Prоceedings: DEFENDANT’S MOTION FOR SUMMARY JUDGMENT PUR- » SUANT TO FEDERAL RULE OF CIVIL PROCEDURE 56
Catherine Jeang Deputy Clerk
Laura Elias Court Reporter / Recorder
Plaintiffs Steven Ades (“Ades”) and Hart Woolery (“Woolery”) filed the instant putative class action on March 15, 2013 in Los Angeles County Superior Court. Defendant in this action is Omni Hotels Management Corporation (“Omni”). Omni removed the case to this Court based on diversity of citizenship on April 8, 2013. Dkt. # 1. Plaintiffs have since sought to substitute Jonathan Murphy (“Murphy”) for Woolery as class representative.. Dkt. # 55, 59.
On April 29, 2013, plaintiffs filed the First Amended Complaint (“FAC”). The FAC asserts claims for relief pursuant to the California Invasion of Privacy Act (“CIPA”), California Penal Code § 630 et seq. In brief, these claims assert that plaintiffs called Omni’s toll-free telephone numbers and provided Omni representatives with personal information. FAC ¶¶ 16-17. Plaintiffs allege that when they placed their calls to Omni’s toll-free telephone numbers, they were not apprised that the call might be recorded. Id. Plaintiffs further allege that Omni has a company-wide policy of recording inbound telephone conversations with consumers without seeking permission or informing consumers about the monitoring. Id. ¶¶ 18-19.
Omni filed a mоtion for summary judgment on July 30, 2014, Dkt. #63, and a corrected memorandum of points and authorities in support thereof on August 1, 2014, Dkt. # 65. Plaintiffs filed an opposition on August 18, 2014. Dkt. # 67. Omni replied on August 28, 2014. Dkt. #72. The parties appeared at oral argument on September 8, 2014. After considering the parties’ arguments, the Court finds and concludes as follows.
II. BACKGROUND
Plaintiffs brought this suit on behalf of themselves and “[a]ll individuals who, between March 15, 2012 and March 22, 2013, inclusive (the ‘Class Period’), while physically present in California, participated in a telephone call with a live representative of Omni” that was placed to one of several Omni toll-free numbers, made from a telephone number with a California area code, and transmitted via the AT & T, Verizon Wireless, or Sprint cellular telephone networks. Dkt. # 59. Plaintiffs contend that they called Omni’s toll-free phone number and, without being warned that their calls were being recorded, provided Omni representatives with personal information including their names, phone numbers, email addresses, and credit card numbers and expirаtion dates. FAC ¶¶ 16-17. Plaintiffs allege that unwarned and uncon-sented recording and monitoring of inbound calls pursuant to Omni company policy violated § 632.7 of CIPA, entitling them to statutory damages. Id. ¶¶ 31-46. The calls at issue were placed to an Omni call center located in Omaha, Nebraska. Defendant’s Statement of Uncontroverted Facts (“DSUF”) ¶¶1-2; Plaintiffs Statement of Disputes of Material Fact (“PSDMF”) ¶¶ 1-2.
Omni states that all relevant incoming calls were recorded solely for quality assurance purposes. DSUF ¶¶2, 4. While disputing that this is relevant to the motion for summary judgment, plaintiffs cite evidence that the recordings were also made so that Omni personnel could consult them in the event of a dispute between Omni and a customer. PSDMF ¶¶ 2, 4. Omni contends that, at all times relevant
III. LEGAL STANDARD
Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party bears the initial burden of identifying relevant portions of the record that demonstrate the absence of a fact or facts necessary for one or more essential elements of each claim upon which the moving party seeks judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323,
If the moving party meets its initial burden, the opposing party must then set out spеcific facts showing a genuine issue for trial in order to defeat the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250,
In light of the -facts presented by the nonmoving party, along with any undisputed facts, the Court must decide whether the moving party is entitled to judgment as a matter of law. See T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n,
IV. DISCUSSION
Omni advances five arguments in support of its motion. First, it argues that Nebraska law, not California law, governs Omni’s conduct. Second, it maintains that if § 632.7 is imposed on Omni’s national call center as plaintiffs urge, it would violate the dormant Commerce Clause of the federal Constitution. Third, Omni contends that the statutory damages sought
A. Choice of Law
“Federal courts sitting in diversity jurisdiction look to the law of the forum state in choice-of-law determinations.” Fields v. Legacy Health Sys.,
First, the court determines whether the relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different. Second, if there is a difference, the court examines each jurisdiction’s interest in the application of its own law under the circumstances of the particular case to determine whether a true conflict exists. Third, if the court finds that there is a true conflict, it carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the application of its own law “to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state,” and then ultimately applies the law of the state whose interest would be the more impaired if its law were not applied.
