Smith v. LoanMe

Whether the California Invasion of Privacy Act prohibits parties to a call from recording a call without the consent of all parties
  • EPIC Amicus: To Protect Privacy, California Must Preserve All-Party Consent for Call Recording: EPIC, the Consumer Federation of California, and Consumer Action have filed an amicus brief urging the California Supreme Court to preserve its long-standing rule requiring all parties to consent to the recording of a call. Consumers in the case, Smith v. LoanMe, sued the online lender for surreptitiously recording customer calls in violation of the California Invasion of Privacy Act. A lower court dismissed the case because it interpreted the law as only applying to third-party eavesdroppers, not parties to the call. The California Supreme Court is reviewing the decision. The amicus brief argues that “recording a call poses unique threats to privacy because a permanent record of the private communication can be made surreptitiously without the consent, or even knowledge, of the caller.” The brief also explains that “the need to preserve California’s all-party consent law is more urgent now than ever before” because COVID-19 has forced millions of Californians “to conduct their personal and business lives remotely, relying on voice and video calls to complete their work, to pursue their education, to preserve their relationships, and to maintain basic human connections.” EPIC routinely files amicus briefs in cases implicating consumer privacy. (Jul. 21, 2020)

Summary

This case concerns the parties covered by California Penal Code section 632.7, part of the California Invasion of Privacy Act. Courts have long interpreted the statute as prohibiting third-party eavesdropping and requiring that all parties must consent to the recording of a call. Smith brought a class action against LoanMe for recording a call without providing notice or obtaining consent. The California Superior Court sided with LoanMe, finding that a "beep" tone at the beginning of the call was sufficient notice that the call would be recorded, and that staying on the line after the beep signaled consent to recording the call. Smith appealed. The Court of Appeal also ruled in favor of LoanMe but on different grounds, holding that the statute applies only to third-party eavesdroppers, not to parties to a call. Smith petitioned the California Supreme Court for review, which was granted.

Background

Factual Background

LoanMe is an online company that provides small business and personal loans. LoanMe called Jeremiah Smith's wife, who is a LoanMe borrower. Smith answered the phone and informed LoanMe that his wife was not home, at which point the call ended. A beep tone that sounded approximately three seconds into the call indicated that the call was recorded. LoanMe did not provide oral notice that the call would be recorded, nor did it receive prior written consent from either of the Smiths. Smith commenced a class action suit against LoanMe for violating section 632.7 of the California Invasion of Privacy Act, which prohibits intercepting or receiving and intentionally recording phone calls.

Legal Background

The California Invasion of Privacy Act (“CIPA”), codified as California Penal Code section 630, et seq., is a wiretapping statute that was enacted in 1967 to protect the people of California from the “serious threat to the free exercise of personal liberties” posed by “new devices and techniques” developed “for the purpose of eavesdropping upon private communications.” Section 632 established California as an all-party consent state, meaning it is illegal to record confidential communications without the consent of all parties. Section 632.7 is part of the Cordless and Cellular Radio Telephone Act, a series of amendments that extended the statute’s wiretapping and recording protections to cordless and cellular phones. While section 632 prohibits recording a “confidential communication,” section 632.7 prohibits intercepting or receiving and intentionally recording any communication. Several federal district courts in California have interpreted section 632.7 as requiring all parties to consent to the recording of a call.

Procedural History

California Superior Court, County of Riverside

The trial court entered a judgment in favor of LoanMe following a trial on the issue of whether beep tones constitute consent to a recorded call. The court agreed with LoanMe’s position that consent was governed by California Public Utilities Commission (“CPUC”) General Order (“GO”) 107-B. GO 107-B prohibits recording a conversation made over the public utility telephone network in California unless all parties provide express prior consent or all parties are given notice. GO 107-B provides that a beep tone “which is audible to all parties to a communication and which is repeated at regular intervals during the course of the communication” is a method of notice. Because LoanMe provided notice through a beep tone, Smith was notified of the recording and consented by staying on the line under 632.7. Smith appealed.

California Court of Appeal, Forth Appellate District, Second Division

The Court of Appeal upheld the lower court’s decision on different grounds. After Smith and LoanMe briefed the court on the issue of whether beep tones constitute notice, the court requested briefing on a new question: does the CIPA apply only to the recording of a wireless communication by someone who is not a party to the communication? The court held that CIPA prohibits third party eavesdroppers from intentionally recording phone calls, but does not prohibit individuals from recording calls in which they are participants.

Smith, as well as the Consumer Federation of California and the executive director of Consumer Action, subsequently filed requests for de-publication of the Court of Appeal’s opinion, and Smith filed a petition for review by the Supreme Court of California.

California Supreme Court

The California Supreme Court granted Smith's application for review.

EPIC's Interest

This case implicates a fundamental privacy principle: the right of individuals to control the retention, use, and disclosure of their telephone communications. Eliminating the all-party consent rule would essentially transform telephone services in California into a take-it-or-leave-it regime, where individuals must allow others to record and retain their communications to use call services. EPIC has long supported strong consumer privacy laws, and opposed take-it-or-leave-it regimes.

Additionally, EPIC has long supported strong privacy rights for California consumers. California is one of only eleven states with constitutional privacy provisions. It is consistently considered the state with the strongest privacy protections. Its commitment to privacy was seen most recently in the passage of the California Consumer Protection Act (“CCPA”). Prior to the CCPA's enactment, EPIC launched a campaign to educate Californians about CCPA and submitted comments for proposed revisions to the Act.

Legal Documents

California Supreme Court (No. S260391)

California Court of Appeal, Forth Appellate District, Second Division (No. E069752)

Resources

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