US Coins

Consumer protection laws can create a fix for what isn't broken

I admire California for the progressiveness of its people and legislatures over the past 100 years or so. Many national health, safety and environmental rules we take for granted today originated on the state level in California.

Much of California law is in the form of codes, as opposed to judge-made common law principles, and back when lawyers kept bound copies of statutes on bookshelves, the California Codes took up quite a lot of space.

Of course, progressiveness and extensive law-writing will produce some unfortunate results from time to time. California’s own Ronald Reagan often complained that legislators who thought they knew what was best often didn’t have a clue (he would have put it more elegantly). In the press of enacting consumer protection laws, legislatures sometimes not only fix things that weren’t broken, but they break things more.

Wiretap lawsuits

In the past two years, at least two national coin dealers, and many more small, medium and large businesses, that deal with California customers have been sued by the same class action law firm purporting to be protecting those customers’ rights under California’s Wiretap Act.

California is one of 12 states that prohibit recording of phone calls without consent of both parties to the call. In 2006, California’s Supreme Court ruled that out-of-state companies that record calls with Californians are liable under the act, even if they are calling from states that do not require both parties to consent. The floodgates slowly opened, as threatening letters were sent and settlements coerced.

Some companies fought this application of the law, but they lost. Then they were successful in getting courts to enforce one aspect of the law that required that the calls being recorded involve “confidential” communications, which the statute defines as communications where the California resident would reasonably expect it to be “confined to the parties thereto.”

But here’s where it turned out the Legislature did something strange.

Cellphone or land line?

The section of the law relating to calls from cell phones or cordless phones did not include the word “confidential,” meaning that calls that were not covered if made on a landline phone were covered if made on a cordless or mobile phone.

Of course, legislatures are free to treat those devices differently, but in practice how is someone supposed to know whether the person on the other end of the phone line is on a landline phone or a mobile phone?

Just get everyone’s consent, you might say. Yes, we’re used to hearing messages from call centers saying calls “may be monitored or recorded for quality assurance purposes.” And the coin dealers I referred to earlier had such messages on their phone systems.

Unfortunately for them, it was alleged that their sales staffs answered incoming calls so quickly that all or parts of that message weren’t heard by the mobile phone callers — therefore no consent.

Applying logic

Recently a federal judge applied some logic to the situation. He ruled that the statute’s defining a wrongdoer as one who “intercepts or receives” a cell phone or cordless phone conversation and then records it implies that the California Legislature meant only to prohibit nonparties to the conversation from recording calls.

The judge dismissed the case (which involved a major hotel chain’s call center), and there’s bound to be an appeal. Other judges, however, have interpreted “intercepts or receives” literally as applying to someone who merely “receives” the call without having “intercepted” it, which would include the parties to the conversation. It seems likely that more lawsuits will be filed before the California Legislature amends the law to make sense.


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