CS Wang & Assoc. v. Wells Fargo Bank, N.A.
| Decision Date | 04 September 2020 |
| Docket Number | No. 16 C 11223,16 C 11223 |
| Parties | CS WANG & ASSOCIATE, SAT NARAYAN dba EXPRESS HAULING, ROBERT MEYER dba MANGIA NOSH, TAYSIR TAYEH dba CHIEF'S MARKET, and JAY SCHMIDT INSURANCE AGENCY, INC., individually and on behalf of all others similarly situated, Plaintiffs, v. WELLS FARGO BANK, N.A., FIFTH THIRD BANK, FIRST DATA MERCHANT SERVICES, LLC, VANTIV, INC., NATIONAL PROCESSING COMPANY, IRONWOOD FINANCIAL, LLC, dba IRONWOOD PAYMENTS, DEWITT LOVELACE, and JOHN LEWIS, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiffs in this case are five small California businesses who allege that Defendants violated California law by recording telephone calls in which Defendants attempted to sell credit and debit card payment processing services and related hardware to Plaintiffs. The five Plaintiffs—CS Wang & Associate, Sat Narayan d.b.a. Express Hauling, Robert Meyer d.b.a. Mangia Nosh, Taysir Tayeh d.b.a. Chief's Market, and Jay Schmidt Insurance Agency, Inc.—allege that between 2011 and 2016, they received telephone calls from International Payment Services, LLC ("IPS")1 and Defendant Ironwood Financial, LLC ("Ironwood"). The complaint alleges these calls were all made on behalf of Defendants Wells Fargo Bank, N.A.; First Data Merchant Services, LLC; Fifth Third Bank; Vantiv, Inc.; and National Processing Company ("NPC"). The calls were recorded, Plaintiffs allege, without their knowledge or consent, in violationof the California Invasion of Privacy Act ("CIPA"), CAL. PENAL CODE § 630, et seq. Several motions are pending. All Defendants move for partial judgment on the pleadings [433, 439, 441], arguing that a recent California decision bars Plaintiffs' CAL. PENAL CODE § 632.7 claims as a matter of law. Defendants Wells Fargo and First Data separately move for judgment in their favor [439] on Plaintiffs' CAL. PENAL CODE § 632 claims against them, as well. For the reasons stated below, all motions for judgment on Plaintiffs' § 632.7 claims are stricken without prejudice. Defendants Wells Fargo and First Data's motion for judgment on Plaintiffs' § 632 claims is denied.
Plaintiffs are California partnerships, sole-proprietorships, and corporations who bring this suit individually and on behalf of six putative classes of California small businesses, alleging CIPA violations. (2d Am. Compl. [285] ¶¶ 28-32, 105.) The factual background is outlined more fully in the court's March 29, 2018 Opinion and Order [180] denying Defendants' motions to dismiss Plaintiffs' first amended complaint. In summary, Plaintiffs allege that IPS and Defendant Ironwood secretly recorded telemarketing calls with Plaintiffs. (Id. ¶ 1.) IPS and Ironwood made these calls in an attempt to sell credit and debit card payment processing services and hardware to Plaintiffs on behalf of fellow Defendants Wells Fargo, First Data Merchant Services, Fifth Third Bank, Vantiv, and NPC. (Id. ¶¶ 3-4, 9-10.) Plaintiffs and the putative class members never entered into contracts with IPS or Ironwood, but received calls from either IPS or Ironwood between 2011 and 2016. (Id. ¶¶ 3, 7, 105.) Initially, IPS made calls on behalf of Defendant Wells Fargo in 2011; later, in 2014, IPS ended its relationship with Wells Fargo and began selling payment processing services for Defendant Fifth Third. (Id. ¶¶ 3-4, 49-50.) Then in 2015, IPS sold its business operations to Ironwood, which continued IPS's call practices. (Id. ¶ 7.) During this time, IPS and Ironwood were also selling debit and credit card processing hardware on behalf of Defendants First Data, Vantiv, and NPC. (Id. ¶ 9.)
Plaintiffs allege that these calls were recorded, but that neither IPS nor Ironwood ever warned Plaintiffs of this. (Id. ¶¶ 6, 8, 65, 98.) The subject matter of the calls was, according toPlaintiffs, "business-related," and specifically involved Plaintiffs' practices for processing credit and debit card transactions and Plaintiffs' monthly or annual credit and debit card sales volumes. A merchant that received a call from IPS or Ironwood would thus, in their view, reasonably have expected the call to remain confidential. (Id. ¶¶ 5, 58, 62, 98.) Plaintiffs bring twenty-two claims for relief arising out of Defendants' alleged violations of CIPA Sections 632 and 632.7. Section 632 prohibits nonconsensual recording of "confidential communications" transmitted using a telephone. CAL. PENAL CODE § 632. Section 632.7 prohibits nonconsensual recording of any communications that involve at least one cellular or cordless telephone. CAL. PENAL CODE § 632.7. Every Defendant allegedly violated both provisions. (See 2d Am. Compl. ¶¶ 119-348.) Plaintiffs seek to permanently enjoin Defendants from recording telephonic communications without consent, and seek statutory damages from each Defendant of $5,000 per violation of Section 632 and 632.7. See CAL. PENAL CODE § 637.2.
