118 - Motion For Summary Judgment Re Counterclaim

Case 2:11-cv-01426-GMS Document 118 Filed 09/10/12 Page 1 of 19
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GINGRAS LAW OFFICE, PLLC 3941 E. CHANDLER BLVD., #106-243 PHOENIX, AZ 85048
David S. Gingras, #021097 Gingras Law Office, PLLC 3941 E. Chandler Blvd., #106-243 Phoenix, AZ 85048 Tel.: (480) 668-3623 Fax: (480) 248-3196 David@GingrasLaw.com Attorney for Plaintiff Xcentric Ventures, LLC
UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA
Xcentric Ventures, LLC, an Arizona limited liability company, Plaintiff, v. Lisa Jean Borodkin, et al., Defendants. Raymond Mobrez, Counterclaimant, v. Xcentric Ventures, LLC, and Edward Magedson, Counterdefendants.
Case No.: 11-CV-1426-GMS PLAINTIFF/COUNTERDEFENDANT XCENTRIC VENTURES, LLCS MOTION FOR SUMMARY JUDGMENT RE: COUNTERCLAIM
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Pursuant to Fed. R. Civ. P. 56(b), Plaintiff/Counterdefendant XCENTRIC VENTURES, LLC (Plaintiff or Xcentric) respectfully moves the Court for an order granting summary judgment in favor of Xcentric as to the Counterclaim (Doc. #109) asserted by RAYMOND MOBREZ (Mr. Mobrez). As explained herein, the material facts relating to the Counterclaim are undisputed and under those facts Xcentric is entitled to judgment as a matter of law.
MOTION FOR SUMMARY JUDGMENT RE: COUNTERCLAIM
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I.
STATEMENT OF UNDISPUTED FACTS Xcentric operates the website
The facts relevant to this motion are simple.
www.RipoffReport.com which was founded by Ed Magedson in 1998. See Xcentrics Separate Statement of Uncontested Facts (SOF) 1, 2. Xcentric is an Arizona limited liability company with its principal and sole place of business in Tempe, Arizona. SOF 2. For the last 20 years through the present, Mr. Magedson has resided in Arizona and has not maintained any residence outside of Arizona in at least 20 years. SOF 3. In various places on the Ripoff Report website including its Terms of Service page and its About Us page Xcentric lists its address as: PO Box 310, Tempe, AZ, 85280 and its telephone number as (602) 359-4357. SOF 5. Xcentric has never had a number with any area code other than 602 for the public to contact the Ripoff Report website. SOF 6. In 2009, a person placing a phone call to Xcentrics business phone number (602) 359-4357was initially greeted by a recorded message which explained various choices such as Push #1 to speak to customer service and so forth. Among the
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available choices was an option to push #5 to speak to the editor of the Ripoff Report website. SOF 10. When a caller selected option #5, the phone system asked the caller to state their name after an audio tone. After the callers response was recorded, the caller was placed on hold while the call was transferred to Mr. Magedson. SOF 11. If Mr. Magedson was not available, the call was forwarded to voicemail. SOF 12. If Mr. Magedson was available, the caller was transferred to him and as soon as the call was connected, Xcentrics phone system automatically began recording the call. At the conclusion of each call, the recording stopped and the phone system automatically emailed a file containing the recorded call to Mr. Magedson. SOF 13. When a call was transferred to him, Mr. Magedson was not able to see the callers actual caller ID information such as the area code from which the call had originated. SOF 14. Except for the automated message asking the caller to state their name and except for calls which were directed to voicemail, callers were not informed that their conversations with Mr. Magedson were recorded. SOF 15. 2
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In April and May 2009, Mr. Mobrez placed a total of seven telephone calls from Los Angeles, California to Xcentrics business phone number in Arizona(602) 3594357. SOF 18. One of these seven calls was not recorded. SOF 18. Of the remaining six calls, two of the calls were voicemails left by Mr. Mobrez. SOF 19. Of the four other calls, Mr. Mobrezs wife, ILIANA LLANERAS (Ms. Llaneras) was secretly listening to three of the calls. SOF 20. The recording of the first conversation between Mr. Mobrez and Mr. Magedson on April 27, 2009 is one minute and thirty five seconds long. SOF 16. During this call, Mr. Mobrez introduced himself and then asked Mr. Magedson about options for how to respond to a complaint on the Ripoff Report website, to which Mr. Magedson responded: You need to send us an e-mail, and we can send you the options. We cant discuss that by phone. SOF 17. The remainder of the brief conversation involved Mr. Magedson explaining how Mr. Mobrez could send an email to the site. At no time during this call did Mr. Mobrez ask Mr. Magedson to keep the conversation confidential, nor