Smith v. LoanMe, Inc.
11 Cal.5th 183
| Cal. | 2021Background:
- LoanMe called a phone number provided by plaintiff Smith’s wife; Smith answered on a cordless phone and the 18‑second call was recorded by LoanMe.
- LoanMe played an automated "beep" three seconds into the call but did not orally notify Smith that the call was being recorded.
- Smith sued on behalf of a putative class under Penal Code § 632.7, alleging intentional recording of a communication involving a cordless or cellular phone without consent of all parties.
- The superior court found the beep gave adequate notice and entered judgment for LoanMe; the Court of Appeal affirmed on the ground that § 632.7 applies only to nonparty eavesdroppers, not to parties recording calls.
- The California Supreme Court granted review and reversed, holding § 632.7 prohibits intentional recording without the consent of all parties regardless of whether the recorder is a party or a nonparty, and remanded for consideration of consent/notice issues.
- The decision rests on statutory text read in context of the Invasion of Privacy Act, legislative history of Assembly Bill 2465 (which added § 632.7 in 1992), and the privacy policy goals underlying the statutory scheme.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Penal Code § 632.7 prohibits a party to a call from recording a communication involving a cellular or cordless phone without consent of all parties | §632.7 bars intentional recording without consent of all parties, and thus applies to parties as well as nonparties | §632.7 targets only nonparty interceptions/receipts; parties by definition consent to receipt of communications so cannot violate the statute | Court held §632.7 applies to both parties and nonparties; parties may not record covered communications without consent of all parties |
| Proper reading of §632.7’s "without the consent of all parties" phrase (whether it modifies receipt/interception or the recording) | The consent requirement applies to recording, not merely to receipt; parties may receive but not necessarily consent to recording | The phrase limits liability to those who intercept/receive without consent (i.e., nonparties) | Court read the phrase as directed at the recording element; "intercepts or receives" describes how recorder becomes privy to communication, not the consent focus |
| Whether legislative history and statutory scheme support party applicability | Legislative history shows intent to plug gap protecting cellular/cordless calls from recording and aligns with Invasion of Privacy Act’s protections for parties | Legislative materials focused on third‑party eavesdropping; harmonization with §§632.5/632.6 supports limiting §632.7 to nonparties | Legislative history and statutory context support that §632.7 was meant to protect against intentional recording by parties and nonparties alike |
| Whether rule of lenity requires resolving ambiguity in favor of defendant | Even if textual ambiguity exists, legislative history, purpose, and policy resolve it; lenity inapplicable | Ambiguity should be resolved in favor of narrower construction (nonparty liability only) | Court declined to apply lenity because statutory language, history, and policy favor the broader interpretation |
Key Cases Cited
- Flanagan v. Flanagan, 27 Cal.4th 766 (2002) (Invasion of Privacy Act protects against intentional nonconsensual recording of telephone calls; §632.7 extends protections to cellular/cordless calls)
- Kearney v. Salomon Smith Barney, Inc., 39 Cal.4th 95 (2006) (it is unlawful for a party to record a telephone conversation without the knowledge of all other parties)
- Ribas v. Clark, 38 Cal.3d 355 (1985) (privacy interests and the distinction between secondhand repetition and secret monitoring)
- Sanders v. American Broadcasting Companies, 20 Cal.4th 907 (1999) (discussing privacy implications of recording communications)
- Warden v. Kahn, 99 Cal.App.3d 805 (1979) (recognition that §632 can prohibit party recordings of confidential communications)
- People v. Manzo, 53 Cal.4th 880 (2012) (rule of lenity applies only when competing reasonable interpretations are in equipoise)
- People v. Nuckles, 56 Cal.4th 601 (2013) (explaining scope of the rule of lenity in penal statutes)