunt, a state Democratic party chairman who had been given de facto power by the governor to select the insurance agencies from which the state would buy its policies. Hunt selected a certain agency as the state’s agent for securing a workmen’s compensation policy, on the condition that that agency would share any resulting commissions in excess of $50,000 a year with twenty-one other insurance agencies specified by Hunt. Among the designated agencies was one controlled by Hunt and Gray (who had formed it for the exclusive purpose of ob­taining the excess commissions). McNally served as the agency’s front man.

Gray and McNally were tried on one count of mail fraud1. The indictment al­leged that the defendants had

devised a scheme (1) to defraud the citi­zens and government of Kentucky of their right to have the Commonwealth’s affairs conducted honestly, and (2) to ob­tain, directly and indirectly, money and other things of value by means of false pretenses and the concealment of materi­al facts.

Id., 107 S.Ct. at 2878.

The District Court instructed the jury it could convict McNally and Gray of mail fraud if it found that they had been part of a scheme through which the agency con­trolled by Hunt and Gray had received the excess commissions and either Hunt or Gray had failed “to disclose [his] interest [in the agency] to persons in state govern­ment whose actions or deliberations could have been affected by that disclosure.” Id., 107 S.Ct. at 2879. The jury convicted defendants, and the Court of Appeals af­firmed the convictions, relying on many prior decisions holding that “the mail fraud statute proscribes schemes to defraud citi­zens of their intangible rights to honest and impartial government.” Id.

The Supreme Court reversed, holding that “[t]he mail fraud statute clearly pro­tects property rights, but does not refer to the intangible right of the citizenry to good government.” Id. The Court framed the issue in the case narrowly:

The issue is thus whether a state officer violates the mail fraud statute if he chooses an insurance agent to provide insurance for the State but specifies that the agent must share its commissions with other named insurance agencies, in one of which the officer has an owner­ship interest and hence profits when his agency receives part of the commissions. We note that as the action comes to us, there was no charge and the jury was not required to find that the Common­wealth itself was defrauded of any mon­ey or property. It was not charged that in the absence of the alleged scheme the Commonwealth would have paid a lower premium or secured better insurance. Hunt and Gray received part of the com­missions but those commissions were not the Commonwealth’s money. Nor was the jury charged that to convict it must find that the Commonwealth was de­prived of control over how its money was spent. Indeed, the premium for insur­ance would have been paid to some agen­cy, and what Hunt and Gray did was to assert control that the Commonwealth might not otherwise have made over the commissions paid by the insurance com­pany to its agent. ... We hold, there­fore, that the jury instruction on the substantive mail fraud count permitted a conviction for conduct not within the reach of § 1341.

Id., 107 S.Ct. at 2881-82 (footnote omit­ted).2

The Court also held that, absent a clearer indication from Congress3, it could not find that the mail fraud statute had criminalized defendants’ failure to disclose their interest in the agency to persons in state govern­ment, in view of the fact that state law apparently did not prohibit such nondisclo­sure. Id., 107 S.Ct. at 2882 n. 9.

Most significantly for this case, the Court in McNally held that, because the mail fraud statute “had its origin in the desire to protect individual property rights, ... any benefit which the Government de­rives from the [mail fraud] statute must be limited to the Government’s interest as property-holder.” Id., 107 S.Ct. at 2881 n. 8. Accordingly, in the present case, the government’s failure to demonstrate the City’s interest “as property-holder” in the medallions would be fatal to that charge in the indictment that is based upon the fraudulent procurement of the medallions.

However, even if the court accepted this argument, the indictment would still stand insofar as it is based on the scheme to avoid payment of license renewal fees. Money is the most concrete and tangible of property. In Reiter v. Sonotone Corp., 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979), the Court stated: “In its dictionary definitions and in common usage ‘property’ comprehends anything of material value owned or possessed.... Money, of course, is a form of property.” On this basis alone, defendant’s motion to dismiss the indictment must be denied. Id. 442 U.S. at 338, 99 S.Ct. at 2330 (citation omitted).

As regards the medallions, the court concludes that the fraudulent misappropri­ation of them deprived the City of a proper­ty interest cognizable under the mail fraud statute.

Defendants cite United States v. Evans, 844 F.2d 36 (2d Cir.1988) for the proposi­tion that the City’s interest in the medal­lions “is ancillary to a regulation, not to property.” Id., 844 F.2d at 42. Evans concerned a scheme to transfer arms regu­lated by the federal government from vari­ous foreign nations to Iran. The scheme required defendants to deceive the govern­ment about the true identity of the pur­chasing country in order to obtain the nec­essary approval for the transaction. The government’s right to regulate such trans­fers arose either from a statutorily-re­quired clause in the contract between the United States and the original foreign buy­er, or by regulation. Id., 844 F.2d at 38.

The Second Circuit, affirming the district court’s dismissal of the mail and wire fraud counts against defendants, held that the government had not shown that it had some property interest in the arms. Id., 844 F.2d at 40. Furthermore, the court rejected the government’s contention that “the right of the United States Government to prevent the resale or retransfer of U.S. military weaponry from foreign nations to other, unacceptable foreign powers” consti­tuted “an interest in, and a right to exer­cise control over, property” for purposes of the mail fraud statute. Id.

