McCabe v. Intercontinental Hotels Group Resources, Inc. et al

Filing 74

Order by Magistrate Judge Nathanael M. Cousins denying 56 Motion to Dismiss.(nclc2, COURT STAFF) (Filed on 2/3/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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LAURA MCCABE and LATROYA

Case No. 12-cv-04818 NC

class of similarly situated individuals,

ORDER DENYING SIX
CONTINENTS’ MOTION TO
DISMISS

12 SIMPSON, individually and on behalf of a
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Plaintiffs,

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v.

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Re: Dkt. No. 56

SIX CONTINENTS HOTELS, INC.,
Defendant.

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In this putative class action for violation of California Penal Code § 632.7, defendant

20 Six Continents moves to dismiss plaintiffs’ second amended complaint on the ground that
21 plaintiffs fail to allege all of the elements required to state a claim for relief under that
22 statute. Because (1) plaintiffs are not required to allege the type of device Six Continents
23 used to receive its calls, and (2) plaintiffs have sufficiently alleged the intent necessary to
24 state a claim under § 632.7, the motion is DENIED.
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I. BACKGROUND

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Plaintiffs’ Allegations

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This class action arises out of Six Continents’ alleged policy and practice of recording

28 calls made to hotel reservation hotlines without the consent of the callers in violation of
Case No. 12-cv-04818 NC
ORDER DENYING MOTION TO
DISMISS

1 California’s Invasion of Privacy Act, Penal Code § 632.7. Dkt. No. 54 ¶¶ 1, 5. Plaintiffs
2 allege that their calls were routed to Six Continents’ call centers when they called the toll3 free reservation number associated with hotel brands owned by Six Continents. Id. ¶ 11.
4 Plaintiffs allege that they each called at least one of Six Continents’ call centers from a
5 cellular phone in California. Id. ¶¶ 14-16, 18. Plaintiffs claim that Six Continents
6 intentionally used hardware and/or software “to carry out the practice and policy of
7 recording and/or intercepting” calls routed to Six Continents’ call centers. Id. ¶ 13.
8 Plaintiffs further allege that before July 18, 2012, callers to five of Six Continents’ English9 speaking call centers received no warning that calls were being recorded and/or monitored.
10 Id. at ¶ 1. Plaintiffs allege that they did not and could not consent to the recordings because
11 they were unaware that they were being recorded. Id. ¶ 16. Plaintiffs seek an award of
12 statutory damages of $5,000 per violation under Penal Code § 637.2. Id. ¶ 36.
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Procedural History

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On July 8, 2012, plaintiffs filed a putative class action in the Superior Court of

15 Alameda County against InterContinental Hotels Group Resources, Inc. and
16 InterContinental Hotels of San Francisco, Inc. Dkt. No. 1 at 9. On July 19, 2012, plaintiffs
17 filed their first amended complaint, adding Six Continents Hotels as a defendant. Id. at 22.
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Defendants removed the case to this Court pursuant to 28 U.S.C. § 1332(d) on July 8,

19 2012. Id. at 2. On October 11, 2012, defendants moved to dismiss plaintiffs’ first amended
20 complaint on the grounds that (1) plaintiffs failed to allege facts necessary to support their
21 claim because a violation of the statute requires the interception of a phone conversation,
22 not just the recording of a phone call; (2) statutory damages were limited to $5,000 per
23 action; and that (3) federal law preempted § 632.7. Dkt. No. 5 at 2, 17-18. This Court
24 denied defendants’ motion on December 18, 2012. Dkt. No. 24.
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On May 20, 2013, the Court granted the parties’ stipulation dismissing defendants

26 InterContinental Hotels Group Resources, Inc. and InterContinental Hotels of San
27 Francisco. Dkt. Nos. 37, 38. On July 10, 2013, plaintiffs filed a motion to amend their
28 complaint to encompass Six Continents’ other hotel brands whose reservation calls are
Case No. 12-cv-04818 NC
ORDER DENYING MOTION TO
DISMISS

