MAAME EWUSI-MENSAH FRIMPONG, United States District Judge

Scott J. Ferrell, David W. Reid, Victoria C. Knowles, Pacific Trial Attorneys APC, Newport Beach, CA, for Plaintiff. Joel D. Siegel, Paul M. Kakuske, Pooja L. Shah, Dentons U.S. LLP, Los Angeles, CA, Sonia Renee Martin, Dentons U.S. LLP, Oakland, CA, for Defendant Nationwide Mutual Insurance Co.

ORDER GRANTING IN PART MOTION TO DISMISS FIRST AMENDED COMPLAINT; GRANTING REQUEST FOR JUDICIAL NOTICE [ECF NO. 12, 13]

MAAME EWUSI-MENSAH FRIMPONG, United States District Judge

Before the Court are a Motion to Dismiss the First Amended Complaint (ECF No. 12) and a Request for Judicial Notice (ECF No. 13) filed by Defendant Nationwide Mutual Insurance Co. For the reasons stated herein, the Court GRANTS the Request for Judicial Notice and GRANTS IN PART the Motion to Dismiss the First Amended Complaint.

BACKGROUND

I. Factual Background

Plaintiff Sonya Valenzuela ("Valenzuela") is a citizen of California. ¶ 4. Defendant Nationwide Mutual Insurance Co. ("Nationwide") is an Ohio corporation that does business with California residents. ¶¶ 3, 5.

Nationwide operates a website, www.nationwide.com ("the Website"). See Introduction. The Website includes a chat feature, which allows customers to have conversations with Nationwide. ¶¶ 9, 11, 14. Visitors to the Website share sensitive personal data with Nationwide through this chat feature. ¶ 14.

Nationwide pays a third-party company—"Akamai," a/k/a "Kustomer"—to embed code in to the Website which allows Akamai to monitor and store the conversations that occur through the chat feature. ¶ 11. Akamai is not a defendant or otherwise a party to this litigation. Nationwide contracted with Akamai in part because Akamai specializes in harvesting data from conversations for financial gain. ¶ 12. Nationwide does not inform customers who use the chat feature that this monitoring of conversations, storing of transcripts, or data harvesting occurs. ¶¶ 13, 17. Nor does Nationwide obtain customers' consent. ¶ 13.

Valenzuela visited the website at an unspecified time "within the statute of limitations period." ¶ 16. Valenzuela used, among other devices, a smart phone to visit the Website. ¶ 33. Valenzuela communicated with Nationwide using a smartphone or similar device enabled with cellular technology. Id.

II. Procedural History

Valenzuela filed her Complaint in Los Angeles County Superior Court on July 26, 2022. See ECF No. 1-1 ("Complaint" or "Compl."). Nationwide removed the action to this Court on August 30, 2022. See ECF No. 1 ("Notice of Removal").

Valenzuela filed a First Amended Complaint on September 20, 2022. ECF No. 9 ("FAC"). Valenzuela alleges two causes of action: (1) Violations of the California Invasion of Privacy Act pursuant to California Penal Code § 631 ("Section 631"); and (2) Violations of the California Invasion of Privacy Act pursuant to § 632.7 ("Section 632.7"). Valenzuela brings this suit as a purported class action. See FAC. She asserts that the class is "All persons within California who within the statute of limitations period: (1) communicated with Defendant via the chat feature on Defendant's Website using cellular or landline telephony, and (2) whose communications were recorded and/or eavesdropped upon without prior consent." FAC ¶ 20. The Court has not yet ruled on class certification. See generally ECF Nos. 1-20.

Nationwide filed its Motion to Dismiss the First Amended Complaint and Memorandum of Points and Authorities in support on October 14, 2022. ECF No. 12 ("Motion"); ECF No. 12-1 ("MPA"). Also on October 14, 2022, Nationwide filed a Request for Judicial Notice in Support of its Motion, along with fourteen documents that Nationwide requests the Court take notice of. ECF No. 13 ("Request for Judicial Notice" or "RJN"); ECF No. 13-1 ("RJN Exhibits"). Valenzuela filed an Opposition to the Motion and an Opposition to the Request for Judicial Notice on May 4, 2023. ECF No. 17 ("MTD Opp'n"); ECF No. 17-1 ("RJN Opp'n"). Nationwide filed a Reply in Support of the Motion to Dismiss and a Reply in Support of the Request for Judicial Notice on May 11, 2023. ECF No. 18 ("MTD Reply"); ECF No. 19 ("RJN Reply"). Nationwide filed a Notice of Supplemental Authority on May 30, 2023. ECF No. 22. Nationwide filed a second Notice of Supplemental Authority on July 18, 2023. ECF No. 27.