did Mr. Mobrez divulge any private or secret information. SOF 17. II. ARGUMENT a. The Counterclaim Is Untimely As explained below, Xcentrics primary position is that Arizona law, not California law, applies here and, as such, Xcentrics actions were entirely lawful. However, it is not necessary for the Court to reach that issue because even if California law applied, Xcentric is nevertheless entitled to judgment as a matter of law because Mr. Mobrezs Counterclaim is untimely. The statute of limitations for claims under Cal. Penal Code 632 is one year. See Cashcall, Inc. v. Superior Court, 150 Cal.App.4th 273, 292 n.9, 71 Cal.Rptr.3d 441, 455 n.9 (Cal. App. 4th Dist. 2008) (applying one-year limitations period of Cal. Code Civ. P. 340(a) to claim under Pen. Code 632). Claims under Penal Code 632 accrue at the moment the call is recorded, not when the recording is disclosed to a third party. See Ribas v. Clark, 38 Cal.3d 355, 365, 212 Cal.Rptr. 143, 696 P.2d 637 (Cal. 1985). 3
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Here, the undisputed facts show that Xcentric recorded six phone calls from Mr. Mobrez in April and May 2009. SOF 18. Mr. Mobrez was informed that these calls were recorded during his deposition on May 7, 2010. SOF 17. Even assuming that his claims did not accrue until he discovered the fact that the calls to Xcentric were recorded, any cause of action based on the recordings would have expired one year later on May 7, 2011. Thus, Mr. Mobrezs Counterclaim seeking damages based on Cal. Pen. Code On this
632 was untimely by more than a year when it was filed on August 15, 2012.
basis alone, Xcentric is entitled to summary judgment as to Mr. Mobrezs Counterclaim. b. Arizona Law Applies To Xcentrics Practice Of Recording Calls Although it is not necessary for the Court to reach the substance of the Counterclaim, Xcentric contends that it is entitled to summary judgment because California law does not apply here under a choice of law analysis. This is a question of first impression for Arizona, but the same legal question has been addressed by many different courts including Kearney v. Solomon Smith Barney, Inc., 39 Cal.4th 95, 137 P.3d 914, 45 Cal.Rptr.3d 730 (Cal. 2006) and Becker v. Computer Sciences Corp., 541 F.Supp. 694 (S.D.Tex. 1982). Although they involved exactly the same question, these cases reached different conclusions: the first held that California law applied (in part) to a business in Georgia which recorded calls to/from its customers in California, while the second case held that California law did not apply to an employee in Texas who secretly recorded telephone calls with coworkers in California. In the first case, Kearney, the California Supreme Court issued a lengthy and thorough decision arising from a class-action lawsuit against stockbroker Solomon Smith Barney. Employees in Solomons Georgia office routinely recorded conversations with their customers, including customers in California, without the customers knowledge or consent. After discovering this, several of Solomons California customers filed a class action lawsuit in California state court alleging violations of Cal. Pen. Code 632. As explained in the case, Georgia, like Arizona, permits one-party recording of calls. See Kearney, 137 P.3d at 917, 39 Cal.4th at 99. 4
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The trial court dismissed the case, agreeing with Solomons argument that Georgia law applied to its conduct in Georgia. See id. The Court of Appeal affirmed the dismissal, but the California Supreme Court reversed, finding that California law should be applied, albeit only in part. Despite this conclusion, the California Supreme Court appeared to seriously doubt the propriety of its own decision; so much so that the court reached an internally split decisionit determined that California law applied in the future, but it held that the plaintiffs could not recover any damages from Solomon for its past conduct even though such damages were mandatory under Cal. Pen. Code 632; although we conclude that in general California law is applicable in this setting and that plaintiffs may seek injunctive relief to require SSB to comply with California law in the future, we shall apply Georgia law with respect to SSBs potential monetary liability for its past conduct, thus relieving SSB of any liability for damages for its past recording of conversations. See Kearney, 137 P.3d at 938, 39 Cal.4th at 131. Notably, the California Supreme Court conceded that its holding was not consistent with rulings from most other jurisdictions. Indeed, the court recognized that most other courts had applied a completely different standard; i.e., that the law of the state in which the person is doing the recording should apply ... . Kearney, 137 P.3d at 938 n.16, 39 Cal.4th at 129 n.16 (empahsis added) (citing MacNeill Engineering Co. v. Trisport, Ltd., 59 F.Supp.2d 199, 202 (D.Mass. 1999); Pendell v. AMS/Oil, Inc, 1986 WL 5286, 1986 U.S.Dist. Lexis 26089 (D.Mass. 1986); Wehringer v. Brannigan, 1990 WL 200563, 1990 U.S. Dist. Lexis 16447 (S.D.N.Y. 1990); Locke v. Aston, 31 A.D.3d 33, 814 N.Y.S.2d 38 (2006); Becker v. Computer Sciences Corp., 541 F.Supp. 694 (S.D.Tex. 1982)). In the same footnote, the California Supreme Court cited only one other decision which reached the same result it didKoch v. Kimball, 710 So.2d 5 (Fla.Ct.App. 1998) (finding Florida law applied to defendant in Georgia who secretly recorded phone call with party in Florida). However, two years after Kearney was decided in 2006, the Florida courts substantially abrogated Koch in 2008. See Kountze v. Kountze, 996 So.2d 5
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246 (Fla. App. 2d Dist. 2008) (expressly rejecting Koch and finding that Florida courts could not exercise personal jurisdiction over defendant in Nebraska who secretly recorded phone call with plaintiff in Florida without resolving choice of law question). In Becker v. Computer Sciences Corp., 541 F.Supp. 694 (S.D.Tex. 1982), a federal court in Texas reached exactly the opposite result from Kearney. In Becker, the plaintiff (a Texas resident) sued his former employer for wrongful termination. During the
litigation, the plaintiff revealed that he secretly recorded several phone calls with his coworkers while the plaintiff was located in Texas and the other employees were in California. See Becker, 541 F.Supp. at 697. Like Arizona, Texas is a one-party state which does not prohibit the unilateral recording of telephone calls by a party. See id. at 702 (explaining, Texas does not provide a remedy for the surreptitious recording of telephone conversations where only one party to the conversation consents.) After learning of the recordings, the defendant/employer requested leave to amend its Answer so it could assert a counterclaim against the plaintiff for violating Cal. Pen. Code 632. The district court performed a conflict of law analysis and then denied leave to amend, finding that Texas law applied. Xcentrics position is that this Court should follow Becker and hold that Arizona law applies to Xcentrics conduct in Arizona. This holding is consistent with the
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majority rule in cases of interstate calls; that the law of the state in which the person is doing the recording should apply ... . This argument is explained further below. c. AnalysisArizona Law Applies To Xcentrics Actions In Arizona With these two conflicting lines of cases in mind, Xcentric offers the following observations. First, as a diversity action, this Court must apply Arizonas1 choice of law As this Court is aware, in the prior California proceeding Xcentric argued and the district court agreed that federal law, rather than California or Arizona law, should govern the admissibility of the recorded calls in a federal question case. See Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *12 (C.D.Cal. 2010) (rejecting attempt to suppress recordings under Penal Code 632 and concluding, because the recordings at issue comply with federal law, they may be admitted as evidence without regard to California Penal Code 632.) 6
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rules; In diversity cases, district courts in Arizona must look to Arizonas choice-of-law rules. Dyer v. Dirty World, LLC, 2011 WL 2173900, *2 (D.Ariz. 2011) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); see also Greer v. T.F. Thompson & Sons, Inc., 2011 WL 175889, *2 (D.Ariz. 2011) (same). Furthermore, Arizona courts apply the Restatement (Second) on Conflict of Laws ... to determine the applicable choice of law in torts cases. Dyer, 2011 WL 2173900, *2. This is significant because unlike Arizona, California does not follow the Restatement when deciding choice of law issues. Rather, as explained by the California Supreme Court in Kearney, California has applied the so-called governmental interest analysis in resolving choice-of-law issues. Kearney, 39 Cal.4th at 107, 137 P.3d at 922. Californias test is a three-step process: [T]he governmental interest approach generally involves three steps. First, the court determines whether the relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different. Second, if there is a difference, the court examines each jurisdictions interest in the application of its own law under the circumstances of the particular case to determine whether a true conflict exists. Third, if the court finds that there is a true conflict, it carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the application of its own law to determine which states interest would be more impaired if its policy were subordinated to the policy of the other state and then ultimately applies the law of the state whose interest would be the more impaired if its law were not applied. Kearney, 39 Cal.4th at 10708, 137 P.3d at 922 (quoting Bernhard v. Harrah's Club, 16 Cal.3d 313, 320, 128 Cal.Rptr. 215, 546 P.2d 719 (Cal. 1976)). Although this standard is somewhat flexible, it is certainly not the same test required by the Restatement.
