Smith v. LoanMe, Inc. ( 2021 )

IN THE SUPREME COURT OF
CALIFORNIA
JEREMIAH SMITH,
Plaintiff and Appellant,
v.
LOANME, INC.,
Defendant and Respondent.
S260391
Fourth Appellate District, Division Two
E069752
Riverside County Superior Court
RIC1612501
April 1, 2021
Chief Justice Cantil-Sakauye authored the opinion of the Court,
in which Justices Corrigan, Liu, Cuéllar, Kruger, Groban and
Jenkins concurred.
SMITH v. LOANME, INC.
S260391
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
1
All subsequent undesignated statutory references are to the
Penal Code.
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Opinion of the Court by Cantil-Sakauye, C. J.
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
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Opinion of the Court by Cantil-Sakauye, C. J.
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 (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.) 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
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Opinion of the Court by Cantil-Sakauye, C. J.
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.) 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.) 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.)
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
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Opinion of the Court by Cantil-Sakauye, C. J.
Legislature “never shows any concern about recording by
parties.” (Smith, supra, 43 Cal.App.5th at p. 859.)
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,
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Opinion of the Court by Cantil-Sakauye, C. J.
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 every word, phrase, sentence, and part of an act
in pursuance of the legislative purpose.’ ” ’ ” (Meza v. Portfolio
Recovery Associates, LLC (2019) 6 Cal.5th 844, 856–857.) The
interpretation of a statute presents a question of law that this
court reviews de novo. (People v. Jimenez (2020) 9 Cal.5th 53,
61; Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332.)
B. The Context and Provisions of Section 632.7
Section 632.7 is part of the Invasion of Privacy Act (§ 630
et seq.). As we explained in Flanagan v. Flanagan (2002)
27 Cal.4th 766, 768–769 (Flanagan), as originally enacted in
1967 this statute replaced “prior laws that permitted the
recording of telephone conversations with the consent of one
party to the conversation. [Citation.] The purpose of the act
was to protect the right of privacy by, among other things,
requiring that all parties consent to a recording of their
conversation.”
A foundational component of the act, section 632, provides
for liability when “[a] person . . . intentionally and without the
consent of all parties to a confidential communication . . . uses
an electronic amplifying or recording device to eavesdrop upon
or record the confidential communication, whether the
communication is carried on among the parties in the presence
of one another or by means of a telegraph, telephone, or other
device, except a radio.” (Id., subd. (a).) Other provisions within
the statutory scheme reflect updates that have been made from
time to time in response to the emergence of new communication
devices. The Legislature augmented the statutory scheme in
1985, 1990, and 1992 “to take account of privacy issues raised
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Opinion of the Court by Cantil-Sakauye, C. J.
by the increased use of cellular and cordless telephones. (See
§ 632.5, added by Stats. 1985, ch. 909, § 3, p. 2902; § 632.6,
added by Stats. 1990, ch. 696, § 4, p. 3269; § 632.7, added by
Stats. 1992, ch. 298, § 6, p. 1216.) In enacting the first of these
amendments[, the Cellular Radio Telephone Privacy Act of
1985], the Legislature found that ‘the advent of widespread use
of cellular radio telephone technology means that persons will
be conversing over a network which cannot guarantee privacy
in the same way that it is guaranteed over landline systems.’
(Stats. 1985, ch. 909, § 2, p. 2900; similar language as to cordless
telephones appears in Stats. 1990, ch. 696, § 2, p. 3268.)
Responding to the problem of protecting the privacy of parties
to calls involving cellular or cordless telephones, the Legislature
prohibited the malicious interception of calls from or to cellular
or cordless phones (§§ 632.5, 632.6) and the intentional
interception or recording of a communication involving a
cellular phone or a cordless phone (§ 632.7).” (Flanagan, at
pp. 775–776.)2
This case concerns the most recent of the revisions
discussed in Flanagan. Section 632.7(a) provides, “Every person
who, 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 two cellular radio
telephones, a cellular radio telephone and a landline telephone,
two cordless telephones, a cordless telephone and a landline
2
As will be explained in part II.C, section 632.7 does not
prohibit the “intentional interception or recording” of a covered
communication (Flanagan, supra, 27 Cal.4th at p. 776); it is
concerned instead with the intentional recording of an
intercepted or received communication.