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1 routed to the same call centers, which this Court granted. Dkt. Nos. 41, 52. On October 11,
2 2013, plaintiffs filed their second amended complaint. Dkt. No. 54. Six Continents then
3 filed this motion to dismiss. Dkt. No. 56.
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The Court has jurisdiction over this case under the Class Action Fairness Act, which

5 gives district courts original jurisdiction over class actions in which (1) there are at least 100
6 putative class members; (2) the aggregate amount in controversy exceeds the sum or value
7 of five million dollars exclusive of interest and costs; and (3) any putative class member’s
8 citizenship is different from any defendant’s. 28 U.S.C. § 1332(d). The minimal diversity
9 requirement is satisfied because Six Continents is incorporated under the laws of the State
10 of Delaware, with its principal place of business in Atlanta, Georgia, and plaintiffs McCabe
11 and Simpson are citizens of California. Dkt. No. 1 at 4. Further, both the minimum class
12 size and the amount in controversy requirements are satisfied as plaintiffs seek $5,000 in
13 statutory damages per alleged violation during a period in which approximately seven
14 thousand calls made from California were recorded. Id. at 4-6.
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All parties have consented to the jurisdiction of a United States magistrate judge

16 under 28 U.S.C. § 636(c). Dkt. Nos. 7, 8.
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II. STANDARD OF REVIEW
The purpose of a motion to dismiss under Rule 12(b)(6) is to test the “legal

19 sufficiency of the complaint.” N. Star. Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th
20 Cir. 1983). To survive a motion to dismiss, a complaint must contain sufficient factual
21 matter, construed in the light most favorable to the non-moving party, to state a claim for
22 relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007);
23 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible when the
24 “pleaded factual content allows the court to draw a reasonable inference that the defendant
25 is liable for the misconduct alleged.” Iqbal, 556 U.S. at 664 (citing Twombly, 550 U.S. at
26 555). If a court grants a motion to dismiss, leave to amend should be granted unless the
27 pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203
28 F.3d 1122, 1127 (9th Cir. 2000).
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ORDER DENYING MOTION TO
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III. DISCUSSION

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Parties’ Requests for Judicial Notice

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The Court first addresses the parties’ requests for judicial notice filed in connection

4 with the motion to dismiss. Generally, a court may not look to matters beyond the
5 complaint without converting a motion to dismiss into one for summary judgment. Datel
6 Holdings Ltd. v. Microsoft Corp., 712 F. Supp. 2d 974, 983 (N.D. Cal. 2010) (citations
7 omitted). However, a court may take judicial notice of material that is submitted as part of
8 the complaint, or is necessarily relied upon by the complaint, as well as matters of public
9 record. Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001). Under Federal Rule of
10 Evidence 201(b), “a judicially noticed fact must be one not subject to reasonable dispute
11 that is either: (1) generally known within the territorial jurisdiction of the trial court; or (2)
12 capable of accurate determination by resort to sources whose accuracy cannot reasonably be
13 questioned.” Datel Holdings, 712 F. Supp. 2d at 983.
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Six Continents seeks judicial notice of (1) “the fact that telephone calls may be

15 answered by using a computer on Voice-Over Internet Protocol,” and (2) the decision of the
16 Central District of California in Vartanian v. VW Credit, Inc., No. 11-cv-10776 (C.D. Cal.
17 Feb. 22, 2012). Dkt. No. 56-1 at 5-9.
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Plaintiffs ask the Court to take judicial notice of four documents: (1) “a publicly

19 available, research document entitled ‘Pew Internet: Mobile’”; (2) “a publicly available
20 research document entitled ‘Wireless Quick Facts’” authored by the CTIA (The Wireless
21 Association); (3) “a publicly available government research document entitled ‘Wireless
22 Substitution: Semiannual Estimates from the NHIS ER Program’”; and (4) “a publicly
23 available government research document entitled ‘Wireless Substitution: Early Release of
24 Estimates from the National Health Interview Survey.’” Dkt. No. 63.
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This Court GRANTS in part Six Continents’ request, and takes judicial notice of the

26 existence of the Vartanian opinion. See Lee, 250 F.3d at 690 (while a court may take
27 judicial notice of another court’s opinion, “it may do so not for the truth of the facts recited
28 therein, but for the existence of the opinion, which is not subject to reasonable dispute over
Case No. 12-cv-04818 NC
ORDER DENYING MOTION TO
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1 its authenticity.”) (internal quotation marks and citation omitted). As none of the remaining
2 materials in either plaintiffs’ or Six Continents’ request for judicial notice are necessary for
3 the Court’s determination of the issues, plaintiffs’ request is DENIED and Six Continents’
4 request is DENIED in part.
5 B.

