Ballard Spahr LLP: Calif. Law Does Not Bar Recording of Cell Phone Calls by Participants, Federal Court Rules

By the Consumer Financial Services Group

A California federal court recently ruled that the state’s call recording statute does not apply to cell phone call participants. This decision should help companies that record consumer calls for monitoring purposes defeat class actions brought under the statute.

At issue in Young v. Hilton Worldwide Inc., et al. [enhanced opinion available to lexis.com subscribers] was the scope of Section 632.7 of the California Invasion of Privacy Act (***), which applies to any person “who without the consent of all parties to a communication, intercepts or receives and intentionally records”  (emphasis added) a call involving a wireless telephone. *** penalties are draconian, with violations potentially yielding damages of $5,000 per violation or triple the amount of actual damages, whichever is greater.  Such penalties, together with several prior court decisions concluding that Section 632.7 applies to call participants because each party “receives a call,” have resulted in numerous class action lawsuits against companies that routinely record cell phone calls for monitoring purposes.

The plaintiff in Young alleged that Hilton violated Section 632.7 when it recorded a cell phone call he made to a customer service center to update his credit card information. In granting Hilton’s motion for judgment on the pleadings, the court accepted the defendants’ argument that, in enacting Section 632.7, the California Legislature was concerned about third-party interception of calls. According to the court, “[t]he statutory scheme makes it clear that [this section] refer[s] to the actual interception or reception of these radio signals by third parties and do[es] not restrict the parties to a call from recording those calls.” The court further observed that to the extent Hilton “received” the plaintiff’s call, it “had permission” to receive the call, and “service observing recordings are exempted.”

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). The firm’s Privacy and Data Security Group assists clients in responding to data breaches and regulatory data security requirements. Members of the Group regularly work with clients to develop and implement data security plans and privacy policies.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or kaplinsky@ballardspahr.com, John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com, Telephone Consumer Protection Act Task Force Chair Mark J. Furletti at 215.864.8138 or furlettim@ballardspahr.com, or Privacy and Data Security Group Leader Mercedes Kelley Tunstall at 202.661.2221 or tunstallm@ballardspahr.com.  


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