The evolution of California Invasion of Privacy Act class actions continue – and this time I am here to report on a great win for CIPA defendant Hot Topic.

As the Dame recently reported, Goodyear Tire recently lost on its motion to dismiss plaintiff’s complaint for allegations violations of Sections 631(a) and 632.7 of CIPA. There, plaintiff Arisha Byar alleged Goodyear used a third-party company to record and transcribe the conversation she initiated in the chat feature on Goodyear’s website using her smartphone.

Shortly after Judge Sunshine Skyes (what a name!) denied Goodyear Tire’s motion to dismiss, in Byars v Hot Topic Inc., Judge Jesus Bernal, out of the U.S.D.C. of Central District of California, in disagreeing with Judge Skyes, granted Hot Topic’s motion to dismiss against the same Goodyear plaintiff – Arisha Byars.

Judge Bernal found Plaintiff failed to state a claim under both Section 631(A) and Section 632.7 of CIPA.

So let’s dive in.

First Cause of Action: California Penal Code Section 631(a).

First, in regards to Plaintiff’s first cause of action, Judge Bernal, relying on Williams v. What if Holdings, held Plaintiff failed to allege that Hot Topic is or aids and abets, a third-party eavesdropper within the meaning of Section 631(A).

In Hot Topic, Plaintiff argued Defendant Hot Topic was liable for all pattens of conduct under CIPA under Section 631: (1) intentional wiretapping, (2) wilfully attempting to learn the contents or meaning of a communication in transit over a wire, and (3) attempting to use or communicate information obtained as a result of engaging in either of the previous two activities.

The Court agreeing with Williams found all 3 of these theories of liability failed because as a website owner [like What if] defendant was the intended recipient of plaintiff’s communications and parties to a conversation cannot eavesdrop on their own conversation.

While Plaintiff argued that there is no party exemption under the first clause of section 631(a) – the Court aggressively disagreed and cited several federal district court rulings stating otherwise. “The California Supreme Court has also explained the underlying purpose of Section 631(a). “Section 631 was aimed at one aspect of the privacy problem—eavesdropping, or the secret monitoring of conversations by third parties.”

Thus the only viable theory of liability for a website owner like Defendant is under the fourth clause of Section 631(a), which encompasses one “who aids, agrees with, employs, or conspires with any person or persons to unlawfully do, permit, or cause to be done” any of the first three “patterns of conduct.” Cal. Penal Code § 631.

“As such, like in Williams, the only possible basis for Defendant to be liable under Section 631(a) must be an aiding and abetting theory. See Williams, 2022 WL 17869275 at *2. Under that theory, Defendant’s liability must be “based entirely” on whether the unnamed, likely unknown third-party software vendor “violated Section 631(a) in some way.” Id. “Because a party to the communication is exempt from liability under CIPA, our dispositive question is whether [the third-party vendor] constitutes a third-party eavesdropper.” Id. at *3 (citation omitted). “Put differently, the question boils down to whether [the third-party vendor] was an independent third party hired to eavesdrop on [Defendant’s] communications, or whether [the third-party vendor’s] software was merely a tool that [Defendant] used to record its own communications with plaintiff.” 

Plaintiff argued defendant allowed “at least one third party to eavesdrop.” As in Williams, the court was unpersuaded and found that the limited allegations stated in the complaint were a mere conclusion and not enough to show that Hot Topic uses a third party eavesdropper.

“Unlike in Williams, Graham or other opinions, Plaintiff appears to know nothing about the role that the third-party vendor plays, because she does not even know what it is, let alone how it works. The FAC refers to an unnamed third-party (or multiple third-parties) except in one location, where Plaintiff alleges that “Defendant allows at least one independent third-party vendor (on information and belief, Salesforce)” to access its chat communications.”

So with the first cause of action swept aside, the court went on to analyze Plaintiff’s second cause of action under Section 632.7.

Second Cause of Action: California Penal Code Section 632.7.

CIPA Section 632.7 prohibits intercepting or recording “a communication transmitted between two cellular radio phones.” Cal. Penal Code § 632.7 (emphasis added).

The Court disagreed with Byars v. Goodyear, and held that the language of Section 632.7 does not apply in the context of text-based communications on a website, and may only apply to communications involving two telephones. Plaintiff admitted that Hot Topic was not using a telephone, and thus her cause of action failed as a matter of law.

Plaintiff allegations related to the text-based communications regarding a chat feature on a website. While the court noted there was “no intellectually honest way to distinguish Goodyear” as it involved identical allegations as in the instant complaint, the court found Goodyear was only relevant to the extent of its “ability to persuade.”

And Judge Bernal was unpersuaded.

The court instead upheld the construction of the statute:

The California Supreme Court has found that, in enacting Section 632.7, the California Legislature was “[r]esponding to the problem of protecting the privacy of parties to calls involving cellular or cordless telephones[.]…It protects against intentional, nonconsensual recording of telephone conversations regardless of the content of the conversation or the type of telephone involved….Determining ‘what type of telephone was used to receive the subject call’ is an element of a Section 632.7 claim….To this Court’s knowledge, at least until [Goodyear] … courts universally agreed that the statutory language of Section 632.7 would not apply in the context of text-based communications on a website.” (Emphasis added).

In the end, the Court found that the Goodyear court relied on the false premise that Goodyear was using a telephone at all and rejected the Goodyear’s courts holding that there was no requirement for Plaintiff to allege that the type of telephonic device used by Goodyear.

Since Plaintiff admitted Hot Topic was not using a telephone –  court dismissed WITHOUT LEAVE TO AEMND Plaintiff’s Section 632.7 claim.

So there you go. Just like in TCPAWorld, with so many different judges presiding over these matters, there will likely continue to be conflicting rulings across California. As we’ve been reporting, California federal courts are also split over whether “session replay” vendors are third-party eavesdroppers or a party to the communication.

If you’re a website operator using “live chat” applications on your site, it is critical you keep these new wave of class actions in mind — especially since we do not yet have guidance from the Ninth Circuit and are unsure how California courts will rule.

We’ll continue to keep an eye on these as case law continues to develop.

Happy CIPA Sunday.