United States: Are Call Recording Class Actions Doomed?

In the past four years, droves of call recording class actions have been filed in state and federal courts across California. The gist of each is that a company violates the law when its customer service department records calls with its customers without first providing notice that the calls may be recorded. In a recent published decision, the California Court of Appeal may have sounded the death knell for these class actions. The Court of Appeal affirmed the trial court's denial of a class certification motion, holding that individualized issues predominated.

In the case – Hataishi v. First American Home Buyers Protection Corp., No. B244769, __ Cal. App. 4th __, 2014 WL 667381 (Cal. App. 2d Dist., Div. 3, Feb. 21, 2014) – the defendant recorded all calls with its sales department, inbound and outbound. For inbound calls, an electronic notice played notifying customers that their calls may be recorded. But for outbound calls, no electronic notice played and the defendant's sales representatives were not trained to notify customers that their calls may be recorded. Nor was there a company policy directing sales representatives to provide such a notice on outbound calls.

The plaintiff sued, alleging a single cause of action for violation of Penal Code section 632. Section 632 prohibits a party from recording or monitoring a "confidential communication" without the consent of all parties to the conversation. The plaintiff claimed that two outbound calls placed by sales representatives to her were recorded without her consent.

The Court of Appeal reaffirmed that a plaintiff may pursue a claim under Section 632 only if she had "an objectively reasonable expectation that the conversation [was] not being overheard." This standard proved the undoing of the class claims. The Court held that each plaintiff's objectively reasonable expectations would turn on individualized inquiries, including the length of the class member's experience with the defendant, whether the class member had ever been notified that her calls with defendant may be recorded, and each class member's experience with other businesses that record or monitor calls.

The plaintiff's own experiences were a perfect example. She placed 12 inbound phone calls to the defendant's sales department, and each time she received an electronic notice that her call may be recorded. In not one of those 12 calls did the plaintiff "[tell] the [defendant's] representative that she refused to be recorded and she never terminated the call to avoid being recorded." In addition, the plaintiff "also confirmed that she had participated in 'dozens and dozens and dozens' of telephone calls with companies [other than the defendant] where she understood her call could be recorded or monitored for quality assurance."

These facts, the Court held, affected the plaintiff's objectively reasonable expectations. A different class member with different experiences may have different objectively reasonable expectations. "A jury could rationally reach a different conclusion concerning another plaintiff who has not had the same experience. In any event, due process requires that [the defendant] be permitted to cross-examine [each class member] regarding those experiences that may impact the reasonableness of his or her alleged confidentiality expectation." Individualized issues thus predominated, precluding certification of a class.

In hopes of saving the class claims, the plaintiff suggested that she could add a claim under Penal Code section 632.7. Section 632.7 is different from Section 632 in two key respects: (1) Section 632.7 applies only to telephone conversations where at least one party is on a cellphone or a cordless phone; and (2) Section 632.7 prohibits the recording or monitoring of the call without consent even if the call is not a "confidential communication." The plaintiff thus sought to avoid the individualized inquiries surrounding the "confidential communication" standard under Section 632.

But the Court held that a Section 632.7 claim could not revive the class action. "[A]dding a section 632.7 claim would not have dispensed with the need to engage in an individualized factual inquiry." The trier of fact would have to "determine what type of telephone was used to receive the subject call." Because the plaintiff's "proposed methodology for identifying outbound calls provided no means to determine whether a landline, cellular or cordless telephone had been used to receive the subject call and that a call-by-call inquiry would be required to make this determination," individualized issues still predominated.

Will this be the end of call recording class actions in California? Time will tell.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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