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SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
telephone, or a cordless telephone and a cellular radio telephone,
shall be punished” in the manner the section proceeds to
describe. (See also § 637.2 [specifying statutory damages and
other remedies for violations of § 632.7].) Subdivision (b) of
section 632.7 provides for certain exceptions to this prohibition,
and subdivision (c) defines or explains some of the terms as used
within the section.3
The Court of Appeal’s decision below was the first
published opinion by a California appellate court to have
specifically addressed whether section 632.7 applies to the
intentional recording of a communication by a party. The Court
of Appeal’s interpretation of section 632.7 departs from the
majority view of the federal district courts that have considered
the same issue. Some of these courts have concluded that the
text of section 632.7(a) unambiguously prohibits a party from
recording a protected communication without the consent of all
other parties. (E.g., Montantes v. Inventure Foods (C.D.Cal.,
3
Within section 632.7, subdivision (c), “cellular radio
telephone” is defined as “a wireless telephone authorized by the
Federal Communications Commission to operate in the
frequency bandwidth reserved for cellular radio telephones.”
(Id., subd. (c)(1).) “Cordless telephone” is defined as “a two-way,
low power communication system consisting of two parts, a
‘base’ unit which connects to the public switched telephone
network and a handset or ‘remote’ unit, that are connected by a
radio link and authorized by the Federal Communications
Commission to operate in the frequency bandwidths reserved for
cordless telephones.” (Id., subd. (c)(2).) Lastly, section 632.7,
subdivision (c)(3) explains that “ ‘[c]ommunication’ includes, but
is not limited to, communications transmitted by voice, data, or
image, including facsimile.” Several other terms used in section
632.7, including “intercepts,” “receives,” and “parties,” are not
similarly defined within the section, or for that matter anywhere
in the code chapter in which they appear.
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SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
July 2, 2014, No. CV-14-1128-MWF(RZx)) 2014 WL 3305578,
pp. *2–*4; Ades v. Omni Hotels Management Corp. (C.D.Cal.
2014) 46 F.Supp.3d 999, 1017–1018.) Other federal courts have
regarded the text of section 632.7(a) as ambiguous but read the
legislative history as evincing legislative intent that the statute
would apply to parties and nonparties alike. (E.g., Brinkley v.
Monterey Fin. Servs., LLC (S.D.Cal. 2018) 340 F.Supp.3d 1036,
1042–1043; Simpson v. Best Western Intern., Inc. (N.D.Cal.,
Nov. 13, 2012, No. 3:12-cv-04672-JCS) 2012 WL 5499928,
pp. *6–*9.) Finally, a minority position aligns with the views of
the Court of Appeal below and regards section 632.7 as
concerned only with intentional recording by persons other than
the parties to a communication. (Young v. Hilton Worldwide,
Inc. (C.D.Cal., July 11, 2014, No. 2:12-cv-01788-R-(PJWx)) 2014
WL 3434117, p. *1.)
In interpreting section 632.7 as inapplicable to the parties
to a communication, the Court of Appeal did not examine our
decision in Flanagan, supra, 27 Cal.4th 766, which contains our
most extensive prior discussion of section 632.7. In Flanagan,
we resolved a split of authority regarding what amounts to a
“confidential communication” that section 632, subdivision (a)
protects from recording without the parties’ consent. We agreed
with the view that “a conversation is confidential if a party to
that conversation has an objectively reasonable expectation that
the conversation is not being overheard or recorded” (Flanagan,
at p. 768), and rejected an alternative interpretation of the
statutory language that we considered less protective of the
parties’ privacy (ibid.). In so holding, we emphasized that the
preferred interpretation was more consistent with the
protections conferred by sections 632.5, 632.6, and 632.7. These
other provisions, we observed, all “protect against interception
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Opinion of the Court by Cantil-Sakauye, C. J.
or recording of any communication. When the Legislature
determined that there was no practical means of protecting
cordless and cellular phone conversations from accidental
eavesdropping, it chose to protect all such conversations from
malicious or intentional eavesdropping or recording, rather than
protecting only conversations where a party wanted to keep the
content secret.” (Flanagan, at p. 776.) We later added, “Under
the construction adopted here, the [Invasion of] Privacy Act is a
coherent statutory scheme. It protects against intentional,
nonconsensual recording of telephone conversations regardless
of the content of the conversation or the type of telephone
involved.” (Ibid.; see also id., at p. 771, fn. 2 [“Section 632.7,
enacted in 1992, prohibits intentionally intercepting or
recording communications involving cellular telephones and
cordless telephones. This prohibition applies to all
communications, not just confidential communications.”];
Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95,
122 (Kearney) [“it is unlawful under California law for a party
to a telephone conversation to record the conversation without
the knowledge of all other parties to the conversation”].)
