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Legal Review: CIPA Class Actions Losing Favor With Judges

1 Mar, 2013 By: Jeffrey D. Knowles, Venable LLP’s Advertising, Thomas E. Gilbertsen Response

The Ninth Circuit Court of Appeals’ recent ruling in Faulkner v. ADT may appear, at first, to be a defeat for marketers who record telephone calls for customer service purposes. However, a closer look at the appellate court’s decision demonstrates that the Faulkner decision is a substantial win for marketers.

This is because the court’s grave doubts about the plaintiff’s claims are part of a growing, and increasingly vocal, judicial recognition that class actions pertaining to customer service calls and invoking the California Invasion of Privacy Act (CIPA) turn consumer protection law on its head and do little, if anything, to help consumers.

The Faulkner Case

In early 2011, John Faulkner, a California resident, called ADT to dispute a charge. During the call, he heard intermittent “beeping” sounds. He asked about the sounds and was told that the conversation was being recorded by ADT. Faulkner told the ADT representative that he had not previously been told the conversation was being recorded and that he did not wish to continue the conversation if the recording continued.

The representative advised Faulkner to contact the customer service line to discuss the issue. When Faulkner asked to speak with a representative on a line that was not being recorded, he was informed that it was the company's policy to record telephone calls and advised Faulkner to end the call if he did not wish to be recorded, which he did.

Faulkner subsequently filed a putative class action against ADT in February 2011 claiming that his call was a confidential communication under CIPA and that ADT had violated his privacy rights.

In March 2011, the case was removed to federal court based on the diversity of the potential class of plaintiffs. In May 2011, the federal district court dismissed the complaint with prejudice, concluding Faulkner had not and could not allege plausible circumstances that “would support an expectation of privacy in such a call.”

On appeal, the Ninth Circuit expressed grave doubts about Faulkner’s CIPA claims but sent the case back to the district court, in what it called an “overabundance of caution,” to allow Faulkner’s complaint to be amended to meet federal pleading standards. However, the appellate court agreed that a customer does not have a reasonable expectation of privacy for typical customer service calls.

About CIPA

Passed in 1968, CIPA prohibits the recording of “confidential communication” without the consent of both parties. CIPA defines “confidential communication” as “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 . . . in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.”

Businesses are expressly authorized by federal law to monitor or record their own call center activity and the California legislature recognized that no valid privacy rights are implicated by these practices when it enacted CIPA in 1968. However, a California state appellate court’s Kight v. CashCall Inc. decision held that CIPA could apply to business call monitoring and recording in certain circumstances. This decision set off a feeding frenzy of consumer class action suits alleging CIPA violations by companies recording customer service calls.

The Way Forward

Whatever special circumstances Faulkner and his attorneys ultimately plead on remand, it is difficult to imagine how new details will bring this plaintiff’s CIPA case closer to class certification. In our experience, the majority of these cases are nuisances, and many settle on an individual basis. Many others are dismissed on initial motions for summary judgment.

Absent unique circumstances, these cases should not gain traction. However, a minority of California courts refuse to recognize ordinary course of business exemptions under CIPA, at least on motions to dismiss. Until the California state and federal courts uniformly adopt the view that customer call recording does not constitute a potential CIPA violation, businesses should be cautious and, at the outset of all conversations with customers, advise them that the call is being monitored or recorded. ■

About the Author: Jeffrey D. Knowles

Jeffrey D. Knowles

About the Author: Thomas E. Gilbertsen

Jeffrey D. Knowles

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