Smith v. Loanme, Inc.

• Decision Date: 01 April 2021
• Docket Number: S260391
• Citation: 11 Cal.5th 183,483 P.3d 869,276 Cal.Rptr.3d 746
• Parties: Jeremiah SMITH, Plaintiff and Appellant, v. LOANME, INC., Defendant and Respondent.
• Court: California Supreme Court

11 Cal.5th 183

483 P.3d 869

276 Cal.Rptr.3d 746

Jeremiah SMITH, Plaintiff and Appellant,

v.LOANME, INC., Defendant and Respondent.

S260391

Supreme Court of California.

April 1, 2021

Law Offices of Todd M. Friedman, Todd M. Friedman, Adrian R. Bacon, Beverly Hills, and Thomas E. Wheeler for Plaintiff and Appellant.

F. Paul Bland ; DiCello Levitt Gutzler, Amy E. Keller, San Francisco, and Justin Hawal for Public Justice, P.C., as Amicus Curiae on behalf of Plaintiff and Appellant.

Ignacio Hernández; Megan Iorio and Alan Butler for Consumer Action, Consumer Federation of California and Electronic Privacy Information Center as Amici Curiae on behalf of Plaintiff and Appellant.

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

Barr & Klein, Benjamin T. Barr, Stephen R. Klein ; Litchfield Cavo and G. David Rubin, Pasadena, for Project Veritas and Project Veritas Action Fund as Amici Curiae on behalf of Defendant and Respondent.

Akin Gump Strauss Hauer & Feld, Rex S. Heinke, Neal Ross Marder, Jessica M. Weisel, Los Angeles, and Rebecca A. Girolamo for American Medical Response, Inc., as Amicus Curiae on behalf of Defendant and Respondent.

Baker McKenzie, Edward D. Totino, Los Angeles, and Benjamin W. Turner for Atlantic Credit & Finance, Inc., as Amicus Curiae on behalf of Defendant and Respondent.

Opinion of the Court by Cantil-Sakauye, C. J.

Under Penal Code section 632.7, subdivision (a) (hereinafter section 632.7(a) ),¹ it is a crime when a person "without the consent of all parties to a communication, intercepts or receives and intentionally records, or assists in the interception or reception and intentional recordation of, a communication transmitted between" a cellular or cordless telephone and another telephone. A violation of section 632.7 also can be pursued civilly and lead to the assessment of damages and other appropriate relief. The issue presented in this case is whether section 632.7 applies to the parties to a communication, prohibiting them from recording a covered communication without the consent of all participants, or whether the section is concerned only with recording by persons other than parties (sometimes hereinafter referred to as "nonparties" to the communication), such as an individual who covertly intercepts a phone call and eavesdrops upon it.

The Court of Appeal concluded that section 632.7 applies only to nonparties and does not forbid a party to a phone call transmitted to or from a cellular or cordless telephone from recording the conversation without the consent of the other party or parties. We reach a contrary conclusion and hold that section 632.7 applies to parties as well as nonparties. This interpretation reflects the most sensible reading of the statutory text, is consistent with the relevant legislative history, and advances the Legislature's apparent intent by protecting privacy in covered communications to a greater degree than the Court of Appeal's construction would. Accordingly, we reverse the judgment below and remand the matter to the Court of Appeal for further proceedings consistent with our opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

This case arises out of a brief phone conversation. Defendant LoanMe, Inc. (LoanMe) extended a loan to the wife of plaintiff Jeremiah Smith. In October 2015, a LoanMe employee called a phone number Smith's wife had provided. Smith answered, on what he asserts was a cordless phone. Smith advised the LoanMe representative that his wife was not at home. The call then ended, 18 seconds after it began.

LoanMe recorded the call. Three seconds into the call, LoanMe caused a "beep" tone to sound. The LoanMe representative on the call did not orally advise plaintiff that the call was being recorded.

In September 2016, Smith brought suit on behalf of a putative class consisting of "[a]ll persons in California whose inbound and outbound telephone conversations involving their cellular or cordless telephones were recorded without their consent by [LoanMe] or its agent/s within the one year prior to the filing of this action." The complaint alleged that the recording of these calls violated section 632.7.