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The question presented herei.e., whether Xcentrics act of recording the calls was tortiousis a question of substantive law rather than admissibility of evidence. Given this difference, there is nothing inconsistent about Xcentrics argument here that Arizona law (rather than federal law) controls the actionability of the recordings. 7
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Rather, under Section 6(2) of the Restatement, conflict of law decisions require the court to consider multiple factors including: (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied. Also relevant to this analysis are the points set forth in Section 145 of the Restatement: (1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in 6. (2) Contacts to be taken into account in applying the principles of 6 to determine the law applicable to an issue include: (a) the place where the injury occurred, (b) the place where the conduct causing the injury occurred, (c) the domicil [sic], residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. Significantly, unlike the California courts decision in Kearney which did not apply the Restatement, the Texas district courts decision in Becker was based solely on Sections 6 and 145 of the Restatement. See Becker, 541 F.Supp. at 70304. Because the Restatement applies here as well, Xcentric submits that the following points are relevant: (a) The place where the injury occurred As was true in Becker, Mr. Mobrez was in California when his calls with Mr. Magedson were recorded in Arizona. To the extent that the mere recording of these calls qualifies as an injury to Mr. Mobrez, that injury occurred in California. 8
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However, Mr. Mobrezs Counterclaim describes his injury in slightly different terms: I am injured and caused harm by Xcentrics illegal wiretapping of my confidential conversations, by Xcentric using the recordings as the sole basis for this lawsuit. Doc. #109 at 11:23 (empahsis added). Thus, Mr. Mobrez claims that the bulk of his injury occurred in Arizona because Xcentric has sued him here based in part on the recorded phone conversations. (b) The place where the conduct causing the injury occurred Mr. Magedson was in Arizona when his calls with Mr. Mobrez were recorded. As such, the conduct at issue occurred in Arizona. See Becker, 541 F.Supp. at 704 (when calls were recorded in Texas, the conduct causing the injury occurred in Texas). (c) The domicil [sic], residence, nationality, place of incorporation and place of business of the parties Mr. Magedson was, and is, a resident of the State of Arizona, and Mr. Mobrez was a resident of the State of California. Xcentric is an Arizona limited liability company with its sole place of business in Arizona. It is unclear where Mr. Mobrezs place of business is currently located, but during the events giving rise to this case, Mr. Mobrez conducted business in California. (d) The place where the relationship, if any, between the parties is centered Xcentric contends that as it relates to the Counterclaim, the entire relationship between the parties solely occurred in Arizona. It is undisputed that Mr. Mobrezs Counterclaim arises from seven unilateral phone calls which he made from California to Xcentric in Arizona. Mr. Mobrez does not allege that Mr. Magedson ever returned any of his calls, nor does he claim that Mr. Magedson recorded any calls other than the ones voluntarily initiated by Mr. Mobrez. The decision to make these disputed calls originated solely and exclusively with Mr. Mobrez. This is not a case in which Mr. Magedson somehow encouraged or invited Mr. Mobrez to place calls into Arizona and then secretly recorded them, nor is this a case 9
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in which Mr. Mobrez dialed a number without realizing which state he was contacting, as might be the case if Xcentric used a geographically neutral area code such as 1-800. i. Application Of Restatement Factors As noted above, after determining the contacts to be taken into account, Restatement Section 6(2) of the Restatement requires an analysis of seven different factors such as: the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, the protection of justified expectations, and the basic policies underlying the particular field of law ... . Because some of these factors overlap while other factors are largely irrelevant, rather than discussing all of the factors at length, Xcentric believes that just two key points demonstrate a compelling basis for the application of Arizona law here. 1. Relevant PoliciesCalifornia Law Never Authorizes Perjury
