The California Invasion of Privacy Act, Penal Code sections 630 et seq. (CIPA) is only a credible threat if plaintiffs can achieve class certification.  Otherwise, the case is nearly valueless, and will fall to the curb in no time.

CIPA can expose businesses to liability for recording routine conversations for quality assurance purposes with Californians without their consent.  These lawsuits, typically filed as class actions, seek statutory damages of $5,000 for each telephone call that was recorded without informing the callers that the call may be monitored or recorded.  They have resulted in multimillion-dollar settlements even absent the disclosure of any confidential information and where no one has suffered any harm. 

A recent decision by the California Court of Appeal in the hotly contested Kight v. CashCall, Inc., 231 Cal. App. 4th 112 (2014) (Cashcall II) case, however, makes it more difficult for plaintiffs to certify certain types of these lawsuits, specifically those brought under California Penal Code section 632, which prohibits the intentional recording of confidential communications.  The recent CashCall II ruling may also have an impact on plaintiffs’ abilities to certify class actions brought under California Penal Code section 632.7, which prohibits the recording of certain wireless and cellular phone communications but does not, by its express terms, have a confidentiality requirement.

CALIFORNIA’S INVASION OF PRIVACY ACT

Section 632 prohibits the intentional recording of “confidential communications” without consent.  Confidential communications are defined as those “carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made . . . in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.”  Cal. Pen. Code § 632(c) (emphasis added).

Additionally, Section 632.7 prohibits intercepting or receiving and recording communications transmitted between certain types of phones, which some courts have applied to recording conversations involving at least one cellular phone or cordless phone.  Unlike Section 632, Section 632.7 is not limited to “confidential communications” − which is why the litigation has evolved to plaintiffs bringing only a Section 632.7 claim, to increase their chances of achieving class certification. 

KIGHT VS. CASHCALL

The history leading up to CashCall II is important to better understand the decision, because the case has previously been before the Court of Appeal, in Kight v. CashCall, Inc., 200 Cal. App. 4th 1377 (2011) (CashCall I).

In 2006, borrowers sued CashCall in a CIPA class action, alleging that CashCall monitored[1] their telephone conversations without their consent in violation of Section 632.  Following the trial court’s certification of a Section 632 class, CashCall successfully moved for summary adjudication on the Section 632 claim by arguing that a corporation does not violate Section 632 when an employee monitors a telephone conversation that another employee is having with a customer because the two are a single “person” within the meaning of the statute. 

The Court of Appeal reversed the trial court’s summary adjudication order in a published opinion, CashCall I.  Rejecting CashCall’s interpretation of Section 632, the Court of Appeal held that the statute applies even if the unannounced listener is employed by the same corporate entity as the known recipient. 

The Court of Appeal also rejected CashCall’s alternative argument that summary adjudication was proper because the undisputed facts established that the telephone conversations were not “confidential communications” within the meaning of Section 632.  The Court of Appeal spent a significant portion of CashCall I explaining that the “confidential communication” requirement is a statutory element of a Section 632 claim and requires plaintiffs to show that they had an “objectively reasonable expectation” that their conversations would not be secretly monitored, and held that triable factual issues existed on this statutory element.  In so holding, the Court of Appeal stated that the “issue whether there exists a reasonable expectation that no one is secretly 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 consumer, the length of the customer-business relationship, the customer’s prior experiences with business communications, and the nature and timing of any recorded disclosures” (the “CashCallfactors”).

On remand, CashCall moved to decertify the class, primarily based on its argument that the issue of whether any particular class member can satisfy the reasonable-expectation test requires an assessment of the numerous CashCall factors and that these individual issues predominate over any remaining common issues, making the class action unmanageable.  Plaintiffs opposed the motion, arguing that CashCall did not meet its burden of establishing the changed circumstances necessary for class decertification and, alternatively, that common issues continued to predominate in the case. 

