Plaintiffs’ attorneys have increasingly filed consumer class actions in California seeking to apply the state’s privacy laws to routine communications between businesses and their customers. If a company records or monitors inbound or outbound telephone calls with customers for calls made to or received by someone located in California, it runs the risk of violating California’s call recording and monitoring laws, which have become enticing to the plaintiffs’ consumer class action bar.

A recent California appellate decision, Kight v. CashCall, Inc., will make it more difficult for plaintiffs to obtain class certification in such cases. Case No. D063363, 4th Appellate Dist., 1st Div. 2014.

Background

Nearly 100 cases have been filed in the last year alleging that companies violated the California Invasion of Privacy Act by failing to inform customers that their inbound or outbound telephone calls were being recorded or monitored.

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The CIPA prohibits the intentional recording or eavesdropping of telephone calls without the consent of all parties. Eleven other states also prohibit call recording without the consent of both parties to a telephone call: Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Montana, Nevada, New Hampshire, Pennsylvania and Washington.

The CIPA imposes both criminal and civil liability for violators of the statute. For private causes of action, there is arguably no requirement that the plaintiff suffer actual damages. In particular, there is a $5,000 penalty for each violation of California Penal Code section 632. These penalties can quickly accrue as companies who may record or monitor hundreds, if not thousands, of calls each week could be potentially liable for millions of dollars in penalties.

Section 632 prohibits the intentional recording or eavesdropping of a confidential communication without the consent of all parties to the confidential communication.

The California Appellate Court’s Decision

In Kight v. CashCall, Inc., a California Appellate Court affirmed a trial court’s order decertifying a putative class action in a case alleging violations of California Penal Code section 632.  The appellate court held that trial court did not abuse its discretion in finding that “individual issues regarding the individual putative class members’ ‘objectively reasonable expectation of privacy’ predominate over defendant’s alleged uniform policies.” (Slip Op. at 14-15).

In the case, a small group of CashCall borrowers brought a putative class action against the company alleging the unlawful monitoring of telephone conversations. CashCall’s decertification motion argued that numerous individual factual issues relevant to the confidential-communications issue demonstrated that liability on the section 632 claim “cannot be resolved on a class-wide basis.” CashCall focused on the circumstances surrounding each of the named plaintiff’s telephone conversations with CashCall employees and demonstrated that each plaintiff had different experiences regarding “the timing, extent, and nature of the monitored calls and of the call monitoring disclosure, and had different prior experiences with business communications.” (Slip Op. at 13).

CashCall argued that section 632 prohibits eavesdropping only “without the consent” of all parties, and that “[t]he issue of consent cannot be determined on a class-wide basis,” particularly regarding the inbound-caller class members because they may have heard the monitoring disclosure at the outset of call. CashCall argued the “case would quickly splinter into more than 500 mini-trials” and “would be riddled with administrative burdens and complexities that defeat the purpose of the class action mechanism.”  (Slip Op. at 14).

Seeking to overturn the trial’s court decertification order, Plaintiffs argued that the court erred in concluding that individual issues existed regarding whether there was a “confidential communication” within the meaning of section 632 that precluded class action treatment. Plaintiffs argued that common issues predominated because it was undisputed that CashCall secretly monitored more than 500 calls, and no outbound-caller class member received the call monitoring disclosure during the telephone conversation. Plaintiffs argued that whether inbound-caller class members heard the monitoring disclosure during or before the monitored inbound call could be determined on “question and answer forms.”  (Slip Op. at 14).

The appellate court ruled that there were individual fact issues critical to resolving the issue of liability: “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.” (Slip Op. at 23).  Instead of relying upon “question and answer forms,” the court found that cross-examination must be permitted, to determine whether each monitored telephone call was a confidential communication subject to section 632’s statutory prohibition.

The court ruled that under section 632, the defendant has the right to litigate the issue of each class member’s consent and each class member’s claimed objectively reasonable expectation that the call was not being monitored. The appellate court reasoned that although “there remain certain common questions—including whether CashCall monitored the calls and the timing of the Call Monitoring Disclosures—the [trial] court acted within its discretion in finding these questions pale in terms of factual complexity and scope when compared with the significant individual questions regarding liability.” (Slip Op. at 26).  The appellate court also found that there were significant individual issues regarding each plaintiff’s reasonable expectations that the conversation would not be overheard or recorded.

Implications

While this decision will help defeat class certifications motions brought under section 632, it remains to be seen whether it will be useful in defending against Section 632.7 claims. Section 632.7 prohibits the recording or monitoring of calls involving cellular or cordless phones and there is no requirement that the communications be confidential.

In this emerging area, sensible business leaders should seek advice from competent counsel to ensure that their call monitoring and recording practices comply with applicable law.