The Ninth Circuit recently issued a divided and unpublished opinion in Young v. Hilton Worldwide Inc. et al, which plaintiffs may attempt to use in class action lawsuits against call centers for violations of the California Invasion of Privacy Act (“CIPA”).  We previously reported that in Faulkner v. ADT Security Services Inc., the Ninth Circuit may have foreclosed class actions like the one presented in Young because of the court’s holding that CIPA violations, at least in the call center context, require an individualized, fact-intensive inquiry regarding, among other things, the relationship between the parties and the particular circumstances of the call.  Arguably, such an inquiry would impose a substantial obstacle for any plaintiff seeking class certification for a CIPA claim.

In Young, however, the Ninth Circuit came to a different conclusion based on its understanding of the distinction between CIPA’s Section 632 (at issue in Faulkner) and Section 632.7 (at issue in Young).  Section 632.7 states, in relevant part, that “[e]very person who, without . . . consent . . . intercepts or receives and intentionally records . . . a communication transmitted between two cellular radio telephones . . . shall be punished by a fine not exceeding . . . $2,500.”  Missing from this statutory language is Section 632’s limitation that the intercepted or received call be a “confidential communication.”  Relying on this distinction, the Ninth Circuit held that, in order to state a viable claim pursuant to Section 632.7, a plaintiff need not allege that the recorded communications were intended to be confidential.  In other words, the viability of CIPA class actions may now turn on whether plaintiffs allege use of a cell phone, rather than a landline phone.  Though an unfortunate decision, there are several reasons to believe the import of Young will be relatively limited.

First and foremost, Young is a 2/1/4-paged, unpublished opinion, with a somewhat strange history.  The Ninth Circuit was tasked with reviewing a district court order that dismissed plaintiff’s Section 632 and Section 632.7 claims but, for reasons unknown, the order only discussed and formally ruled upon plaintiff’s Section 632 claim.  Consequently, the Ninth Circuit was reviewing a relatively limited record, and did not have the benefit of the district court’s analysis (nor did it have the benefit of Hilton’s analysis) with respect to the plaintiff’s Section 632.7 claim.

Second, while Hilton raised several statutory construction arguments in its appellate briefing, the Ninth Circuit declined to address them because it determined that the arguments were waived by Hilton.  Accordingly, it is unclear whether or not such arguments would have traction in a future case.

Third, in a dissenting opinion in Young, Judge Motz, a Senior District Judge for the United States District Court for the District of Maryland (sitting by designation), raised several compelling arguments that, given a proper record, may succeed in future cases.  Specifically, the dissent argued:

  • The California Supreme Court case Flanagan v. Flanagan, upon which the majority heavily relied, determined the proper definition of the word “confidential” as it is used in Section 632.  Flanagan was not reviewing a Section 632.7 claim.
  • There is no principled reason why the “service-observing” exception (an exception that applies to businesses which record phone calls for the purposes of monitoring their employees) applicable to Section 632 should not also apply to Section 632.7.  A contrary reading would arguably destroy the exception because most customers use cell phones, and because employers cannot determine with any degree of efficiency or certainty whether a customer is calling from a cell phone or a landline phone.
  • CIPA’s use of the terms “receive” and “intercept” may suggest that the statute was not meant to reach intended parties to a communication, but rather parties who received the communication by some means short of “intercepting” it.  A contrary reading arguably renders “intercept” superfluous because one who intercepts a call also receives the call.
  • Since CIPA is a criminal statute, the majority’s view that recording a call is either criminal or innocent based on the conduct of the caller (i.e., whether or not he/she uses a cell phone) is fraught with problems, some of them potentially constitutional in nature.

It is possible we will be able to evaluate the impact of Young sooner, rather than later.  There have been numerous cases brought in federal district court, as well as in California state court, wherein plaintiffs have alleged virtually identical class action claims.  See, e.g., Simpson v. Vagabond Franchise System Inc., Case No. 2012-00126259-CV, Super. Ct. Sacramento; Simpson v. Vantage Hospitality Group, Inc., Case No. RG 12637277, Super. Ct. Alameda; Simpson v. Doubletree Management LLC, et al., Case No. C12-016033, Super. Ct. Contra Costa; McCabe v. Intercontinental Hotels Group Resources, Inc., Case No. RG12637671, Super. Ct. Alameda; Simpson v. Ramada Worldwide, Inc., Case No. CV174549, Super Ct. Santa Cruz; McMachon v. Embassy Suites Management, Case No. CGC-12-522496, Super. Ct. San Francisco; Roberts v. Wyndham International Inc., Case No. RG 12639819, Super. Ct. Alameda; Simpson v. Best Western International, Inc., Case No. 12-cv-04672-JCS, 2012 U.S. Dist. LEXIS 162181 (N.D. Cal. Nov. 13, 2012).  It is possible that the statutory arguments waived by Hilton, and discussed by Judge Motz in Young, will make their way up to the Ninth Circuit before long.

Hopefully the dissent in Young will prove to be the stronger position.  Suffice it to say for now that companies, regardless of the industry they are in, should make absolutely sure that that they immediately implement policies designed to obtain prior consent before recording calls from their customers.