Back in February, the California Court of Appeal in Hataishi v. First American Home Buyers Protection Corp., 223 Cal. App. 4th 1454 (Feb. 21, 2014), dealt a significant blow to call recording class actions across California. The Court held that plaintiffs asserting claims under California Penal Code section 632 (“Section 632”) had to establish that the telephone calls that were monitored or recorded were “confidential” – meaning that the plaintiffs had an objectively reasonable expectation that their calls were not being overheard or recorded. Applying this standard classwide was impossible. Each individual’s objectively reasonable expectations would turn on individualized inquiries, including the length of the class member’s experience with the defendant, whether the class member had ever been notified that her calls with the defendant may be monitored or recorded, and each class member’s experience with other businesses that record or monitor calls. We asked then whether call recording class actions were doomed.
The Court of Appeal has now dealt another blow to plaintiffs in these cases. In Kight v. CashCall, Inc., No. D063363, __ Cal. App. 4th __, 2014 WL 5573457 (Cal. App. 4th Dist., Div. 1, Oct. 9, 2014), the Court of Appeal affirmed an order decertifying a class action alleging a claim under Section 632. Quoting Hataishi, the Court stated that “the determination whether an individual plaintiff had an objectively reasonable belief that his or her conversation with the defendant would not be recorded will require individualized proof of, among other things, the length of the customer-business relationship and the plaintiff’s prior experience with business communications” (internal quotations omitted). As a result, “[a]lthough each plaintiff” in the CashCall case 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” (emphasis in original).
In CashCall, a warning that calls might be monitored or recorded played before certain calls, but not others – it depended on whether customers pressed 1 or 2 or some other number, or combination of numbers, in CashCall’s automated phone system. One plaintiff “testified that he never heard the Call Monitoring Disclosure; he had no prior business experience with call monitoring; and he had three telephone calls with CashCall employees before his monitored call.” But another plaintiff “had 17 calls with CashCall within three months of his monitored call; had experience with business communications; and was equivocal about whether he had heard the Call Monitoring Disclosure.” These differences proved the end of plaintiffs’ class claims: “A jury could logically distinguish between these plaintiffs on the issue of whether each had a reasonable expectation the conversation would not be overheard.”
Where will call recording plaintiffs go from here?
They will likely try to find solace in Penal Code section 632.7 (“Section 632.7”), which prohibits the “interception or reception” and subsequent “recording” of communications where at least one party to the call is on a cellular or cordless phone. Section 632.7 does not explicitly incorporate the “confidential communication” standard from Section 632, and thus plaintiffs have argued that the objectively reasonable expectations test applied in Hataishi and CashCall should not apply.
While some courts have already intimated that the objectively reasonable expectations test applies to Section 632.7 claims, these claims are likely to flounder for other reasons too.
Claims under both Section 632 and 632.7 fail if plaintiffs gave consent to the recording of their calls. Courts have found that implied consent is sufficient, and the factors giving rise to implied consent are similar to those relevant to the objectively reasonable expectations test. If a plaintiff knew or should have known that his calls were being recorded, but continued with the calls anyway, a reasonable jury might find that the plaintiff consented to the recordings. Whether each class member knew or should have known that their calls might be recorded will undoubtedly turn on individualized inquiries. The Court in CashCall seemed to suggest as much, noting that just as a class’s objectively reasonably expectations are “factual issues for the trier of fact,” so too are “consent/notice issues.”
Section 632.7 claims also face other hurdles. As noted above, Section 632.7 applies to cellphone communications and only when those communications are intercepted or received, and then recorded. When Section 632.7 was enacted, the Legislature was concerned with the use of electronic scanners to intercept or passively receive cellphone communications, and the potential violations of privacy that might follow. With that as a backdrop, at least one Court had held that Section 632.7 applies only when a third-party to a call intercepts the cellphone communication and records it. The court dismissed claims under Section 632.7 where the business was recording its own calls with its customers. See Young v. Hilton Worldwide, Inc., 2014 WL 3434117 (C.D. Cal. July 11, 2014) (“The statutory scheme makes it clear that these sections refer to the actual interception or reception of these radio signals by third parties and do not restrict the parties to a call from recording those calls.”).
Section 632.7 also presents unique issues because it involves cellphones. Determining whether a customer called from a cellphone while physically present in California might also cause individualized issues to predominate. See Hataishi, 223 Cal. App. 4th at 1469.
Section 632 and 632.7 will continue to attract plaintiffs because the code provides a $5,000 statutory penalty per violation of each. But these claims, which have been filed seemingly every week against every company for the past four years, appear to be on their way out.