475 F.Supp.3d 1071
N.D. Cal.2020Background:
- Plaintiff Luka Erceg (California resident) alleges LendingClub (call center in Massachusetts) recorded an October 3, 2018 cellphone call without notifying him; he disclosed sensitive financial information during that call.
- Plaintiff first learned of the recording during a February 14, 2019 protective-order hearing where the recording was played; a LendingClub employee testified the company routinely records customer interactions.
- Plaintiff sued on behalf of a nationwide class, asserting violations of Cal. Penal Code §§ 632 and 632.7 and Mass. Gen. Laws ch. 272 § 99.
- Defendant moved to stay the California claims pending the California Supreme Court’s review of Smith v. LoanMe (construing § 632.7), and alternatively moved to dismiss the Massachusetts claim and to strike the nationwide class allegations.
- The court stayed Plaintiff’s California § 632 and § 632.7 claims pending the California Supreme Court’s decision in Smith; granted dismissal of the Massachusetts claim without leave to amend; and denied the motion to strike the nationwide class allegations.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to stay CA claims pending CA Supreme Court decision in Smith | Stay unnecessary; prejudicial delay | Smith may be dispositive of §632.7 and informative as to §632, so stay avoids wasted litigation | Court granted stay of §632 and §632.7 claims pending Smith |
| Whether Mass. Gen. Law ch. 272 § 99 applies where plaintiff was a non‑resident located in CA when recorded | Massachusetts statute applies regardless of plaintiff residency; no residency requirement | Massachusetts law was enacted to protect Commonwealth citizens; applying it to out‑of‑state plaintiffs is improper; CA law should govern | Court dismissed the Massachusetts claim without leave to amend (CA law governs) |
| Whether nationwide class allegations should be stricken pre‑discovery due to choice‑of‑law conflicts | Nationwide class appropriate at pleading stage; discovery and certification will address conflicts | Class is overbroad; individual choice‑of‑law issues predominate and counsel against a nationwide class | Court denied motion to strike class allegations; class allegations survive to discovery/certification |
| Whether Plaintiff should be granted leave to amend the dismissed Massachusetts claim | Leave to amend should be allowed | Amendment would be futile because plaintiff cannot state a MA claim as a CA resident recorded in CA | Court denied leave to amend; dismissal without leave due to futility |
Key Cases Cited
- Landis v. N. Am. Co., 299 U.S. 248 (U.S. 1936) (district courts have inherent authority to stay proceedings pending resolution of controlling issues)
- CMAX, Inc. v. Hall, 300 F.2d 265 (9th Cir. 1962) (factors for analyzing whether to grant a stay)
- Kearney v. Salomon Smith Barney, 39 Cal.4th 95 (Cal. 2006) (choice‑of‑law for recording statutes favors law of state where recorded party was located)
- Smith v. LoanMe, Inc., 43 Cal. App. 5th 844 (Cal. Ct. App. 2019) (held §632.7 prohibits only third‑party eavesdroppers; decision pending review by CA Supreme Court)
- Valentine v. NebuAd, Inc., 804 F. Supp. 2d 1022 (N.D. Cal. 2011) (out‑of‑state plaintiffs may bring CIPA claims when intercepted data routed to defendant’s California operations)
- In re Yahoo Mail Litig., 308 F.R.D. 577 (N.D. Cal. 2015) (choice‑of‑law and individual consent issues can complicate recording‑statute class actions)
- Brinkley v. Monterey Fin. Servs., LLC, 340 F. Supp. 3d 1036 (S.D. Cal. 2018) (legislative history explaining §632.7 was intended to extend §632 protections to cellular calls)
- Dependable Highway Express, Inc. v. Navigators Ins. Co., 498 F.3d 1059 (9th Cir. 2007) (district court discretion in granting or denying Landis stays)
- Commonwealth v. Hyde, 434 Mass. 594 (Mass. 2001) (Massachusetts law requires consent for recording, relevant to dual‑consent analysis)