The parties agreed to a bifurcated bench trial for the court to decide whether Smith consented to having the phone call recorded by continuing the conversation after LoanMe activated the "beep" tone. After listening to the call, the trial court agreed with LoanMe that the tone gave Smith adequate notice that the call was being recorded. The trial court subsequently entered judgment in LoanMe's favor.

When Smith sought review, the Court of Appeal did not delve into the consent issue decided by the superior court. Instead, the reviewing court requested supplemental briefing regarding whether section 632.7 prohibits a party from intentionally recording a communication transmitted to or from a cellular or cordless phone, or whether the section forbids only the intentional recording of such communications by persons other than parties. The Court of Appeal ultimately concluded "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." ( Smith v. LoanMe, Inc. (2019) 43 Cal.App.5th 844, 848, 257 Cal.Rptr.3d 61 ( Smith ).) The judgment was affirmed on this basis. ( Ibid . )

The Court of Appeal regarded section 632.7 as unambiguously applicable only to nonparties. ( Smith , supra , 43 Cal.App.5th at p. 851, 257 Cal.Rptr.3d 61.) It reasoned, "The statute ... requires that the interception or receipt of the [covered] communication be without the parties’ consent. But the parties to a phone call always consent to the receipt of their communications by each other — that is what it means to be a party to the call (or at least that is part of what it means). In this case, for example, LoanMe consented to Smith's receipt of LoanMe's communications (‘Is Mrs. Smith there?’), and Smith consented to LoanMe's receipt of Smith's communications (‘No.’). Consequently, the parties to a phone call are incapable of violating section 632.7, because they do not intercept or receive each other's communications without all parties’ consent." ( Ibid . )

The Court of Appeal also saw its interpretation of section 632.7 as harmonizing this section with sections 632.5 and 632.6, which also address privacy issues implicated by the use of cellular and cordless phones. Sections 632.5 and 632.6 provide for liability when a person "maliciously and without the consent of all parties to the communication, intercepts ... [or] receives" a communication transmitted between devices including a cellular phone ( § 632.5, subd. (a) (hereinafter section 632.5(a) )) or a cordless phone ( § 632.6, subd. (a) (hereinafter section 632.6(a) )). The Court of Appeal determined that these sections cannot reasonably be applied to the parties to a phone call, for reasons including the fact that it was "not clear what it would mean for one party to receive the other party's communications with malice ." ( Smith , supra , 43 Cal.App.5th at p. 852, 257 Cal.Rptr.3d 61.) Because sections 632.5 and 632.6 do not apply to the parties to a communication, the Court of Appeal reasoned, section 632.7 should be construed similarly. ( Smith , at pp. 851–852, 257 Cal.Rptr.3d 61.) The Court of Appeal also saw it as "absurd" for a party to be held liable under section 632.7 for recording a call when it was "pure happenstance" whether the other party or parties were using cellular or cordless phones, as opposed to landline phones. ( Smith , at p. 853, 257 Cal.Rptr.3d 61.)

Finally, the Court of Appeal also saw its reading of section 632.7 as accordant with the relevant legislative history. The court observed that in materials generated during legislative deliberations regarding Assembly Bill No. 2465 (1991–1992 Reg. Sess.) (hereinafter Assembly Bill 2465), the measure through which section 632.7 was added to the Penal Code, the Legislature "never shows any concern about recording by parties." ( Smith , supra , 43 Cal.App.5th at p. 859, 257 Cal.Rptr.3d 61.)

We granted review.

II. DISCUSSION

The discussion below proceeds as follows. We first examine the text of section 632.7(a), which we determine is most naturally read as prohibiting both parties and nonparties from intentionally recording a covered communication without the consent of all parties to the communication. Because the text conceivably could support the Court of Appeal's interpretation as well, however, we also consult the legislative history and public policy as additional tools to ascertain the Legislature's intent. Upon review of these resources, we conclude that this section applies to the intentional recording of a covered communication regardless of whether the recording is performed by a party to the communication, or by a nonparty.

A. General Principles

" ‘ "When we interpret a statute, ‘[o]ur fundamental task ... 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. 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.’ [Citation.] ‘Furthermore, we consider portions of a statute in the context of the entire statute and the statutory scheme of which it is a part, giving significance to...