Plaintiffs Allege Sufficient Facts to State a § 632.7 Claim.

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Six Continents contends that the complaint does not state a claim for relief under

7 § 632.7 because plaintiffs have failed to allege (1) the type of device Six Continents used to
8 receive the calls, and (2) facts showing that Six Continents knew that plaintiffs were calling
9 from their cellular phones when it recorded the communications. The Court finds that
10 neither of these arguments has merit.
The California Legislature enacted the California Invasion of Privacy Act to “protect

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12 the right of privacy of the people” of California from “the invasion of privacy resulting
13 from the continual and increasing use” of technology capable of accessing confidential
14 communications. Cal. Penal Code § 630. Within the Act, Penal Code § 632.7 creates
15 liability for every person who:
[W]ithout the consent of all parties to a communication, intercepts or receives
and intentionally records . . . 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 telephone, or a
cordless telephone and a cellular radio telephone.

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20 To enforce this provision, the Legislature provided a cause of action for victims of
21 violations. See Cal. Penal Code § 637.2.
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In determining the requisite elements to state a claim for relief under § 632.7, this

23 Court is bound by the decisions of the Supreme Court of California in interpreting this state
24 law. See generally Vernon v. City of L.A., 27 F.3d 1385, 1391 (9th Cir. 1994). When the
25 California Supreme Court has not spoken on a particular issue, this Court must decide what
26 result the Supreme Court would reach based on available court opinions, statutes, and
27 treatises. Id.
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1.

Plaintiffs Are Not Required to Allege the Type of Device Six Continents
Used to Receive Their Calls.

Six Continents contends that § 632.7 “can only apply to a communication with a

4 cellular or cordless phone on one end and a cellular, cordless or landline telephone on the
5 other.” Dkt. No. 56 at 6. As such, Six Continents argues that plaintiffs’ claim is
6 insufficient because they fail to allege that Six Continents received their calls with a device
7 that falls within the protection of the statute. Id. Six Continents further asserts that this is
8 significant because it could have answered plaintiffs’ calls with VoIP technology, which is
9 not expressly listed in the statute as a protected telephonic device. Id. However, Six
10 Continents has not cited any cases in support of this proposition, nor has this Court found
11 any cases in which plaintiffs were required to allege the type of phone defendant used when
12 receiving a communication as an element of a § 632.7 claim.
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Instead, courts applying § 632.7 have characterized the statute as prohibiting “the

14 intentional recording of any communication without the consent of all parties where one of
15 the parties is using a cellular or cordless telephone.” Zephyr v. Saxon Mortg. Services, Inc.,
16 873 F. Supp. 2d 1223, 1225 (E.D. Cal. 2012); accord Roberts v. Wyndham Intern., Inc., No.
17 12-cv-5180 PSG, 2012 WL 6001459, at *4 (N.D. Cal. Nov. 30, 2012) (determining that
18 “Plaintiffs have alleged a communication involving at least one cellular phone, which
19 satisfies the California Supreme Court’s interpretation of Section 632.7.”); Kuschner v.
20 Nationwide Credit, Inc., 256 F.R.D. 684, 688 (E.D. Cal. 2009) (stating § 632.7 “makes
21 unlawful the intentional, non-consensual recording of a telephone communication, where at
22 least one of the phones is a cordless or cellular telephone.”).
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This interpretation comports with the California Supreme Court’s discussion of

24 § 632.7 in Flanagan v. Flanagan, in which the Supreme Court stated that § 632.7 prohibited
25 the “intentional interception or recording of a communication involving a cellular phone or
26 a cordless phone.” 27 Cal. 4th 766, 776 (2002) (emphasis added). While the California
27 Supreme Court’s analysis of § 632.7 was not central to its holding in Flanagan¸ the
28 Supreme Court’s discussion is instructive of its interpretation of the statute, and
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1 accordingly, guides this Court’s analysis.
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Applying this construction of the statute, the court in Roberts rejected the same

