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June 21, 2023

Volume XIII, Number 172

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Protecting Against Invasion of Privacy Chat Box Class Actions

Tuesday, June 20, 2023

California has seen a recent surge of both class action and individual
claims under the California Invasion of Privacy Act (“CIPA”) in which
plaintiffs attack websites using “chat boxes”—live or automated instant
messaging features on websites designed to help users communicate for
customer service purposes. The claims have evolved, and plaintiffs now
allege, in a highly generalized manner, that companies’ use of chat
boxes violates web users’ privacy by allowing a third-party chat
software provider to wiretap and eavesdrop on the private conversations
of users who interact with the company via chat. Given the high volume
at which cases have been filed and the potential for statutory damages
of $5,000 per violation, companies should take action now to protect
against future litigation.

Background on CIPA

CIPA is a 1967 law which prohibits certain parties from wiretapping,
eavesdropping, or recording telephone communications of private
citizens. While CIPA is a criminal statute, the California Penal Code
also creates a civil private right of action for CIPA
violations.[1] CIPA Section 631 covers telegraph or telephone wire.
Section 632.7 was added much later to CIPA and was specifically adopted
to address the intentional recording of cellular radio and cordless
telephone communications.[2]

Liability under Section 631 may exist in any of four ways. First,
liability may be present when a third party taps, or makes an
unauthorized connection with, a telegraph or telephone wire. Second,
liability may exist where a third party eavesdrops on a conversation
without the consent of all parties while the communication is “in
transit,” or simultaneously. Third, anyone who “uses, or attempts to
use, in any manner, or for any purpose, or to communicate in any way,
any information so obtained,” may be liable. And finally, a party may
incur liability under Section 631 for helping another person or entity
to commit any of the above violations.[3]

Section 632.7 only covers “a communication transmitted between (1) two
cellular radio telephones, (2) a cellular radio telephone and a
landline telephone, (3) two cordless telephones, (4) a cordless
telephone and a landline telephone, or (5) a cordless telephone and a
cellular radio telephone.[4]

Courts do not require a plaintiff to prove actual damages to recover on
a CIPA claim, but the plaintiff still must sustain an injury-in-fact to
be entitled to the statutory damages. A violator must pay the greater
of $5,000 per violation or three times the amount of actual damages
sustained by the plaintiff. However, even without injury, plaintiffs
can still attempt to seek an injunction to restrict the company’s chat
box use and the dissemination of their data to third parties.[5]

Theories and Arguments

Traditionally, the purpose of CIPA was to prevent non-parties from
listening in on confidential communications where the parties had
reasonable expectations of privacy, and/or on certain telephone
communications which were more susceptible to breach. The case law
interpreting CIPA over the past decades is vast; however, it has, for
the most part, addressed traditional theories of liability. In 2019,
lawsuits brought under CIPA began regarding website functionality and
online communications, moving away from email and into website
analytics tools and session-replay technology. Then in 2022, an
unpublished ruling by the Ninth Circuit concerning the narrow issue of
consent to use session replay technology emboldened entrepreneurial
plaintiffs to file class actions under CIPA alleging that companies
enable third parties to eavesdrop on their communications with website
visitors.[6] As one district court recently observed, the decision
“opened the floodgates for these cases, an unfortunate unintended
consequence” of a narrow ruling.[7] To be sure, that was not the first
case to find CIPA applies to Internet communications, but it was the
first case on appeal involving a web operator’s co-liability.

While California has amended CIPA multiple times, it has yet to amend
CIPA to expressly cover Internet communications, nor is there is any
indication that the Legislature intends to do so. Despite this, class
actions have seized on a grey area in the statute and the Ninth
Circuit’s ruling to challenge the complex and technical workings of web
functionality tools.

Yet, plaintiffs in these actions typically argue that chat box features
secretly wiretap conversations between web users and a website customer
service representative through embedded code that automatically records
and transcribes conversations for third-party vendors to simultaneously
eavesdrop upon. They allege that this is done without the consent of
the plaintiff, and thus constitutes a violation of Section 631 of CIPA.

