Opinion
Plaintiffs brought individual and class claims against CashCall, Inc., a consumer finance company, alleging CashCall secretly monitored their telephone conversations with CashCall employees without plaintiffs’ knowledge or consent. Plaintiffs alleged this practice violated their common law, statutory, and constitutional privacy rights. The court certified a class on one of these claims, an alleged violation of Penal Code
CashCall successfully moved for summary adjudication on the section 632 claim. The court found as a matter of law a corporation does not violate the statute when one of its supervisory employees secretly monitors a conversation between a customer and another corporate employee. The court agreed with CashCall’s argument that section 632 did not apply because the eavesdropping prohibited under the statute requires a third party and there were only two parties to the alleged monitored conversations—the corporation and the customer.
We reverse the summary adjudication order. The trial court’s statutory interpretation is inconsistent with section 632’s language and purpose. In Flanagan v. Flanagan (2002)
CashCall is a finance company that provides unsecured loans to consumers. Plaintiffs’ amended complaint alleged that each of the plaintiffs borrowed money from CashCall, and, in making the loans and collecting delinquent payments on those loans, CashCall “secretly” monitored and eavesdropped on telephone conversations between CashCall employees and plaintiffs, including conversations pertaining to “sensitive financial information.” Plaintiffs alleged CashCall conducted the “illegal monitoring ... for the purpose of assisting [CashCall] in its collection efforts” without the “knowledge or consent” of plaintiffs or the class members. Plaintiffs further alleged CashCall’s “corporate representative has admitted under oath that as a regular part of its ongoing daily business practices, [CashCall] monitors, eavesdrops on, or otherwise makes unauthorized connections to a number of collection calls with alleged debtors.”
The amended complaint alleged several causes of action, including (1) unlawful invasion of privacy in violation of sections 631 and 632; (2) unlawful intrusion into private affairs; and (3) violation of the right to privacy under the California Constitution. Plaintiffs sought statutory damages for violation of section 632 (the greater of $5,000 per violation or three times the amount of actual damages) and an injunction to prohibit CashCall from continuing to engage in this practice. (See § 637.2.)
Based on precertification discovery, the court allowed plaintiffs to amend the first amended complaint to substitute new class representatives because the facts showed CashCall had not monitored conversations of the original named plaintiffs. (See CashCall, Inc. v. Superior Court (2008)
The trial court then certified a class on plaintiffs’ claim alleging a violation of “section 632 by ‘eavesdropping’ ” and seeking “the statutory penalty of $5,000.” The court defined the class as: “ ‘All persons that were physically in California at the time they had telephone conversations in which defendant [CashCall], its employees, contractors, agents or other persons working on [CashCall’s] behalf, monitored . . . such conversations, within one year prior to May 16, 2006, the date of filing of the original Complaint. . . .’ ” (Underscoring omitted.) The court also identified two subclasses. Subclass one consisted of class members monitored on outbound calls from CashCall employees or agents to the class member. Subclass two consisted of class members who were monitored on inbound calls from the class member to a CashCall employee or agent.
During the relevant times, consumers applied for loans from CashCall by applying online or by calling one of CashCall’s advertised toll-free numbers and speaking to a CashCall representative. All borrowers, including online applicants, must call CashCall and speak to a CashCall representative to complete their loan applications. All members of the class are or were CashCall borrowers.
CashCall has a production department and a servicing department. The production department generates new loans, which includes taking applications, handling underwriting, and providing information to consumers interested in securing a loan. The servicing department focuses on collections and debt recovery and ensuring payment is made on existing loans.
During the class period, CashCall randomly monitored 547 calls to and from the servicing department: 225 inbound calls and 322 outbound calls. The calls were monitored for quality control purposes to ensure CashCall employees were following CashCall’s policies and procedures and applicable laws governing debt collections. Supervisors monitored calls either electronically by using CashCall’s EnsemblePro Concerto software or by physically sitting next to the representative and “plugging” into the call. For purposes of the summary adjudication motion, it was assumed that the calls were not recorded; the supervisor would listen to the call while the conversation was occurring.
With respect to call monitoring disclosures, CashCall used an interactive voice response system (IVR) to receive and route calls. Under this system, a caller was greeted by an automated message that offered two options. Option 1 prompted the callers to press “1” if they did not have an existing CashCall loan. Option 2 prompted callers to press “2” if they had an existing loan. A caller who selected either of these announced options automatically heard the “Call Monitoring Disclosure” which stated: “This call may be monitored or recorded for quality control purposes.” The IVR would then route the call to the selected department.