3 argument Six Continents makes here. 2012 WL 6001459, at *4. In Roberts, defendants
4 similarly claimed that their client “hypothetically could have used [] ‘VoIP’ technology,
5 which may not qualify under Section 632.7.” Id. Denying the motion, the court stated that
6 plaintiffs had alleged a communication involving at least one cellular phone, which was
7 sufficient to state a claim under Flanagan’s interpretation of § 632.7. Id.
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Although the Court need not go beyond the plain language of § 632.7, the legislative

9 history also does not support Six Continents’ narrow interpretation of the statute. As the
10 California Supreme Court observed in Flanagan, the California Invasion of Privacy Act
11 “protects against intentional, nonconsensual recording of telephone conversations regardless
12 of the conversation or the type of telephone involved.” 27 Cal. 4th at 776. Additionally,
13 according to a Bill Analysis of A.B. 1554, which added § 632.7 to the Invasion of Privacy
14 Act, § 632.7 “makes the interception and intentional recording of a communication
15 transmitted between two telephones, one or both of which is a cellular, cordless or landline
16 telephone, without the consent of all parties to that communication, punishable as an
17 alternate felony/misdemeanor.” Cal. B. Analysis, A.B. 1554, S. Comm. on Judiciary, July
18 13, 1993 (emphasis added). This is the same analysis that was given during the third
19 reading in front of the California State Senate while voting on A.B. 1554, which amended
20 § 632.7. Cal. B. Analysis, A.B. 1554, S. Third Reading, Aug. 17, 1993.
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Accordingly, plaintiffs here have stated a claim for relief under § 632.7 as they allege

22 that their calls from cellular phones were intentionally recorded by Six Continents without
23 consent. See, e.g., Dkt. No. 54 ¶¶ 13-16.
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2.

Plaintiffs Are Not Required to Allege That Six Continents Knew They
Were Calling on Their Cellular Phones.

Six Continents contends that because § 632.7 “only applies to communications

27 between a cellular or cordless phone on one end, and a cellular, cordless or landline
28 telephone on the other[,] . . . the intent required to state a valid Section 632.7 claim is not
Case No. 12-cv-04818 NC
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1 just the intent to record any conversation, [but] the intent to record a communication
2 between” two of the phones specified in that section. Dkt. No. 56 at 6-7. According to Six
3 Continents, plaintiffs have not stated a claim under § 632.7 because they have not alleged
4 Six Continents “knew that they were calling on their cellular telephones and intentionally
5 recorded the cellular call.” Id. at 7. Six Continents has not cited to any cases or any other
6 legal authority that interprets § 632.7 as requiring a plaintiff to allege facts showing such
7 specific knowledge or intent. To support its contention, Six Continents makes two primary
8 arguments.
First, Six Continents analogizes § 632.7’s intent requirement to the intent requirement

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10 under California Penal Code § 632. This analogy misses the mark. Section 632
11 criminalizes the acts of “[e]very person who, intentionally and without the consent of all
12 parties to a confidential communication, by means of any electronic amplifying or recording
13 device, eavesdrops upon or records the confidential communication.” Cal. Penal Code
14 § 632. Unlike § 632.7, the plain language of § 632 requires the intent to eavesdrop upon or
15 record a confidential communication without the consent of all parties. See People v. Super.
16 Ct. of L.A., 70 Cal. 2d 123, 133 (1969) (granting defendant’s motion to dismiss because
17 plaintiff failed to allege that defendant had the intent to record a confidential
18 communication required by § 632); Vartanian v. VW Credit, Inc., No. 11-cv-10776 (C.D.
19 Cal. Feb. 22, 2012), Dkt. No. 56-1 at 5-9 (granting defendant’s motion to dismiss because
20 plaintiff only pleaded that defendant had a policy of recording conversations, which was
21 insufficient to allege that defendant intentionally recorded a confidential communication).
22 By contrast, the California Supreme Court has observed that § 632.7 protects “against
23 interception or recording of any communication,” without requiring a specific intent to
24 record a distinct type of communication. Flanagan, 27 Cal. 4th at 776. Six Continents’
25 reliance on cases interpreting § 632 does not support its argument that plaintiffs were
26 required to allege that Six Continents knew plaintiffs were calling from cellular phones to
27 state a claim under § 632.7.
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Second, Six Continents argues that this Court should apply the rule of lenity when