C. The Language of Section 632.7, Read in Context,
Favors an Interpretation of the Section as
Applicable to Parties as Well as Nonparties
We now look more closely at the language of section
632.7(a), focusing upon its phrasing, “[e]very person who,
without the consent of all parties to a communication, intercepts
or receives and intentionally records . . . a communication . . . .”
The Court of Appeal read section 632.7(a) as
contemplating liability only in situations in which a person
(1) intercepts or receives a communication without the consent
of all parties to the communication, and (2) intentionally records
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Opinion of the Court by Cantil-Sakauye, C. J.
the communication without the consent of all parties to the
communication. As previously observed, the Court of Appeal
relied on this construction of section 632.7(a) in concluding that
recording by a party to a phone call is not prohibited under this
provision because the parties to a call normally consent to other
participants’ “receipt” of their input.
A different interpretation of section 632.7(a) would read
its consent language as directed at the recording component of
the offense, with the section’s “intercepts or receives” phrasing
specifying the circumstances in which a person may become
privy to a covered communication. Under this interpretation of
section 632.7(a), there is no doubt regarding its applicability to
parties as well as nonparties to a communication. Although
parties might normally be regarded as consenting to the receipt
of their communications by other parties to a call, this
acquiescence would not, by itself, necessarily convey their
consent to having these communications recorded.4
We conclude that the second of these interpretations
represents the more plausible reading of section 632.7(a).
Within section 632.7(a), the interception or receipt of a covered
communication is not so much a discrete subject of consent as it
is a description of the circumstances in which the prohibited act
of recordation without proper consent may occur. Such a
construction aligns with how phrasing comparable to that found
4
The circumstances involved with certain kinds of
communications may lead to a reasonable inference that a party
sending a communication has consented to having it recorded by
the intended recipient — recordation would be expected with a
facsimile or text transmission, for example. (See § 632.7, subd.
(c)(3) [defining “communication” as including facsimile
transmissions].)
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Opinion of the Court by Cantil-Sakauye, C. J.
in section 632.7(a) would be understood in other contexts.
Consider, for example, a rule providing that “any person who,
without the prior consent of the court, receives a jury summons
and fails to report to jury duty, shall be guilty of contempt.” In
this example, the receipt of the jury summons is obviously not
the target of the consent language; it is simply a fact that, when
coupled with an unconsented-to failure to appear, can lead to
liability. The language of section 632.7(a) communicates a
similar rule.5
This interpretation of section 632.7(a) finds some support
elsewhere in the statutory scheme. When the Legislature added
section 632.7 to the Penal Code through Assembly Bill 2465, it
also amended section 633.5 to add a reference to section 632.7
as follows: “Nothing in Section 631, 632, 632.5, 632.6, or 632.7
prohibits one party to a confidential communication from
recording the communication for the purpose of obtaining
evidence reasonably believed to relate to the commission by
another party to the communication of” certain crimes. (Stats.
5
One might also draw an analogy to the language in section
632, subdivision (a) prohibiting a person from, intentionally and
without the consent of all parties to a confidential
communication, using “an electronic amplifying or recording
device to eavesdrop upon or record the confidential
communication.” Just as liability under section 632 would not
be avoided by the parties’ consent to someone using an electronic
amplifying or recording device for some purpose other than
eavesdropping upon or recording a communication, the consent
language in section 632.7(a) is not properly understood as
separately directed at a discrete “intercepts or receives”
component of the course of conduct proscribed by this section.
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Opinion of the Court by Cantil-Sakauye, C. J.
1992, ch. 298, § 9, p. 1218, italics added.)6 The inclusion of this
reference to section 632.7 within section 633.5 suggests that the
legislators who enacted Assembly Bill 2465 believed section
632.7 could apply to parties.7
Meanwhile, nothing within this scheme provides concrete
evidence of a contrary intention. As previously mentioned, the
Court of Appeal regarded its interpretation as harmonizing
section 632.7’s provisions with those of sections 632.5 and 632.6,
which apply when a person “maliciously and without the
consent of all parties to the communication, intercepts, receives,
or assists in intercepting or receiving a communication”
involving a cellular or cordless telephone.
(§§ 632.5(a), 632.6(a).)8 The Court of Appeal reasoned that it
was difficult to fathom how a party could “maliciously” receive a
communication. (Smith, supra, 43 Cal.App.5th at p. 852.) And
because sections 632.5 and 632.6 do not appear to have parties
in mind, the Court of Appeal determined, section 632.7 should
be construed as similarly limited to nonparties. (Smith, at
pp. 851–852.) In a related vein, LoanMe argues that the word
“receives,” as used in sections 632.5(a) and 632.6(a),
6
A similar reference to section 632.7 still appears in section
633.5, notwithstanding subsequent amendments to the latter
section.