Kearney v. Salomon Smith Barney, Inc.,
1. Difference Between California and Nebraska Law
First, Omni argues that the relevant California and Nebraska laws do not differ because both states exempt service monitoring from the applicable privacy statutes. Therefore, Omni contends, the Court need not advance past the first step of the government interest analysis.
When construing a state statute, federal courts apply state law of statutory construction. Bass v. County of Butte,
In support of its contention that the two states exempt service monitoring, Omni cites passages from CIPA’s legislative history and changes to the California Public
To its arguments raised on the motion to dismiss, Omni adds more detail regarding the PUC’s regulation of the telephone industry. Under General Order 107-B, the PUC formerly required telephone utilities to file tariffs setting conditions for use of its networks by companies that provided their own terminal equipment and monitored or recorded conversations between their employees and customers.
Omni does not claim that any recordings made during the Class Period were literally made on equipment “furnished and used pursuant to the tariffs of a public utility.” Cal. PemCode § 632.7(b)(2). The text of § 632.7(b)(2) suggests that the public utilities exception itself does not apply unless this condition is met; moreover, the California Supreme Court has declined to apply the exception where “there indeed was no tariff’ applicable “at the time of the conduct alleged.” Ribas v. Clark, 88 Cal.3d 355, 362,
Rather, Omni argues that because the PUC once regulated monitoring and recording of the kind at issue here, § 632.7 should be read as if it never applied to service monitoring. Most courts considering § 632.7 or the identical exception in § 632(e), however, have rejected this argument. See, e.g., Right v. CashCall, Inc.,
Omni attempts to ignore authorities rejecting a service monitoring exception by reasoning that “the courts that have actually addressed CIPA’s legislative history have concluded that CIPA does not apply to service observing.” Mem. Supp. Mot. Summ. J. at 6. But because the statute’s meaning is plain and unambiguous, examination of the legislative history is improper. See Kaufman,
Omni cites some cases supporting a service monitoring exemption; however, the Court finds them less persuasive than those discussed above. The court in Shin v. Digi-Key Corp., No. cv-12-5415 PA (JCGx),
Based on the foregoing, the Court finds (1) that the statutory public utility exemption does not apply to Omni’s conduct and (2) that CIPA does not contain a broad exception for routine service monitoring. Accordingly, the Court rejects Omni’s argument that CIPA does not differ from Nebraska law in relevant respects.
2. Remaining Government Interest Analysis
Omni argues in the alternative that if there is a conflict between California and Nebraska law — that is, if § 632.7 makes illegal non-consensual recordings made for service monitoring purposes — Nebraska’s interests in applying its law outweigh those of California. Nebraska law permits employers to “intercept, disclose, or use” communications related to “any activity which is a necessary incident to the rendition of ... [its] service or to the protection оf the rights or property of the carrier or provider of such communication services.”' Neb.Rev.Stat. § 86-290(2)(a). Based on this provision, Omni contends that Nebraska favors allowing businesses to monitor their employees, as to provide better customer service, over protecting consumer privacy directly. Omni argues that the difference in law reflects Nebraska’s attempt to make its state more business-friendly. Moreover, Omni argues that Nebraska law applies because the alleged wrong took place in Nebraska, the location of “the last event necessary to make the actor liable.” Mem. Supp. Summ. J. at 9-10 (citing Mazza v. Am. Honda Motor Co.,
Plaintiffs first respond that Kearney, which involved CIPA and Georgia’s single-consent recording law, is dispositive of the choice of law issue. Second, they dispute Omni’s characterization of Nebraska as a “zero-consent” state as regards service monitoring, pointing out that the statute cited by Omni provides: “employers and providers shall not utilize service observing or random monitoring except for mechanical, service quality, or performance control checks as long as reasonable notice of the policy of random monitoring is provided to their employees.” Neb.Rev.Stat. § 86-290(2)(a). Next, they argue that Cal
In Kearney, plaintiffs alleged that Atlanta-based employees of a nationwide brokerage firm had repeatedly “recorded telephone conversations with California clients without the clients’ knowledge or consent.”