The trial court granted the motion and decertified the class.  The trial court found that the CashCall Idecision constituted changed circumstances and “individual issues regarding the individual putative class members’ ‘objectively reasonable expectation of privacy’ predominate over defendant’s alleged uniform policies.” 

The plaintiffs appealed, and the Court of Appeal affirmed the trial court’s decision to decertify the class in its CashCall II decision.  Recently, on January 14, 2015, the California Supreme Court denied the plaintiffs’ request to review.

The CashCall II Decision

In CashCall II, the Court of Appeal held that determining what constitutes a “confidential communication” for purposes of Section 632 requires an individualized analysis that precludes class certification. 

The Court of Appeal began by referencing another recent decision on this issue, Hataishi v. First American Home Buyers Protection Corp., 223 Cal. App. 4th 1454 (2014), wherein the Court of Appeal affirmed the refusal to certify a class of “outbound” callers who alleged a violation of Section 632.

The Court of Appeal agreed with the analysis in Hataishi and found it applicable to the case before it, specifically stating that “in Hataishi, as here, the plaintiffs had a continuing ongoing business relationship with the defendant, during which many plaintiffs may have heard a monitoring disclosure statement at least once.”  Further, the Court of Appeal stated “as we determined in CashCall [I], there are numerous facts unique to each individual plaintiff that are critical to resolving the liability issues under these circumstances.”  Importantly, the Court of Appeal also explained that “although each plaintiff declared that he or she did not believe anyone was listening to their monitored calls with CashCall employees, the trier of fact would have to determine whether a person under the particular circumstances and given the background and experience of each plaintiff would have understood that the particular call was not being monitored.”

Notably, the Court of Appeal also emphasized, in response to the plaintiffs’ contention that the confidential communication issue could be resolved by a questionnaire or survey, that CashCall must have the ability to cross-examine each putative class member on the factual circumstances of their calls.  Specifically, the Court of Appeal stated that “under Section 632, the defendant has the right to litigate the issue of each member’s consent and each class member’s claimed objectively reasonable expectation that the call was not being monitored.”  The Court of Appeal took a strong stance on this issue because the existence of a confidential communication is a statutory element of a Section 632 claim and, as the Court of Appeal explained, the plaintiffs could not use the class action procedure to “interfere with a defendant’s right to challenge the plaintiff’s evidence.” 

IMPLICATIONS OF CASHCALL II FOR CALL RECORDING CLASS ACTIONS

CashCall II, building upon the momentum of Hataishi, basically sounds the death knell for call recording class actions brought under Section 632 in California.

CashCall II clarifies that what constitutes a “confidential communication,” a statutory element of a Section 632 claim that plaintiffs are required to prove, requires an individualized analysis.  231 Cal. App. 4th at 130 (“Although each plaintiff declared that he or she did not believe anyone was listening to their monitored calls with CashCall employees, the trier of fact would have to determine whether a personunder the particular circumstances and given the background and experience of each plaintiff would have understood that the particular call was not being monitored.”)  Because proving this statutory element requires an individualized analysis, it renders adjudication of Section 632 claims inappropriate for class treatment.  Indeed, most recent CIPA class actions are being brought only under Section 632.7, which does not require a “confidential communication.”

But defense lawyers may still be able to use CashCall II to defend against Section 632.7 cases.  Most notably, CashCall II took a strong position on a defendant’s ability to challenge evidence at the class certification stage stating that “[u]nder Section 632, the defendant has the right to litigate the issue of each member’s consent and each class member’s claimed objectively reasonable expectation that the call was not being monitored.”  That consent, along with reasonable expectation of privacy, is viewed as an individualized issue that the defendant should be able to contest as to each and every putative class member, provides defendants with further support that class certification is not appropriate in both Section 632 and Section 632.7 cases.

In summary, while the California Court of Appeal continues to chip away at a plaintiff’s ability to bring certain CIPA call recording class actions, privacy lawyers on both sides can expect CIPA call recording class actions to continue, particularly with respect to those brought under Section 632.7.