In addressing the latter argument, the court rejected the government’s analogies to common law property rights. The court reasoned that, while a right to control the future alienation and use of a thing can be a traditional property right (e.g., the fee simple determinable, the fee simple subject to a condition subsequent, the possibility of reverter, and the power of termination), that does not mean that every such right is cognizable under the mail and wire fraud statutes. Id., 844 F.2d at 40-41.4 Specifi­cally, the court noted that the govern­ment’s right to control arms transfers be­tween foreign powers would never permit the United States to possess the weapons in question, and had no effect on the pur­chaser’s title to the arms or the seller’s right to profits from the sale. Rather, the regulatory scheme governing such trans­fers “substitutes for the traditional proper­ty remedies of replevin, damages or specif­ic performance, a substitution that is fur­ther proof that the right is not property.” Id., 844 F.2d at 41. Moreover, the court expressed its reluctance to apply common law property rules in the fundamentally different context of weapons transfers, which are governed by foreign policy and human rights considerations in addition to the usual economic laws of supply and de­mand. Id., 844 F.2d at 42.

The court summed up by finding that the government’s interest in the weapons was essentially regulatory:

All of these distinctions suggest to us that the government’s interest here is ancillary to a regulation, not to property. A law prohibiting a particular use of a commodity that the government does not use or possess ordinarily does not create a property right. If it did, many govern­ment regulations would create property rights. For example, laws preventing the sale of heroin or the dumping of toxic waste would create government property rights in the drugs or chemicals. Admit­tedly, the line between regulation and property is difficult to draw with scien­tific precision ... and we do not mean to imply that the government never has a property interest in the limits it imposes on property use.

Id., 844 F.2d at 42 (citation omitted).

Evans is distinguishable. As discussed above, in Evans the United States had no possessory interest in the weapons, nor did the deception practiced by the defendants affect the purchaser’s title to the weapons or the seller’s right to profit from the sale of the weapons. Here, defendants are ac­cused of taking 23 items of tangible per­sonal property from the City’s possession. Title to those medallions in the hands of third persons would be affected. Citation of authority is not required for the princi­ple that a thief cannot transfer title even to a bona fide purchaser for value. While the government in Evans had no possessory interest in the weapons, the TLC in this case did have a possessory interest in the medallions. It maintained them under lock and key at its offices. It had title to them. An action for conversion of those medal­lions would lie and either replevin or dam­ages would be an available and appropriate remedy. Modern authority abounds. See, e.g., 1 F. Harper & F. James, The Law of Torts, §§ 2.11 and 2.36 (1956); Prosser and Keaton, The Law of Torts 106 (5th ed. 1984); N.Y.Civ.Prac.L. & R. § 7103(a) (McKinney 1980). Given the impetus to return to the arcane learning of the law of property prompted by McNally, a quota­tion from Book III of Blackstone’s Com­mentaries on the Laws of England (Lew­is’ Ed.1902) seems appropriate. At pages 145-46 that venerable author wrote:

The wrongful taking of goods being thus most clearly an injury, the next consider­ation is, what remedy the Law of Eng­land has given for it. And this is, in the first place, the restitution of the goods themselves so wrongfully taken, with damages for the loss sustained by such unjust invasion; which is effected by ac­tion of replevin; ...

That the medallions themselves are a valuable, marketable commodity was ad­verted to years ago by Professor Charles A. Reich in his seminal article entitled The New Property, 73 Yale L.J. 733 (1964). He wrote, at page 735:

A New York City taxi medallion, which costs very little when originally obtained from the city, can be sold for over twen­ty thousand dollars.

In a footnote at that point, the author observed:

7. A New York Taxi Medallion is a piece of tin worth 300 times its weight in gold. No new transferable medallions have been issued since 1937. Their value in 1961 was estimated at $21,000 to $23,­000; banks will lend up to $13,000 on one. The cabbie pays the City only $200 a year for his medallion. There is a brisk trade in them: out of 11,800, about 600 changed hands in 1961. One compa­ny, National Transportation Co., sold 100 medallions at $21,000 each, a transaction totaling $2,100,000. A non-transferable license, of which there are a few, has no market value. N.Y. Times, Dec. 5, 1961, p. 46, col. 3.

The government also contends that the medallion is, in essence, the equiv­alent of an easement to use the city streets. At the risk of dwelling too long on the esoterica of property, the medallions could not properly be equated with easements. An easement is generally appurtenant, which is to say that it is a right which the owner of one parcel of land (the dominant tenement) may exercise in or over the land of another (the servient tenement) for the benefit of the former. See, e.g., Green­wood Lake & Port Jervis R.R. Co. v. New York & Greenwood Lake R.R. Co., 134 N.Y. 435, 31 N.E. 874 (1892). An easement in gross is a right created in a person to use the land of another, which the owner of that easement may enjoy even though he does not own or possess a dominant estate. Although the concept of an easement in gross has been recognized, such an ease­ment is rare. See, e.g., Mayor, etc. of City of New York v. Law, 125 N.Y. 380, 26 N.E. 471 (1891). The government’s contention would have been more technically correct had it characterized the medallion as a “special franchise” which confers a right to do something in the public highway which, except for the grant, would be a trespass. See, e.g., City of New York v. Comtel Inc., 57 Misc.2d 585, 594 n. 3, 293 N.Y.S.2d 599, 607 n. 3 (Sup.Ct.N.Y.Co.), aff'd, 30 A.D.2d 1049, 294 N.Y.S.2d 981 (1st Dep’t 1968), aff'd, 25 N.Y.2d 922, 304 N.Y.S.2d 853, 252 N.E.2d 285 (1969).