If a caller did not press a button or pressed “0,” the caller would be connected to a CashCall operator. The caller would then hear the Call Monitoring Disclosure only if the operator routed the call to a particular department as opposed to a particular representative. Additionally, a caller could press “4” and then dial a representative’s direct extension. This “4” option was not included on the IVR., but a caller would sometimes learn of
At the outset of the borrower relationship, CashCall generally provides written notice to all borrowers that information disclosed to CashCall would be disseminated to “those employees who need to know that information to provide products or services to you.”
Based on these facts and evidence relating to the phone conversations of three named plaintiffs, CashCall argued plaintiffs’ section 632 claim failed as a matter of law because (1) section 632 does not prohibit the type of participant business call monitoring alleged in the complaint because the statute prohibits only an unannounced third party from overhearing a conversation and two corporate employees count as a single party under corporations law; (2) the undisputed facts establish plaintiffs’ calls with CashCall employees were not “confidential communications” within the meaning of section 632; and (3) each plaintiff heard the Call Monitoring Disclosure during the borrower-lender relationship.
After considering the parties’ papers and conducting a hearing, the court granted the summary adjudication only on the first ground. The court stated that: “Under the undisputed facts . . . , the ‘parties’ to the monitored calls in issue were the Class Member-borrower and corporate defendant CashCall; and, no ‘person’ other than the Class Member-borrower and CashCall heard the communications during the monitored calls. Therefore, there was no violation of section 632.” Based on this ruling, the court declined to address CashCall’s alternate grounds for the motion.
Plaintiffs appeal.
DISCUSSION
I. Standards of Review
Summary adjudication is proper if the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to prevail
We review a summary adjudication order de novo. (Miller v. Department of Corrections (2005)
The issues on appeal require that we interpret section 632. In doing so, we independently review the statute, applying well-established statutory construction principles. Our “fundamental task” is to ascertain and implement the legislative intent. (Day v. City of Fontana (2001)
If the statutory language is ambiguous, “ ‘courts may consider other aids, such as the statute’s purpose, legislative history, and public policy.’ ” (Jones v. Lodge at Torrey Pines Partnership (2008)
Although the Legislature imposed penal sanctions and civil liability for section 632 violations, the sole issue before us is whether CashCall may be held civilly liable. We thus apply interpretation principles applicable to a civil statute and make no attempt to determine whether our interpretation extends to a criminal matter. (See Kearney v. Salomon Smith Barney, Inc. (2006)
II. Section 632
In 1967, the Legislature enacted section 632 as part of the California Invasion of Privacy Act (Privacy Act), to address concerns that “advances in science and technology have led to the development of new devices and techniques for the purpose of eavesdropping upon private communications and that the invasion of privacy resulting from the continual and increasing use of such devices and techniques has created a serious threat to the free exercise of personal liberties and cannot be tolerated in a free and civilized society.” (§ 630.)
Section 632 prohibits recording or eavesdropping on a telephone conversation without the consent of all parties to the conversation. Specifically, section 632, subdivision (a) imposes liability on “Every person who, intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, eavesdrops upon or records the confidential communication . . . .” (Italics added.)
