The California Court of Appeal, Fourth District, recently affirmed a trial court’s judgment against a class action plaintiff who alleged that a lender violated Penal Code § 632.7 of the California Invasion of Privacy Act, by recording him without prior notice. The Court of Appeal held that a party violates Section 632.7 when he or she both 1) receives or intercepts a communication (without consent) and 2) records that communication (without consent). The Court of Appeal found that the parties to a phone call are incapable of violating Section 632.7, because they do not intercept or receive each other’s communications without consent. In so ruling, the Fourth District found that Section 632.7 prohibits only third-party eavesdroppers from intentionally recording telephonic communications involving at least one cellular or cordless telephone.
A copy of the Court of Appeal’s opinion in Smith v. LoanMe, Inc. may be found here.
The lender called a borrower to discuss an outstanding loan. The borrower’s husband, the class action plaintiff, took the call on a cordless telephone. Three seconds into the call the lender caused a beep to sound. The lender did not orally advise the class action plaintiff that the call was being recorded. The class action plaintiff did not sign a contract granting the lender consent to record calls.
After a bifurcated trial, the trial court concluded that the beep tone provided sufficient notice under section 632.7 that the call was being recorded and that the class action plaintiff implicitly consented to being recorded by remaining on the call.
The Court of Appeal focused its analysis on whether Section 632.7 applies to the recording of a phone call by a participant in the phone call, or instead applies only to recording by third-party eavesdroppers.
As you may recall, the California legislature enacted the California Invasion of Privacy Act, Pen. Code, § 630, et seq. (“CIPA”) to protect privacy rights in response to new devices and techniques used for eavesdropping upon private communications. (Pen. Code, § 630.)
The CIPA criminalizes (with certain exceptions) anyone who:
Intentionally and without the consent of all parties to a confidential communication, uses an electronic amplifying or recording device to eavesdrop upon or record the confidential communication, whether the communication is carried on among the parties in the presence of one another or by means of a telegraph, telephone, or other device, except a radio … (Pen. Code, § 632(a), emphasis added.)
Maliciously and without the consent of all parties to the communication, intercepts, receives, or assists in intercepting or receiving a communication transmitted between cellular radio telephones or …, between any cellular radio telephone and a landline telephone … (Pen. Code, § 632.5, emphasis added.)
Maliciously and without the consent of all parties to the communication, intercepts, receives, or assists in intercepting or receiving a communication transmitted between cordless telephones …, between any cordless telephone and a landline telephone, or between a cordless telephone and a cellular telephone … (Pen. Code, § 632.6, emphasis added.)
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 … (Pen. Code, § 632.7, emphasis added.)
Any person injured by a violation of the CIPA may bring an action against the person who committed the violation for five thousand dollars ($5,000) per violation or three times the amount of actual damages (whichever is greater).
Numerous federal District Courts have found that Section 632.7 applies to the parties to a phone call, holding that they receive each other’s communications. (See Ades v. Omni Hotels Management Corp. (C.D. Cal. 2014) 46 F.Supp.3d 999, 1017-1018; Ronquillo-Griffin v. Telus Communs., Inc. (S.D. Cal. June 27, 2017) 2017 WL 2779329, at pp. *3-*4; Horowitz v. GC Services Ltd. Partnership (S.D. Cal. Apr. 28, 2015) 2015 WL 1959377, at p. *11; Montantes v. Inventure Foods (C.D. Cal. July 2, 2014) 2014 WL 3305578, at p. *3; Simpson v. Best Western Intern., Inc. (N.D. Cal. Nov. 9, 2012) 2012 WL 5499928, at p. *8; Brown v. Defender Sec. Co. (C.D. Cal. Oct. 22, 2012) 2012 WL 5308964, at pp. *4-*5.)
The Court of Appeal disagreed with these District Court opinions and focused on the meaning of “receives” in the context of the CIPA. The Court of Appeal noted that Section 632.7 requires that the interception or receipt of the communication be without the parties’ consent. The Court of Appeal then held that the parties to a call are incapable of violating Section 632.7 because the parties to a phone call always consent to the receipt of their communications by each other.
In reaching its holding, the Court of Appeal determined that Sections 632.5 and 632.6 clearly applied only to a party who intercepts or receives a communication without all parties’ consent. The Court of Appeal found that applying either section to participants in the call would be absurd and unintelligible because it could not see how one party could possibly receive the other party’s communications with malice. Interestingly, the Court of Appeal’s opinion did not address the circumstance by which one party receives a communication under false pretenses, such as by claiming a false identity.
In addition, the Court of Appeal also noted that if Sections 632.5 and 632.6 applied to parties to the call, then they would impose liability on the basis of factors that are often beyond the putative wrongdoer’s knowledge or control because liability would turn on whether the call recipient answered using a cellular or cordless telephone. According to the Court of Appeal, imposing liability on the basis of pure happenstance would be absurd and any interpretation leading to it should be avoided.
The Court of Appeal then concluded that the statutory language, “without the consent of all parties … intercepts or receives,” similarly limited Section 632.7 to third-party eavesdroppers.
The Court of Appeal rejected the class action plaintiff’s argument that because the statute uses both “intercepts” and “receives,” those terms must refer to different types of conduct. The Court of Appeal determined that “receives” must mean some form of eavesdropping because Sections 632.5 and 632.6 apply only to eavesdropping and because “receives” should have the same meaning in Section 632.7.
The Court of Appeal then considered whether “without the consent of all parties to the communication” modifies both “intercepts or receives” and “intentionally records.”
Specifically, if “without the consent of all parties to the communication” modifies both “intercepts or receives” and “intentionally records”, then a party who receives a communication with the consent of the communicator and records that communication without the communicator’s consent does not violate Section 632.7. Conversely, if “without the consent of all parties to the communication” modifies two conjunctives – “intercepts and intentionally records” and “receives and intentionally records”, then a party to a call who records part of the conversation without the other party’s consent violates Section 632.7.
The Court of Appeal rejected Brinkley v. Monterey Fin. Servs., LLC (S.D. Cal. 2018) 340 F.Supp.3d 1036, 1043, wherein the District Court concluded that Section 632.7 is ambiguous and susceptible to either interpretation and that the legislative history supports the latter interpretation.
Instead, the Court of Appeal found that Section 632.7 is unambiguous and that “without the consent of all parties to the communication” modifies both “intercepts or receives” and “intentionally records.” Therefore, a party to a conversation who receives a communication with the consent of the communicator and then records that communication without the communicator’s consent does not violate Section 632.7 because the statute cannot be violated if the communication was received with all parties’ consent.
In addition, the Court of Appeal also determined that the legislative history indicated that the Legislature was not interested in recording by parties. Rather, the Legislature was targeting recording by eavesdroppers, so it used the same language it had used in Sections 632.5 and 632.6, which target eavesdroppers.
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