The Court held a hearing on the Motion to Dismiss and Request for Judicial Notice on June 15, 2023.

REQUEST FOR JUDICIAL NOTICE

I. Applicable Law

A court may judicially notice facts that: "(1) [are] generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Under this standard, courts may judicially notice "undisputed matters of public record," but generally may not notice "disputed facts stated in public records." Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002).

II. Discussion

Here, Nationwide requests judicial notice of fourteen documents, the RJN Exhibits, which Nationwide describes as complaints filed by Valenzuela in Los Angeles County Superior Court and the United States District Court for the Central District of California. See RJN at 2-3. Valenzuela disputes the relevance of these documents, and notes that "[t]here is no prohibition against suing multiple parties in different lawsuits for separate and distinct" violations of the law. See RJN Opp'n at 1-2. However, Valenzuela does not dispute that the RJN Exhibits are indeed what Nationwide describes them as. See generally RJN Opp'n.

The Court finds that it is an undisputed matter of public record that the RJN Exhibits exist and were filed by Valenzuela in various courts as Nationwide describes. See Lee, 250 F.3d at 690. Accordingly, the Court will take judicial notice that these documents exist and are as Nationwide describes. See id. (a court may take judicial notice of the "existence" of a court document, "which is not subject to reasonable dispute over its authenticity."). The Request for Judicial Notice is GRANTED.

MOTION TO DISMISS

I. Applicable Law

Nationwide brings its Motion pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"). See Motion at 2. Federal Rule of Civil Procedure 12(b)(6) allows a party to seek to dismiss a complaint for "failure to state a claim upon which relief can be granted." "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. Labels, conclusions, and "formulaic recitation of the elements of a cause of action" are insufficient. Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

The determination of whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937. Generally, a court must accept the factual allegations in the pleadings as true and view them in the light most favorable to the plaintiff. Park v. Thompson, 851 F.3d 910, 918 (9th Cir. 2017); Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001). But a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

A properly pleaded complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Although fair notice alone is not sufficient—a complaint must also plausibly state a claim as described above—fair notice is necessary for a complaint to survive a Rule 12 Motion. See id.

As a general rule, leave to amend a dismissed complaint should be freely granted unless it is clear the complaint could not be saved by any amendment. Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). A "district court may dismiss without leave where a plaintiff's proposed amendments would fail to cure the pleading deficiencies and amendment would be futile." Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1041 (9th Cir. 2011).

II. Discussion

Valenzuela brings claims under two different sections of the California Invasion of Privacy Act (CIPA), Section 631 and Section 632.7. See Compl. ¶¶ 26-37. Although Section 631 and Section 632.7 are Penal Code statutes, the Penal Code authorizes civil liability for violations. See Cal. Penal Code § 637.2.

Nationwide's Motion seeks dismissal of both claims. See MPA at 8. As discussed below, the Court finds that Valenzuela has stated a claim under Section 631 but has not stated a claim under Section 632.7.

A. Valenzuela has stated a claim that Nationwide aided Akamai in violating Section 631 (first cause of action).

Section 631 has been interpreted by California courts as containing three different clauses which cover "three distinct and mutually independent patterns of conduct." Tavernetti v. Superior Ct., 22 Cal. 3d 187, 192, 148 Cal.Rptr. 883, 583 P.2d 737 (1978). The three patterns of conduct that Section 631 prohibits are: (1) "intentional wiretapping;" (2) "attempting to learn the contents or meaning of a communication in transit over a wire;" and (3) "attempting to use or communicate information obtained as a result of engaging in either of the previous two activities." Id.; see also Cal. Penal Code § 631(a). In addition to these three clauses, Section 631 contains an aiding provision which imposes liability on anyone who "aids, agrees with, employs, or conspires with any person or persons" in violating the three clauses described above. See Cal. Penal Code § 631(a).