A franchise is property. It is assignable, taxable and transmissible. Hatfield v. Straus, 189 N.Y. 208, 219, 82 N.E. 172 (1907). A mere license, on the other hand, is nothing more than a personal, revocable privilege. See, e.g., Brooklyn Heights R.R. Co. v. Steers, 213 N.Y. 76, 79, 106 N.E. 919 (1914). It would not be seriously disputed that a taxicab “license” is, accurately speaking, a special franchise which is not revocable at will and may not be taken away except by due process. Hecht v. Monaghan, 307 N.Y. 461, 121 N.E.2d 421 (1954). See also, Wignall v. Fletcher, 303 N.Y. 435 (1952). The resolution of this motion will not be dependent, however, upon the technically correct character­ization of the matter in issue as being either a franchise, license, or easement.

The government also contends that the physical medallions themselves are “prop­erty” for purposes of the mail fraud stat­ute. The defendants ridicule that conten­tion by deprecatingly referring to the me­dallions as nothing more than “23 pieces of tin”. Thus, the defendants impliedly, but never explicitly, assert a de minimis quali­fication to the tort of conversion or the crime of larceny. No authority is cited to support that oblique assertion, nor is the court aware of any. In his dissenting opin­ion in McNally, Justice Stevens was pres­cient when he expressed doubt about the gravity of the ramifications of the Court’s decision and said that “Congress can, of course, negate it by amending the statute.” Id., 107 S.Ct. at 2890. As has already been noted, Congress did exactly that. Justice Stevens went on, however, to observe that:

Even without Congressional action, pros­ecutions of corrupt officials who use the mails to further their schemes may con­tinue since it will frequently be possible to prove some loss of money or property.

Id. (emphasis added). In this respect Jus­tice Stevens was also prescient. The me­dallion is a tangible, physical object. The Administrative Code of the City of New York § 19-502(h) provides as follows:

“Medallion” means the metal plate is­sued by the commission for displaying the license number of a licensed taxicab on the outside of the vehicle.

By charging the defendants with obtaining by false and fraudulent representations and promises 23 unauthorized taxi medal­lions, (Indictment ¶ 22(a)), the government is seeking to prosecute these defendants by attempting to prove they caused some loss of property as alleged.

In Evans, upon which the defendants so heavily rely, the defendants were charged with making false statements to United States agencies to obtain approval to ex­port arms. Here, the defendants are ac­cused of taking 23 items of tangible per­sonal property (the metal plates) from the City of New York in which the City did have a possessory interest. This is not a case where it is alleged that the citizenry is merely deprived of the honest services of a public official. This is a case where the public official is accused of conspiring with others to misappropriate tangible personal property. To view this case otherwise would be to hold, in effect, that a City cashier who embezzled money merely de­prived the City of her honest and faithful services to which the embezzled money is an inconsequential appurtenance. It could not be disputed that the cashier committed a fraud, and had she used the mails to further her scheme, she would have com­mitted mail fraud. In Carpenter v. United States,—U.S.—, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987) the Court wrote:

The concept of “fraud” includes the act of embezzlement, which is “‘the fraudu­lent appropriation to one’s own use of the money or goods entrusted to one’s care by another.’”

Id., 108 S.Ct. at 321 (citation omitted).

Whether the medallions are tangible property or not to support a charge of mail fraud may also be discerned by asking whether the wrongful taking of the medal­lions from the offices of the TLC would be larceny. Defendants advise that a state prosecution has been commenced on that ground. See N.Y. Penal Law § 155.00(1) (McKinney 1988), defining property for purpose of state larceny statute as “any article, substance or thing of value”. Thus, the reluctance of the McNally Court to read the mail fraud statute as criminaliz­ing conduct on the part of a state official which is not otherwise prohibited by state law, 107 S.Ct. at 2882 n. 9, need not deter here.

Given the views expressed to the effect that this indictment passes legal muster under McNally, discussion of United States v. Murphy, 836 F.2d 248 (6th Cir.1988), cert. denied,—U.S.—, 109 S.Ct. 307, 102 L.Ed.2d 325 (1988) and of United States v. Ferrara, 701 F.Supp. 39 (E.D.N.Y.1988) aff'd, No. 88-1364,—F.2d—(2d Cir. Dec. 16, 1988) upon which the de­fendants rely is unnecessary. That these cases are deemed to be distinguishable for the reasons advanced should be apparent. The case which is closely analogous and not distinguishable from this is United States v. Ianniello, 677 F.Supp. 233 (S.D.­N.Y.1988) in which the defendants were charged with a scheme to provide false information to the New York State Liquor Authority (“SLA”) in order to obtain liquor licenses and defraud the state of tax pay­ments by concealing the actual owners of the establishments licensed. The object of the scheme to defraud was to skim the profits from the operation of bars and res­taurants. McNally was decided after they were convicted and they filed applications for habeas corpus relief contending that McNally made their mail fraud convictions unlawful. In denying their application and finding McNally readily distinguishable, Chief Judge Brieant held that:

Contrary to petitioners’ contention that the indictment merely alleged a scheme to deprive the SLA of intangible rights, the indictment only referred to the depri­vation of intangible rights as incident to the scheme to defraud for pecuniary gain. The petitioners were alleged to have submitted falsified applications to the SLA that were intended to promote the larger scheme ... of concealing the real ownership interests of the establish­ments at issue in order to obtain liquor licenses to generate revenue from the sale of liquor and to facilitate the remov­al of cash from those businesses without detection by the authorities.

