Courts have said that the California Invasion of Privacy Act (CIPA) (Cal. Penal Code §§ 630-637.5) was enacted by the legislature “to ensure an individual's right to control the firsthand dissemination of a confidential communication, and …to strongly protect an individual's privacy rights in electronic communications.”1
Section 632 of CIPA requires the consent of all parties prior to recording confidential communications, while section 632.7 of CIPA requires consent before recording certain mobile phone calls. Under sections 632 and 637.2 of CIPA, aggrieved parties have been pursuing alleged violators and seeking statutory damages of US$5,000 per violation or three times the amount of actual damages, whichever is greater.
Because of the availability of statutory damages, and the possibility of multiple violations, an increasing number of CIPA class actions are being filed, particularly under sections 632 and 632.7. For example, in the last two years alone, more than 100 cases have been filed, many of which have been removed to federal court, alleging violations of California Penal Code section 632 and, increasingly, section 632.7.
Following the decision in Faulkner v. ADT Security Services, Inc.,2 in which the court found that the plaintiff did not have an objectively reasonable expectation that a telephone call to a customer service center discussing a billing dispute would not be recorded, plaintiffs have increasingly been bringing cases under section 632.7, another section of CIPA. Plaintiffs claim that section 632.7 imposes penalties for the recording without consent of any communication involving cellular or cordless phones, not just “confidential communications” like section 632. In light of these decisions, defendants can expect to see more complaints focusing on section 632.7 filed in 2013. Some trends from recent case law indicate how this area of law may evolve in 2013.
California Penal Code Section 632: the debate over the use of “content”
California Penal Code Section 632 prevents the recording of “confidential communications” without the consent of all parties to the communication.3
Courts agree that “confidential communications” are conversations where a party had no objectively reasonable expectation of being overheard or recorded. For example, conversations that occur in “an open and public place where other employees [are] coming and going and they could readily overhear what was said” do not give rise to “confidential communications” under section 632.4
Nonetheless, over the past year, federal courts have disagreed as to whether the “content” of the call is relevant for determining if the caller had an objectively reasonable expectation of being overheard or recorded.
In two cases, courts held that the content of the call was irrelevant for determining if it was a confidential communication under section 632.5 For example, in Brown v. Defender Security, the court found irrelevant whether or not personal financial affairs or other personal topics were discussed during a call.6 But other recent decisions out of the Central and Southern districts of California suggest otherwise, finding that the content of a call, or at least its subject matter, can be important in determining if it was a confidential communication.7 For example, in Sajfr v. BBG Communications, Inc., the court found that the plaintiffs had no reasonable expectation of privacy when they called the defendant to discuss their bills. Courts have also found that calling a toll-free customer service number may indicate there is no objectively reasonable expectation of privacy; one case was dismissed because the plaintiffs were calling the defendant’s toll-free number for routine matters of billing and reservations, not personal financial affairs or private family matters,8 and another was dismissed because the plaintiffs called a toll-free ordering number and did not indicate they wanted their conversations confined to customer service representatives.9
Similarly, a court in the Southern District of California granted a defendant’s motion to dismiss without leave to amend, finding that the plaintiff had no reasonable expectation of privacy in the telephone call because the communication did not concern his personal financial information, the conversation lasted less than half of a minute with only five sentences exchanged, the parties were complete strangers and did not have a customer or client relationship, the plaintiff did not disclose any personal information, and the defendant did not even call to speak to the plaintiff.10
Other courts have refused to consider the content or subject matter of the communication when determining whether it is confidential. This refusal appears to be based on an over-reliance on broad statements made in Flanagan v. Flanagan.11 Flanagan did not hold that the content of the communication is irrelevant, only that it did not matter “whether the party expects that the content of the conversation may later be conveyed to a third party.”12 Perhaps this distinction can be explained by focusing on the subject-matter of the communication rather than the specific words used during the telephone call.