2 interpreting § 632.7 and adopt a narrow reading of the statute in favor of Six Continents,
3 given the statute’s criminal implications. Dkt. No. 56 at 8 n.3. However, this Court need
4 not apply the rule of lenity in interpreting § 632.7 because Six Continents has not
5 demonstrated that the provision is ambiguous. United States v. Carona, 660 F.3d 360, 369
6 (9th Cir. 2011) (stating that the rule of lenity only applies where “there is a grievous
7 ambiguity or uncertainty in the language and structure of the [statute], such that even after a
8 court has seize[d] every thing from which aid can be derived, it is still left with an
9 ambiguous statute.”); Smith v. United States, 508 U.S. 223, 239 (1993) (“The mere
10 possibility of articulating a narrower construction . . . does not by itself make the rule of
11 lenity applicable.”).
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Moreover, even if plaintiffs were required to allege that Six Continents knew they

13 were calling from cellular phones to state a claim under § 632.7, the Court finds that the
14 complaint is sufficient. The Court must construe a statute so as to effectuate the purpose of
15 the law. See Super. Ct. of L.A., 70 Cal. 2d at 132. The Legislature amended the Invasion of
16 Privacy Act in response to its finding that the “advent of widespread use of cellular radio
17 telephone technology means that persons will be conversing over a network which cannot
18 guarantee privacy in the same way that it is guaranteed over landline systems.” Flanagan,
19 27 Cal. 4th at 775-76. Therefore, the purpose of the Act was to “protect against intentional,
20 nonconsensual recording of telephone conversations regardless of the content of the
21 conversation or the type of telephone involved.” Id. at 776.
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Plaintiffs allege that they called Six Continents’ call centers from their cellular phones

23 in California, that they were never given a warning that the communication could be
24 monitored or recorded, and hence, never given the opportunity to consent. Dkt. No. 54 ¶¶
25 14-16, 18. Plaintiffs also allege that Six Continents had a policy and practice of recording
26 calls at five of its English-speaking call centers without warning callers before July 18,
27 2012, and Six Continents intentionally recorded plaintiffs’ calls according to that policy.
28 Id. at ¶¶ 1, 13. Because plaintiffs allege that Six Continents recorded all calls to five out of
Case No. 12-cv-04818 NC
ORDER DENYING MOTION TO
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heir
h-speaking call centers pursuant to a policy, i could reas
c
o
it
sonably be
1 six of th English
ontinents kn and int
new
tended to re
ecord calls m
made from cellular pho
ones
2 inferred that Six Co
he
ellular and cordless ph
c
hones. Furth
hermore, it would be
3 given th widespread use of ce
stent with th purpose of the statute to impos on plainti the requ
he
o
se
iffs
uirement to allege
4 inconsis
owing defen
ndant’s specific knowl
ledge at the outset of th case, wh those fa
e
he
hen
acts
5 facts sho
o
ot
able
t
it
ery.
6 would ordinarily no be availa without the benefi of discove

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ge
Th
herefore, th Court hol that plai
he
lds
intiffs suffic
ciently alleg that Six Continents
s

d
ording of a communica
ation witho consent in violation of
out
n
8 engaged in the intentional reco

9 § 632.7.
IV. CONCLUS ION
C

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Si Continen motion to dismiss the second amended co
ix
nts’
t
omplaint is DENIED.

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IT IS SO OR
T
RDERED.

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Date: Februa 3, 2014
ary
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____
__________
__________
_____
Nath
hanael M. C
Cousins
Unit States M
ted
Magistrate J
Judge

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Case No. 12-cv-04818 NC
ORDER DENYING MOTION TO
R
G
T
DISMISS

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