As noted in Becker, citizens of a state have a fundamental right to rely on the laws of their state as determining what conduct is allowed and what is prohibited when they are within their home state. See Becker, 541 F.Supp. at 705 (noting, persons within Texas, regardless of whether or not they are citizens, have a right to rely on and to act in conformity with Texas laws.) Despite the fact that Xcentrics actions were entirely lawful in Arizona, it is equally clear that the policy embodied in Californias eavesdropping law does not support Mr. Mobrezs attempt to claim money damages from Xcentric based on the events at issue. This is so because the underlying policy of Cal. Penal Code 632 is entirely consistent with Xcentrics conduct in this case. First, as explained in Kearney, the purpose of Cal. Penal Code 632 is to protect the privacy of the people of this state. Kearney, 39 Cal.4th at 119, 137 P.3d at 930 (emphasis added) (quoting Cal. Pen. Code 630). However, the protection offered by Penal Code 632 is extremely narrow; nothing in the law prohibited Xcentric or Mr. Magedson from publicly disclosing the contents or substance of his telephone conversations with Mr. Mobrez. Thus, if Mr. Magedson had taken hand-written notes of his conversation with Mr. Mobrez and posted them on the Ripoff Report website, such 10
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conduct would not have violated 632. See People v. Wyrick, 77 Cal.App.3d 903, 907, 144 Cal.Rptr. 38, 41 (Cal. App. 3d Dist. 1978) (observing, The statute makes it a crime to secretly record, not to remember, take notes, or later stenographically summarize that recollection.) Indeed, if Mr. Magedson was able to reproduce a verbatim transcript of the conversation from memory, nothing in 632 would not have precluded the public disclosure or use of the transcript. See Frio v. Superior Court, 203 Cal.App.3d 1480, 1493, 250 Cal.Rptr. 819, 826 (Cal. App. 2nd Dist. 1988) (explaining, Nothing in the Privacy Act can be read so as to conclude a party whose confidential communications have been recorded gains greater protection than if they had not been so intercepted. The statute neither can, nor purports to, remove the risk inherent in speaking, namely, the risk the party to whom the remarks are addressed might later repeat the conversation.) (emphasis added). Thus, to the extent that there is any privacy interest implicated at all here, it is extremely narrow. Indeed, the only thing that 632 prohibits is the secret recording of conversations, not the disclosure of their substance. But this restriction is subject to a major practical exceptioneven an unlawfully recorded conversation can always be used for impeachment in California. See Frio, 203 Cal.App.3d at 1497 (agreeing that
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recordings may be used for impeachment and explaining, the evidentiary sanction of section 632, subdivision (d), cannot be construed so as to confer upon a testifying witness the right to commit perjury. The truth finding function of trial ... should not be burdened further by the presentation of evidence through witnesses who may lie with impunity.) Because the substance of the conversation between Mr. Mobrez and Mr. Magedson was not shielded in any way by 632, it is difficult to discern any legitimate public policy reason to penalize Xcentrics actionsit simply recorded the call as a matter of course as permitted by both Arizona and federal law, and then used the recording solely for the purpose of defending itself against false allegations made by Mr. Mobrez regarding the substance of the conversation. This conduct was lawful under both Arizona and federal law, and because California allows even secret recordings of calls to 11
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be used for impeachment, Xcentrics actions were entirely consistent with Californias policies.2 Thus, to the extent that Californias policy choices are relevant here, it is clear that the public policy underlying Cal. Penal Code 632 does not support allowing Mr. Mobrez to export California law to Arizona so that he may re-victimize Xcentric again. 2. Applying California Law Would Impair Arizonas Policy Choices
