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    The Lawletter Blog

    CONSTITUTIONAL LAW: Business Could Be Liable Under Privacy Law for Secret Monitoring of Calls Between Employees and Customers

    Posted by Gale Burns on Tue, Jan 17, 2012 @ 17:01 PM

    The Lawletter Vol 36 No 6

    John Stone, Senior Attorney, National Legal Research Group

    The California Invasion of Privacy Act ("Act"), Cal. Penal Code § 632, prohibits unconsented-to recording or monitoring, regardless of the content of the conversation or the purpose of the monitoring.  The law is intended to protect rights that are separate and distinct from the right to prevent the disclosure of improperly obtained private information, and it requires the assent of all parties to a communication before another person may listen.  An actionable violation of the Act occurs the moment a surreptitious recording or eavesdropping takes place, regardless of whether it is later disclosed.

    In Kight v. CashCall, Inc., 200 Cal. App. 4th 1377, 2011 WL 5829678 (Nov. 21, 2011), the court reversed a summary judgment for the defendant company, finding that a lending corporation was potentially liable for violating the Act's prohibition against eavesdropping on telephone calls, without the consent of all parties, if it had directed one or more of its employees to secretly listen to a telephone conversation between a borrower and another employee.  The legislature enacted the Act prohibiting the recording of confidential communications to ensure an individual's right to control the firsthand dissemination of a "confidential communication," and the legislature further expressed its intent to strongly protect an individual's privacy rights in electronic communications.

    During the relevant period for the class action, 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 that CashCall employees were following CashCall's policies and procedures and applicable laws governing debt collections. Supervisors monitored calls either electronically by using software or by physically sitting next to the representative and "plugging" in to 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.

    While in many cases of incoming calls the customer heard the familiar recording that "[t]his call may be monitored or recorded for quality control purposes," it was not always the case, and it was never the case on outgoing calls.  At the beginning of the borrower relationship, CashCall generally provided 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."

    A "person" is defined in the Act broadly to include business entities like the defendant in Kight.  Based on the facts before it, the appellate court ruled that the lender corporation had potentially violated the Act's prohibition against eavesdropping on telephone calls if the borrowers had had a reasonable expectation that their telephone conversations with its employees were not being secretly overheard by other employees, even if the borrowers knew that the information in their calls would eventually be disseminated to other employees.

    A communication is "confidential" under the Act if a party to the conversation has an objectively reasonable expectation that the conversation is not being overheard or recorded, Flanagan v. Flanagan, 27 Cal. 4th 766, 41 P.3d 575 (2002), and that is generally a question of fact in an action under the Act.  (This standard is to be distinguished from any requirement that a party to the conversation had a reasonable expectation that the contents of the conversation would be kept secret.)  In the case before the court, CashCall argued that the telephone conversations were not confidential as a matter of law, because the undisputed evidence established that all callers had been informed, at least at the outset of the borrower/lender relationship, that calls might be monitored.  However, there was a genuine issue of material fact as to whether notice of monitoring had been disclosed to borrowers during all telephone calls, regardless of what the company might have said to a customer at an earlier point in time.  The presence of this issue should have precluded summary adjudication for the lender on the borrowers' class action claims for violations of the Act, so the case was remanded to the lower court for further proceedings.

    Topics: legal research, The Lawletter Vol 36 No 6, constitutional law, secret monitoring of calls, California Invasion of Privacy Act, unconsented-to recording or monitoring is prohibit, assent required of all parties, Kight v. CashCall, eavesdropping as violating confidentiality was que

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