677 F.Supp. at 234-35.

Similarly, the indictment of these defend­ants alleges that they placed the 23 medal­lions on taxis from which they derived sub­stantial sums which were held and dis­bursed by a shell corporation (W 15-17).

Mindful that “an overspeaking judge is no well-tuned cymbal,” I nevertheless make several additional observations.

The rule announced in McNally was that the mail fraud statute is applicable only to “frauds involving money or property” and not to schemes relating to good govern­ment. 107 S.Ct. at 2881. It logically fol­lowed, said the Court in Evans, 844 F.2d at 39, “that the deceived party must lose some money or property.” Carpenter explained that McNally did not limit the scope of the mail fraud statute “to tangible as distin­guished from intangible property rights.” 108 S.Ct. at 320. From those pronounce­ments, the view has been expressed that obtaining from a sovereign by means of a fraudulent scheme utilizing the mails, a license to engage in a business, profession or occupation is not a violation of the mail fraud statute because the license, although property in the hands of the licensee is not property in the hands of the licensor. Upon reflection, the view is that A has nothing which, when he gives it to B, be­comes something. This brings to mind L. Carroll, Through the Looking Glass, Ch. V (Modern Library Ed. at p. 200):

... the Queen remarked ... “I’m just one hundred and one, five months and a day.”

“I can’t believe that” said Alice.

“Can’t you?” the Queens said in a pity­ing tone. “Try again; draw a long breath and shut your eyes.”

Alice laughed. “There’s no use trying,” she said: “one ca’n’t believe impossible things.”

“I daresay you haven’t had much prac­tice,” said the Queens. “When I was your age, I always did it for half-an-hour a day, why, sometimes I’ve believed as many as six impossible things before breakfast.”

To view the sovereign’s power to grant licenses, or franchises, or easements as be­ing something other than money or proper­ty is to equate, erroneously in my view, the sovereign with an individual or corporation. What the latter sells, buys, creates or man­ufactures and the proceeds derived from those activities is money or property in the traditional sense. The sovereign can buy and sell and manufacture and derive pro­ceeds from those activities only by virtue of the power it possesses as sovereign—namely its police power, its power to tax, etc. It is only through the exercise of those powers that the sovereign obtains the revenues which enable it to function at all and acquire, if it chooses, “property” in the traditional sense. To rob the sovereign of the due exercise of that power by schemes or artifices to defraud, is to rob it of “prop­erty” as surely as the goods or chattels or money obtained from a private person by similar schemes or artifices.

The view of cases such as Murphy and Ferrara, supra, that licenses are only property in the hands of the licensee, but never in the hands of the government rep­resents an inversion of historical fact. In the seminal article to which reference has already been made, which urged that vari­ous important government benefits (includ­ing licenses) be accorded a status akin to “property,” Professor Charles Reich noted that traditionally, just the opposite was true—licenses, and all other forms of government largess were considered government property long before the prop­erty rights of the licensee or recipient were accorded legal recognition:

The chief obstacle to the creation of private rights in [government] largess [e.g., licenses, welfare benefits, services, contracts and franchises] has been the fact that it is originally public proper­ty, comes from the state, and may be withheld completely. But this need not be an obstacle. Traditional property also comes from the state, and in much the same way. Land, for example, traces back to grants from the sovereign. In the United States, some was the gift of the King of England, some that of the King of Spain. The sovereign extin­guished Indian title by conquest, became the new owner, and then granted title to a private individual or group. Some land was the gift of the sovereign under laws such as the Homestead and Preemption Acts. Many other natural resources—water, minerals and timber, passed into private ownership under similar grants. In America, land and resources all were originally government largess. In a less obvious sense, personal property also stems from government. Personal prop­erty is created by law; it owes its origin and continuance to laws supported by the people as a whole. These laws “give” the property to one who performs certain actions. Even the man who catches a wild animal “owns” the animal only as a gift from the sovereign, having fulfilled the terms of an offer to transfer owner­ship.

Reich, The New Property, 73 Yale L.J. 733, 778 (1964) (footnotes omitted; emphasis added).

The salutary fact that, in modern times, courts have recognized the property rights of licensees5 need not blind us to the equal­ly compelling fact that licenses, like other forms of public largess, originate in the state and are “public property,” in the first instance.

The defendants’ reliance upon Hawaii v. Standard Oil Co., 405 U.S. 251, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972) and Reiter v. Sonotone Corp., 442 U.S. 330, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979), each involving § 4 of the Clayton Act, for the proposition that the government must sustain an injury in its commercial, proprietary capacity rather than in its sovereign capacity is not persuasive. Hawaii decided that § 4 of the Clayton Act does not authorize the State of Hawaii to sue as parens patriae for an injury to its general economy for fear of opening the doors to duplicative recoveries which every citizen of the state may obtain for damage to business or prop­erty occasioned by violation of the antitrust laws. Reiter did not involve a claimed injury by a sovereign, but the Court had occasion to elaborate upon its holding in Hawaii. See Reiter, 442 U.S. at 342-43, 99 S.Ct. at 2332-33. Reiter is, however, of more than passing interest in another re­gard. The mail fraud statute (§ 1341), it will be recalled, provides:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses ... (emphasis added)

McNally held that a scheme or artifice to defraud does not violate the statute unless its purpose is to defraud someone of money or property, thus negating the use of the disjunctive in the statute. In Reiter, the Court said, 442 U.S. at 339, 99 S.Ct. at 2331:

In construing a statute we are obliged to give effect, if possible, to every word Congress used. ... Canons of construc­tion ordinarily suggest that terms con­nected by a disjunctive be given separate meanings, unless the context dictates otherwise. ...

