In Hataishi v. First American Home Buyers Protection Corporation, — Cal.Rptr.3d —-, 2014 WL 667381 (Cal.App. 2 Dist. 2014), the Court of Appeal for the Second District affirmed the trial court’s denial of class certification in a call-recording case filed under Penal Code § 632. The facts were as follows:
A customer placing an inbound call to First American is greeted with the following automated disclosure regarding call monitoring or recording: “First American Home Buyer’s Protection—your first choice in home warranty. To ensure the highest quality service your call may be monitored or recorded.” The customer cannot bypass the disclosure. ¶ The automated disclosure regarding call monitoring or recording is not played when a customer receives an outbound call from the Inside Sales group. Prior to 2009, First American also did not have a policy requiring Inside Sales group representatives to advise customers that outbound calls would be recorded. FN2 Nor did First American’s Sales, Policy, and Procedure Manual provide Inside Sales group representatives with directions for advising customers that calls would be recorded.
The Court of Appeal for the Second District found that to prove that the recordings violated the statute, plaintiff had to show that the customer had a reasonable expectation that the conversation would be private, i.e., not overheard or recorded. Contrary to plaintiff’s argument, a defendant does not violate section 632 simply by recording a telephone call without giving the FTC warning, nor is a consumer presumed to reasonably expect that a call will not be recorded absent receipt of such a warning. Rather, a variety of individual factors such as the length of the customer-business relationship, and warnings given on prior calls to or from the business will affect whether the customer reasonably expected the call not to be recorded. Accordingly, the Court of Appeal affirmed the trial court’s denial of class certification since individual questions predominated.
In this case, the trial court found the requisite community of interest lacking because each putative class member, in order to establish that an outbound call was a “confidential communication” under section 632, would be required to individually prove the objective reasonableness of his or her alleged expectation that the call would not be recorded. The court based its ruling on the standard articulated in Flanagan, as applied by the Court of Appeal in Kight v. CashCall, Inc. (2011) 200 Cal.App.4th 1377 ( CashCall ), and evidence showing that First American’s automated message for every inbound call advises customers that calls may be recorded. We conclude the trial court applied the correct legal standard and that its ruling was supported by substantial evidence. ¶ In CashCall, the plaintiffs, on behalf of themselves and a class of California consumers, alleged the defendant consumer finance company monitored calls with its customers without their consent in violation of section 632. ( CashCall, supra, 200 Cal.App.4th at p. 1383.) Except for certain limited circumstances, a customer making an inbound call to the defendant was greeted with an automated “ ‘ “Call Monitoring Disclosure” ‘ which stated: ‘ “This call may be monitored or recorded for quality control purposes.” ‘ “ ( Id. at p. 1385.) However, the Call Monitoring Disclosure was never provided on outbound calls from the defendant’s employees to its customers. Based on these undisputed facts, the defendant moved for summary judgment, asserting, among other things, that none of the calls with defendant’s employees were “confidential communications” within the meaning of section 632. ( Id. at pp. 1386, 1396.) The trial court granted summary judgment, but the Court of Appeal reversed. ¶ Applying the definition of “confidential communication” articulated by the Supreme Court in Flanagan, the CashCall court determined that defendant had failed to meet its “burden to present evidence showing plaintiffs (and the class members) had no reasonable expectation of privacy as a matter of law….” ( CashCall, supra, 200 Cal.App.4th at p. 1397.) In reaching this conclusion, the court made clear that it was not expressing an opinion as to whether plaintiffs would ultimately prevail on the issue at trial. ( Id. at p. 1396.) On the contrary, the CashCall court observed that, consistent with Flanagan and Kearney, “[t]he 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.” ( Ibid., italics added.) Given the “limited record,” the court held “factual issues exist on the reasonable expectation issue and thus summary adjudication on plaintiffs’ section 632 claim was not warranted.” ( Ibid.) ¶ . . . Contrary to Plaintiff’s position, nothing in the language of section 632 or the case law interpreting “confidential communication” suggests that recording a conversation without advising the other party constitutes a per se violation of the statute. We acknowledge that, for purposes of the summary judgment motion in CashCall, “it was assumed that the calls were not recorded; [rather] the supervisor would listen to the call while the conversation was occurring.” ( CashCall, supra, 200 Cal.App.4th at p. 1385.) Be that as it may, we see no reason why the factors listed in CashCall would not apply equally where a business records telephone conversations with its customers. Nothing about those factors is peculiar to eavesdropping or incongruent with assessing the reasonableness of a plaintiff’s alleged expectation that a call will not be recorded. Indeed, other courts that have addressed the issue have determined that reasonableness, even with respect to an expectation concerning recording, is a factual question for the jury to decide. . . . ¶ We agree with CashCall, and the trial court, that the determination whether an individual plaintiff had an objectively reasonable belief that his or her conversation with First American’s Inside Sales group would not be recorded will require individualized proof of, among other things, “the length of the customer-business relationship [and] the [plaintiff’s] prior experiences with business communications ….” ( CashCall, supra, 200 Cal.App.4th at p. 1396.) Indeed, as the trial court alluded to at the class certification hearing, Plaintiff’s unique circumstances—including the fact that she had made approximately a dozen calls to First American during which she was told that the call “may be monitored or recorded”—sets her apart, for purposes of assessing the reasonableness of her expectations, from other customers who never heard the disclosure or heard it only a few times. Likewise, Plaintiff’s prior experience with other businesses—the “dozens and dozens and dozens” of telephone calls where she understood her call could be recorded or monitored for quality assurance—could support a jury finding that she lacked an objectively reasonable expectation that her calls with First American would not be recorded. A jury could rationally reach a different conclusion concerning another plaintiff who has not had the same experience. In any event, due process requires that First American be permitted to cross-examine an individual plaintiff regarding those experiences that may impact the reasonableness of his or her alleged confidentiality expectation.