Both Section 6(2) of the Restatement and the governmental interest test applicable in California place great importance on the question of whether applying the law of one state would interfere with or impair the law of the forum state. In Kearney, the California Supreme Court concluded that Georgias interests would not be impaired by the application of California law because: California law does not totally prohibit a party to a telephone call from recording the call, but rather prohibits only the secret or undisclosed recording of telephone conversations, that is, the recording of such calls without the knowledge of all parties to the call. Thus, if a Georgia business discloses at the outset of a call made to or received from a California customer that the call is being recorded, the parties to the call will not have a reasonable expectation that the call is not being recorded and the recording would not violate section 632. Accordingly, to the extent Georgia law is intended to protect the right of a business to record conversations when it has a legitimate business justification for doing so, the application of California law to telephone calls between a Georgia business and its California clients or customers would not defeat that interest. Kearney, 39 Cal.4th at 127, 137 P.3d at 936 (empahsis added). With all due respect to the California Supreme Court, this argument is both illogical and wrong as a matter of fact. First of all, it is clearly 100% lawful for any person in Arizona to secretly record a conversation without the knowledge of the other parties for any reason or for no reason. As this case demonstrates, such surreptitious3 one-party recordings can be invaluable
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Xcentric presumes that Mr. Mobrez will not argue that the State of California has a legitimate public interest in promoting or concealing the commission of perjury. 3 There is nothing inherently offensive about such conduct. Indeed, just as police may legitimately use undercover officers to observe criminal conduct without detection, the 12
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tools for preventing crime, catching liars in the act, and for simply showing which party was telling the truth and which was not. These are all legitimate public justifications for permitting the practice of undisclosed one-party recording. However, if California law could be applied in the extraterritorial manner suggested by the Kearney court, Arizonas policy of allowing secret recordings would be impaired to the point that this practice would no longer be possible in Arizona. If this
Court were to accept the rule created by Kearney, every recorded phone conversation in Arizona would necessarily require the recording party to begin the call by telling the other participants the call was being recorded, just in case one of the participants happened to be in California. Obviously, this would make it impossible for any Arizona resident or business to ever secretly record any phone calls with any person who might potentially be located in any place other than Arizona, even if it was later determined that all of the participants were actually in Arizona. Such a rule would not only obstruct justice, it would severely impair Arizonas right to permit the undisclosed recording of calls. Under Kearney, secret recordings are never allowed; every recorded call must begin with disclosure of the fact that the call was being recorded, thus making secret recording impossible in this state or any other state. Thus, although the governmental interest test does not apply here, it is clear that the similar factors of Section 6(2) of the Restatement weigh strongly against the application of California law because doing so would drastically impair Arizona law. Furthermore, the Kearney Courts logicthat a business in Georgia could protect itself from inadvertently violating Penal Code 632 by always disclosing the fact that it was recording calls just in case a caller was located in Californiais equally applicable in reverse; i.e., California residents who wish to protect themselves from being secretly recorded by businesses in other states may do so by simply choosing not to place telephone calls to companies outside California. Such a rule is inherently fair, it would practice of secretly recording telephone calls derives value merely from the fact that all participants are not aware that the call is being recorded. 13
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not impose any limitation on the right of California to prohibit secret recordings made within the borders of California, it would not assist criminals in concealing their actions, and it would ensure the right of other states to enact different policy choices, as Arizona and the majority of other states have done. For all of these reasons, this Court should reach the same conclusion as the district court did in Beckerit should hold that Arizona law applies to Xcentrics act of recording incoming telephone calls in Arizona. As a result, summary judgment should be entered in favor of Xcentric as to Mr. Mobrezs Counterclaim. d. Even If California Law Applies, Xcentric Is Entitled To