The same strong California interests apply here as in Kearney. With regard to Nebraska, the relevant statute does appear to give businesses greater latitude to record conversations of their employees than do some other single-consent states. See 5 Leslie T. Thornton & Edward R. McNicholas, Successful Partnering Between Inside and Outside Counsel § 82:55 n. 2 (“At least two states ... require the provision of notice before employers conduct electronic monitoring. Nebraska has taken the contrasting position and enacted an employer friendly law that exempts business from stаte wiretap statutes and gives employers the right to intercept, dis
The Court does not find Mazza to be as helpful to Omni as it claims. That case dealt with a putative nationwide class of consumers from 44 states, and the Ninth Circuit noted each state’s interest in “having its law applied to its resident claimants” and the importance of federalism concerns in “interstate class actions.”
The Court does not dispute the principle that “each state has an interest in setting the appropriate level of liability for companies conducting business within its territory.” Mazza,
B. Dormant Commerce Clause
Omni contends that applying § 632.7 as plaintiffs urge would violate the dormant Commerce Clause of the United States Constitution. “Although the Commerce Clause is by its text an affirmative grant of power to Congress to regulate interstate and foreign commerce, the Clause has long been recognized as a self-executing limitation on the power of the States to enact laws imposing substantial burdens on such commerce.” South-Central Timber Dev., Inc. v. Wunnicke,
Courts evaluating dormant Commerce Clause claims conduct two inquiries.
1. Per Se Violation of the Dormant Commerce Clause
Omni first contends that application of § 632.7 to these facts would effect direct regulation of extraterritorial commerce, constituting a per se violation of the dormant Commerce Clause. Omni argues that the fact that § 632.7 “may not facially or even purposefully control out of state interests is not determinative.” Mot. Supp. Summ. J. at 12 (citing Healy,
.Plaintiffs respond that there is no direct extraterritorial regulation here because the telephone calls at issue do not take place wholly outside California. They further argue .that § 632.7 does not discriminate in any way because it treats out-of-state and in-state businesses the same: both must obtain consent before recording calls from California customers. Plaintiffs assert that it would be possible for Omni to determine the location of cell phone callers, although Omni responds that each method suggested for doing so impermissi-bly burdens interstate commerce. Furthermore, plaintiffs argue that the fact that a business may be incentivized to change its practices nationwide to comply with the regulatory policy of one state does not amount to a Commerce Clause violation.
The Court agrees with plaintiffs that this case does not merit strict scrutiny under the dormant Commerce Clause. First, § 632.7 does not discriminate facially, purposefully, or practically against out-of-state commerce. Omni appears to concede that the statute does not discriminate facially or purposefully, and there is case law to that effect. See Zephyr v. Saxon Mortg. Servs., Inc.,
Nor does § 632.7 directly regulate out-of-state commerce in violation of what has been called the “extraterritoriality doctrine.” See Kearney,
Mоreover, legislation that may cause businesses to decide to conform nationwide conduct to meet the requirements of a given state does not necessarily constitute direct regulation of out-of-state commerce. “Courts have held that when a defendant chooses to manufacture one product for a nationwide market, rather than target its products to comply with state laws, defendant’s choice does not implicate the commerce clause.” Nat’l Fed’n of the Blind v. Target Corp.,
2. Undue Burden on Interstate Commerce
Omni argues in the alternative the requested application of § 632.7 would impose incidental burdens on interstate commerce that clearly outweigh the local benefits secured. Omni contends that compliance with § 632.7 “provides no real benefit whatsoever” for several reasons. First, Omni avers that many California callers assume their calls to hotels are recorded even absent a warning. Second, Omni disputes that Omni’s recording of telephone calls without a warning affected plaintiffs in any way. Third, Omni argues that § 632.7 does not protect Californians’ confidential communications. Fоurth, Omni contends that the statute does not benefit consumers whose calls were recorded for service observing purposes as opposed to intercepted by a third party. Conversely, Omni argues, the “burdens on interstate commerce are extraordinary.” Omni cites the potential damages in this case as well as the fact that this lawsuit has already “coerced Omni into warning every caller that he or she may be recorded.”
