Court Issues Surprising Decision on Phone Call Recording

For many years, California has been one of the dozen states requiring all parties to consent before a telephone call could be recorded. Under the California Invasion of Privacy Act (CIPA), businesses that neglected to warn that “calls may be recorded” risked damages of $5,000 per recording and multimillion-dollar class action lawsuits.

California’s Court of Appeal for the Fourth Appellate District rejected that rule recently in Smith v. LoanMe, Inc., ruling that Penal Code § 632.7 of CIPA prohibits wiretappers and eavesdroppers from recording calls but not individual call participants from doing so.

Smith is the first appellate decision interpreting this statute. Several federal district courts have analyzed the issue, and the decisions vary. ABA Section of Litigation leaders say it is too soon to predict the long-term effects of Smith, but one thing is certain: until the California Supreme Court resolves the issue, uncertainty and forum shopping shall prevail.