7
It is true that section 633.5 also references sections 632.5
and 632.6, which are less obviously applicable to parties. But
even if the Legislature may have been overcautious in adding
these references to section 633.5, that does not mean that the
later Legislature that enacted Assembly Bill 2465 should be
understood as having added surplusage to the statute.
8
Section 632.6(a), but not section 632.5(a), includes
language addressing a situation in which a conversation is
conducted between a cellular phone and a cordless phone.
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Opinion of the Court by Cantil-Sakauye, C. J.
contemplates only persons who receive communications without
the parties’ consent, and that this word should carry the same
meaning as it appears in section 632.7(a).
These arguments overlook important differences between
the language within sections 632.5(a) and 632.6(a) on the one
hand, and section 632.7(a) on the other. It is one thing to
describe a person as someone who “maliciously and without the
consent of all parties to the communication . . . intercepts . . .
[or] receives . . . a communication” (§ 632.5(a), italics added; see
also § 632.6(a) [same]), and another to address a person who
“without the consent of all parties to a communication . . .
intercepts or receives and intentionally records . . . a
communication” (§ 632.7(a), italics added). The additional
language regarding recordation within section 632.7(a), and
section 632.7(a)’s lack of a malice requirement, function to
describe a class of potential perpetrators that includes parties,
even if sections 632.5(a) and 632.6(a) do not. Although it may
be challenging to envision how a party could maliciously receive
a covered communication, it is not so hard to grasp how a party
could just receive such a communication, without malice. That,
or interception, is all that section 632.7(a) requires when
accompanied by intentional recording without the necessary
consent.
Thus, if we had to decide upon an interpretation of section
632.7(a) based solely on the statutory language, we would
conclude that this provision’s prohibition of intentional
recording without the consent of all parties should be construed
as applicable to parties as well as nonparties. But even though
we regard this as the most sensible reading of section 632.7(a),
we cannot say that the statutory language is so clear as to be
unambiguous. Therefore, we also review the pertinent
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Opinion of the Court by Cantil-Sakauye, C. J.
legislative history, which confirms our interpretation by
shedding light on what the Legislature sought to accomplish by
adding section 632.7 to the Penal Code. (See Scher v. Burke
(2017) 3 Cal.5th 136, 148–150.)
D. The Legislative History and Background of
Section 632.7 Are Consistent with Its Application
to Parties
The legislative history of Assembly Bill 2465 comports
with our reading of section 632.7 as announcing a general
prohibition against the intentional recording of a covered
communication without the consent of all parties, regardless of
whether the recording is performed by a party to the
communication or by someone else.
Committee analyses of Assembly Bill 2465, as well as
other materials within the legislative record, establish that
section 632.7 responded to concerns that existing law did not
prohibit the recordation of communications involving a cellular
or cordless telephone. One committee analysis of the measure
explained, “Under current law, it is only illegal to intercept a
conversation transmitted between the [sic] cellular or cordless
telephones. There is no prohibition against recording a
conversation transmitted between cellular or cordless phones.
By comparison, it is currently illegal to intercept or record a
conversation between traditional telephones. There appears to
be no sound policy reason behind this discrepancy.” (Assem.
Com. on Pub. Safety, Analysis of Assem. Bill No. 2465 (1991–
1992 Reg. Sess.) as amended Mar. 9, 1992, p. 1, underscoring
omitted; see also Sen. Rules Com., Off. of Sen. Floor Analyses,
Analysis of Assem. Bill No. 2465 (1991–1992 Reg. Sess.) as
amended June 1, 1992, p. 1; Sen. Com. on Judiciary, Analysis of
Assem. Bill No. 2465 (1991–1992 Reg. Sess.) as amended June 1,
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Opinion of the Court by Cantil-Sakauye, C. J.
1992, pp. 2, 3.) These concerns apparently owed to a sense that
communications involving cellular or cordless telephones might
represent “radio” communications that section 632 expressly
excludes from its purview, or that these communications could
not be regarded as “confidential” under section 632 because they
could be overheard by eavesdroppers using a radio scanner.
