In Smith v. LoanMe, Inc., 2021 Cal. LEXIS 2248 (April 1, 2021), decided by the California Supreme Court, is a great reminder to everyone about California’s two-party consent requirement to record calls. California Penal Code section 632.7 creates a two-party consent requirement in California to record a phone call where at least one party is on a cordless phone or a cell phone. (Other provisions require consent on corded phones also under specific circumstances.) Here, the representative called the phone number provided by the consumer, and reached her husband (on a cordless phone). It appears that during a “right party contact” confirmation, the representative found that he was speaking to the husband, and the wife, the consumer, was not available. The call ended in 18 seconds – and the call was recorded.
It is true that there were beeps on the call, starting 3 seconds after the call began, but the representative did not orally advise the husband that the call was being recorded. Beeps may alert a party that the call is being recorded. The trial court believed that was sufficient to deem continuation of the call as consent by the husband, and granted judgment in favor of LoanMe. The husband appealed, and the appellate court addressed whether section 632.7 was intended to address “intercepted” calls by third parties, or the actual participants on the call. (Smith v. LoanMe, Inc., 43 Cal.App.5th 844 (December 20, 2019).) After all, the language of the statute states that a party cannot “intercept” a call and record – how can the parties to a call “intercept” a call? This is an argument that has played out in courts over the last decade or more, but this issue has not been addressed by the California Supreme Court, until now. The California Supreme Court analyzed the language of the statute, noting that the languages states “intercepts or receives.” You must give effect to all language in a statute – and extra words are not placed in the statute simply to add more words. Therefore, “intercept” means one thing and “receive” means something else. If you receive a call, you have consented to the communication with the other party to the call, but not a recording of the call. Moreover, the additional statutory provisions in this Invasion of Privacy Act supports this interpretation by the California Supreme Court. The California Supreme Court also reviewed the legislative materials regarding the enactment of section 632.7, and determined that its interpretation was supported by the legislative materials. And the California Supreme Court’s interpretation was also supported by the policies underlying the statute.
The California Supreme Court clarified that Penal Code section 632.7 requires consent as between the parties, without third party interception. The California Supreme Court reversed the appellate decision and remanded to the appellate court to address whether beeps put the called party on notice such that remaining on the call after the beeps would be deemed consent, an issue that has yet to be addressed in this case on appeal. It will be interesting to see how this issue is addressed on appeal.
California courts are comfortable with the idea that if you announce you are recording a call – at the beginning of the call – and the other party does not terminate the call, that constitutes consent. And California courts have been pretty strict about making the announcement at the beginning of the call. California courts have not been unreasonable about it – you don’t have to blurt out “recorded call” the minute a person answers the phone. But you need to announce that you are recording the conversation at the beginning. I recommend that people placing calls think of the tag line “on a recorded call” as part of the caller’s name. I have always used an example where a caller might speak with more than one person on a call, and when beginning the call with each new person, the caller is normally predisposed to announce their name: “Hi, my name is Jane Doe.” By adding the tagline – “Hi, my name is Jane Doe on a recorded line” – any time you state your name, callers should be able to remember that (1) the fact that the call is recorded must be stated at the beginning of the call and (2) the fact that the call is recorded must be stated to each person because consent needs to be from each person you record. Statutory damages for failing to get consent is $5,000 per person per call. One can imagine the large statutory damages that might mount in a class action, or even in a single call where the caller recorded three different people before getting the right person on the phone. It is important to say “on a recorded call” at every opportunity to avoid massive damages that might just kill a company. In this case, 18 seconds may cost LoanMe $5,000. And the Smith case is pled as a class action. Who knows how many people are in the class and how much statutory damages a court might award.
If you have questions regarding California recording laws or federal or state laws regarding credit reporting or debt collection, please feel free to contact June Coleman at JColeman@MesserStrickler.com (916-502-1768).