The California Supreme Court recently issued a significant decision interpreting California’s Invasion of Privacy Act, which may lead to criminal and civil liabilities for intentionally recording phone calls without obtaining the appropriate level of consent.  [Note: for other litigations involving the statute, check out our prior coverage here and here].  This interpretation expands the scope of liability, which now encompasses non-parties to a conversation.  Companies that record any conversations with customers in California, the nation’s most populous state, should be aware of this decision and how it may affect their operations.  Luckily, CPW is here to do the groundwork for you.  Read on to learn more.

In Smith v. LoanMe, Inc., (2021) 11 Cal. 5th 183, the California Supreme Court evaluated whether California state law’s restriction against intentionally recording phone calls applies to only the parties of a conversation or whether it also restricts the conduct of persons not included in the conversation, or non-parties.

The lawsuit began when the defendant called a phone number that the plaintiff’s wife had provided to the defendant when she sought out a loan.  The plaintiff answered the phone and advised the defendant’s representative that his wife was not at home.  The defendant recorded the call, which lasted only 18 seconds.  Three seconds into the call, the defendant caused a “beep” tone to sound.  The defendant’s representative on the call did not orally advise plaintiff that the call was being recorded.  At trial, the court held for the defendant, finding that the plaintiff consented to having the phone call recorded when he continued the conversation for 15 seconds after hearing a “beep.”

The scope of the relevant statute, California Penal Code section 632.7(a), was first addressed on appeal, when the appellate court requested briefing on whether the statute prohibits a party, or only non-parties, from intentionally recording a communication.  Section 632.7(a) states, in relevant part, “[e]very 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 involving a cell phone shall be subject to criminal liability.

The appellate court, in what was the first published opinion by a California appellate court specifically addressing whether section 632.7 applies to a party, held the statute applied only to nonparties to a conversation, based on the theory that participants in a phone call “always consent” by nature of their receipt of communications.

The California Supreme Court, however, disagreed.  The court’s opinion looked at the background of the statute and how it has been interpreted, the statutory language itself, and legislative history.

First, the court initially discussed the background context of section 632.7 and how other courts have interpreted it.   The statute was part of the California Invasion of Privacy Act, which was passed to “protect the right of privacy,” including by “requiring that all parties consent to a recording of their conversation.”  The court also noted that a majority of federal courts have interpreted section 632.7 to protect a party from having its communication recorded unless all parties agreed to the recording.  In other words, a majority of federal courts did not distinguish between parties and non-parties, instead holding that the statute’s purpose was to protect a party to a conversation from having its conversation recorded unless it agreed to do so.  Finally, the court noted a prior decision where it interpreted a different issue arising under section 637.2.  In Flanagan v. Flanagan, (2002) 27 Cal. 4th 766, the California Supreme Court held that a conversation was “confidential” under section 632.7 when there was an “objectively reasonable expectation” it would not be overheard or recorded.  It rejected an alternative interpretation that would have been less protective of the parties’ privacy.

Second, the court also looked directly at the relevant language of the statute, which stated “[e]very person who, without the consent of all parties to a communication, intercepts or receives and intentionally records … a communication . . . .”  The statute’s reference to “consent” was crucial to the court’s interpretation.  The court determined the “consent” the statute required was the consent to the act of recording, not consent to a conversation.  Accordingly, under this interpretation, although a party may consent to a conversation by “consenting to the receipt of their communications by other parties to a call,” that consent should not necessarily be equated to consenting to being recorded.

Third, acknowledging that the statutory language was not “so clear as to be unambiguous,” the court also analyzed legislative history.  Looking to legislative committee reports, the court noted that section 632.7 was announced as a “general prohibition” against intentionally recording certain communications without the consent of all parties.  Additionally, the “primary intent” of the statute was to “provide a greater degree of privacy and security” to cell phone users.  These findings suggested to the court “[t]he Legislature’s aim was instead to more generally protect communications, which “would not be vindicated by an interpretation [of the statute] . . . as applicable only to recording by nonparties.”

Accordingly, with the interpretation of section 632.7’s restriction on intentionally recording phone conversations seemingly settled, organizations should be considered on notice of new liabilities.