There is generally a "party exception" to Section 631. In re Facebook, Inc. Internet Tracking Litig., 956 F.3d 589, 607-608 (9th Cir. 2020). A party to a conversation cannot logically be liable for "eavesdropping" on a conversation, so a party to a communication is not liable for learning the contents of that communication. Id. Further, the second clause of Section 631 only applies while a communication is "in transit or passing over any wire, [etc]., or is being sent [ ] or received." Cal. Penal Code § 631(a). Therefore, Section 631 does not prohibit a party to a conversation from recording the conversation with a device and later sharing the recording with a third party. Rogers v. Ulrich, 52 Cal.App.3d 894, 897-99, 125 Cal. Rptr. 306 (1975). However, a third party listening in on communications at the time they are received via a device is a violation of Section 631. Ribas v. Clark, 38 Cal. 3d 355, 363, 212 Cal.Rptr. 143, 696 P.2d 637 (1985). Further, when a first party intends to communicate with a second party, and computer code automatically directs the communication to an additional third party, the third party is not construed as a party to the communication, and so the party exception does not shield the third party. In re Facebook, 956 F.3d at 607. The Ninth Circuit has urged courts to consider the party exception "in the technical context of [the] case." Id.

Here, Nationwide argues that Valenzuela failed to state a claim under any of three main clauses, and as a result, has also failed to state a claim under the aiding provision. See MPA 11-18. Valenzuela disagrees and argues she has stated a claim under each of the three clauses, and also states a claim that Nationwide aided Akamai in violating Section 631. See MTD Opp'n at 1-11.

The Court holds that Valenzuela's FAC properly pleads at least one theory as to Nationwide's liability, as described below.

1. Valenzuela has plausibly alleged that Akamai violated Section 631, and that Nationwide aided Akamai in doing so.

Akamai is not a defendant in this action. See generally FAC. However, Valenzuela alleges that Nationwide "aided, abetted, and even paid third parties to eavesdrop" on her conversations. Section 631 imposes liability on anyone who "aids" another in violating the three main clauses. See Cal. Penal Code § 631(a). So, the Court must analyze whether Valenzuela has properly alleged that third party Akamai violated Section 631, and whether Valenzuela alleged that Nationwide aided in the alleged violation, in order to determine whether Valenzuela has stated a claim against Nationwide.

a. Valenzuela alleged that Akamai violated the second clause of Section 631 .

The second clause of Section 631 imposes liability on anyone who:

willfully and without the consent of all parties to the communication, or in any unauthorized manner, reads, or attempts 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

The statute contains several independent requirements that must be met for a person to violate this clause. First, the person must read, or attempt to read or to learn, the contents of a message or similar communication. See id. Second, this must be done without consent of "all parties," or in some other "unauthorized manner." See id. Third, this must be done while the message is "in transit," or passing over a wire, or being sent or received from within California. See id. Fourth, this must be done willfully. The Court will examine Valenzuela's allegations in light of these requirements.

First, Valenzuela plausibly alleged that Akamai read, or attempted to read or to learn, the contents of her messages. She alleged that Nationwide paid Akamai to "embed code" into the website that "enables Akamai to secretly intercept in real time, eavesdrop upon, and store transcripts" of messages sent via chat feature. FAC ¶ 11. Valenzuela alleged that Akamai's business model is to harvest data from communications. Id. ¶ 12. Valenzuela further alleged that she visited the website and communicated with Nationwide via her smartphone. Id. ¶¶ 16, 33. Drawing all inferences in Valenzuela's favor, as the Court must on a motion to dismiss, these allegations amount to a plausible claim that Akamai intercepted Valenzuela's messages and harvested data from them, which would almost certainly constitute reading, or attempting to read or to learn.

Although Valenzuela has not alleged specifically that she used the chat feature, as Nationwide notes, this is not fatal to her claim. MPA at 7-8. That Valenzuela used the chat feature is a plausible inference from her allegations. Taken together, the allegations that Valenzuela communicated with Nationwide (FAC ¶ 33), that Valenzuela visited the Website (id. ¶ 16), that Nationwide "caused" Valenzuela's "internet communication [ ] with Defendant's Website to be recorded" (id. ¶ 29), and the description of the chat feature (id. ¶ 11) suggest that Valenzuela used the chat feature.

Nationwide also points out that "there is no allegation that Akamai actually intercepted any communication by Plaintiff." MPA at 15 (emphasis in original). But at this stage, Valenzuela's allegations are sufficient. She alleged that Akamai is capable of intercepting messages, that she sent messages, that Nationwide "caused the internet communication between [Valenzuela] and Class Members with [Nationwide]'s Website to be recorded" by Akamai's software, and that Nationwide "aided, abetted, and even paid [Akamai] to eavesdrop upon such conversations." FAC ¶¶ 11, 29. Further, Akamai's business model appears to rely on intercepting all or nearly all messages for mass data analysis. See FAC ¶¶ 11-12. These amount to a sufficient allegation that Akamai intercepted Valenzuela's messages.