(Sen. Com. on Judiciary, Analysis of Assem. Bill No. 2465, at
p. 3; Ops. Cal. Legis. Counsel, No. 27958 (Dec. 17, 1991)
Invasion of Privacy, pp. 2, 5–6.)9
Providing additional context, another committee analysis
of Assembly Bill 2465 described the rationale behind section
632.7 as follows: “According to the author, [¶] [t]he primary
intent of this measure is to provide a greater degree of privacy
and security to persons who use cellular or cordless telephones.
Specifically, AB 2465 prohibits persons from recording
conversations transmitted between cellular or cordless
telephones. [¶] Under current law, it is only illegal to
‘maliciously’ intercept a conversation transmitted between the
above-identified telephones. There is no prohibition against
recording a conversation transmitted between cellular or
cordless telephones. [¶] By comparison, it is currently illegal to
‘intentionally’ intercept or record a conversation transmitted
between landline, or traditional, telephones. [¶] AB 2465
recognizes the distinction between traditional, landline
9
Whether a court should arrive at the same interpretation
of section 632 as the one apparently accepted by the Legislature
that passed Assembly Bill 2465 is an issue we need not address
here. We note without further comment, though, that some
federal case law regards section 632 as applicable to
communications involving a cellular phone. (E.g., Brinkley v.
Monterey Fin. Servs., LLC, supra, 340 F.Supp.3d at p. 1042.)
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Opinion of the Court by Cantil-Sakauye, C. J.
telephones and inherently, less secure (or more public) non-
traditional cellular and cordless telephones. Most simply,
landline telephones employ ‘closed’ wire-to-wire systems,
whereas cellular and cordless telephones employ radio waves.
Generally, there is a greater expectation of privacy with regard
to the former technology than the latter technology. [¶]
However, this does not mean that persons who use cellular or
cordless telephones may reasonably anticipate that their
conversations will be both intercepted and recorded. While
there may be utility in retaining relatively unimpeded access to
the public ‘air waves,’ there is no value in permitting private
telephone conversations that employ the ‘air waves’ to be
indiscriminately record[ed]. [¶] AB 2465 strikes the
appropriate balance. The innocent, merely curious, or non-
malicious interception of cellular or cordless telephone
conversation will remain legal. However, it will be illegal to
record the same conversations. Henceforth, persons using
cellular or cordless telephones may do so knowing that their
conversations are not being recorded.” (Sen. Com. on Judiciary,
Analysis of Assem. Bill No. 2465, supra, at pp. 3–4, underscoring
omitted; see also Assem. Conc. Sen. Amends. to Assem. Bill
No. 2465 (1991–1992 Reg. Sess.) as amended June 1, 1992, p. 1
[also quoting the author’s statement that the bill “prohibits
persons from recording conversations transmitted between
cellular or cordless phones”]; Assem. Com. on Pub. Safety,
Analysis of Assem. Bill No. 2465, supra, p. 1 [similarly quoting
the author’s statement of intent].)
These descriptions of existing law, and of what Assembly
Bill 2465 would accomplish, fairly convey that the enacting
Legislature viewed section 632.7 as plugging a perceived hole in
the statutory scheme that left communications involving
17
SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
cordless and cellular telephones unprotected from recording.
The apparent intent was not limited to protecting covered
communications from interlopers acting without malice (the
malicious interception or receipt of a communication already
being covered by sections 632.5 and 632.6). The Legislature’s
aim was instead to more generally protect communications
involving a cordless or cellular phone from intentional
recordation without the parties’ consent — and by doing so,
better align the array of protections accorded to calls involving
cellular or cordless phones with the safeguards applicable to
calls involving only landlines.
This intent would not be vindicated by an interpretation
of section 632.7 as applicable only to recording by nonparties.
Were the section so construed, parties to a communication
transmitted between a cellular or cordless phone and another
device could covertly record the communication, leaving intact a
substantial component of the “discrepancy” in protections that
the Legislature detected and sought to address. (Assem. Com.
on Pub. Safety, Analysis of Assem. Bill No. 2465, supra, at p. 1.)
On this point, by the time Assembly Bill 2465 came before the
Legislature it had long been established that section 632
prohibits parties as well as nonparties from recording a
“confidential communication” within its parameters. (Warden
v. Kahn (1979) 99 Cal.App.3d 805, 812; Forest E. Olson, Inc. v.
Superior Court (1976) 63 Cal.App.3d 188, 191–192.) Were we to
regard section 632.7 as inapplicable to the parties to a
communication, we would have to conclude that the Legislature
that enacted Assembly Bill 2465 was content with retaining a
substantial gap between the protections attached to landline
communications and those afforded to calls involving a cellular
or cordless telephone. Such a view of legislative intent — which
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SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
would be in some tension with our previous assessment of the
statutory scheme in Flanagan, supra, 27 Cal.4th at page 776 —
would be difficult to square with the historical record.
