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Legal Review: CashCall Case Brings Call Monitoring Into the Spotlight

1 Jan, 2012 By: Thomas E. Gilbertsen, Jeffrey D. Knowles, Venable LLP’s Advertising Response

Knowles and GilbertsonIn November, a California Court of Appeals decision set the stage for a likely California Supreme Court showdown with implications for any company that monitors its own telephone calls for quality assurance, regulatory or other purposes. At issue in Kight v. CashCall Inc. is whether businesses must receive consent from each party on a call before monitoring customer service and other types of telephone calls conducted during the ordinary course of business. Until that final Supreme Court reckoning, businesses face the threat of California class actions for simply monitoring or recording their own business telephone calls.

In this case, the court ruled that the California Invasion of Privacy Act (CIPA) prohibits a business from monitoring its own telephone calls conducted in the ordinary course of its own business unless consent is obtained from each person on the call. While there is no question that obtaining consent from each party on a monitored call is a good business practice, the Kight decision conflicts with a long-standing federal statute expressly authorizing one-party consent monitoring and recording for calls conducted in the ordinary course of business. The decision also refuses to follow an earlier Ninth Circuit decision, Thomasson v. GC Services L.P., holding that undisclosed business call monitoring does not constitute an invasion of privacy under CIPA.

In the Kight case, the plaintiffs allege that, during calls with CashCall about initiating loans and in subsequent collection attempts, the company’s supervisors “secretly” monitored their conversations with other CashCall employees. CashCall, like almost every consumer service business, monitors its employees’ calls with borrowers for quality control purposes. Customer service calls are monitored only by supervisors and not recorded.

Inbound calls are greeted by an interactive voice recognition (IVR) system that typically provides an advisement that calls might be monitored. However, in some limited circumstances, the advisement may not air depending on particular options selected by the inbound caller. According to the appellate court, CashCall representatives never gave the advisement during outbound calls.

In Thomasson — which was defended by Thomas E. Gilbertsen (a co-author of this column) — the plaintiffs accused GC Services of eavesdropping upon its own business telephone calls handled in its California call centers. The Thomassons brought claims under the Fair Debt Collection Practices Act and several state privacy statutes, including CIPA. Gilbertsen and the defense team successfully demonstrated that a company monitoring its own ordinary-course-of-business telephone calls is incapable of “eavesdropping” upon itself under CIPA.

Cases like Kight and Thomasson threaten to turn consumer protection law on its head by attacking a practice that businesses undertake, at substantial cost, for the sole benefit of their customers: supervising and training call representatives and monitoring their performance to assure compliance with the law. This type of class action — which seems to thrive only in California courts — also turns class certification rules inside out. Too often, trial courts have seemingly ignored the individualized fact-finding that these cases require. In both the Kight and Thomasson cases, classes were certified despite judicial acknowledgements that individual cases need to be examined on a case-by-case basis to determine whether a monitoring advisement was given, whether the consumer consented to monitoring, and whether the circumstances of each call implicated any privacy issues.

Given the far-reaching business implications of the Kight decision, any company conducting call monitoring and serving any clients in California should take a keen interest in this case. If the defendants in the Kight case do appeal to the California Supreme Court, direct marketers may want to consider sharing their opinions on the case with the Court. Under Rule of Court 8.500(g), amici curiae, or “friends of the court,” may submit letters to the court supporting or opposing the grant of review. Despite their informal status, letters from amici curiae often are pivotal in demonstrating why a case is worthy of the court's review.

About the Author: Thomas E. Gilbertsen

About the Author: Jeffrey D. Knowles

Jeffrey D. Knowles

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