Bales v. Sierra Trading Post Inc. et al, No. 3:2013cv01894 - Document 20 (S.D. Cal. 2013)
Court Description: ORDER denying Defendant Sierra Trading Post, Inc.'s 12 Motion to Dismiss the Complaint for Failure to State a Claim Pursuant to FRCP 12(b)(6). Signed by Judge Jeffrey T. Miller on 12/3/2013. (jah)
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Bales v. Sierra Trading Post Inc. et al Doc. 20 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 SCOTT BALES, CASE NO. 13cv1894 JM(KSC) 11 Plaintiff, vs. SIERRA TRADING POST, INC., ORDER DENYING MOTION TO DISMISS 12 13 14 15 Defendant. Defendant Sierra Trading Post, Inc. (“STP”) moves to dismiss the complaint for 16 failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff 17 Scott Bales (“Bales”) opposes the motion. Pursuant to Local Rule 7.1(d)(1), this matter 18 is appropriate for decision without oral argument. For the reasons set forth below, the 19 court denies the motion to dismiss. 20 21 BACKGROUND On July 15, 2013, Plaintiff commenced a class action in the Superior Court for 22 the County of San Diego by alleging a single claim for violation of Cal. Penal Code 23 §630 et seq., recording communications “without the consent of plaintiff.” (Compl. 24 ¶16). In broad brush Plaintiff alleges that he “had one or more telephone 25 communications with defendants’ (sic) representatives in which he provided personal 26 financial information (including credit card information) to defendants (sic).” (Compl. 27 ¶5). During these telephone calls, Plaintiff was not notified that the “telephone 28 communication was being recorded.” (Compl. ¶9). -1- 13cv1894 Dockets.Justia.com 1 On August 14, 2013, STP removed this action based upon diversity jurisdiction, 2 the 2005 Class Action Fairness Act, 28 U.S.C. §1332(d)(2)(A). Plaintiff and the class 3 members he seeks to represent are California residents, and STP is a Wyoming 4 Corporation with its primary operations in Cheyenne, Wyoming and its corporate 5 headquarters in Framingham, Massachusetts. (Notice of Removal, Ct. Dkt. 1, p.2:236 27). 7 DISCUSSION 8 Legal Standards 9 Federal Rule of Civil Procedure 12(b)(6) dismissal is proper only in 10 "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 11 1981). Courts should grant 12(b)(6) relief only where a plaintiff's complaint lacks a 12 "cognizable legal theory" or sufficient facts to support a cognizable legal theory. 13 Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Courts should 14 dismiss a complaint for failure to state a claim when the factual allegations are 15 insufficient “to raise a right to relief above the speculative level.” Bell Atlantic Corp 16 v. Twombly, 550 U.S. 544, 555 (2007) (the complaint’s allegations must “plausibly 17 suggest[]” that the pleader is entitled to relief); Ashcroft v. Iqbal, 556 U.S. 662 (2009) 18 (under Rule 8(a), well-pleaded facts must do more than permit the court to infer the 19 mere possibility of misconduct). “The plausibility standard is not akin to a ‘probability 20 requirement,’ but it asks for more than a sheer possibility that a defendant has acted 21 unlawfully.” Id. at 678. Thus, “threadbare recitals of the elements of a cause of action, 22 supported by mere conclusory statements, do not suffice.” Id. The defect must appear 23 on the face of the complaint itself. Thus, courts may not consider extraneous material 24 in testing its legal adequacy. Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th 25 Cir. 1991). The courts may, however, consider material properly submitted as part of 26 the complaint. Hal Roach Studios, Inc. v. Richard Feiner and Co., 896 F.2d 1542, 1555 27 n.19 (9th Cir. 1989). 28 Finally, courts must construe the complaint in the light most favorable to the -2- 13cv1894 1 plaintiff. Concha v. London, 62 F.3d 1493, 1500 (9th Cir. 1995), cert. dismissed, 116 2 S. Ct. 1710 (1996). Accordingly, courts must accept as true all material allegations in 3 the complaint, as well as reasonable inferences to be drawn from them. Holden v. 4 Hagopian, 978 F.2d 1115, 1118 (9th Cir. 1992). However, conclusory allegations of 5 law and unwarranted inferences are insufficient to defeat a Rule 12(b)(6) motion. In 6 Re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996). 