What’s Going On With Class Actions Alleging That Businesses That Record Customer-Service Calls Are Violating California’s Invasion Of Privacy Act?

Since 2006, companies based outside California have been alert to the potential burdens of class actions under California’s Invasion of Privacy Act (“CIPA”), Cal. Penal Code § 630 et seq. The laws of most states, as well as federal law, allow telephone calls to be recorded with the consent of one party to the call. Accordingly, companies in those states usually can record customer service calls for quality-assurance purposes without the need to procure the customer’s consent because the call-center employee, as a party to the call, can consent to the recording. California, however, is one of 12 states that allow recording only if all parties to the call consent. (The other so-called “two-party consent” states are Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania, and Washington.) The plaintiffs’ bar has been trying to use California’s extremely pro-plaintiff privacy laws, such as the CIPA, to turn this innocuous business practice into an opportunity to extract class-action settlements from companies.

In 2006, the California Supreme Court held that CIPA applies even when one party to the conversation is outside California in a state that authorizes recording with the consent of a single party to the call. Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95 (2006). The court explained that, under California’s choice-of-law rules, California had the overriding interest in applying its privacy laws, such as CIPA, whenever “national or international firms” headquartered outside of California record “conversations with their California clients or customers.” And, like Flanagan v. Flanagan, 27 Cal. 4th 766 (2002), Kearney applied CIPA regardless of the content of the conversations, though that likely was because Kearney involved calls to a financial institution and Flanagan involved calls between family members—i.e., situations where callers arguably have an expectation of privacy. Nonetheless, an onslaught of consumer class actions followed and continue to this day.

Companies facing CIPA suits have been making progress. More and more courts are recognizing that CIPA was not intended to apply to calls to customer-service centers. See Shin v. Digi-Key Corp., 2012 WL 5503847 (C.D. Cal. Sept. 17, 2012); Sajfr v. BBG Commc’ns, Inc., 2012 WL 398991 (S.D. Cal. Jan. 10, 2012). They’ve also recognized that customer-service calls usually do not involve private information. See Faulkner v. ADT Sec. Servs., Inc., 706 F.3d 1017, 1020 (9th Cir. 2013); Shin; Safjr. And they’ve found that individualized issues of privacy and consent under CIPA preclude class certification. See Torres v. Nutrisystem, Inc., 289 F.R.D. 587 (C.D. Cal. 2013).

The recent decision in Jonczyk v. First National Capital Corp., No. 13-cv-959-JLS (C.D. Cal. Jan. 14, 2014), provides another arrow in companies’ quivers—and a large one at that. In that case, First National and its employee were located in California and the plaintiff called in from her home in Missouri. The district court applied a conflict-of-law analysis and concluded that the law of Missouri (a one-party consent state) should apply, not California’s CIPA. The court distinguished Kearney, which involved Salomon Smith Barney’s California clients, and held that California had little interest in a Missouri resident’s claims, while Missouri had valid interests in limiting the reach of its wiretapping statute. In so holding, the court cited our victory in Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) for the proposition that “maximizing consumer and business welfare … does not inexorably favor greater consumer protection.” The district court’s extension of Mazza to the privacy context, and CIPA specifically, represents a significant step forward for companies doing business in California. The decision should be particularly helpful to companies in California who receive out-of-state customer calls that are recorded.

Topics:  Class Action, Customer Service Calls, Invasion of Privacy, Surveillance

Published In: Civil Procedure Updates, General Business Updates, Privacy Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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