Summary Judgment Because None Of The Calls At Issue Were Confidential To be clearXcentrics primary argument here is that Mr. Mobrezs Counterclaim fails because Arizona law applies to Xcentrics conduct of recording incoming phone calls to its Arizona phone number, and such recordings are entirely permissible under Arizona law. However, a much simpler basis exists for rejecting Mr. Mobrezs Counterclaimnone of the calls at issue qualify as confidential communications within the meaning of California law. To begin, both in the prior California case and in this litigation, Mr. Mobrez took the position that California Penal Code 632 always prohibits the recording of every phone call without the consent of all parties. This position is wrong as a matter of law. By definition, California Penal Code 632 restricts only the recording of confidential communications which are defined in 632(c) as follows: (c) The term confidential communication includes any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto, but excludes a communication made ... in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded. Thus, a conversation may qualify as confidential under California law if the conversation was carried on in circumstances as may reasonably indicate that any party 14
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to the communication desires it to be confined to the parties thereto, but a conversation cannot qualify as confidential if any party reasonably expect[s] that the communication may be overheard or recorded. Applying these standards to the actual facts of this case shows that Xcentric is entitled to judgment as a matter of law for two different reasons. Taking the easier issue first, of the six recorded calls at issue, two were voicemails left by Mr. Mobrez for Mr. Magedson. As the California district court already found, voicemails are per se outside the scope of Penal Code 632 because voice mails are necessarily recorded (and expected to be so) and therefore do not constitute confidential communications. Asia Economic Institute, LLC v. Xcentric Ventures, LLC, 2010 WL 4977054, *11 n.11 (C.D.Cal. 2010). Of the four remaining calls, it is undisputed that Mr. Mobrezs wife, Ms. Llaneras, was secretly listening to three of themMs. Llaneras listened to both calls on May 5, 2009 and she listened to the call on May 12, 2009. SOF 20. Because Mr. Mobrez knew that these three conversations were being overhead by another person, they are not confidential communications because Penal Code 632(c) expressly excludes a communication made ... in any other circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded. (empahsis added). This leaves only one remaining recording which was not a voicemail and which was not overheard by Ms. Llanerasthe first call made by Mr. Mobrez to Mr. Magedson on April 27, 2009. However, as the actual recording of this call shows, the conversation at issue was not confidential within the meaning of 632(c) because it was not carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto ... . This result is similar to the outcome in Wilkins v. National Broadcasting Co., Inc., 71 Cal.App.4th 1066, 84 Cal.Rptr.2d 329 (Cal. App. 2nd Dist. 1999). In Wilkins, the defendant (NBC) conducted a hidden camera meeting with several individuals suspected of operating a scheme to overcharge and defraud telephone customers. The meeting was 15
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secretly video and audio recorded without the consent of the targets, and footage from the meeting was aired in an episode of Dateline NBC entitled Hardcore Hustle. After the episode aired, the targets sued NBC for, among other things, violating California Penal Code 632 by secretly recording the lunch meeting without their knowledge or consent. See Wilkins, 71 Cal.App.4th at 1073, 84 Cal.Rptr.2d at 33233. The trial court granted summary judgment in favor of NBC and the Court of Appeal affirmed, finding that the conversation which took place during the lunch meeting was not a confidential communication within the meaning of Penal Code 632(c). In reaching this conclusion, the Wilkins court explained: Application of the statutory definition of confidential communication [from Penal Code 632(c)] turns on the reasonable expectations of the parties judged by an objective standard and not by the subjective assumptions of the parties. Wilkins, 71 Cal.App.4th at 1080, 84 Cal.Rptr.2d at 337 (empahsis added). After reviewing the facts, the court explained that no reasonable person would objectively believe that the lunch conversation was confidential: [NBCs undercover reporters] were virtual strangers to Wilkins and Scott, and the two people who accompanied them were total strangers, about whom Wilkins and Scott never inquired. Moreover, the topic of the lunch was SimTels business and Wilkins gave