Nationwide further argues that Valenzuela failed to allege the contents of her communications. See MPA at 16. Nationwide notes that Valenzuela has not alleged "she herself shared personal data," or identified what data she shared. Id. But the second clause does not require that personal data be shared, it only requires reading the contents of a communication. Valenzuela alleged that she communicated with Nationwide; if she communicated, the communications must have had some content. See FAC ¶ 33. Failing to allege what specifically she communicated does not undermine her allegation that Akamai learned the contents of her communications. Nationwide also cites In re Zynga Privacy Litig., where the Ninth Circuit analyzed federal law and distinguished the "contents" of communications from "record information" about communications. In re Zynga Priv. Litig., 750 F.3d 1098, 1104 (9th Cir. 2014). Record information includes items such as "name," "address," "subscriber number," etc. See id. Here, this distinction is not dispositive. It is not clear from the allegations in the FAC what "data" Akamai "harvests," and it may be the case that Akamai only uses record information. See FAC ¶ 9. But Valenzuela has alleged that Akamai "eavesdrop[s] on the conversations" and that "transcripts can [ ] be 'data harvested.' " Id. From these allegations, a plausible inference is that Akamai reads the actual contents of messages and does not simply harvest record information. In sum, Valenzuela has met the second clause's first requirement by alleging that Akamai learned the contents of her communications with Nationwide. See Cal. Penal Code § 631(a).

Valenzuela has also met the other requirements. As to the second, Valenzuela clearly alleged that Akamai did not have the consent of all parties. See Cal. Penal Code § 631(a). Specifically, Akamai did not have Valenzuela's consent. FAC ¶¶ 13, 19. As to the third, Valenzuela alleged that Akamai intercepted her messages while they were "in transit." See Cal. Penal Code § 631(a). Her complaint makes clear that she alleges Akamai can "intercept [chat communications] in real time." Id. ¶ 11; see also id. ¶ 24. Nationwide describes this as "conclusory," but this is not a "threadbare recitals of a cause of action's elements, supported by mere conclusory statements. See MPA at 17; Iqbal, 556 U.S. at 663, 129 S.Ct. 1937. Valenzuela did not simply recite that there was real time interception, she added detail on how it occurs (through the code Nationwide paid Akamai to embed) and pointed to statements from Akamai regarding "[r]eal-time insights" and [d]ata from every use event collected as it happens." FAC ¶¶ 11-12 (emphasis added). The allegation of real time interception is plausible based on the factual support alleged. Nationwide also is on notice as to Valenzuela's theory; although Nationwide attempts to argue it does not understand (MPA at 17), the SAC makes quite clear that Valenzuela's allegation is that Akamai's code intercepts chat messages in real time and stores transcripts, which gives Nationwide plenty of notice on what is alleged. See SAC ¶ 11. Nothing more than this combination of plausibility and notice is required at this stage. See Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Finally, as to the fourth requirement, it is a reasonable inference from Valenzuela's allegations that Akamai acted "willfully" when it engaged in the alleged conduct. See Cal. Penal Code § 631(a). Accordingly, Valenzuela has stated a claim that Akamai violated the second clause, by willfully reading, or attempting to read or to learn, the contents of Valenzuela's communications, while the communications were in transit, without Valenzuela's consent. See Cal. Penal Code § 631(a).

b. Valenzuela alleged that Akamai violated the third clause

The third clause of Section 631 prohibits using, or attempting to use, information gained in violation of the first or second clause "in any manner, or for any purpose." Cal. Penal Code § 631(a). Valenzuela stated a claim that Akamai violated the third clause.

Valenzuela alleged that Akamai uses the data it collects. Valenzuela alleged that Akamai's business model is to harvest data "for the benefit of its clients." FAC ¶ 12. She alleged that Nationwide contracted with Akamai in order to benefit from this data harvesting, among other reasons. Id. She further alleged that Nationwide and Akamai's conduct allows transcripts to "be 'data harvested' for financial gain." Id. ¶ 9. These allegations lead to a plausible inference that Akamai is using the information it gathers in some manner for Nationwide's benefit. Nothing more is required at this stage. Accordingly, she has stated a violation of the third clause by Akamai. See Cal. Penal Code § 631(a).

c. Valenzuela alleged that Nationwide aided Akamai in its violations of Section 631 .

