Hyde & Swigart's own Joshua B. Swigart was recently interviewd by The Los Angeles Daily Journal in regards to Mr. Swigart's "pioneering" in the field of class action lawsuits seeking to apply the state's privacy laws. Via The Los Angeles Daily Journal:
In recent years, California courts have seen a spate of class actions seeking to apply the state's privacy laws to routine communication between corporations and their customers. The plaintiffs in these class actions, of which the Daily Journal has identified nearly 80, argue the companies violated California's Invasion of Privacy Act, or CIPA, by failing to inform customers their calls were being recorded - ostensibly to monitor employee performance. Defense attorneys - and at least one judge - say the CIPA's drafters specifically intended to exempt such calls, known as "service-observing." "It's unequivocal they intended to exempt service-observing," said Fred R. Puglisi of Sheppard Mullin Richter & Hampton LLP. Granting companies the ability to record calls to monitor employee performance, he said, "is in the public's best interest." Defense attorneys point specifically to Assembly bill digests, Assembly journals and even a letter to then- Gov. Ronald Reagan in which CIPA's proponents discuss their intent to exempt service-observing recordings. The law has been on the books since 1967. So why the sudden burst of litigation over a 45-year-old statute? Paul R. Kiesel of Kiesel Boucher & Larson LLP, whose firm is currently litigating several of these cases, said companies have developed a bad habit of not disclosing that they're recording outgoing calls to customers. "Changes in technology have made it very easy for companies to record all calls both inbound and outbound," Kiesel wrote in an email. "The result are warnings for incoming but not for outgoing calls." But defense attorneys say the plaintiffs' bar has simply discovered CIPA's lucrative damages provision, which prescribes a $5,000 civil penalty for every illegally recorded phone call. "If you start adding up the number of calls from a customer service center of a large corporation," Puglisi said, "you're talking potentially hundreds of millions or even billions of dollars in damages." Puglisi said numbers that size can induce defendants to settle a class representative's claim before the putative class is certified. Despite negotiating some settlements, it's still unclear how well the litigation is going for plaintiffs' attorneys. Observers say the class actions have faced several roadblocks, chief among them finding class representatives with meritorious claims.
Attorneys say many cases have been voluntarily dismissed after discovery revealed that the class representative did in fact receive a disclaimer or, in some cases, that the call wasn't recorded at all. Kiesel said this is just part of the process. "When a client advises she has been 'recorded' without her consent," he wrote, "often times the prospective client doesn't have the actual recording. Plaintiffs' counsel can attempt to confirm that the alleged defendant 'records calls' and does not seemingly warn but until discovery is initiated, unless defense counsel volunteers the information, there is no way to guarantee a call was recorded and no warning was given." Tomio B. Narita of San Francisco-based Simmonds & Narita LLP offered a different explanation. Recent decisions by California appellate courts have opened the door for the plaintiffs' bar to cash in, he said, and the potential for such large awards has the lawyers proceeding rashly. "These guys are so excited about this statute, I don't think they're vetting these cases closely enough," he said. At the forefront of the litigation is Joshua B. Swigart of Hyde & Swigart in San Diego. Swigart has filed at least 22 of the class actions in the last three years, all of them in federal court. Swigart rebuffed the charge that such cases are all about money for plaintiffs' attorneys. Swigart said his class representatives, some of whom appear in two or three different lawsuits, are not hired hands but sophisticated clients genuinely aggrieved by various companies' recording practices.
I'd love to tell you what we're settling these cases for," Swigart said, "but I can't, because the defendants all bargain for confidentiality agreements. I can tell you it's not what you think." Swigart insisted the litigation is having an impact, even if some cases are struggling to get past the pleading stage. "I'm not saying I'm a pioneer," Swigart said, "but we have changed the way some companies are doing business. I've heard of significant industries where practices have changed."
As for whether case law will ever actually require these reforms, much remains to be seen. Last week, Los Angeles Superior Court Judge Daniel J. Buckley cited the statute's legislative history to dismiss one of the class actions, but attorneys say the decision isn't likely to have a wide impact, especially in federal court where most of the suits are filed. Some federal district courts have have dismissed class actions on the grounds that, at least when a customer initiates the phone call, the conversations don't carry the reasonable expectation of privacy required by the statute. Several dismissals, in both state and federal court, are currently being appealed. "This is a developing area of law," Swigart said. "It's probably going to take an appellate court decision." On Thursday, after Swigart's comments, the 9th U.S. Circuit Court of Appeals weighed in on one of the class actions - but only tentatively. Second Circuit Judge Robert D. Sack, sitting by designation and writing for a unanimous panel, agreed with a district court's dismissal of a putative class representative's claims, reasoning the plaintiff hadn't sufficiently alleged a reasonable expectation of privacy when calling ADT's customer service center. Faulkner v. ADT Services, Inc., 2013 DJDAR 817. But rather than affirm, the court remanded the case so Faulkner could amend his complaint, suggesting his communication with ADT may in fact fall within CIPA's ambit. "Circumstances may arise under which the nature of the relationship or the character of the communications between a customer and a home security company could plausibly constitute a confidential communication under the California statute," Sack wrote. Regardless of the outcome of Faulkner or other such privacy cases, attorneys on both sides said the nearly 80 class actions filed since 2010 is a significant number. "We've seen an avalanche of these filings," said Zachary J. Alinder of Bingham McCutchen LLP, who said he has handled "quite a few" recording cases. Puglisi of Sheppard Mullin said he's handled at least half a dozen such cases, adding that a situation where so many companies face such large potential awards "when no one has really been harmed" strikes him as "very unusual."
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