Judge Rules California Invasion of Privacy Act Does Not Extend to Service-Observing Conduct

For the last 40 years, the California Invasion of Privacy Act (“CIPA”) has been used as it was intended—to prohibit the clandestine and surreptitious eavesdropping or recording of private and confidential communications.  During that same period, not one court applied the CIPA to the routine business monitoring and recording of calls between a business and a consumer (referred to by the Legislature as “service-observing”) as it was clear that such activity was specifically excluded from the CIPA.  

In the past few years, however, seizing upon technological changes in the telecommunications industry and resulting misinterpretations of the statute, plaintiffs have filed more than 100 putative class actions against businesses seeking excessive statutory damages for service-observing—an activity that the Legislature deemed at the time of the CIPA’s passage to be “in the public’s best interest.” 

However, a recent ruling in the Central District of California may end, or at the very least, curtail this trend.  On June 23, 2014, Judge Manuel L. Real dismissed a putative class action against Hilton Hotels for alleged violations of the CIPA for recording phone calls to a customer service representative.  See Young v. Hilton Worldwide, Inc., et al., Case No. 12-cv-01788.  In his Order, Judge Real highlighted three reasons as to why the CIPA does not apply in that context. 

The Court first held that Cal. Penal Code § 632 does not apply to conversations made with a “cellular radio telephone” because the section “explicitly excludes communications received with a radio from its purview.”  Because plaintiff alleged the calls were made to his cellular radio telephone, that claim was quickly dismissed. 

Next, the Court held that while Cal. Penal Code § 632.7 covers “[e]very person who without the consent of all parties to a communication, intercepts or receives and intentionally records” a communication involving a cellular or cordless phone, that section does not apply to participants to the call.  Judge Real explained: 

Sections 632.5, 632.6, and 632.7 restrict third-party interception of cellular and cordless telephonic radio transmissions. 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. The use of a landline telephone as Hilton allegedly did, was already expressly covered in Section 632, and to give independent meaning to Section 632.7 it would have to cover the radio signals it was meant to protect. 

Most importantly, the Court held that the Legislature never intended to limit the service-observing conduct of companies such as Hilton, and the routine business monitoring and recording of calls between a business and a consumer are specifically excluded from the CIPA:  

the legislature did not limit the service observing monitoring of calls that it is alleged in this case. See Shin v. Digi-Key Corporation, 2012 WL 5503847 (C.D. Cal. September 17, 2012). The context of the statutory scheme along with legislative history make it clear that Section 632.7 does not reach Hilton’s alleged activity. Hilton is not alleged to have received or intercepted a radio transmission … and service observing recordings are exempted. 

While this Court dismissed the putative class action against Hilton Hotels for allegedly recording phone calls to a customer service representative in violation of the CIPA, this area of law continues to develop. Similar cases are pending in the Ninth Circuit, and companies should review their call monitoring and recording practices to minimize the risk of claims under the CIPA.