Smith v. Loanme, Inc.

          APPEAL from the Superior Court of Riverside County No. RIC1612501. Sharon J. Waters, Judge. Affirmed.

          Law Offices of Todd M. Friedman, Todd M. Friedman and Adrian R. Bacon for Plaintiff and Appellant.

          Finlayson Toffer Roosevelt & Lilly, Michael R. Williams and Jared M. Toffer for Defendant and Respondent.

          OPINION

          MENETREZ, J.

         Jeremiah Smith filed a class action complaint against LoanMe, Inc. (LoanMe), alleging that LoanMe violated the California Invasion of Privacy Act (Privacy Act) (Pen. Code, § 630, et seq.).^[1] Smith alleged that LoanMe violated section 632.7 by recording a phone call with Smith without his consent while he was using a cordless telephone, and he claimed that a “beep tone” at the beginning of the call did not constitute sufficient notice that LoanMe was recording the call. In a bifurcated trial about the beep tone issue, the trial court concluded that (1) the beep tone provided sufficient notice to Smith that the call was being recorded, and (2) Smith implicitly consented to being recorded by remaining on the call.

         We requested supplemental briefing on the issue of whether section 632.7 applies to the recording of a phone call by a participant in the phone call or instead applies only to recording by third party eavesdroppers. We asked that the briefs address the question in light of the plain language of section 632.7, its legislative history, and its relationship with other provisions of the Privacy Act. No California appellate opinion addresses the issue. Several federal district courts in California have analyzed the issue, and they are not in agreement.^[2]

         We conclude that section 632.7 prohibits only third party eavesdroppers from intentionally recording telephonic communications involving at least one cellular or cordless telephone. Conversely, section 632.7 does not prohibit the participants in a phone call from intentionally recording it. Consequently, Smith failed to state a claim against LoanMe under section 632.7. We therefore affirm the trial court's dismissal of Smith's lawsuit.

         BACKGROUND^[3]

         LoanMe is in the business of providing personal and small business loans. Smith's wife is the borrower on a loan from LoanMe. In October 2015, an employee of LoanMe called the telephone number provided to LoanMe by Smith's wife to discuss the loan. Smith answered the call on a cordless telephone and informed the caller that his wife was not available, and the call then ended. The call lasted approximately 18 seconds. LoanMe recorded the call. Three seconds into the call LoanMe “caused a ‘beep tone' to sound.” It is LoanMe's practice to cause a beep tone to play at regular 15 second intervals on all of its outbound calls. LoanMe did not orally advise Smith that the call was being recorded. Smith also did not sign a contract granting LoanMe consent to record calls.

         In September 2016, Smith filed a class action complaint against LoanMe, alleging that LoanMe recorded phone calls without consent in violation of section 632.7 and seeking statutory damages and injunctive relief.^[4] On the parties' stipulation, the trial court ordered a bifurcated bench trial to resolve the “the beep tone issue.” After listening to a recording of the phone call, the trial court concluded that the beep tone provided Smith sufficient notice under section 632.7 that the call was being recorded and that Smith implicitly consented to being recorded by remaining on the call. The trial court entered judgment against Smith.

         DISCUSSION

         A. Analytical Framework for Statutory Interpretation

         In interpreting a statute, our goal “‘‘‘‘is to determine the Legislature's intent so as to effectuate the law's purpose. We first examine the statutory language, giving it a plain and commonsense meaning. We do not examine that language in isolation, but in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment.'”''' (Meza v. Portfolio Recovery Associates, LLC (2019) 6 Cal.5th 844, 856 (Meza).) In other words, “[t]he meaning of a statute may not be determined from a single word or sentence; the words must be construed in context, and provisions relating to the same subject matter must be harmonized to the extent possible.” (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.) “‘‘‘‘If the language is clear, courts must generally follow its plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend. If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute's purpose, legislative history, and public policy.'”''' (Meza, supra, at p. 856.)

         We independently review questions of statutory interpretation. (California Building Industry Assn. v. State Water Resources Control Bd. (2018) 4 Cal.5th 1032, 1041.)

         B. The Privacy Act Provisions Relating to Cordless and Cellular Phones, and Section 632

         In 1967, the Legislature enacted the Privacy Act “to protect the right of privacy of the people of this state” from technological advances that “led to the development of new devices and techniques for the purpose of eavesdropping upon private communications.” (§ 630.) The Legislature considered eavesdropping on private communications a serious threat that “cannot be tolerated in a free and civilized society.” (§ 630; Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95, 115 (Kearney) [describing the Privacy Act as “a broad, protective invasion-of-privacy statute”].)

         One of the provisions of the original 1967 legislation-section 632-prohibits the intentional recording of a confidential telephone communication without the consent of all parties. (Kearney, supra, 39 Cal.4th at p. 117.) In relevant part, section 632, subdivision (a), provides: “A person who, intentionally and without the consent of all parties to a confidential communication, uses an electronic amplifying or recording device to eavesdrop upon or record the confidential communication, whether the communication is carried on among the parties in the presence of one another or by means of a telegraph, telephone, or other device, except a radio, shall be punished by” a fine, imprisonment, or both. For purposes of the statute, “person” includes businesses. (§ 632, subd. (b).)

         In addition to section 632's creation of criminal liability for this invasion of a person's privacy, section 637.2, which was also part of the original legislation, “explicitly created a new, statutory private right of action, authorizing any person who has been injured by any violation of the invasion-of-privacy legislation to bring a civil action to recover damages and to obtain injunctive relief in response to such violation.” (Kearney, supra, 39 Cal.4th at pp. 115-116.) Any person injured by a violation of the Privacy Act may recover $5, 000 per violation. (§ 637.2, subd. (a)(1).)

         In 1985, in response to the early stages of technological advances in wireless communication, particularly cellular radio telephones, the Legislature enacted section 632.5 as part of the Cellular Radio Telephone Privacy Act of 1985 (a subpart of the Privacy Act). (Flanagan v. Flanagan (2002) 27 Cal.4th 766, 775.) Section 632.5 provides in relevant part: “Every person who, maliciously and without the consent of all parties to the communication, intercepts, receives, or assists in intercepting or receiving a communication transmitted between cellular radio telephones or between any cellular radio telephone and a landline telephone shall be punished by” a fine, imprisonment, or both. (§ 632.5, subd. (a).)

         In 1990, the Legislature amended the 1985 legislation, renaming it the Cordless and Cellular Radio Telephone Privacy Act of 1985. The amendment added section 632.6, which uses the same language as section 632.5 to extend the same protection to cordless telephones instead of cellular telephones. Under section 632.6, “[e]very person who, maliciously and without the consent of all parties to the communication, intercepts, receives, or assists in intercepting or receiving a communication transmitted between cordless telephones..., between any cordless telephone and a landline telephone, or between a cordless telephone and a cellular telephone shall be punished by” a fine, imprisonment, or both. (§ 632.6, subd. (a); see also § 632.6, subd. (c) [defining cordless ...