Good news for companies that routinely record or monitor calls to or from California residents – the Ninth Circuit Court of Appeal’s January 17 decision in Faulkner v. ADT Security Services, Inc. has made it harder for class action plaintiffs in federal court to allege an actionable claim under Section 632 of California’s Invasion of Privacy Act (“CIPA”) and to obtain class certification. In Faulkner, the Ninth Circuit upheld the District Court’s dismissal of a consumer’s CIPA claim in a putative class action for failure to state a claim. Sections 632 and 637.2 of CIPA impose a $5,000 penalty for recording or monitoring “confidential communications” without the other party’s consent. The California Supreme Court has explained that a communication is “confidential” under Section 632 of CIPA if a party to a conversation has an objectively reasonable expectation that the conversation is not being overheard or recorded. However, state and federal courts have disagreed regarding whether the content of the conversation has any bearing on that determination.
The Ninth Circuit’s Faulkner decision concluded that content matters. The court held that the plaintiff’s allegation that he called the defendant, his home security provider, to “dispute a charge” was insufficient to allege an objectively reasonable expectation of confidentiality. According to the court, “too little is asserted in the complaint about the particular relationship between the parties, and the particular circumstances of the call, to lead to the plausible conclusion that an objectively reasonable expectation of confidentiality would have attended such a communication.” The court suggests in a footnote that the plaintiff “might” have a claim if he provided sensitive information like his social security number or an unlisted phone number.
Under Faulkner, merely alleging that a routine customer service call was recorded or monitored is not enough to state a Section 632 CIPA claim in federal court. Further, because individual circumstances are now required, it will be more difficult for plaintiffs to allege a cognizable class and obtain class certification.
While Faulkner is an important and positive development for companies that routinely record or monitor calls to or from California residents, that business practice still carries substantial risk. For example, companies who routinely request personal information such as social security numbers before disclosing that the call may be recorded or monitored are still at risk of being sued in a call recording class action under Section 632 of CIPA. Further, Section 632.7 of CIPA, which Faulkner did not address, prohibits intentionally recording all calls to or from cell phones and cordless phones, regardless of their confidentiality. And some defendants will not be able to remove their cases from the California courts, where the pleading standards are not as exacting, and the case law is divided on the relevance of the content of the call under Section 632.
Accordingly, companies that routinely record or monitor calls to or from California residents (or other States with dual-consent recording statutes) should consider employing the following practices:
For inbound calls, providing an automated warning that calls may be monitored or recorded before the caller is connected to a live agent.
For outbound calls, giving a warning before the person being called is recorded.
Providing live agent with scripts requiring them to give a warning at the outset of speaking to every new person.
If you have contracts with the customers calling / being called, including provisions (1) providing notice that calls may be monitored or recorded, (2) requiring arbitration of claims, and/or (3) providing that the laws of a single-consent State govern the party’s relationship.
If any third-party vendors make customer service calls on your behalf, including provisions in your contracts with those vendors requiring the vendors to comply with all laws related to call recording and to indemnify you for any claims arising out of calls that they make on your behalf.
Obtaining insurance coverage for defense of third-party claims for unlawful call recording and invasion of privacy.