a sales pitch he had given to many others ... . Indeed, Wilkins admitted at his deposition that the sales discussion contained no secrets. Scott admitted at his deposition that Cloherty and Surles could have brought with them to lunch as many people as they liked. No trier of fact could find, judged by an objective standard, that Wilkins and Scott reasonably expected that their conversation would not be divulged to anyone else. Penal Code section 632 prohibits the recording only of confidential conversations. This conversation was not confidential under the terms of the statute and O'Laskey and Coulter. Accordingly, videotaping the lunch meeting did not violate Penal Code section 632. Wilkins, 71 Cal.App.4th at 1080, 84 Cal.Rptr.2d at 337 (empahsis added). Applying Wilkins to the facts this case is simplethe conversation which took place between Mr. Mobrez and Mr. Magedson during their first 90-second call cannot support an objectively reasonable belief that the discussion was confidential because: Mr. Mobrez and Mr. Magedson were complete strangers; 16
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The topic of conversationhow to deal with a report and how to send an email to Ripoff Report by using the Contact Us link on the websitewas extremely general and did not involve any secrets;
Mr. Mobrez never asked Mr. Magedson to keep the conversation secret; Mr. Magedson was not under any independent legal duty to keep the conversation secret; i.e., this was not a privileged conversation between an attorney/client, husband/wife, doctor/patient, priest/penitent or any other legally recognized confidential relationship.
Several years after Wilkins the California Supreme Court revisited the definition of confidential communications and it explained the rule in somewhat narrower language: a conversation is confidential under section 632 if a party to that conversation has an objectively reasonable expectation that the conversation is not being overheard or recorded. Flanagan v. Flanagan, 27 Cal.App.4th 766, 77677, 41 P.3d 575 582 (Cal. 2002) (empahsis added). While this interpretation of 632 is narrower than the rule described in Wilkins, it continues to require a showing that Mr. Mobrez had an objectively reasonable expectation that his conversation with Mr. Magedson was not being recorded. No facts support such a conclusion here because Mr. Mobrez knew he was placing a call to a business in Arizona with a 602 area code, he knew or reasonably should have known that Arizona is a one-party state which allows the recording of calls without consent, and it is extremely common for businesses to record incoming calls for quality assurance or other purposes. Furthermore, at no time did Mr. Mobrez request that the call not be recorded, and at no time did Mr. Magedson say the call was not being recorded. Under these facts, Mr. Mobrez had no reason to expect that the call was not being recorded, and absent that showing, Penal Code 632 simply does not apply at all. III. CONCLUSION
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For the reasons stated herein, summary judgment should be entered in favor of Xcentric as to the Counterclaim asserted by Raymond Mobrez arising from the alleged violation of California Penal Code 632. 17
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DATED September 10, 2012. GINGRAS LAW OFFICE, PLLC /S/ David S. Gingras David S. Gingras Attorneys for Plaintiff
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CERTIFICATE OF SERVICE
I hereby certify that on September 10, 2012 I electronically transmitted the attached document to the Clerks Office using the CM/ECF System for filing, and for transmittal of a Notice of Electronic Filing to the following: John S. Craiger, Esq. David E. Funkhouser III, Esq. Krystal M. Aspey, Esq. Quarles & Brady LLP One Renaissance Square Two North Central Avenue Phoenix, Arizona 85004-2391 Attorney for Defendant Lisa J. Borodkin Raymond Mobrez Iliana Llaneras PO BOX 3663 Santa Monica, CA 90408 Defendants Pro Se And a courtesy copy of the foregoing delivered to: HONORABLE G. MURRAY SNOW United States District Court Sandra Day OConnor U.S. Courthouse, Suite 622 401 West Washington Street, SPC 80 Phoenix, AZ 85003-215 /s/David S. Gingras
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118 - Motion For Summary Judgment Re Counterclaim

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118 - Motion For Summary Judgment Re Counterclaim

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Case 2:11-cv-01426-GMS Document 118 Filed 09/10/12 Page 1 of 19

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA

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STATEMENT OF UNDISPUTED FACTS Xcentric operates the website

The facts relevant to this motion are simple.

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