It is true that one might infer from some committee
analyses of Assembly Bill 2465 that the prospect of invasions of
privacy by third parties was front-and-center in legislators’
minds as they considered the bill. (See Smith, supra,43 Cal.App.5th at p. 857.) But unlike the Court of Appeal, we
do not regard recording by nonparties as the Legislature’s sole
focus or concern. Even if such scenarios loomed large as
Assembly Bill 2465 proceeded through the Legislature, it is also
apparent from the legislative history that the Legislature saw
this measure as protecting the privacy interests that can be
implicated whenever a communication is recorded without
consent, regardless of whether it is a party or an outsider
performing the recording. (See People v. Wade (2016) 63 Cal.4th
137, 143; Grupe Development Co. v. Superior Court (1993)
4 Cal.4th 911, 921; accord, Oncale v. Sundowner Offshore
Services, Inc. (1998) 523 U.S. 75, 79 [noting that statutory
prohibitions “often go beyond the principal evil to cover
reasonably comparable evils, and it is ultimately the provisions
of our laws rather than the principal concerns of our legislators
by which we are governed”].) And as explained ante, the
language of section 632.7(a) is best read as addressing this more
far-reaching concern by encompassing recordation by parties
and nonparties alike. In short, even if certain scenarios
involving third-party recordation of phone conversations may
have been particularly salient when the Legislature passed
Assembly Bill 2465, that does not mean section 632.7 applies
only in those circumstances.
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SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
E. Interpreting Section 632.7 as Applicable to
Recording by Parties Better Promotes the
Statutory Scheme’s Goal of Protecting Privacy in
Communications
Policy considerations enshrined in the statutory scheme
also point toward an interpretation of section 632.7 as applicable
to recording by parties as well as nonparties. Such an
interpretation is in synch with expressions of intent, findings,
and declarations within the Invasion of Privacy Act, and with
what we have understood to be the Legislature’s rationales for
shielding certain kinds of communications from recording.
“In enacting [the Invasion of Privacy Act], the Legislature
declared in broad terms its intent ‘to protect the right of privacy
of the people of this state’ from what it perceived as ‘a serious
threat to the free exercise of personal liberties [that] cannot be
tolerated in a free and civilized society.’ (Pen. Code, § 630.) This
philosophy appears to lie at the heart of virtually all the
decisions construing the Privacy Act.” (Ribas v. Clark (1985)
38 Cal.3d 355, 359 (Ribas).) As we observed in Flanagan, supra,27 Cal.4th 766, in subsequently enacting the Cellular Radio
Telephone Privacy Act of 1985, the Legislature found and
declared, “ ‘the advent of widespread use of cellular radio
telephone technology means that persons will be conversing
over a network which cannot guarantee privacy in the same way
that it is guaranteed over landline systems.’ ” (Flanagan, at
pp. 775–776, quoting Stats. 1985, ch. 909, § 2, p. 2900.) But
significantly, the Legislature also declared in the 1985 law that
“parties to a cellular radio telephone communication have a
right of privacy in that communication.” (Stats. 1985, ch. 909,
§ 2, p. 2900.) The Legislature made similar findings and
declarations when, five years later, it retitled the 1985 law the
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SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
Cordless and Cellular Radio Telephone Privacy Act and
protected communications involving cordless phones from
malicious interception and receipt. (Stats. 1990, ch. 696, §§ 1, 2,
pp. 3267, 3268.)
The interpretation of section 632.7 we adopt is better
aligned with these aims and declarations than a narrower
interpretation would be. Recording a communication without
the speaker’s consent can implicate significant privacy concerns,
regardless of whether a party or someone else is performing the
recording. As we explained in Ribas, supra, 38 Cal.3d at
pages 360–361, “While one who imparts private information
risks the betrayal of his confidence by the other party, a
substantial distinction has been recognized between the
secondhand repetition of the contents of a conversation and its
simultaneous dissemination to an unannounced second auditor,
whether that auditor be a person or mechanical device.” (See
also Flanagan, supra, 27 Cal.4th at p. 775; Sanders v. American
Broadcasting Companies (1999) 20 Cal.4th 907, 915.) The
distinction stressed in Ribas owes to the fact that “secret
monitoring denies the speaker an important aspect of privacy of
communication — the right to control the nature and extent of
the firsthand dissemination of his statements.” (Ribas, at
p. 361; United States v. White (1971) 401 U.S. 745, 787–788 (dis.