Section 631 imposes liability on anyone who aids another in violating any of the three main clauses. See Cal. Penal Code § 631(a). Here, Valenzuela alleged that Nationwide hired Akamai specifically to intercept messages and use them for Nationwide's financial gain. See FAC ¶ 12. Further, she alleged that Nationwide facilitated Akamai embedding Akamai's code into Nationwide's website. FAC ¶ 11. These are plausible allegations that Nationwide "aid[ed]," "permit[ted]," or "cause[d]" Akamai's violations, which would lead to Nationwide itself being liable.

In its reply, Nationwide argues that Nationwide cannot be liable for Akamai's conduct, because Akamai's collection and use of data was for Nationwide's benefit. See MTD Reply at 9-10. Nationwide cites several federal District Court cases for this purported rule. See id., citing Licea v. Am. Eagle Outfitters, Inc., No. EDCV221702MWFJPR, 659 F.Supp.3d 1072 (C.D. Cal. Mar. 7, 2023); Licea v. Cinmar, LLC, No. CV 22-6454-MWF (JEM), 659 F.Supp.3d 1096 (C.D. Cal. Mar. 7, 2023); Williams v. What If Holdings, LLC, No. C 22-03780 WHA, 2022 WL 17869275 (N.D. Cal. Dec. 22, 2022); Graham v. Noom, Inc., 533 F. Supp. 3d 823, 832 (N.D. Cal. 2021). In the hearing, Nationwide stressed the importance of Graham, which held that a software service provider is "an extension of" the party that contracted with it and "provides a tool," and thus is "not a third-party eavesdropper." Graham, 533 F. Supp. 3d at 832-33. These cases are not binding on this Court, and at least two federal District Courts have held that a software vendor hired by a party to a conversation, and acting for that party's benefit, is not itself a party and therefore is not protected by the party exception. Saleh v. Nike, Inc., 562 F. Supp. 3d 503, 519-21 (C.D. Cal. 2021) ("[the third-party software provider] did not become a 'party' to the communication simply because it was providing recording and transmission services for [Defendant]"); Revitch v. New Moosejaw, LLC, No. 18-CV-06827-VC, 2019 WL 5485330, *2 (N.D. Cal. Oct. 23, 2019) ("Although [Defendant] cannot be liable for eavesdropping on its own communications with [Plaintiff], the complaint adequately alleges that [Defendant] violated section 631 by enabling [the third-party software provider's] wrongdoing.").

Eavesdropping on a conversation at the time it occurs is a violation of Section 631, even if done for the benefit of a party to the conversation. It is far from clear that Akamai did not also benefit—given that Nationwide allegedly paid Akamai "substantial sums" (see FAC ¶ 11)—but even if Akamai acted solely for Nationwide's benefit, that would not necessarily mean Akamai did not violate Section 631 if Akamai intercepted in real time. In Ribas, the Supreme Court of California addressed how Section 631 applies where a spouse's friend eavesdropped on a conversation between spouses with only one spouse's consent. See Ribas, 38 Cal. 3d at 358, 212 Cal.Rptr. 143, 696 P.2d 637. The court held that the friend's conduct violated Section 631. Id. at 363, 212 Cal.Rptr. 143, 696 P.2d 637. This friend was acting with the permission of one spouse, and for that spouse's benefit, but this did not immunize the friend from liability. See id. However, recording a conversation with a device and later sharing the recording with others is not a violation. See Rogers, 52 Cal. App. 3d at 899, 125 Cal.Rptr. 306.