7 The Motion 8 California’s Privacy Act, Penal Code §632, prohibits, in relevant part, the 9 recording of “confidential communication” without consent: 10 11 12 13 14 15 16 (a) Every person who, intentionally and without the consent of all parties to a confidential communication, by means of any ... recording device, ... records the confidential communication, ... shall be punished by [a fine and/or imprisonment].... Pen.Code §632(a). A “confidential communication” is defined in the statute: (c) The term "confidential communication" includes any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made . . . in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded. 17 Pen.Code §632(c). Penal Code Section 632 prohibits a party to a telephone 18 conversation from “secretly or surreptitiously recording the conversation, that is, from 19 recording the conversation without first informing all parties to the conversation that 20 the conversation is being recorded.” Kearney v. Salomon Smith Barney, Inc., 39 21 Cal.4th 95, 118 (2006). 22 STP contends that the underlying conversations were not confidential 23 communications for purposes of §632(c) and that the conversations were, as a matter 24 of law, exempt from liability pursuant to §632(e). Each argument is discussed in turn. 25 Confidential Communication 26 In reliance upon Faulkner v. ADT Security Services, Inc., 706 F.3d 1017 (9th 27 Cir. 2013), STP contends that the complaint fails to adequately allege a “confidential 28 communication” for purposes of §632. This argument is not persuasive. -3- 13cv1894 1 In Faulkner, plaintiff alleged that he called his security provider to dispute an 2 assessed charge. He was then transferred to ADT’s technical line where he heard 3 periodic “beeping” sounds during the conversation. Upon inquiring about the sounds, 4 Faulkner was informed that the telephone conversation was being recorded. He then 5 informed the representative that he had not previously been informed that the 6 conversation was being recorded and that he did not desire to continue the conversation 7 if it was being recorded. When he contacted customer service to discuss the issue, he 8 was informed that “it was the company’s policy to record telephone calls and advised 9 Faulkner to end the call if he did not wish to be recorded, which he did.” Id. at 1018. 10 The district court granted the Rule 12(b)(6) motion concluding that the “conversation 11 was not a confidential communication because he had no objectively reasonable 12 expectation that his telephone conversation with ADT would not be overheard or 13 recorded.’” Id. 14 The Ninth Circuit affirmed the dismissal, noting that a conversation is 15 confidential “if a party to that conversation has an objectively reasonable expectation 16 that the conversation is not being overheard or recorded,.” Id. at 19 (quoting Kearney 17 v. Salomon Smith Barney, Inc., 39 Cal.4th 95, 117 n.7 (2006). The Faulkner complaint 18 set forth two allegations concerning the confidentiality of the conversation. First, the 19 complaint alleged that Faulkner called to dispute a charge, and second, “it was carried 20 on in circumstances as may reasonably indicate that any party to the communication 21 desires it to be confined thereto.” Id. at1020. The court determined that the allegation 22 that Faulkner called to dispute a “charge,” without more, is insufficient to give rise to 23 an objectively reasonable expectation of confidentiality. Id. With respect to the second 24 allegation, the Ninth Circuit noted that the allegation is nothing more than a threadbare 25 recital of the statutory language of §632 and violated the pleading standard set forth in 26 Iqbal, 556 U.S. at 678. The Ninth Circuit affirmed the dismissal of the complaint. 27 Here, in contrast to Faulkner, Plaintiff alleges that he provided personal financial 28 information, including credit card information, to STP. The disclosure of personal -4- 13cv1894 1 financial information is sufficient to establish a confidential communication for 2 purposes of §632. See Flanagan v. Flanagan, 27 Cal. 4th 766, 776-77 (2002) (a 3 telephone call is a confidential communication if there is an objectively reasonable 4 basis that the call is not being recorded). Further, California courts construe the 5 Privacy Act broadly. See id. at 776 (“Under the construction adopted here, the Privacy 6 Act is a coherent statutory scheme. It protects against intentional, nonconsensual 7 recording of telephone conversations regardless of the content of the conversation or 8 the type of telephone involved.”) Here, the complaint adequately states that Plaintiff 9 had a reasonable basis to believe that his personal financial information, including his 10 credit card number, would not be recorded absent the required notice. See Mirkarimi 11 v. Nev. Prop. 1LLC, 2013LEXIS 99363 at *9 (S.D. Cal. July 15, 2013) (sharing of 12 credit card information is private information). The court concludes that the allegations 13 of a confidential communication are sufficient to provide STP with sufficient notice to 14 prepare an answer and to conduct discovery. 