January 22, 2013

"This Call May Be Recorded" - Ninth Circuit Says Disclaimer Not Always Necessary. But It's Still A Good Idea!

Consumer Advertising Law Blog

John Faulkner called ADT Home Security Services to complain about his bill. He heard a funny "beeping"; sound, and when he asked about it, he learned his call was recorded. So he sued ADT, alleging the call was recorded without his consent. Faulkner brought his class action in California state court, but ADT removed it to federal court, and then persuaded the judge to dismiss it -- with prejudice.

California is one of a small handful of states that require all parties to a confidential communication to give their consent before it can be recorded. Whether a call is "confidential" under the applicable penal code (yes, penal code) provisions is measured objectively: the test is whether Faulkner had an "objectively reasonable expectation that his telephone conversation" would not be "overheard or recorded."

On January 17, the Ninth Circuit agreed with the well-reasoned opinion of Judge Jeffrey White of the US District Court for the Northern District of California: one can look to the "surrounding circumstances" to determine whether such an objectively reasonable expectation exists, and those circumstances can include the nature of the defendant's business and even the character of the call.

Faulkner had alleged only that he called to "dispute a charge." The rest of his Complaint was formulaic babble. Both Judge White and the Ninth Circuit said that's not enough. Both courts found Faulkner's allegation to be "merely consistent" with a confidential communication, but under Federal pleading standards as articulated by the US Supreme Court in Ashcroft v. Iqbal, it wasn't enough to nudge Faulkner's claim "from conceivable to plausible."

This is good news for companies that perform service monitoring, but that don't inform California callers in advance that their call may be recorded. But the story may not be over for ADT. Although the District Court dismissed the case with prejudice, the Ninth Circuit decided to give Faulkner one more chance in what it conceded was "an abundance -- perhaps an overabundance -- of caution."

Companies that record calls should be similarly cautious: avoid a lawsuit altogether by informing every caller that their call may be recorded.

© 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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