One of the most important privacy protections in an era where our privacy has become more and more limited in this age we live in. One of the biggest areas of protection is in telephone conversations. This post is a brief explanation of a major case on consumer privacy rights which has come down today.
A Quick Introduction of the Law
You may have heard that California is a “two-party” consent state, where both parties to a telephonic conversation must agree to be recorded before any recording can take place. That’s due to the California Invasion of Privacy Act (“CIPA”), Penal Code § 630 et seq. Under CIPA, any call that contains confidential information cannot be recorded without both parties consent. Penal Code §632. And up until 2019, any call, regardless of what was discussed, made on a cell phone, VOIP phone, or cordless phone, recorded without both parties’ knowledge was illegal. Penal Code §632.7 (a) states:
Every 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, shall be punished. . .
While Penal Code §§632 and 632.7 are penal statutes – that is, a violation of either is technically a crime – a different provision of the Penal Code, specifically §637.2, allows for a private right of action. Under Penal Code §637.2, any violation of §§632 or 632.7 allows the Plaintiff seek statutory damages of at least $5,000 per recorded phone call. I say at least because if the plaintiff suffers greater harm from the phone call than $5,000, they can seek more in damages.
So, to recover money under these statutes, the plaintiff has to prove that their call was (1) recorded without their permission, and either (2) contained confidential information; or (3) was made to a cordless phone.
A reasonable question for this sort of thing is “so what?” After all, who is recording phone conversations without giving notice? Well, surprisingly, almost every call center records phone calls. That’s because call center management has figured out that they can improve the quality of their calls by recording and listening to phone calls made by their employees. For that reason, you will often hear “this call may be recorded and monitored for quality assurance,” when you call into any call center.
But what if the call center calls you? That’s where things get interesting. In this, the law is clear, the recording party must get prior permission before they start recording. For most call centers, CIPA’s restrictions on recording outgoing calls can be highly problematic. By this point we’re all accustomed to hearing that calls may be monitored when we call a call center. But many call centers have found that announcing that the call will be recorded during a call they make to consumers is often the end of the call. So, rather than comply with the law, they just record.
Smith v. LoanMe
As stated above, prior to December of 2019, it was widely held by a number of courts that Penal Code §632.7 prohibited any party to a phone call to record a phone call without the other party’s consent if the call itself is made to a radio, a cordless phone, or a cellphone. In 2019, though, the California Court of Appeal in Smith v. Loanme (2019) 43 Cal.App.5th 844 threw a monkey wrench into CIPA litigation by following what was essentially the minority rule on Penal Code §632.7, and holding that Penal Code §632.7 only applied to third parties. In other words, unless the recorded party could prove that the conversation was confidential, call centers could record consumers without their consent.
Before we get into what happened next, I should mention how unusual this decision was. By the time the Court of Appeal heard Smith v. LoanMe, there were at least a dozen published federal opinions, reviewing the same statute, and coming to the exact opposition conclusion – namely that §632.7’s anti-recording provisions applies to everyone, including the parties on the call. Several of these cases were decades old by the time the Court of Appeal issued its ruling.
The other thing to keep in mind is that the ruling in Smith v. LoanMe essentially foreclosed class actions in this area because there would now be a focus whether the parties to each phone call believed the contents were “confidential” for purposes of Penal Code §632. Such a requirement makes class certification of such cases difficult (though not impossible).
Shortly after the Court of Appeal decided the LoanMe case, the California Supreme Court granted a petition for review, and after significant briefing, and after oral arguments, the California Supreme Court, in a 7-0 decision, reversed the Court of Appeal in its entirety. A copy of the decision is attached here. The long and short of it, though, is that the California Supreme Court held that the Court of Appeal basically got the entire decision wrong.
Essentially, the law is now back to where it was before the Court of Appeal’s decision in LoanMe, but better. Where before most courts and litigants thought they knew where the law was, now there is a binding legal opinion.
And what this also means is that if you are being inundated with harassing phone calls, particularly from debt collectors, listen closely to the beginning of every phone call. If you aren’t being told that the call is being recorded, ask, and make sure to ask if all of your earlier calls were recorded. If the answer to either question is “yes” contact a law firm like Potter Handy, LLP immediately. The damages for a violation of CIPA are significant – $5,000 per phone call – which in many cases, have been used to wipe out debts.