15 In sum, the court denies the motion to dismiss on the ground that Plaintiff fails 16 to allege a confidential communication for purposes of §632. 17 Exemptions to the Privacy Act 18 STP contends that the legislative history of the Privacy Act demonstrates that 19 §632 was not intended to cover the conduct at issue in this case. The claimed 20 exemption from liability provides: 21 22 (e) This section does not apply . . . (2) to the use of any instrument, equipment, facility, or service furnished and used pursuant to the tariffs of a public utility. . . . 23 §632(e)(2). This argument is similarly not persuasive. 24 A “tariff” filed with the Public Utility Commission (“PUC”): 25 consists of schedules showing all rates, tolls, rentals, charges, and classifications collected or enforced, or to be collected or enforced, together with all rules, contracts, privileges, and facilities which in any manner affect or relate to rates, tolls, rentals, classifications, or service. 26 27 28 Cal.Pub.Util.Code §489. “The tariff, with any limitations of liability specified therein, is the document that governs the rights and liabilities between a public utility, such as -5- 13cv1894 1 Teleport, and its customers.” Pink Dot, Inc. v. Teleport Communications Group, 89 2 Cal.App. 4th 407, 410 n.1 (2001) (citing Trammell v. Western Union Tel. Co., 57 3 Cal.App.3d 538, 548-553 (1976)).1 The rationale behind exempting telephone 4 equipment and services from the Privacy Act is rooted in the legislative belief that 5 telephone providers carried some assurance that they would act responsibly in 6 monitoring their own equipment and services. See Newport v. BPG Home Warranty 7 Co., Case No. BC488142 (Super Ct. L.A. County, May 8, 2013) (PRJN Exh. 8 at pp.88 10). As noted in Newport, the Privacy Act was enacted in 1967 before the modern-day 9 deregulation of the telephone industry. The exception provided for in §632(e), the 10 practice known as service-observing, was adopted “because those devices were limited, 11 regulated, and carried some assurance that they were being utilized for a proper 12 purpose. The legislative history routinely distinguishes such recordings from those 13 made by clandestine, unregulated devices.” Id. 14 STP also argues that the Privacy Act was not intended to criminalize service- 15 observing. As noted in the legislative history of the Privacy Act, the exclusion of 16 service-observing equipment is appropriate “only with the approval of the Public 17 Utilities Commission.” Id. The statute was not intended to govern the use of telephone 18 monitoring equipment by public utilities or “by a subscriber when furnished by a 19 communications public utility pursuant to its tariffs.” (DRJN, Exh. A at 112). 20 With respect to deregulation of the telephone industry, STP argues that “it is now 21 illegal for carriers to provide such equipment” and that the §632(e)(2) “exception is 22 therefore meaningless if construed literally because it would be impossible to comply 23 with.” (Reply at p.6:5-10). The fact that “it is now illegal for carriers to provide such 24 equipment” (reply at p.6:5-6), does not mean that the court should breathe new life into 25 an exception that no longer applies. See Knell v. FIA Card Services, N.A., Case No. 26 12cv0426 AJB (WVG) (S.D. Cal. Feb. 21, 2013) (Judge Battaglia held, “Section 632(e) 27 28 1 The court notes that the Privacy Act was enacted in 1967, before the deregulation of the telephone industry. -6- 13cv1894 1 does not create a ‘service-observing’ exemption in its unambiguous provisions and, 2 thus, the Court declines to create one based upon the statute’s legislative history.”). 3 Here, the complaint does not allege, nor does STP proffer, that its recording 4 equipment is furnished and used pursuant to any published tariff. On its face, 5 therefore, the statute does not appear ambiguous as applied to STP’s alleged routine 6 recording of telephonic conversations. At this stage in the litigation process, the court 7 declines to read into the statute a new “service-observing” exception that would permit 8 companies to secretly record telephone conversations for quality assurance purposes. 9 In sum, the court denies the motion to dismiss. 10 IT IS SO ORDERED. 11 DATED: December 3, 2013 12 Hon. Jeffrey T. Miller United States District Judge 13 14 cc: All parties 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- 13cv1894
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