January 28, 2013

"This Call May Be Recorded" . . . But Don't Count on This Disclaimer

Consumer Advertising Law Blog

Last August, Mr. Rea Perea called Humana Pharmacy, Inc. to talk about his erectile dysfunction. He says he didn't learn until later that his call was recorded. So, not surprisingly, he sued. He alleged that Humana violated California's ban on recording confidential communications without the consent of all parties.

Humana moved to dismiss the class action complaint on several grounds. On January 23, 2013, the US District Court for the Central District of California rejected all of Humana's arguments.

First, Humana made the factual argument that Mr. Perea lacked Article III standing because he didn't suffer an injury to a legally protected interest. Humana challenged Mr. Perea's standing under Rule 12(b)(1), declaring that Mr. Perea couldn't have been injured because Humana plays a recording at the beginning of every call disclosing that "calls may be recorded." The court said that factual argument, which went to the merits of the case, was better addressed under Rule 12(b)(6) (failure to state a claim). So it dismissed that part of Humana's motion.

Second, the court ruled that if Humana really did warn Mr. Perea that his call would be recorded, it could introduce evidence of that fact on summary judgment. But on a motion to dismiss, where Mr. Perea alleged he wasn't informed his call would be recorded, the court was forced to believe Mr. Perea (at least for the time being).

Third, Humana raised the legal argument that the California statute contains an exception for "service observing," which is the practice of recording calls so that supervisors can monitor and improve the quality of service provided by a company's customer service agents. The court found that Humana didn't fully support the argument, in part because it failed to deal with contrary authority from the California Court of Appeal. Further, it wasn't clear from the complaint that Humana's purpose in recording the call was "service observing." Humana may, however, have another chance to make this argument on summary judgment.

Fourth, Humana argued that a statutory exception for radio communications should apply because Mr. Perea called Humana using his cell phone. Humana asked the court to take judicial notice that cell phones transmit signals using radio waves. The court wasn't persuaded, finding in part that the radio exception applies to "a radio" (meaning the device, like the C.B. radio collecting dust in your grandfather's attic), and not to "telephones that operate on radio frequencies."

Finally, Humana argued that Mr. Perea's call wasn't "confidential" as a matter of law. As we reported last week, the Ninth Circuit just held that confidentiality is measured by an objective standard, and that courts can consider the nature of the defendant's business and the character of the call to determine if the plaintiff could reasonably expect that the call would not be overheard or recorded. Applying that standard, the Ninth Circuit held that calls about mere billing disputes ordinarily are not confidential. But here, because Humana was in a line of business that often deals with sensitive medical information, because Humana provided assurances that "it respects the privacy of its customers," and because Mr. Perea alleged he called to discuss "a very private and highly sensitive medical condition related to erectile dysfunction," the court found Mr. Perea had stated a plausible claim.

One might find it ironic that Mr. Perea announced his erectile dysfunction to the world in a public court filing that seeks money because of an alleged invasion of his privacy. In any event, although federal courts have shown skepticism of such lawsuits in recent months (there are currently several pending in California), plaintiffs now have a model for a complaint that stands a chance of surviving a motion to dismiss. On the other hand, if Humana can prove on summary judgment that it did play a recorded disclaimer, then it may obtain a ruling in its favor.

© Arnold & Porter Kaye Scholer LLP 2013 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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