The Ninth Circuit Holds That Plaintiffs Must Show More Under California’s Call Recording Law

January 22, 2013

On Jan, 17, 2013, in Faulkner v. ADT Security Services, Inc., 2013 WL 174368 (9th Cir. Jan. 17, 2013), the United States Court of Appeals for the Ninth Circuit weighed in on the pleading requirements under California’s Invasion of Privacy Act, California Penal Code Section 632 regarding recording of telephone calls. Section 632 makes it illegal to “intentionally and without the consent of all parties to a confidential communication” eavesdrop upon or record such confidential communication “by means of any electronic amplifying or recording device.” The statute creates a private right of action and provides for statutory damages for $5,000 per violation. Over the past few years, a substantial number of cases have been filed under the California Invasion of Privacy Act.

The new decision addresses the factual circumstances plaintiffs must plead to allege that a communication was confidential. “Confidential communication,” as defined in the statute, includes communications “carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made . . . in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.”

Faulkner alleges in his complaint that he contacted his security provider, ADT, to dispute a charge, and heard “beeping” sounds during the conversation. When he asked about the sounds, he was informed by ADT that his conversation was being recorded. He further alleges that his conversation was a confidential communication because it was “carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto.” Faulkner contends that this communication violated California’s Invasion of Privacy Act.

The district court dismissed the complaint without leave to amend, finding that the conversation was not a confidential communication because Faulkner had “no objectively reasonable expectation that his telephone conversation with ADT would not be overheard or recorded . . . .” Faulkner v. ADT Sec. Servs., Inc., 2011 WL 1812744 (N.D. Cal. May 12, 2011). The Court looked to the “surrounding circumstances” and found that based on the “nature of [Defendant’s] business” and “the character of the telephone call,” the communication was not confidential. Faulkner appealed.

The Ninth Circuit remanded the case to the district court so the district court could consider whether plaintiff should be allowed to amend his complaint. The Court did so, however, “[i]n an abundance —perhaps an overabundance — of caution.” The Court’s opinion recognizes that calls are not confidential by merely being alleged as such. Instead, a plaintiff must allege circumstances surrounding the call that would support a reasonable expectation of privacy, which the Court noted includes the nature of the defendant’s business, and the character and content of the communication.

With respect to Faulkner’s allegations, the Court held that merely alleging the call was carried on in confidential circumstances is “no more than a ‘[t]hreadbare recital’ of the language of Section 632, precisely the kind that Iqbal prohibits.” Faulkner’s allegations that his call related to a billing dispute were also insufficient to state a claim under the statute. The Court held that “too little is asserted in the complaint about the particular relationship between the parties, and the particular circumstances of the call, to lead to the plausible conclusion that an objectively reasonable expectation of confidentiality would have attended such a communication.”

Faulkner clarifies a split between lower courts regarding the federal pleading requirement under California’s Invasion of Privacy Act. The opinion calls into question a recent line of cases where courts have found that the plaintiff adequately alleged a confidential communication simply by alleging that the plaintiff had a reasonable expectation that the call was not being recorded. The opinion supports a separate line of recent cases where courts have dismissed call recording claims based on the plaintiff’s failure to adequately plead surrounding circumstances that would support an objectively reasonable expectation that the call would not be recorded. In doing so, the Faulkner Court recognized that the circumstances and content of the communication are relevant in determining whether a business-related telephone call was a confidential communication. Faulkner also confirmed that federal pleading standards apply to motions to dismiss in federal court, even if the case is governed by state substantive law.

As such, Faulkner requires plaintiffs to do more than make conclusory allegations that a call was a confidential communication. One interesting question, not yet directly addressed by the Ninth Circuit, is how recordings made for quality assurance purposes by businesses like ADT can ever be confidential communications given that the legislative history confirms that such “service observing” calls are not subject to the California Invasion of Privacy Act. In other words, since the legislature intended that recordings made for service observing purposes are exempt from the statute, no plaintiff can reasonably expect such calls will not be recorded for quality assurance purposes. That issue remains to be addressed in a future decision.

This article was originally published by Bingham McCutchen LLP.