Liability under California’s Invasion of Privacy Act (CIPA) expanded by California Supreme Court decision
Earlier this year, in Smith v. LoanMe, Inc., a case interpreting California Penal Code section 632.7, the California Supreme Court held that cellular or cordless phone conversations cannot be recorded by either nonparties or parties to the call without consent. Smith v. LoanMe Inc., 11 Cal. 5th 183 (2021). LoanMe overturned a California Court of Appeal’s ruling that consent is required only if nonparties, and not the parties to the call, recorded the conversation. Smith v. LoanMe, Inc., 43 Cal. App. 5th 844 (2019), rev’d and remanded.
California Penal Code § 632.7
As part of CIPA, Penal Code § 632.7 expanded the criminalized unconsented recording of phone conversations involving cellular and cordless phones, providing in pertinent part: “Every person who, without the consent of all parties to a communication, intercepts or receives and intentionally records, or assists in the interception or reception and intentional recordation of, a communication transmitted between two cellular radio telephones, a cellular radio telephone and a landline telephone, two cordless telephones, a cordless telephone and a landline telephone, or a cordless telephone and a cellular radio telephone, shall be punished.”
Initial violations of the section include a fine not exceeding $2,500, imprisonment not exceeding a year, or both, while punishment for those with previous convictions of this section includes the same but for increasing the fine to not exceed $10,000. Although not before the Court in LoanMe, Penal Code § 637.2 provides additionally that any person injured by a violation of CIPA may bring a civil action against the person who committed the violation for the greater of $5,000 per violation or treble damages, if any, sustained by the injured person.
Smith v. LoanMe
LoanMe arose from a company calling a number provided to it by a customer, but instead of reaching the customer, the customer’s husband answered on a cordless phone and the conversation ended after the husband informed the company that the customer (his wife) was not home. The call lasted only a total of eighteen seconds, with a “beep” tone caused to be sounded by the company three seconds into it to signal that the call was about to be recorded. Significantly and consequentially for the company with respect to the statute’s application, the company never verbally advised the husband of the recording. A class action suit was subsequently filed by the customer’s husband under Penal Code § 632.7 on behalf of a putative class consisting of anyone in California whose calls with the company were recorded nonconsensually within one year of the suit’s filing.
The trial court held that there was no statutory violation on grounds that the beep tone provided sufficient notice that the call was going to be recorded by the company. The Court of Appeal upheld the lower court’s decision on different grounds, concluding that the statute only applied when an unintended party to the conversation intercepted or received a call, reasoning that parties to a call always consent to the receipt of their communications by each other.
The Supreme Court subsequently reversed the lower courts, firmly holding that Penal Code § 632.7 “applies to the intentional recording of a covered communication regardless of whether the recording is performed by a party to the communication, or a nonparty.” Acknowledging the statute’s potentially ambiguous language, the Supreme Court interpreted it by reviewing the legislative history and general public policy. The Court’s findings support that under California law it is unreasonable to assume that a person consented to a recording of their conversation by virtue of simply being on the call, as parties to a phone call will typically have a reasonable expectation that the call is not being recorded. The Court ultimately concluded that since the intent of the statute was to protect privacy in communications, there was no reason to distinguish between types of phone used or parties to a call versus non-parties.
With the LoanMe decision, companies will want to ensure that they receive the other party’s consent before recording both inbound and outbound calls with California individuals, to avoid potential criminal and civil liability, including expansive class actions. It is now unlawful for anyone, party or nonparty, to record a cellular or wireless telephone call without the consent of all parties to the call. With potential exposure of $5,000 per violation (i.e., per call), companies need to be confident that their phone recording practices comport with the LoanMe decision to avoid potentially vast and quickly accruing statutory liability.
 Case No. S260391 (Apr. 1, 2021).
 Superior Court of California, County of Riverside, Case No. RIC1612501 (Nov. 21, 2017).