Though most of these cases are in the early stages, courts have thus
far generally rejected these arguments for several reasons by
interpreting the plain language of the statute and finding that
third-party service providers do not fit the bill as “wrong actors.”
Unfortunately, however, the results have not been uniform. For example,
one California federal court considered a plaintiff’s allegations that
an Internet chat box communication taking place via the user’s handheld
smart phone was a telephonic communication sufficient to survive a
motion to dismiss.[8]

Regarding third-party “wrong actors,” plaintiffs have since evolved
their theories of liability, particularly under Section 631, and have
turned to a more traditional aiding and abetting theory, alleging that
the websites enable third-party software providers to spy on their
assumed private conversations and use the data for various targeted
advertising and other purposes for their own gain.

Without any iota of evidence, plaintiffs are now claiming the
third-party software is “integrated” with Meta subsidiaries like
Facebook and WhatsApp, which allows the sharing of web users’ private
information obtained from the chat box as data in a unified
system.[9] Once this data has been harvested through its subsidiaries
and used to identify user interests, Meta then profits by selling the
advertising space and directing targeted ads to the web users through
its brands like Facebook and WhatsApp. This theory, however, should not
withstand a motion to dismiss in part because it lacks specificity and
calls for unsupported speculation about integrations between
third-party vendors and Meta.[10]

How to Protect Against CIPA Chat Box Claims

Companies that use or are considering using customer chat functionality
on their websites should be aware of this recent wave of both class
action and individual litigation because, even without actual injury,
statutory damages can impose significant monetary damages. Companies
can face a minimum of $5,000 per violation, in addition to plaintiffs’
attorney’s fees and costs. And litigation is expensive, even if the
claims are without merit. To protect against potential litigation,
companies should be sure to update their privacy policies, terms of
use, and disclosures, both on their websites and in their chat box
features, to assure that web users have proper consent for the use of
chat transcripts and content.

The Privacy Class Acton Defense group would like to thank Summer
Associate Sierra Lactaoen for her work on this client alert.
__________________________________________________________________

FOOTNOTES

[1] Cal. Pen. Code §637.2.

[2] Smith v. LoanMe, Inc., 11 Cal. 5th 183 (2021).

[3] Cal. Pen. Code §631.

[4] Montantes v. Inventure Foods, 2014 WL 3305578, at *4 (C.D. Cal.
July 2, 2014).

[5] Cal. Pen. Code §637.2.

[6] Javier v. Assurance IQ, 2022 WL 1744107 (9th Cir. May 31, 2022).

[7] Byars v. Hot Topic, Inc., 2023 WL 2026994, at *9 (C.D. Cal. Feb.
14, 2023).

[8] Byars v. Goodyear Tire & Rubber Co., 2023 WL 1788553, at *5 (C.D.
Cal. Feb. 3, 2023).

[9] First Amended Class Action Complaint, 4, Valenzuela v. Keurig Green
Mountain, Inc., 2023 WL 3707181 (N.D. Cal. May 24, 2023).

[10] Order Re: Motion to Dismiss, 7, Valenzuela v. Keurig Green
Mountain, Inc., 2023 WL 3707181 (N.D. Cal. May 24, 2023).
© 2023 Blank Rome LLPNational Law Review, Volume XIII, Number 171
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About this Author
[319]Ana Tagvoryan Litigator Blank Rome [320]Ana Tagvoryan
Partner

CO-CHAIR, CORPORATE LITIGATION PRACTICE GROUP

CO-CHAIR, CLASS ACTION DEFENSE TEAM

Ana Tagvoryan is a high-stakes corporate litigator with almost two
decades of experience advising, counseling, and defending business
clients in consumer-facing litigation and enforcement actions in state
and federal courts across the nation. Her complex corporate litigation
and compliance-related practice focuses on current issues presented for
clients with consumer-facing businesses in retail, media, hospitality,
technology,...
[321][email protected]
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[323]Harrison Brown
[324]Harrison Brown Business Litigation Attorney Los Angeles
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Harrison Brown’s practice encompasses a wide range of business
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claims in both state and federal courts, including claims under the
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[327]Sharon R. Klein
[328]Sharon R. Klein Orange County Cybersecurity Attorney Blank Rome
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[331]Alex C. Nisenbaum
[332]Alex Nisenbaum Data Privacy and Information Security Attorney
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Alex advises clients on data privacy and information security laws and
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