Plaintiffs deny that Omni has shown any burden imposed on it by application of § 632.7. They point out that, following this lawsuit’s filing, Omni added an automated notification of potential recording for each caller, and assert that adding the recording cost Omni only about an hour’s worth of employee labor. PSDMF ¶ 13. Plaintiffs also deny that Omni has presented evidence that having to inform callers of potential recording has adversely impacted Omni. On the benefits side of the equation, plaintiffs argue that 632.7 protects strong privacy interests ignored by Omni.
Despite Omni’s argument that § 632.7’s applicatiоn to Omni’s conduct provides “no real benefit whatsoever,” this Court finds persuasive the California Supreme Court’s reasoning that refusing to apply the law to similar conduct would “significantly impair the privacy policy guaranteed by California law.” Kearney,
C. Excessive Damages
Omni next argues that the statutory damages sought by plaintiffs are unconstitutional under the Excessive Fines Clause, U.S. Const, amend. VIII, and due process principles.
The Excessive Fines Clause is inapplicable'where, as here, civil damages are sought in a lawsuit between privаte parties. United States v. Bajakajian, cited by Omni in support of its argument, explains that “fine” as used in the Eighth Amendment means “a payment to a sovereign as punishment for some offense.”
At this stage of the litigation, Omni’s argument that the statutory damages violate due process must also be rejected. In fact, one of the two opinions Omni cites in support of its due process contentions declined at a similar juncture to consider an argument that statutory damages were excessive. See In re Napster, Inc. Copyright Litig., No. C MDL-00-1369 MHP,
D. § 632.7’s Applicability to Call Participants
Next, Omni argues that § 632.7 does nоt apply to call participants based on differences between the language in that provision and § 632. Specifically, § 632 holds hable anyone who “eavesdrops upon or records” a telephone communication, and § 632.7 imposes liability on anyone who “intercepts or receives and records” a cellular telephone call. Omni first cites general principles of statutory interpretation to argue (1) that “intercepts or receives” would be extraneous if § 632.7 applied to parties, and (2) that the use of “receives” in §§ 632.5 and 632.6 to apply to third parties shows that “receives” should be read to only apply to third parties in § 632.7. Omni then turns to legislative history it argues “demonstrates that the drafters sought only to fill a perceived gap in the statutory scheme by merely extending sections 632.5 and 632.6, which required malice, to non-malicious third-party recordings.” Mem. Supp. Summ. J. at 21. Omni also claims that the legislative history and potential “absurd and unfair re-suits” justifies “qualifying] the plain meaning” of 632.7. Id. at 24 (citing Ctr. for Nat’l Policy Review on Race & Urban Issues v. Weinberger,
The Court agrees with the decisions cited by plaintiff, and finds that § 632.7 prevents a party to a cellular telephone conversation from recording it without the consent of all parties to the conversation. See Montantes v. Inventure Foods, No. cv-14-1128-MWF (RZx),
E. “Injury” Under § 632.7
Finally, Omni contends that plaintiffs cannot sustain an action under § 632.7 because they cannot demonstrate that they have suffered an injury. Plaintiffs respond that Omni’s alleged violation of CIPA is “itself a legally cognizable injury giving rise to the right to recover statutory damages,” and that they “are not required to show any financial or other injury.” PSDMF ¶ 10. Omni argues that plaintiffs’ argument relies on a conflation of the terms “injury” and “damages.”
The Court concurs with cases cited by plaintiffs finding thаt, in light of the California legislature’s decision to create statutory damages for each violation of CIPA, no separate showing of injury aside from a violation of the privacy rights protected'by CIPA is required. See, e.g., In re Google Inc. Gmail Litig., No. 13-MD-02430-LHK,
For the foregoing reasons, Omni’s motion for summary judgment is DENIED.
IT IS SO ORDERED.