When the individual expectation of privacy cannot be determined on a common basis
In another significant trend, class certification has been denied because it was not possible to determine on a common basis whether each individual class member had an objectively reasonable expectation of privacy in the communication.
In Kight v. CashCall, Inc., an important CIPA appellate decision issued in late 2011, the defendant lender was recording telephone conversations with its customers.13 The trial court certified a class, but then granted summary judgment to the defendant. On appeal, the court reversed summary judgment but held that a communication is “confidential” under section 632 “if a party to the conversation had an objectively reasonable expectation that the conversation was not being overheard or recorded. The issue whether there exists a reasonable expectation that no one is secretly recording or listening to a phone conversation is generally a question of fact…that may depend on numerous specific factors, such as whether the call was initiated by the consumer or whether a corporate employee telephoned a customer, the length of the customer-business relationship, the customer's prior experiences with business communications, and the nature and timing of any recorded disclosures.”14
Following the reasoning in Kight, the Superior Court for Los Angeles County denied a plaintiffs’ motion for class certification.15 The court found there was an insufficient showing of commonality of the class because the court must make “an individualized inquiry into whether each class member with respect to each ‘confidential communication’ had an objectively reasonable expectation that the conversation was not being recorded…which would be extremely costly and time-consuming.”16 And on remand in Kight itself, the court decertified the class, finding that the defendant “persuasively argues that individual issues regarding the individual putative class members’ ‘objectively reasonable expectation of privacy’ predominate over defendant’s alleged uniform policies.”17
In light of these recent decisions, more courts may find that class certification is improper for section 632 claims because class certification requires the court to make an inquiry into whether each member had an objectively reasonable expectation of privacy in the communication being recorded, rather than deciding this issue on a common basis.
California Penal Code Section 632.7: no reasonable expectation of privacy required
Given the uncertainty of what may give rise to a “confidential communication” under section 632, and the chance that class certification will be denied because of the call-by-call factual inquiry required into what gives rise to a confidential communication, plaintiffs are bringing a flood of cases under section 632.7 of CIPA.
Section 632.7 imposes penalties on "[e]very person who, without the consent of all parties to a communication, intercepts or receives and intentionally records or assists in the interception or reception and intentional recordation of, a communication transmitted between two cellular radio telephones, a cellular radio telephone and a landline telephone, two cordless telephones, a cordless telephone and a landline telephone, or a cordless telephone and a cellular radio telephone." Plaintiffs’ lawyers, relying on dicta and arguably wrongly decided cases, say that section 632.7 applies where at least one party uses a cellular or cordless phone. Cal. Penal Code § 632.7(a).
Defendants have challenged the recent inundation of cases brought under section 632.7, arguing that section 632.7 claims are limited to “confidential communications” as in section 632 and that section 632.7 is limited to third parties who intercept a call. But, over the last several months, courts have consistently disagreed. Section 632.7 is not limited to unknown parties and therefore applies to defendants as well as third parties who intercept the call.18 Moreover, courts are finding section 632.7 by its terms does not require the communication to be confidential, unlike section 632, meaning that plaintiffs no longer need to allege they had a reasonable expectation that the call would not be recorded.19
Although section 632.7 may appear to be a silver bullet for plaintiff’s lawyers, plaintiffs still face many hurdles. For example, defendants have argued that the text of section 632.7 indicates the communication must be intercepted or recorded while being transmitted over the airwaves, not after reaching its destination. In addition, section 632.7 only applies where at least one party uses a cellular or cordless phone, and this raises a number of due process and class certification issues.20 There are still several unresolved section 632.7 issues that plaintiffs must overcome. Courts have left open the issue of whether use of Voice over Internet Protocol (VoIP) eliminates section 632.7 claims.21 Many of these issues will not be fully resolved until cases have worked their way through the appellate process.
What’s next: clarity, challenges, disagreements
In 2013, it is anticipated that appellate courts will clarify just how much the content or subject matter of a communication is relevant for determining whether the plaintiff had an objectively reasonable expectation of privacy in a call.