Section 632, subdivision (b) defines the term “ ‘person’ ” to include: “an individual, business association, partnership, corporation, limited liability company, or other legal entity, and an individual acting or purporting to act for or on behalf of any government or subdivision thereof, whether federal, state, or local, but excludes an individual known by all parties to a confidential communication to be overhearing or recording the communication.” (Italics added.) Section 632, subdivision (c) defines “ ‘confidential communication’ ” to “include)] any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made in a
Under these provisions, section 632 prohibits unconsented-to recording or monitoring regardless of the content of the conversation or the purpose of the monitoring, and is intended to protect rights separate and distinct from the right to prevent the disclosure of improperly obtained private information. (Flanagan, supra, 27 Cal.4th at pp. 775-776.) “ ‘While one who imparts private information risks the betrayal of his confidence by the other party, a substantial distinction has been recognized between the secondhand repetition of the contents of a conversation and its simultaneous dissemination to an unannounced second auditor, whether that auditor be a person or mechanical device.’ ” (Id. at p. 775, quoting Ribas v. Clark (1985)
This reasoning—that the crux of section 632 is the right to prevent a simultaneous dissemination to an unannounced listener—was crucial to the California Supreme Court’s resolution of two conflicting lines of cases pertaining to the meaning of a “confidential communication” under section 632. (See Flanagan, supra, 27 Cal.4th at pp. 768, 772-774.) One line of authority held that a conversation is confidential if a party to the conversation has an objectively reasonable expectation that the conversation is not being overheard or recorded. (Id. at p. 772; see Frio v. Superior Court (1988)
After examining section 632’s language and purpose, the Flanagan court endorsed the Frio standard and disapproved the O’Laskey v. Sortino, supra,
With this overview, we turn to address the three issues raised on appeal. First, does section 632’s statutory prohibition against eavesdropping apply when a corporate employee secretly monitors a conversation between another corporate employee and a customer? Second, does the summary adjudication record show as a matter of law plaintiffs’ conversations with CashCall employees were not “confidential communications”? Third, does the summary adjudication record establish as a matter of law that CashCall adequately notified plaintiffs that their telephone conversations were being monitored?
The summary adjudication record shows CashCall monitored 547 telephone calls between CashCall employees and plaintiff borrowers during the class period. Most of these phone conversations concerned debt collection issues. CashCall monitored the calls for quality control purposes, and the monitoring was performed by the supervisors using CashCall’s electronic software or by physically sitting next to the CashCall representative and plugging into the call. The calls were not recorded; the supervisor would listen to the call while the conversation was occurring.
The trial court found that even assuming the telephone calls were “confidential communications” within the meaning of section 632 and the parties were not informed of the monitoring, the monitoring was not prohibited under section 632 because eavesdropping requires three parties and there were only two parties to the conversation: the corporate defendant (CashCall) and the plaintiff borrower. Plaintiffs challenge this conclusion on appeal, contending the interpretation of section 632 is contrary to the statutory language and intent. We agree.
The statute prohibits a “person” from overhearing a confidential communication without the consent of “all parties.” (§ 632, subd. (a).) A “ ‘person’ ” is defined to “include^” an “individual” and a “corporation.” (§ 632, subd. (b).) The word “include” generally is a word of expansion, not limitation. (See Flanagan, supra,
CashCall nonetheless argued, and the trial court agreed, that as a matter of law a corporation cannot be liable for “eavesdropping” because a
We agree with Black's holding. Because a corporation is a legal fiction that cannot act except through its employees or agents, a corporation and its employees generally function as a single legal unit and are the same legal “person” for purposes of applying various tort, agency, and jurisdiction principles. (See Fiol v. Doellstedt (1996)
However, the presumption the Legislature knew of a particular jurisprudence when it enacted a statute must be viewed in light of another equally important rule that when statutory language does not explicitly address a subject and the language is potentially susceptible of differing constructions, we must presume the Legislature intended reasonable results consistent with its expressed purpose. (See People v. Zambia (2011)
The Legislature enacted section 632 to ensure an individual’s right to control the firsthand dissemination of a confidential communication, and expressed its intent to strongly protect an individual’s privacy rights in electronic communications. (§ 630; see Kearney, supra,
In this regard, CashCall does not dispute that a corporation violates section 632 and may be held liable for civil damages if one of the corporate employees “records” a confidential communication without adequately notifying all parties to the conversation, even if the recording was for legitimate business purposes. (See Kearney, supra,
CashCall contends “a broadly expressed policy cannot extend the reach of a statute beyond its express scope.” (See Klein v. United States of America (2010)
In support of its arguments, CashCall relies on two unpublished federal decisions and one Public Utilities Commission (PUC) opinion. (See Thomasson v. GC Services Limited Partnership (9th Cir. 2008)
In Thomasson, the Ninth Circuit held in an unpublished decision that a limited partnership did not violate section 632 when its supervisory employees monitored conversations between customers and the partnership’s employees. (Thomasson, supra,
Thomasson is unhelpful because it contains no supporting analysis, other than to note that eavesdropping refers to a “third party secretly listening to a conversation.” (Thomasson, supra,
CashCall’s reliance on other portions of PUC Rulemaking Decision is unhelpful. CashCall contends PUC Rulemaking Decision defined “ ‘Monitoring’ ” as “ ‘the use of monitoring equipment to allow a third person to
We additionally find unavailing CashCall’s reliance on a second unpublished federal decision, Membrila, supra, 2010 U.S.Dist. Lexis 33565. There, the plaintiff alleged a debt collection business “ ‘surreptitiously recorded’ ” his telephone conversation with company employees without giving adequate notice at the outset of the call. (Id. at pp. *l-*2.) The court found the plaintiff did state a cause of action for violation of section 632, noting, “it is a violation of this section [for a business] to ‘recordf] the conversation without first informing all parties to the conversation that the conservation is being recorded.’ ” (Membrila, supra, at pp. *7-*8.) But the Membrila court found the plaintiff failed to state a claim under section 631 because that statute pertains only to eavesdropping by wire and not to recording of conversations. (Membrila, at pp. *6-*7.)