See Justice Stevens’ dissent in McNally, 107 S.Ct. at 2884, questioning the Court’s construction of § 1341 which ignores the canons of construction previously recog­nized as controlling.

The government has asked the court to regard McNally as limited to its precise facts in light of a recent amendment to the mail fraud statute which was intended to overrule McNally’s holding that the intan­gible right to honest government services is not “property” under § 1341. See 18 U.S.C. § 1346 (“For the purposes of this chapter, the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”). For two reasons, the court need not address this argument. First, the indictment in this case involves a scheme to defraud the City of taxi medal­lions and license renewal fees, not a scheme to deprive the City of the intangible right of honest services. Second, the court finds that the indictment satisfies McNal­ly ’s holding that any benefit to the govern­ment under the mail fraud statute is limit­ed to its interest as “property-holder.” Thus, the indictment stands, whether or not McNally is limited to its precise facts.

For the reasons stated above, defend­ants’ motion to dismiss the indictment is denied.

II.

The defendants also seek dismissal of the indictment for the reason that, they contend, the mailings were incident to and not for the purpose of executing the al­leged scheme to defraud. The mailings, they contend, were not integral or closely connected to the fraudulent scheme but were, instead, remote, tangential, collateral or incidental to the mail fraud scheme al­leged.

The cases in which this issue has been previously addressed by other federal courts were thoroughly briefed and dis­cussed by both sides. Suffice it to say that the indictment alleges that the mailings charged in counts two through fourteen were made “for the purpose of executing the aforesaid scheme and artifice and at­tempting to do so.” Despite the defend­ants’ protest that the mailings specified cannot be regarded as furthering the scheme and artifice, that conclusion is not compelled by a reading of the indictment in its entirety. The jury will be instructed on the elements of mail fraud the government must prove beyond a reasonable doubt and it will be for the jury to determine whether those mailings were for the purpose of executing the scheme to defraud or were entirely incidental to it.

III.

The defendants have sought an or­der of the court which would compel the government to provide a witness list prior to trial. An analysis of the reasons ad­vanced by the defendants for the issuance of such order fails to reveal a specific showing of particularized need for such a list in the preparation of their defense. The allegations in this indictment have been the subject of investigation by the New York State Investigation Commission and the Grand Jury for some time. The mailings enumerated in counts two through fourteen, the records referred to in the indictment, and the testimony the defend­ants gave before the State Investigation Commission are or should be well known to them. Absent the requisite showing of need, the motion for such a list is denied.

IV.

The defendants have sought an or­der which would compel the government to provide a bill of particulars with respect to paragraphs 18 and 19 of the indictment which allege that they attempted to conceal the conspiracy by giving false testimony to the State Commission of Investigation (¶ 18) and that Turoff gave false informa­tion to the Mayor of the City of New York and to the Taxi and Limousine Commission.

Rule 7(f) of the Fed.R.Crim.P. leaves such a request to the discretion of the court. That discretion should be exercised in favor of the movant when a bill of partic­ulars is necessary to inform the defendant with sufficient precision of the charges against him to enable him to prepare his defense, avoid unfair surprise at trial, and assert the prohibition against being twice put in jeopardy for the same offense. No such necessity is apparent from a reading of this indictment which clearly informs the defendants of the charges against them. This aspect of the motion is denied.

V.

The defendants request an order compelling the production of statements of co-conspirators that the government in­tends to introduce at trial as admissions of the defendants under Rule 801(d)(2) Fed.R. Evid. The defendants base the request upon Rule 16(a)(1)(A) of the Fed.R.Crim.P. which provides in substance that the government shall permit the defendant to inspect and copy or photograph any rele­vant written or recorded statements made by the defendant of which the government knows or should know and within its pos­session or control; the substance of any oral statement of the defendant in response to interrogation by a person known to the defendant to be a government agent and which the government intends to offer in evidence; and recorded testimony of a de­fendant before a grand jury which relates to the indictment.

The government does not dispute the de­fendants’ assertion of entitlement to pre­trial disclosure of coconspirators’ state­ments on the ground that such statements are defendants’ statements under Fed.R. Crim.P. 16(a)(1)(A) or by attribution under Fed.R.Evid. 801(d)(2). The government is, therefore, hereby directed to disclose all statements made during the course of and in furtherance of the conspiracy by a co-­conspirator who is not also a government witness as would be required by Rule 16(a)(1)(A) if the statement were that of a defendant.

VI.

The defendants Donald and Ronald Sher­man have moved pursuant to Fed.R.Crim. P. 12 for an order suppressing evidence obtained from the execution of search war­rants for the Midland Service Corporation and Research Cab Corporation premises. The motion to suppress is predicated upon the assertions that the warrants were over-­broad; there was an absence of probable cause to issue them; the reliance upon the facial text of the warrant was unreason­able.

