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Amanda Kight et al v. Cashcall

November 21, 2011


(Super. Ct. No. GIC866032) APPEAL from an order of the Superior Court of San Diego County, William R. Nevitt, Jr., Judge.

The opinion of the court was delivered by: Haller, J.


Reversed and remanded.

Plaintiffs brought individual and class claims against CashCall, Inc., a consumer finance company, alleging CashCall secretly monitored their telephone conversations with CashCall employees without plaintiffs' knowledge or consent. Plaintiffs alleged this practice violated their common law, statutory, and constitutional privacy rights. The court certified a class on one of these claims, an alleged violation of Penal Code*fn1 section 632, which imposes liability on a person (defined to include a "corporation") who intentionally "eavesdrops upon or records [a] confidential communication" and engages in this conduct "without the consent of all parties."

CashCall successfully moved for summary adjudication on the section 632 claim. The court found as a matter of law a corporation does not violate the statute when one of its supervisory employees secretly monitors a conversation between a customer and another corporate employee. The court agreed with CashCall's argument that section 632 did not apply because the eavesdropping prohibited under the statute requires a third party and there were only two parties to the alleged monitored conversations -- the corporation and the customer.

We reverse the summary adjudication order. The trial court's statutory interpretation is inconsistent with section 632's language and purpose. In Flanagan v. Flanagan (2002) 27 Cal.4th 766 (Flanagan), our Supreme Court held that section 632 protects an individual's right to know who is listening to a telephone conversation. Consistent with this holding, we conclude the statute applies even if the unannounced listener is employed by the same corporate entity as the known participant in the conversation. We further determine that on the summary adjudication record before us triable factual issues exist on whether the alleged telephone conversations were "confidential communication[s]" within the meaning of section 632 and whether plaintiffs had objectively reasonable expectations that their conversations would not be secretly monitored.


CashCall is a finance company that provides unsecured loans to consumers. Plaintiffs' amended complaint alleged that each of the plaintiffs borrowed money from CashCall, and, in making the loans and collecting delinquent payments on those loans, CashCall "secretly" monitored and eavesdropped on telephone conversations between CashCall employees and plaintiffs, including conversations pertaining to "sensitive financial information." Plaintiffs alleged CashCall conducted the "illegal monitoring . . . for the purpose of assisting [CashCall] in its collection efforts" without the "knowledge or consent" of plaintiffs or the class members. Plaintiffs further alleged CashCall's "corporate representative has admitted under oath that as a regular part of its ongoing daily business practices, [CashCall] monitors, eavesdrops on, or otherwise makes unauthorized connections to a number of collection calls with alleged debtors."

The amended complaint alleged several causes of action, including: (1) unlawful invasion of privacy in violation of sections 631 and 632; (2) unlawful intrusion into private affairs; and (3) violation of the right to privacy under the California Constitution. Plaintiffs sought statutory damages for violation of section 632 (the greater of $5,000 per violation or three times the amount of actual damages) and an injunction to prohibit CashCall from continuing to engage in this practice. (See § 637.2.)

Based on precertification discovery, the court allowed plaintiffs to amend the first amended complaint to substitute new class representatives because the facts showed CashCall had not monitored conversations of the original named plaintiffs. (See CashCall, Inc. v. Superior Court (2008) 159 Cal.App.4th 273.)

The trial court then certified a class on plaintiffs' claim alleging a violation of "section 632 by 'eavesdropping' " and seeking "the statutory penalty of $5,000." The court defined the class as: " 'All persons that were physically in California at the time they had telephone conversations in which defendant [CashCall], its employees, contractors, agents or other persons working on [CashCall's] behalf, monitored . . . such conversations, within one year prior to May 16, 2006, the date of filing of the original Complaint. . . .' " (Underscoring omitted.) The court also identified two subclasses. Subclass One consisted of class members monitored on outbound calls from CashCall employees or agents to the class member. Subclass Two consisted of class members who were monitored on inbound calls from the class member to a CashCall employee or agent.

CashCall then moved for summary adjudication on plaintiffs' section 632 class claim, and plaintiffs opposed the motion. Of relevance here, the following facts were before the court in the summary adjudication proceedings.

During the relevant times, consumers applied for loans from CashCall by applying online or by calling one of CashCall's advertised toll-free numbers and speaking to a CashCall representative. All borrowers, including online applicants, must call CashCall and speak to a CashCall representative to complete their loan application. All members of the class are or were CashCall borrowers.

CashCall has a production department and a servicing department. The production department generates new loans, which includes taking applications, handling underwriting, and providing information to consumers interested in securing a loan. The servicing department focuses on collections and debt recovery and ensuring payment is made on existing loans.

During the class period, CashCall randomly monitored 547 calls to and from the servicing department: 225 inbound calls and 322 outbound calls. The calls were monitored for quality control purposes to ensure CashCall employees were following CashCall's policies and procedures and applicable laws governing debt collections. Supervisors monitored calls either electronically by using CashCall's EnsemblePro Concerto software or by physically sitting next to the representative and "plugging" into the call. For purposes of the summary adjudication motion, it was assumed that the calls were not recorded; the supervisor would listen to the call while the conversation was occurring.

With respect to call monitoring disclosures, CashCall used an Interactive Voice Response system (IVR) to receive and route calls. Under this system, a caller was greeted by an automated message that offered two options. Option 1 prompted the callers to press "1" if they did not have an existing CashCall loan. Option 2 prompted callers to press "2" if they had an existing loan. A caller who selected either of these announced options automatically heard the " 'Call Monitoring Disclosure' " which stated: " 'This call may be monitored or recorded for quality control purposes.' " The IVR would then route the call to the selected department.

If a caller did not press a button or pressed "0," the caller would be connected to a CashCall operator. The caller would then hear the Call Monitoring Disclosure only if the operator routed the call to a particular department as opposed to a particular representative. Additionally, a caller could press "4" and then dial a representative's direct extension. This "4" option was not included on the IVR, but a caller would sometimes learn of this option after having spoken with a CashCall representative. The Call Monitoring Disclosure was not announced if a caller reached a CashCall employee through the "4" option. Additionally, the Call Monitoring Disclosure was never announced on outbound calls (calls from a CashCall employee to a class member).

At the outset of the borrower relationship, CashCall generally provides written notice to all borrowers that information disclosed to CashCall would be disseminated to "those employees who need to know that information to provide products or services to you."

Based on these facts and evidence relating to the phone conversations of three named plaintiffs, CashCall argued plaintiffs' section 632 claim failed as a matter of law because: (1) section 632 does not prohibit the type of participant business call monitoring alleged in the complaint because the statute prohibits only an unannounced third party from overhearing a conversation and two corporate employees count as a single party under corporations law; (2) the undisputed facts establish plaintiffs' calls with CashCall employees were not "confidential communications" within the meaning of section 632; and (3) each plaintiff heard the Call Monitoring Disclosure during the borrower-lender relationship.

After considering the parties' papers and conducting a hearing, the court granted the summary adjudication only on the first ground. The court stated that: "Under the undisputed facts . . . , the 'parties' to the monitored calls in issue were the Class Member-borrower and corporate defendant CashCall; and, no 'person' other than the Class Member-borrower and CashCall heard the communications during the monitored calls. Therefore, there was no violation of section 632." Based on this ruling, the court declined to address CashCall's alternate grounds for the motion.

Plaintiffs ...

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