Your ISP can read your e-mail.

That's what a federal district court decided in 2003, and what the First Circuit Court of Appeals upheld last week.

A little history: Back in 1998, an online bookseller gave free e-mail accounts to book dealers and then secretly copied all messages that came in from Amazon.com. While two employees plead guilty to wiretapping charges, a supervisor fought the charges. He said he wasn't aware of the scheme and should not be held liable, but even if he were, the federal wiretapping law didn't apply.

Because the messages were saved on the company's hard drive while being processes, he argued, they should be considered stored communication. This distinction is important. The federal wiretapping laws ban a company from monitoring its customers' communications, but it does not apply to stored communications. The reasoning there is that there is an inherent loss of privacy once the e-mail is stored.  By putting e-mail in this category of stored communication, the courts have effectively removed the privacy protections granted by the act.

Chris has commentary here and here. NYT article here (subscription required).

Related: Top 10 Places Your E-Mail Can Be Intercepted. (via MS Exchange Blog). And if they're storing the e-mails, well.... they can do so without liability.