A recent pair of rulings from the Central District of California may well stem the deluge of so-called “chatbox” class actions filed under Section 631 of the California Invasion of Privacy Act (“CIPA”) (Cal. Penal Code §§ 630 et seq.). On March 7, 2023, District Judge Michael W. Fitzgerald ruled that serial plaintiff Miguel Licea – whose counsel has filed over 100 cookie-cutter Section 631 complaints in various California federal and state courts -- had failed to state a claim against defendant American Eagle Outfitters, Inc., represented by Dentons attorney Joel D. Siegel. This published ruling, along with the concurrent ruling in Licea v. Cinmar, LLC, should go a long way toward stemming the tide of these abusive and meritless lawsuits.  See Licea v. American Eagle Outfitters, Inc., __ F. Supp. 3d __, No. 22-cv-01702-MWF-JPR, 2023 WL 2469630 (C.D. Cal. March 7, 2023).

CIPA section 631’s “wiretapping” and “eavesdropping” prohibitions

By way of background, in 2022 plaintiff class action law firms began filing CIPA Section 631 lawsuits en masse, alleging “eavesdropping” and “wiretapping” of website users’ chat communications. These lawsuits follow on the heels of similar mass filings under the call-recording provisions of CIPA Sections 632 and 632.7.  Each of these complaints alleged that third-party software code had been embedded on the defendants’ websites to power the sites’ chat functionality. They further alleged – in a highly generalized manner devoid of meaningful specifics --  that this embedded code provided the third-party with “real time” access to the chat communications and facilitated the recording of those communications, without the users’ knowledge or consent. These court filings followed, often within days, an unpublished Ninth Circuit opinion (Javier v. Assurance IQ, 2022 WL 1744107 (9th Cir. 2022)) that, as one district court aptly observed, seemingly “opened the floodgates for these cases”¹ by reversing a district court’s dismissal order on the grounds of retroactive consent. 

In pertinent part, Section 631 makes it unlawful for any person to:

1. “intentionally tap[], or make[] any unauthorized connection, . . . with any telegraph or telephone wire, line, cable,” or;
2. “willfully and without the consent of all parties to the communication, or in any unauthorized manner, read[], or attempt[] to read, or to learn the contents or meaning of any message, report, or communication while the same is in transit or passing over any wire, line, or cable, or is being sent from, or received at any place within this state.”

CIPA provides for a “$5,000 per violation” statutory penalty, with no requirement to prove actual damages, rendering it an attractive vehicle for class action plaintiff attorneys.

The American Eagle outfitters ruling

Several of the Central District’s preliminary conclusions in American Eagle confirmed a wealth of pre-existing CIPA jurisprudence. For example, the Court confirmed that, notwithstanding Plaintiff Licea’s argument to the contrary, CIPA Section 631 does in fact contain the same “party exception” codified in the federal Wiretap Act (see 18 U.S.C. § 2511(2)(d)) and that therefore a website operator, as a party to the communication, is legally incapable of tapping or eavesdropping upon its own communications. The Court also agreed with the reasoning of “numerous” prior district courts that internet communications do not constitute the use of a “telephone or telegraph wire, line, or cable” for purposes of the CIPA “wiretapping” clause.

The more notable aspects of the Court’s ruling were in the context of CIPA’s “eavesdropping” clause. First, the Court concluded that the third-party software vendor was more akin to a tape-recorder – capturing and recording the chat communications -- as opposed to an unannounced third-party auditor. On this point the Court emphasized that the Complaint did not allege that the third party vendor had “the ability to use the information independently,” for its own financial benefit, but instead alleged only that the vendor could use the communications “for the benefit of” the website operator. Thus, the software code was more akin to a tape-recorder, as opposed to a true third-party, such that the party-exemption rule barred the claim. In so doing, Judge Fitzgerald’s decision sided with the earlier decisions of the Northern District in Graham v. Noom, 533 F.Supp.3d 823 (N.D. Cal. 2021) and Williams v. What If Holdings, LLC, 3:22-cv-3780, 2022 WL 17869275 (N.D. Cal. Dec. 22, 2022).

Finally, the Court ruled that plaintiff had not sufficiently pled that any communications were intercepted while “in transit,” meaning prior to the chat communication’s arrival at American Eagle’s website. Specifically, the Court agreed with Dentons’ argument that a Complaint’s mere recitation of conclusory phrases – such as “in real time” – were not detailed enough to survive a pleadings challenge. 

Not all defendants have been so fortunate. On February 3, 2023, Central District of California District Judge Sunshine Sykes denied a motion to dismiss a virtually identical “chatbox” lawsuit, allowing that action to proceed to the discovery phase. See Byars v. The Goodyear Tire & Rubber Co., et al., No. 5:22-cv-01358, 2023 WL 1788553 (C.D. Cal. Feb. 3, 2023) (J. Sykes). That ruling, however, is better understood in the context of the motion papers filed in support, which focused primarily on forum selection arguments and did not brief the party exception under either federal or state wiretapping laws.

1. Licea v. Caraway Home Inc., Case No. 5:22-cv-01791, 2023 WL 1999496 (C.D. Cal. Feb. 9, 2023).