The Facts

The facts leading up to the issuance of and the execution of the search warrants have been stated in an affidavit of Anthony Valenti, a criminal investigator for the United States Attorney’s Office. Those facts are not in dispute and are as follows:

On March 13, 1986, Mr. Valenti was in­formed by the United States Attorney that the New York State Investigation Commis­sion (“SIC”) had that day referred a matter for possible federal prosecution involving fraud and corruption at the New York City Taxi and Limousine Commission (“TLC”).

The following day, March 14, 1986, In­vestigator Valenti met with SIC officials who briefed him on that portion of the SIC’s investigation that related to the is­suance by the TLC of 100 taxi medallions to Research Cab Corporation in connection with an experimental program intended to test the feasibility of diesel engines in taxi­cabs (hereinafter referred to as the “Diesel Medallion Program”). Investigator Valenti was informed that the SIC had uncovered certain evidence that in addition to the 100 experimental medallions an extra 23 medal­lions had been fraudulently obtained and used by Research and Tulip Cab Corpora­tions, both of which were operated and managed by Midland Service Corp., whose principals included Donald Sherman. In the briefing, the SIC officials also informed investigator Valenti of a burglary that had occurred at the TLC office on or about March 6, 1986, in which 23 of the medal­lions that had been used by Research Cab were reported stolen and that on March 7, 1986, Jay Turoff, then Chairman of the TLC, mysteriously recovered 18 of those “stolen” medallions in a wastebasket in the TLC offices.

In the late afternoon of March 14, 1986, Investigator Valenti received information from an SIC investigator that yet another suspicious break-in had occurred the night before at a TLC facility in Queens and that records relating to Research Cab apparent­ly had been taken.

Faced with the possibility that critical evidence relevant to fraud and corruption in connection with the Diesel Medallion Program was being systematically de­stroyed by persons who feared discovery of their criminal activities, Investigator Valen­ti contacted Assistant U.S. Attorney Reena Raggi, who was then the Chief of Special Prosecutions in the United States Attor­ney’s Office and who had been assigned to the TLC investigation. At approximately 5:30 P.M. on the evening of March 14, 1986, Valenti and AUSA Raggi began preparing an application for search warrants for the respective premises of Research Cab, Tulip Cab and Midland Service Corporation.

At approximately 9:00 P.M., AUSA Raggi and Investigator Valenti contacted Chief United States Magistrate A. Simon Chrein by telephone to apply orally for the war­rants. After ascertaining the nature of the call, Chief Magistrate Chrein made ar­rangements to tape the conversation and placed both Investigator Valenti and AUSA Raggi under oath. The AUSA informed the magistrate that a nighttime warrant was urgently needed as a result of the two break-ins that had occurred within the last week. These break-ins, the AUSA contin­ued, provided “reason to think that some­one is interested in either stealing or de­stroying evidence pertinent to this investi­gation.”

Investigator Valenti provided the magis­trate with the basis for probable cause. The investigator stated that in 1978, the TLC had issued 100 medallions to Research Cab for use in the Diesel Medallion Pro­gram. A subsequent audit by the New York City Comptroller’s Office revealed, however, that in fact 28 additional unautho­rized medallions had been obtained and used by Research. Moreover, despite the fact that a final report rejecting the use of diesel engines had been issued in early 1985, by the end of 1985, only 58 of the 123 diesel medallions had been surrendered to the TLC and as of March 14, 1986, some 25 of the medallions were still missing. In­vestigator Valenti further recounted the two break-ins that had occurred and Tu­roff’s purported recovery of 18 of the “sto­len” medallions in a waste paper basket. Finally, Investigator Valenti averred that examination of the wide range of books and records sought was necessary for a “full and complete investigation into possi­ble fraudulent issuance of taxi medallions to Research Cab Corporation”.

Thereafter, Chief Magistrate Chrein questioned AUSA Raggi about the doc­uments sought by the warrants:

MC: Ah, I take it the specific records you hope to find in the subject premis­es are, are the duplicates of the public­ly main, ah stored records that are maintained by the target cab company.

RR: No, Your Honor, that’s not quite true. What we’re trying to find at this point are all of the records, all of the business records.

MC: Yes, but they’re in the custody of the target companies.

After further colloquy between Chief Magistrate Chrein and AUSA Raggi relat­ing to the burglaries and the need for a nighttime search warrant, the magistrate determined to issue the search warrants stating:

No, no, I just want, I am gonna authorize the entries and I'm gonna authorize the night time entries....

I’m satisfied that, ah, I can issue the warrant ah, and, and ah, and it can be a night time warrant, ah, the record should reflect that I’ve authorized the warrant at 9:36 P.M. ...

Although the government had not re­quested that any statutory section of the criminal code be contained in the warrants’ proposed description of items to be seized, Chief Magistrate Chrein modified the de­scription to include a reference to the mail fraud statute, 18 U.S.C. § 1341, and in­formed AUSA Raggi and Investigator Va­lenti of this change. This modification was then included in the description of items authorized to be seized on the original war­rant that the magistrate was required to prepare under Rule 41(c)(2) of the Federal Rules of Criminal Procedure. This modifi­cation was not, however, made on the “du­plicate original” warrant that was in the possession of AUSA Raggi and Investiga­tor Valenti. As authorized by Chief Magis­trate Chrein and contained in the original warrants, the description of the items to be seized read as follows:

Books, Records, Documents Correspon­dence, Memoranda, Invoices, Bills, Leas­es, Registrations, Medallions, Contracts, Logs, Trip Sheets, Payroll Records, Bank Records, and Writings of any kind relat­ing to the ownership, operations and maintenance of Research Cab Corpora­tion, Midland Service Corporation, Car­riage Service Company and Tulip Cab Corporation which constitute evidence of violation of 18 U.S.C. section 1841.

