First, ruling from the bench on the day of the hearing made a lot of sense. We already have a detailed opinion on this question from Magistrate Judge Francis, and an appeal to the Second Circuit was very likely no matter which side prevailed below. Given that these are pure issues of law, the District Court was only going to be a temporary stopping point on the way to the Second Circuit. This is a pending investigation, so delay is unhelpful. Better to weigh in and pass along the case to the Court of Appeals rather than sit on it.
Second, I spoke with an attorney who attended the hearing, Craig Newman, to get a sense of how Chief Judge Preska approached the case. I gather from Craig that Preska largely agreed with the approach of Magistrate Judge Francis. In particular, it sounds like Preska concluded that the statute regulates providers rather than data: On that view, the scope of the statute is governed by whether providers have control over data rather than where in the physical world they happen to place the data. Part of that may boil down to how you think of territoriality. Here’s the question: If a U.S. company with a U.S. network decides to place a file on a server outside the U.S., but the company still retains full control over the file and can access it from the U.S. just as it would a file stored in the U.S., can you say that the file is out of U.S. territorial reach just because the copy happens to be stored on that foreign server? DOJ says no; Microsoft says yes. Chief Judge Preska agreed with DOJ on that issue.
Microsoft has already announced its plan to appeal, so now the issue will be heading upstairs to the Second Circuit. The case presumably will stop there, as this is a novel issue that is a very unlikely candidate for Supreme Court review any time soon.