In its appellate brief, CashCall relies on the Membrila court’s discussion of the plaintiff’s section 631 claim to argue that the decision supports its arguments. (Membrila, supra, 2010 U.SJDist. Lexis at pp. *6-*7.) This reliance is misplaced. The Membrila court’s discussion of section 631 pertained only to the recording issue and has no applicability to the issue raised here relating to whether a business illegally eavesdrops when it directs its employees to surreptitiously listen in on telephone conversations.
We conclude the court erred in granting summary adjudication on plaintiffs’ section 632 claim based on the court’s finding there was no illegal eavesdropping because there were only two parties to the alleged monitored telephone conversations. This holding means only that we disagree with the trial court’s conclusion that plaintiffs’ section 632 claim fails as a matter of law because the person allegedly secretly monitoring the telephone conversation was employed by the same entity as the other known party to the call. To recover, plaintiffs will still need to prove the other requisite elements of a section 632 claim, including a reasonable expectation of privacy and that their communications were “confidential.”
CashCall alternatively urges this court to affirm the summary adjudication based on the other independent grounds raised in its motion pertaining to whether the telephone conversations were “confidential communications.” Specifically, CashCall argued (1) the conversations were not confidential because a reasonable person would expect the content of the conversation would be disclosed to third parties and (2) plaintiffs were advised “at the outset of the borrower/lender” relationship of CashCall’s intent to monitor the telephone calls. We conclude CashCall did not meet its summary adjudication burden to establish it is entitled to prevail on either of these theories.
In reaching these conclusions, we do not intend to suggest an opinion whether plaintiffs will ultimately prevail on these issues at trial. The issue whether there exists a reasonable expectation that no one is secretly listening to a phone conversation is generally a question of fact that may depend on numerous specific factors, such as whether the call was initiated by the consumer or whether a corporate employee telephoned a customer, the length of the customer-business relationship, the customer’s prior experiences with business communications, and the nature and timing of any recorded disclosures. In this case, we determine only that on the limited record before us factual issues exist on the reasonable expectation issue and thus summary adjudication on plaintiffs’ section 632 claim was not warranted.
A. Plaintiffs’ Reasonable Expectations Conversations Would Not Be Monitored
Section 632 applies only to a “confidential communication” (§ 632, subd. (a)), defined to “include[] any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made in a public gathering ... or in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded” (§ 632, subd. (c)).
A communication is “confidential” under this definition if a party to the conversation had an objectively reasonable expectation that the conversation was not being overheard or recorded. (Flanagan, supra, 27 Cal.4th at pp. 768, 774-776.) The issue whether there exists a reasonable expectation that no one is secretly recording or listening to a phone conversation is generally a question of fact. (See Lieberman v. KCOP Television, Inc., supra,
As the party moving for summary adjudication, CashCall had the burden to present evidence showing plaintiffs (and the class members) had no reasonable expectation of privacy as a matter of law and/or that plaintiffs would not be able to prove this element of the section 632 claim. In seeking to meet this burden, CashCall argued it was “objectively unreasonable” for plaintiffs to expect their communications would be confidential because any reasonable caller would know the information disclosed to a CashCall customer service representative would be shared within the company. On appeal, CashCall similarly argues that under the circumstances any reasonable borrower would understand “information disclosed to CashCall would be disseminated to ‘those employees who need to know that information to provide products and services ....’”