After receiving judicial authorization to conduct the searches, Investigator Valenti, another criminal investigator from the U.S. Attorney’s Office and three investigators from the SIC, conducted the searches of the two premises. Investigator Valenti su­pervised both searches and participated in all decisions regarding whether particular items should be seized pursuant to the war­rants. Valenti was present during the en­tirety of both searches. Prior to the start of the initial search of the Midland/Tulip premises, but after investigators had en­tered the premises, Donald Sherman was apprised of the scope and nature of the searches to be conducted. Specifically, In­vestigator Valenti spoke by telephone with Donald Sherman and informed Sherman, in general terms, that the warrants involved the Diesel Medallion Program and the ex­perimental medallions issued to Research Cab. Investigator Valenti also agreed to delay the search until Donald Sherman could arrive from his home, but Sherman did not thereafter come to the premiss be­ing searched. Investigator Valenti subse­quently spoke to counsel for Sherman and provided counsel with basically the same information he had earlier provided to Don­ald Sherman.

The searches were conducted and very few items were actually seized. The fol­lowing items of evidence were seized from the Midland/Tulip premises:

1. a binder containing listings of ve­hicles and medallion numbers in the Midland fleet, including Tulip Cab and Research Cab;

2. a binder containing information relat­ing to inspection stickers for taxicabs in the Midland fleet, including Re­search Cab and Tulip Cab;

3. folders marked “Research” and “Lost Rate Cards”;

4. a box containing numerous “TLC” rate cards for taxicabs of Research Cab and Tulip Cab;

5. the general ledgers for Midland for the years 1981 through early 1986;

6. two midland check stub books;

7. various roof lights bearing medallion numbers of taxicabs used by Re­search Cab and Tulip Cab;

8. a stack of New York City motor ve­hicle tax returns, including some for Research Cab and Tulip Cab;

9. a notebook reporting the occurrence of taxicab accidents, including nu­merous accidents involving Research Cab and Tulip Cab; and

10. a rolodex card listing the names and telephone numbers of various TLC personnel.

The following items were seized from the Research Cab premises:

1. one folder containing information re­lating to the “retro-fitting” of Re­search Cabs with diesel engines;

2. one folder containing documents re­lating to Volvos used by Research Cab;

3. one envelope marked “Research”;

4. a pad containing information relating to repairs of Research taxicabs;

5. roof lights reflecting medallion num­bers for Research cabs;

6. various business cards; and

7. a lobby sign containing information relating to rates for leasing of Re­search taxicabs.

Before leaving each premiss, Investigator Valenti left behind a copy of the “duplicate original” warrant and an inventory of the seized items.

A. Overbreadth

At the outset it should be noted that the warrants issued by Chief Magistrate Chrein at 9:30 P.M. on March 14, 1986 specifically authorize the seizure of the items enumerated from the premises de­scribed “which constitute evidence of viola­tion of 18 USC section 1341.” Those war­rants also recite that the grounds for their issuance were communicated orally in an electronically recorded statement which will be transcribed, certified as accurate and attached when the warrants are re­turned. An examination of those warrants together with the statements upon which they were based support the conclusion that the requirement of the Fourth Amend­ment that the place to be searched and the things to be seized be particularly de­scribed has been satisfied.

The sworn oral statement of Mr. Valenti to Chief Magistrate Chrein was so detailed and so complete as to leave no doubt re­garding the purpose for which the search warrant was sought, and the nature of the documents which would be the objects of the search. That sworn application was, as has been indicated, explicitly incorporated by reference. United States v. Weinstein, 762 F.2d 1522 (11th Cir.1985), cert. denied, 475 U.S. 1110, 106 S.Ct. 1519, 89 L.Ed.2d 917 (1986).

B. Probable Cause

The contention that the magistrate lacked probable cause may be quickly dis­posed of when the test for making a proba­ble cause determination is applied to the sworn information presented to him. In Illinois v. Gates, 462 U.S. 213, 238-39, 103 S.Ct. 2317, 2332, 76 L.Ed.2d 527 (19832) the Court stated:

The task of the issuing magistrate is simply to make a practical, commonsense decision whether, given all the circum­stances set forth in the affidavit before him, including the “veracity” and “basis of knowledge” of persons supplying hearsay information, there is a fair prob­ability that contraband or evidence of a crime will be found in a particular place. And the duty of a reviewing court is simply to ensure that the magistrate had a “substantial basis for ... conclud[ing]” that probable cause existed. Jones v. United States, 362 U.S., [257] at 271 [80 S.Ct. 725 at 736, 4 L.Ed.2d 697 (1960)].

Bearing in mind not only the facts presented to the magistrate but that they were presented by an Assistant United States Attorney who was then the Chief of Special Prosecutions and a criminal investi­gator with years of experience, there was more than ample basis for concluding that probable cause existed.

