Keypoint: In the wake of a recent California decision that allowed claims alleging use of chat functionality on website violated California wiretapping laws, three California district courts have dismissed nearly identical claims causing a split in Central District of California courts.

Following a February decision that allowed a complaint that alleged a website operator’s use of a customer support chat feature violated California wiretapping laws to proceed past the pleading stage, three California district courts have since dismissed nearly identical claims. The result leaves companies who may find themselves named as defendants in these lawsuits uncertain whether they will be able to escape litigation at the less costly motion to dismiss stage. In the below post, we analyze these decisions and their impact on future litigation over these claims.

In early February 2023, a Central District of California court denied a motion to dismiss claims that chat functionality on a website violated Sections 631(a) and 632.7 of the California Invasion of Privacy Act (“CIPA”). To read our earlier analysis of this trend of cases, please see our February 16, 2023, blog post.

Six days after that decision published, Judge Bernal of the Central District of California issued a decision that granted a motion to dismiss a nearly verbatim complaint. Licea v. Caraway Home Inc. et al., 2023 WL 1999496 (C.D. Cal. Feb. 9, 2023). Judge Bernal took issue with the plaintiff’s complaint—which was substantially similar to 60 other complaints filed—finding the plaintiff failed to allege facts to plausibly plead (rather than merely conclude) either that at least 1,000 Californians used the chat feature on the defendant’s website or that the court had personal jurisdiction over the defendant, who was a Delaware corporation with a principal place of business in New York. Id. at *6–*9. Having resolved the motion to dismiss on the jurisdictional arguments, the court expressly did not reach the defendant’s argument that the plaintiff’s complaint should be dismissed for failure to state a claim under Rule 12(b)(6). Id. at *5.

Five days later, however, Judge Bernal issued a decision in a second lawsuit that did just that. Byars v. Hot Topic, Inc. et al., 2023 WL 2026994 (E.D. Cal. Feb. 14, 2023). That decision also involved a complaint that was nearly identical to approximately 60 other complaints. Judge Bernal again found the plaintiff failed to plead facts that would give the court subject matter jurisdiction. Id. at *6–*7. The court continued and also dismissed the plaintiff’s Section 631(a) and 632.7 claims under Rule 12(b)(6). Id. at *7–12.

The court first found the plaintiff failed to adequately plead a Section 631(a) claim because the defendant was a party to the communications and the plaintiff did not plead sufficient facts that, if true, would establish the service providers were also not a party to the communication. Id. at *7–10. The court then found a claim that chat functionality offered by a website could not violate Section 632.7 because the “unambiguous meaning of the statute is thus that it only applies to communications involving two telephones.” Id. at *10. In reaching this decision, Judge Bernal directly addressed the earlier February 2023 decision that denied a motion to dismiss a Section 632.7 claim in a nearly verbatim complaint. Id. at 11. Judge Bernal admitted he was unable to factually distinguish the prior decision because it involved a nearly identical complaint and instead found that the decision was, simply wrong. Id. at *12. Although Judge Bernal allowed both plaintiffs leave to amend at least some of their complaints, the plaintiffs dismissed their complaints and did not file an amended complaint after Judge Bernal entered these two decisions.

On March 2, 2023, Judge Sykes of the Central District of California—who also authored the earlier February decision—decided another motion to dismiss another nearly identical complaint. Cody v. Boscov’s Inc., No. 8:22-CV-01434-SSS-KKx (C.D. Cal. March 2, 2023) (ECF No. 47). Here, however Judge Sykes granted the defendant’s motion to dismiss both the Section 631(a) and Section 632.7 claims. Id. at 4-5. Judge Sykes first found that the plaintiff could not show the defendant directly violated Section 631(a) because, as the website operator, the defendant was a party to the communication. Id. at 4. Although Judge Sykes also found the plaintiff failed to plead facts that, if true, would show the service provider recorded the information for some use beyond merely supplying it to the defendant, the court allowed the plaintiff leave to amend its complaint to allege these facts. Id. at 5.

Judge Sykes then dismissed the plaintiff’s Section 632.7 claim because the plaintiff did not allege any party to the communication used a telephonic device. Id. Judge Sykes again held, however, that Section 632.7 did not require both parties to the communication use telephonic devices. The court also allowed the plaintiff leave to amend its complaint to address this deficiency. Id. at 6. Less than 24 hours later, the plaintiff filed its amended complaint.

With the four decisions from the Central District of California in the last month, litigants and potential-litigants now face uncertainty caused by the split between Judge Sykes and Judge Bernal. Resolution of these cases may turn on which judge is assigned to their case, at least until either the Ninth Circuit or a California higher state authority resolves the scope of Section 632.7. Alternatively, additional cases that will be heard soon may also provide another means to resolve this dispute without resolving this Central District split. To date, these decisions have not addressed whether chat participants consent to the recording of their chat conversation when the Privacy policy discloses chat conversations are recorded and shared with third parties. Motions to dismiss that will be heard later this month, however, directly raise this issue.