These arguments reflect a misunderstanding of the applicable legal standard. The fact that plaintiffs may have known the information discussed in their phone calls would be disclosed to other CashCall employees does not mean plaintiffs had no reasonable expectation that their telephone conversations were not being secretly overheard. In Flanagan, the California Supreme Court held the statute’s reasonable expectations test pertains to the question whether there is a reasonable expectation that the conversation is being monitored or recorded. (Flanagan, supra, 27 Cal.4th at pp. 774-776.) Under this standard, the fact that the borrower knows or should know the information will be shared with coemployees or other parties does not change the confidential character of a communication for purposes of section 632. (Flanagan, at pp. 774-776.)
In seeking to avoid this conclusion, CashCall relies on People v. Maury (2003)
Maury was a death penalty case in which the defendant made several telephone calls to a crime tip hotline after he murdered and/or raped a victim to give information about the crimes. (Maury, supra, 30 Cal.4th at pp. 359-372.) On appeal, the defendant argued the trial court violated his Fourth Amendment rights in denying his motion to suppress evidence of these telephone calls. (30 Cal.4th at pp. 381-382.) To show he had a reasonable expectation of privacy, the defendant relied on representations that the crime tip hotline guaranteed anonymity to its callers and that the program managers (as agents of the police) violated this guarantee when they taped his telephone conversations without a search warrant. {Id. at pp. 384—388.)
The section 633.5 crime exception and the Maury court’s Fourth Amendment analysis as applied to the criminal defendant’s telephone calls are inapplicable here. In arguing for a broader reading of the Maury decision, CashCall relies on a paragraph in the Maury opinion in which the California Supreme Court quotes from the trial court’s order denying the suppression of the evidence. (Maury, supra,
B. Factual Issues Pertaining to Whether Monitoring Was Disclosed to Plaintiffs
CashCall alternatively argues the telephone conversations were not confidential as a matter of law because the undisputed evidence established that “all callers were informed, at least at the outset of the borrower/lender relationship, that calls might be monitored.”
The issue Of adequate disclosure under section 632 was recently discussed by the California Supreme Court in Kearney, supra,
In reaching this conclusion, the California Supreme Court noted that section 632 prohibits monitoring or recording only without the consent of all parties to the conversation. (Kearney, supra, 39 Cal.4th at pp. 117-118, 127.) But the high court rejected the Court of Appeal’s suggestion that under California law there was no need for an explicit advisement regarding the secret recording because “clients or customers of financial brokers . . . ‘know or have reason to know’ that their telephone calls with the brokers are being recorded.” (Kearney, supra,
Consistent with the high court’s observations, we cannot accept CashCall’s argument that it provided adequate notice as a matter of law. First, even assuming CashCall’s argument is correct that each plaintiff heard the warning message “at the outset’ of his or her “borrower/lender relationship” with CashCall, this fact does not establish as a matter of law plaintiffs were adequately warned that subsequent calls would be monitored. (Italics added.) CashCall’s recorded call monitoring disclosure stated: “This call may be monitored or recorded for quality control purposes,” which would not necessarily inform a borrower that that this call and all future calls with CashCall may be monitored or recorded. (Italics added.)
Additionally, the undisputed evidence establishes that CashCall did not provide monitored warnings on any of its 322 outbound calls to class members. The evidence further raises factual issues as to whether all inbound callers received the message. Although the evidence showed that most inbound callers would receive the recorded message, the evidence also showed that there were various ways in which a caller could speak with a CashCall employee without hearing this message—including by pressing the “0” (operator) number or pressing “4” with an employee’s direct extension.
The court is directed to vacate its order granting CashCall’s motion for summary adjudication, and to enter a new order denying the motion. Respondent to bear appellants’ costs on appeal.
McConnell, P. 1, and Huffman, J., concurred.
Respondent’s petition for review by the Supreme Court was denied February 29, 2012, S199063.
Notes
All further statutory references are to the Penal Code unless otherwise specified.
On our own motion, we raised the issue whether the summary adjudication order was appealable because the named plaintiffs had remaining unresolved claims against CashCall. We conclude the order is appealable under the death knell exception to the one final judgment rule because the order terminated all class claims and left the named plaintiffs’ individual claims for further adjudication in the lawsuit. (See In re Baycol Cases I & II (2011)
In California courts, “[u]npublished federal cases are not binding authority but they may be cited as persuasive.” (Hall v. Goodwill Industries of Southern California (2011)