opn. of Harlan, J.) [“[m]uch off-hand exchange is easily forgotten
and one may count on the obscurity of his remarks, protected by
the very fact of a limited audience, and the likelihood that the
listener will either overlook or forget what is said, as well as the
listener’s inability to reformulate a conversation”]; Van Boven,
Electronic Surveillance in California: A Study in State
Legislative Control (1969) 57 Cal. L.Rev. 1182, 1231–1232.) To
ensure that these concerns are addressed, the state has a
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SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
“strong and continuing interest in the full and vigorous
application” of laws that vindicate the privacy rights that can be
compromised when a communication is recorded without
consent. (Kearney, supra, 39 Cal.4th at p. 125 [discussing
section 632].)
LoanMe asserts that these privacy interests would not be
significantly affected if this court were to adopt the Court of
Appeal’s construction of section 632.7 because section 632 would
remain as a backstop, protecting confidential communications
conducted over a cellular or cordless telephone from being
electronically recorded without all parties’ consent. The
fundamental problem with this argument is not necessarily that
it is incorrect — the question of section 632’s precise scope not
being squarely before us — but that it does not align with the
Legislature’s intent when it enacted section 632.7. Correctly or
not, the Legislature that passed Assembly Bill 2465 and added
section 632.7 to the Penal Code read section 632 differently and
saw a gap in the statutory scheme that left cellular and cordless
communications unprotected. This perceived hole would be
adequately filled only if section 632.7 is construed as prohibiting
the intentional recording of these communications absent the
consent of all parties, without regard to whether the recording
is performed by a party or by someone other than a party.
F. LoanMe’s Absurdity Argument Fails
Echoing the Court of Appeal below, LoanMe also argues
that section 632.7 should not be interpreted as imposing liability
on parties “on the basis of pure happenstance.” (Smith, supra,
43 Cal.App.5th at p. 853.) As LoanMe puts it, “[h]ad Smith
answered on a landline phone, section 632.7 could not apply
under any interpretation had LoanMe been using a landline too.
22
SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
But because of the happenstance that Smith allegedly answered
LoanMe’s call on a cordless phone, section 632.7 subjects
LoanMe to criminal and civil liability.” As had the Court of
Appeal (Smith, at p. 853), LoanMe characterizes this result as
“absurd.”
This argument gives short shrift to section 632.7’s
complementary role in a larger statutory scheme. It is true that
section 632.7 does not apply when all parties to a
communication use landline phones. But section 632, which
prohibits the use of an electronic device to intentionally record
without proper consent “confidential communications”
transmitted between such phones, frequently will apply to such
a conversation. As construed in Flanagan, supra, 27 Cal.4th at
page 768, section 632’s protections adhere to communications in
which a party has “an objectively reasonable expectation that
the conversation is not being overheard or recorded.” When one
juxtaposes section 632’s coverage, so defined, against that of
section 632.7, it becomes apparent that as a practical matter the
kind of phone used to receive a call will commonly make no
difference in determining whether a caller is liable under some
portion of the statutory scheme for recording a call without the
consent of all parties.
Concededly, a discrepancy may exist between section 632’s
coverage and that of section 632.7 in situations where a
communication is not confidential. Yet this difference, whatever
it may be in practical terms today in light of current privacy
expectations (see Flanagan, supra, 27 Cal.4th at p. 768), owes
to the Legislature’s apparent sense, decades ago, that cellular
and cordless communications were incapable of being cast as
confidential. Moreover, any perceived harshness in applying
section 632.7 to a party’s recordation of a nonconfidential
23
SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
communication is lessened by the fact that a party can avoid
liability under the statute by taking reasonable precautions,
such as obtaining the consent to record the statute requires. In
this respect, LoanMe’s absurdity argument resembles a position
we rejected in Kearney, supra, 39 Cal.4th 95, in which we
determined that section 632 applied prospectively to phone calls
between the Georgia branch of a national brokerage firm and
the firm’s California clients. (Kearney, at pp. 100–101.) In
Kearney, we responded to the defendant’s concern that someone
who received a call in Georgia would not necessarily know
whether a caller was in California, and hence whether
California law applied to the call. (Id., at p. 127.) We observed
that “there would appear to be no reason why an [employee of
the defendant], when answering a call, could not simply inquire
where the client is calling from.” (Ibid.) Similarly here, a party
who wants to record a call that may fall within the strictures of
section 632.7 is hardly in an impossible situation.10
10
Amici curiae Project Veritas and the Project Veritas
Action Fund (the Veritas amici) assert that constitutional
considerations militate in favor of a construction of section 632.7
as concerned only with recording by nonparties. We do not
believe any such considerations carry sufficient force here as to
compel this interpretation. We observe, however, that
especially insofar as the Veritas amici’s concerns involve section
632.7’s application to emerging uses of smartphones and similar
devices, the Legislature has in the past amended the Invasion
of Privacy Act to better address the use and misuse of new
technologies. Our sister branch may well take another look at
the statutory scheme, should legislators believe that further
updating is warranted.