C. Reliance Upon the Warrant as Issued

The defendants’ contention that Investi­gator Valenti unreasonably relied upon the warrant as issued and that United States v. Leon, 468 U.S. 897, 104 S.Ct. 3405, 82 L.Ed.2d 677 (1984) therefore is inapplicable, has no merit.

Because I have concluded that the war­rant was issued with probable cause and was not overbroad, a discussion of this contention may be superfluous. Leon cre­ated a good faith exception to the Fourth Amendment exclusionary rule, by holding that the rule was not applicable to a search conducted pursuant to a technically defec­tive warrant where the officer reasonably believed that the search was authorized by a valid warrant. Assuming that I were to hold that the warrant was not sufficiently particularized and that the Chief Magis­trate erroneously believed there was proba­ble cause to issue it, I would readily find that Leon was applicable.

A reading of Massachusetts v. Shep­pard, 468 U.S. 981, 104 S.Ct. 3424, 82 L.Ed. 2d 737 (1984) decided on the same day as Leon, and United States v. Buck, 813 F.2d 588 (2d Cir.1987) furnishes the touchstones that are significant in determining whether good faith reliance was present. In Shep­pard, the Court found that (1) the officers took every step that could reasonably be expected of them; (2) the officer prepared an affidavit which was reviewed and ap­proved by the prosecuting attorney; (3) that affidavit was presented to a neutral judge; and (4) the judge concluded that the affidavit established probable cause. 468 U.S. at 989, 104 S.Ct. at 3428. In Buck, the court found that (1) the sworn state­ment (oral affidavit) made to the neutral magistrate was tape recorded to assure accuracy; (2) the crime was outlined for the magistrate; and (3) the officers de­scribed the evidence that led them to the premises searched. 813 F.2d at 592-93. Here, the magistrate was informed of bur­glaries which provided the urgency for a nighttime search. Every one of the factors to be gleaned from these cases as being significant, was present here. To accept the contention of the defendants would re­quire a ruling that Investigator Valenti was required to disbelieve Chief Magistrate Chrein, who advised him that the warrant would issue and that he was authorized to conduct the search he requested. Shep­pard, 468 U.S. at 989-90, 104 S.Ct. at 3428. The Court in Buck was faithful to that teaching in Sheppard in holding that the deterrent function of the exclusionary rule would not be served by penalizing the offi­cer who relies upon the “objectively reason­able legal conclusions of an issuing judge.” 813 F.2d at 593. It should be added here that the officer would also be penalized for relying upon the supervising Assistant United States Attorney.

For the foregoing reasons the motion to suppress is denied.

SO ORDERED.

1

Defendants were also tried and convicted on one count of conspiracy to violate the mail fraud statute and to defraud the United States through the obstruction of federal tax collec­tion. Id., 107 S.Ct. at 2878.

2

The narrowness of McNally’s holding was un­derscored in Carpenter v. United States,—U.S.—, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987), which held that a newspaper had a property right under § 1341 in the exclusive pre-publication use of confidential business information, and noted that "McNally did not limit the scope of § 1341 to tangible as distinguished from intan­gible property rights." Id., 108 S.Ct. at 320.

3

Congress has given a clearer indication by adding a new section, 18 U.S.C. § 1346, includ­ed in the Anti-Drug Abuse Act of 1988 signed by the President on November 18, 1988. That sec­tion provides:

For the purposes of this chapter, the term "scheme or artifice to defraud" includes a scheme or artifice to deprive another of the intangible right of honest services.

4

I note that the possessory and future interests named are not intrinsically "devices through which a nonpossessor controls land” or "con­trol[s] alienation.” 844 F.2d at 41. The estates in land described are expressions of the extent of one’s present interest in property measured in terms of time. The owner of a fee simple deter­minable has a present, possessory interest in property which will continue “until” or “so long as” a specified event does or does not occur. The possibility of reverter is the present interest one has in the future use and enjoyment of the property when the fee simple determinable ends. The owner of a fee simple subject to a condition subsequent has a present possessory interest in property “upon condition that” or "provided that” a specified event does or does not occur. The power of termination is the present interest one has in the future use and enjoyment of that property upon the exercise of his power to terminate the possessory estate. All the estates described are present property interests in the sense that they are all descend­ible, devisable and alienable. N.Y.Est.Powers & Trusts Law § 6-5.1 (McKinney 1967). That a person who acquired either of those estates in property by or through a scheme or artifice to defraud would acquire a present interest in property is beyond cavil.

5

See, e.g., Bell v. Burson, 402 U.S. 535, 91 S.Ct. 1586, 29 L.Ed.2d 90 (1971) (driver's license); Dixon v. Love, 431 U.S. 105, 97 S.Ct. 1723, 52 L.Ed.2d 172 (1977) (same); Mackey v. Montrym, 443 U.S. 1, 99 S.Ct. 2612, 61 L.Ed.2d 321 (1979) (same); Gibson v. Berryhill, 411 U.S. 564, 93 S.Ct. 1689, 36 L.Ed.2d 488 (1973) (license to practice optometry); Willner v. Committee on Character and Fitness, 373 U.S. 96, 83 S.Ct. 1175, 10 L.Ed.2d 224 (1963) (license to practice law); Barry v. Barchi, 443 U.S. 55, 99 S.Ct. 2642, 61 L.Ed.2d 365 (1979) (horse trainers’ harness rac­ing license).