Notes
. The facts set forth in this section are not all undisputed and are provided for background purposes only.
. A "tariff” filed with the PUC "consists of schedules showing all rates, tolls, rentals, charges, and classifications collected or enforced, or to be collected or enforced, together with all rules, contracts, privileges, and facilities which in any manner affect or relate to rates, tolls, rentals, classifications, or service.” Cal. Pub. Util.Code § 489.
. However, adjacent provisions of the same PUC order cited by Omni state that customers who provide their own terminal equipment must provide notice of any monitoring or recording. Def.’s Request for Judicial Notice Ex. F at 12. This order explained that the tariff conditions for such companies were intended "to assure the same degree of privacy” for these telephone conversations. Id. Similarly, all of the no-longer-filed carrier tariffs cited by Omni included provisions requiring notice of recording or monitoring. See id. Ex. G at 3; id. Ex. H at 4; id. Ex. I at 12.
. See Brown v. Defender Security Comp., No. cv-12-7319-CAS (PJWx),
. Omni also cites two Los Angeles County Superior Court orders finding a service monitoring exemption, only one of which is a written opinion. See Mem. Supp. Summ. J. at 7. The Superior Court has reached the opposite conclusion in a pair of recent opinions. See Newport v. BPG Home Warranty Co., No. BC488142, slip op. at 9 (L.A.Cnty.Sup.Ct. May 8, 2013) (PL’s Request Judicial Notice Ex. 2) (“Defendant’s attempt to shoehorn its alleged unregulated practice of audio recording into the framework of an exception that was clearly grounded in a heavily regulated world of yesteryear is unavailing.”); Zamar v. Mercury Ins. Co., No. BC469266, slip op. at 5 (L.A.Cnty.Sup.Ct., Apr. 17, 2013) (PL’s Request Judicial Notice Ex. 1) ("The legislative history, however, is irrelevant here.”).
. In reply, Omni dismisses these required warnings as "periodic, generic notice” that do not undermine the differences between Nebraska law and the Georgia law considered in Kearney. Because the required notice ensures that each Omni employee participating in a recorded call is aware that her calls with customers are being recorded, the Court does not find the fact that the employees need not consent anew at the outset of each call determinative. In this regard, the Court notes that one of Omni’s primary arguments in opposition to class certification rests upon the proposition that consent can be implied from a general awareness that a call might be recorded, even without actual prior notice at the outset of the particular call.
. A threshold inquiry is whether the Commerce Clause applies at all. The Clause is implicated whenever the regulated activity has a “ 'substantial effect' on interstate commerce such that Congress could regulate the activity.” Conservation Force, Inc. v. Manning,
. Brown-Forman Distillers Corp. v. New York State Liquor Authority,
. Although the Kearney court made this determination in the context of choice of law and due process arguments, the Court finds the facts and legal issues similar enough to make the court's reasoning relevant and persuasive. See Donald H. Regan, Siamese Essays: (1) CTS Corp. V. Dynamics Corp. of America and Dormant Commerce Clause Doctrine; (II) Extraterritorial State Legislation, 85 Mich. L.Rev. 1865, 1884-85 (1987) (noting that courts deciding conflict-of-laws cases have addressed extraterritoriality issues similar to those treated under the dormant Commerce Clause).
. The Court does not find Omni’s citation of several cases involving internet content regulation persuasive as to either the extraterritoriality of or the interstate burden imposed by § 632.7, chiefly because the nature of the internet and the conduct regulated in those cases directly extended the regulation to persons with nо connection to the regulating state. See Mot. Summ. J. at 15, 17-18. The Court also finds inapposite Consolidated Cigar Corp. v. Reilly,
. The Court agrees with plaintiffs that the statutory damages sought in this case are a potential penalty for failing to comply with California law, not a burden on interstate commerce resulting from compliance.
. The Court is not persuaded to consider Omni’s arguments at this juncture by Cohorst v. BRE Props., Inc., No. 3:10-cv-2666-JM-BGS,
. Because the Court finds the statutory language unambiguous, it does not consider legislative history. Viceroy Gold Corp. v. Aubry,
. Omni relies heavily on a Superior Court's order in Hopkins v. Healthmarkets, No. BC404133,