24
SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
G. The Rule of Lenity Does Not Apply Here
LoanMe also argues that the rule of lenity applies here
and supports an interpretation of section 632.7 as concerned
only with recording by nonparties to a communication. We
conclude that the circumstances before us do not justify the
invocation of this principle.
The rule of lenity “ ‘generally requires that “ambiguity in
a criminal statute should be resolved in favor of lenity, giving
the defendant the benefit of every reasonable doubt on questions
of interpretation.” ’ ” (People v. Nuckles (2013) 56 Cal.4th 601,
611.) But “[t]he rule of lenity does not apply every time there
are two or more reasonable interpretations of a penal statute.”
(People v. Manzo (2012) 53 Cal.4th 880, 889 (Manzo).) On the
contrary, this principle applies only “ ‘when “ ‘two reasonable
interpretations of the same provision stand in relative equipoise
. . . .’ ” ’ ” (Ibid.)
As in Manzo, supra, 53 Cal.4th at page 889, “We do not
face that degree of uncertainty in this case” — or, frankly, any
great uncertainty at all regarding legislative intent. Here, as
there, “[t]he legislative history, the purpose of the statute,
general public policy concerns, and logic all favor” the
interpretation we adopt. (Ibid.) Of even more significance, so
too does the statutory language. Accordingly, we decline
LoanMe’s invitation to apply the rule of lenity.11
11
Smith argues that the rule of lenity has no application
where, as here, a law with potential civil and criminal
consequences is being invoked only by a civil plaintiff. (But see
Leocal v. Ashcroft (2004) 543 U.S. 1, 11–12, fn. 8.) Our analysis
makes it unnecessary to address this argument.
25
SMITH v. LOANME, INC.
Opinion of the Court by Cantil-Sakauye, C. J.
III. DISPOSITION
We conclude that section 632.7 prohibits parties as well as
nonparties from intentionally recording a communication
transmitted between a cellular or cordless phone and another
device without the consent of all parties to the communication.
The Court of Appeal did not address LoanMe’s additional
contentions that its activation of a beep tone gave Smith notice
that their conversation was being recorded, and that by
remaining on the call, Smith consented to having the call
recorded. We reverse the judgment of the Court of Appeal and
remand the cause to that court for further proceedings
consistent with our opinion, including consideration of these
arguments as may be appropriate.
CANTIL-SAKAUYE, C. J.
We Concur:
CORRIGAN, J.
LIU, J.
CUÉLLAR , J.
KRUGER, J.
GROBAN, J.
JENKINS, J.
26
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Smith v. LoanMe, Inc.
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XX 43 Cal.App.5th 844Rehearing Granted
__________________________________________________________________________________
Opinion No. S260391
Date Filed: April 1, 2021
__________________________________________________________________________________
Court: Superior
County: Riverside
Judge: Sharon J. Waters
__________________________________________________________________________________
Counsel:
Law Offices of Todd M. Friedman, Todd M. Friedman, Adrian R. Bacon and Thomas E. Wheeler for
Plaintiff and Appellant.
F. Paul Bland; DiCello Levitt Gutzler, Amy E. Keller 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 for Defendant and
Respondent.
Barr & Klein, Benjamin T. Barr, Stephen R. Klein; Litchfield Cavo and G. David Rubin 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 and Rebecca A.
Girolamo for American Medical Response, Inc., as Amicus Curiae on behalf of Defendant and Respondent.
Baker McKenzie, Edward D. Totino and Benjamin W. Turner for Atlantic Credit & Finance, Inc., as
Amicus Curiae on behalf of Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Adrian Bacon
Law Offices of Todd M. Friedman, P.C.
21550 Oxnard St., Suite 780
Woodland Hills, CA 91367
(866) 598-5042 ext. 648
Jared Toffer
Finlayson Toffer Roosevelt & Lilly LLP
15615 Alton Parkway, Suite 250
Irvine, CA 92618
(949) 759-3810