By its order of March 29, 2018, this court denied Defendants' motions to dismiss Plaintiffs' amended complaint.2 Plaintiffs filed a second amended complaint in February 2019. Defendants now move for judgment on the pleadings, filing three separate motions. Defendants Fifth Third, Vantiv, and NPC (collectively "Fifth Third Defendants") jointly move for judgment [433] on Plaintiffs' § 632.7 claims alleged against them, and Defendants Ironwood, Lovelace, and Lewis (collectively "Ironwood Defendants") do the same [441]. Defendants Wells Fargo and First Data (collectively "Wells Fargo Defendants") move for judgment [439] on all of Plaintiffs' claims against them.3 Every group of Defendants advances the same argument in favor of dismissal of Plaintiffs' § 632.7 claims: in December 2019, the California Court of Appeal in Smith v. LoanMe, Inc., heldthat CAL. PENAL CODE § 632.7 prohibits only third-party eavesdroppers from recording telephonic communications, not parties to the call. 43 Cal. App. 5th 844, 859, 257 Cal. Rptr. 61, 72 (4th Dist. 2019), review granted, 460 P.3d 757 (Cal. Apr. 1, 2020). Defendants in this case are alleged to be call participants rather than third-party eavesdroppers. (See, e.g., 2d Am. Compl. ¶¶ 152, 165, 308, 321, 333.) Accordingly, in Defendants' view, Plaintiffs' § 632.7 claims fail as a matter of law.
The Wells Fargo Defendants contend they are entitled to dismissal of all of Plaintiffs' claims against them on the additional basis of res judicata, or claim preclusion. In March 2016, a California Superior Court entered a Stipulated Final Judgment between the California Attorney General, several California County District Attorneys, and Wells Fargo settling the State's claim under the CAL. BUS. & PROF. CODE § 17200, et seq., for violations of CAL. PENAL CODE §§ 632 and 632.7 based on the alleged failure of Wells Fargo employees to disclose that they were recording communications with members of the California public. ( ) The Wells Fargo Defendants assert that this Stipulated Judgment is a final judgment addressing the same issues Plaintiffs raise in this case, and that Plaintiffs are in privity with the People of the State of California for res judicata purposes. As a result, the Wells Fargo Defendants contend, all of Plaintiffs' claims against them must be dismissed.
A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) challenges "the sufficiency of the complaint to state a claim upon which relief may be granted," Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009), and is subject to the same standard as a Rule 12(b)(6) motion to dismiss for failure to state a claim. Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635, 639 (7th Cir. 2015). A plaintiff must "state a claim to relief that is plausible on its face." Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The court construes the pleadings "in the light most favorable to the nonmovingparty, accept[s] well-pleaded facts as true, and draw[s] all inferences in [the nonmoving party's] favor," Berger v. Nat'l Coll. Athletic Ass'n, 843 F.3d 285, 290 (7th Cir. 2016), but need not accept "threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). As with a Rule 12(b)(6) motion to dismiss, in reviewing a motion for judgment on the pleadings, the court may consider the complaint, "documents that are attached to the complaint, documents that are central to the complaint and referred to in it, and information that is properly subject to judicial notice," Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013), including matters in the public record. See Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 556 (7th Cir. 2012); FED. R. EVID. 201(b).
Section 632.7 of CIPA prohibits "without the consent of all parties to a communication, intercept[ing] or receiv[ing] and intentionally record[ing], or assist[ing] in the interception or reception and intentional recordation of a communication transmitted between" two telephones, at least one of which is cellular or cordless. CAL. PENAL CODE § 632.7(a). In December 2019, the California Court of Appeal held that "section 632.7 prohibits only third party eavesdroppers from intentionally recording telephonic communications involving at least one cellular or cordless telephone." Smith, 43 Cal. App. 5th at 848, 257 Cal. Rptr. 3d at 63. "Conversely, section 632.7 does not prohibit the participants in a phone call from intentionally recording it." Id. Based on this ruling, all Defendants move for partial judgment on the pleadings, seeking dismissal of Plaintiffs' § 632.7 claims because D...
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