We will also see an increasing number of challenges to class certification of section 632 claims, due to the individualized analysis of whether each putative class member had an objectively reasonable expectation of privacy.
Finally, we anticipate that disagreement over the interpretation of section 632.7 will continue through 2013, including such issues as whether section 632.7 applies to VoIP calls or whether section 632.7 applies only to the interception or recording of communications while they are being transmitted over the airwaves rather than after reaching their destination. Defendants will also continue to raise due process and class certification defenses to section 632.7 claims.
In light of the significant statutory damages, and because this area of law is evolving, businesses faced with section 632 and section 632.7 class actions should retain experienced counsel, not only to defend them but to review their current recording policies and procedures.
For more information about these cases and their meaning for your business, please contact Perrie Weiner or Edward Totino.
You may also be interested in our related alert, “The mobile app ecosystem shifts as California AG issues mobile app privacy guidelines.”
1 Kight v. CashCall, Inc. 200 Cal. App. 4th 1377, 1392 (2011).
2 See Faulkner v. ADT Security Servs., Inc., 2011 WL 1812744, * 3-4 (N.D. Cal., May 12, 2011).
3 California Penal Code § 632 states “[e]very person who, intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, eavesdrops upon or records the confidential communication, … shall be punished by a fine not exceeding two thousand five hundred dollars ($2,500), or imprisonment in the county jail not exceeding one year, or in the state prison, or by both that fine and imprisonment.” Cal. Penal Code § 637.2(a) states that “[a]ny person who has been injured by a violation of this chapter may bring an action against the person who committed the violation for the greater of the following amounts: (1) Five thousand dollars ($5,000); (2) Three times the amount of actual damages, if any, sustained by the plaintiff.”
4 Chamberlain v. Les Schwab Tire Ctr. of California, Inc., 2012 WL 6020103, *3 (E.D. Cal., Dec. 03, 2012).
5 See Brown v. Defender Security Company, CV 12-7319-CAS (C.D. Cal., Oct. 22, 2012) and Roberts v. Wyndham Intl. Inc., 2012 WL 6001459 (N.D. Cal., Nov. 30, 2012).
7 See Sajfr v. BBG Communications, Inc., 2012 WL 398991 (S.D. Cal., Jan. 10, 2012), Shin v. Digi-Key Corp, 2012 WL 5503847 (C.D. Cal., Sept. 17, 2012), Young v. Hilton Worldwide, Inc., 2012 WL 5503866 (C.D. Cal., June 18, 2012), and Weiner v. ARS Nat’l Servs., Inc., --- F.Supp.2d ----, 2012 WL 3632025 (S.D. Cal., July 5, 2012).
8 Young, 2012 WL 5503866 (C.D. Cal., June 18, 2012), currently on appeal with the Ninth Circuit.
10 Weiner v. ARS Nat’l Servs., Inc., 2012 WL 3632025 (S.D. Cal., July 5, 2012).
11 See Flanagan v. Flanagan, 27 Cal.4th 766 (2002).
13 Kight v. CashCall, Inc. 200 Cal. App. 4th 1377 (2011).
15 See Coleman v. First American Home Buyers Protection Corp., 2012 WL 5288582 (Cal. Super., Aug. 27, 2012).
17 Kight v. CashCall, Inc., Minute Order, Cal. Super Ct. No. GIC866032 (Nov. 19, 2012.)
18 See e.g. Brown, CV 12-7319-CAS and Simpson v. Best Western Int'l, Inc., 2012 WL 5499928 (N.D. Cal., Nov. 13, 2012).
19 See Id., Roberts, 2012 WL 6001459, and Simpson v. Vantage Hospitality Group, Inc., 2012 WL 6025772 (N.D. Cal., Dec. 4, 2012).
20 Cal. Penal Code section 632.7(a).
21 See Roberts, 2012 WL 6001459, *4.