The key question is whether Nationwide's alleged actions to facilitate Akamai's alleged eavesdropping are more akin to a party recording a conversation and later sharing it with a third party, like in Rogers, or to a party allowing a third party to listen live, like in Ribas. See Rogers, 52 Cal. App. 3d at 899, 125 Cal.Rptr. 306; Ribas, 38 Cal. 3d at 363, 212 Cal.Rptr. 143, 696 P.2d 637. The Court finds that the allegations here are more like Ribas. Valenzuela alleged that Nationwide allowed Akamai "to secretly intercept in real time, eavesdrop upon, and store transcripts of Defendant's chat communications." FAC ¶ 11; see also id. ¶ 29 (Nationwide "even paid third parties to eavesdrop upon such conversations."). Valenzuela has alleged that Nationwide allowed a third-party interloper to listen in on communications in real time. This is like Ribas. See Ribas, 38 Cal. 3d at 363, 212 Cal.Rptr. 143, 696 P.2d 637. And although the alleged recording by Akamai is somewhat akin to the recording in Rogers, Akamai is not a mechanical device being used by a party to a conversation. See Rogers, 52 Cal. App. 3d at 899, 125 Cal.Rptr. 306. This Court disagrees with the reasoning of Graham—Akamai is not merely a tool used by Nationwide akin to a tape recorder. See Graham, 533 F. Supp. 3d at 832-33. Rather, a plausible inference from Valenzuela's allegations is that Akamai—a corporate entity wholly distinct from Nationwide—is a third party learning the contents of communications in real time. Whether the third party's use was purely for Nationwide's benefit, rather than for its own benefit, is immaterial under the statute. Allowing a third party to listen in makes the third party liable for a violation of Section 631. Ribas, 38 Cal. 3d at 363, 212 Cal.Rptr. 143, 696 P.2d 637. Section 631 makes clear that aiding a violation is also a violation. See Cal. Penal Code § 631(a). Nationwide may be liable for its conduct to aid Akamai's alleged violation.

B. Other possible theories under Section 631 fail (first cause of action).

Valenzuela complaint does not plausibly allege any other theories of liability under Section 631, for the reasons described below.

1. Valenzuela fails to state a claim under the first clause, because she has not alleged that she communicated via telephone or telegraph.

By its text, the first clause of Section 631 only applies to wiretapping of telephone and telegraph lines. The clause imposes liability on any person who: "intentionally taps, or makes any unauthorized connection, whether physically, electrically, acoustically, inductively, or otherwise, with any telegraph or telephone wire, line, cable, or instrument, including the wire, line, cable, or instrument of any internal telephonic communication system." Cal. Penal Code § 631(a) (emphasis added). This is unambiguous; the statute describes several different types of telephone or telegraph lines that one might make an unauthorized connection with. It does not mention any other forms of communication, many of which are covered by other clauses of Section 631. This clause of Section 631 does not apply to communications that occur by channels other than telephone or telegram.

In her complaint, Valenzuela suggests that her claim falls within the first clause because "[t]he software embedded on Defendant's Website to record and eavesdrop upon the Class's communications qualified as a 'machine, instrument, contrivance, or . . . other manner' used to engage in the prohibited conduct alleged herein." FAC ¶ 29. This ignores the fact that the first clause requires that the Defendant make an unauthorized connection with a telegraph or telephone wire, line, cable, or instrument. See Cal. Penal Code § 631(a) (emphasis added).

Similarly, in her opposition, Valenzuela attempts to circumvent the requirements of the first clause by pointing out that she has alleged she accessed the Website via her smartphone. See FAC ¶ 33; MTD Opp'n at 6. But in doing so, she was using her smartphone's computer function, not its telephone function. With modern technology, an ever-increasing number of devices contain telephone functionality. The fact that a device contains telephone capabilities does not mean courts should construe all communications from the device as telephone communications. Doing so would vastly expand the meaning of this first clause. Accordingly, because Valenzuela did not communicate via telephone or telegraph, she has not stated a claim under the first clause. See Cal. Penal Code § 631(a).

2. Valenzuela fails to allege that Nationwide directly violated the second or third clauses, because Nationwide was a party to the communications.

Under the "party exception" to Section 631, a party to a communication is not liable for learning the contents of that communication. In re Facebook, 956 F.3d at 607-608 (9th Cir. 2020). A party to a conversation cannot logically be liable for "eavesdropping" on a conversation, and a party to a communication is not liable for learning the contents of that communication. Id.

Here, Valenzuela bases her claim on communications that she sent to Nationwide. See FAC ¶ 33 ("Plaintiff and class members communicated with Defendant using smartphones . . ."). She cannot claim that she did not consent to Nationwide attempting to read or learn the contents of those communications. Second 631 only applies to "eavesdropping by a third party." Warden v. Kahn, 99 Cal. App. 3d 805, 811, 160 Cal.Rptr. 471 (Ct. App. 1979).

Accordingly, Nationwide is not liable for the actions it took to read Valenzuela's messages or learn their contents. Similarly, Nationwide cannot be liable for using the contents of those messages, as it did not acquire those contents without consent. See Cal. Penal Code § 631(a). For this reason, Nationwide's liability is limited to the theory that Nationwide aided Akamai in Akamai's violations of the second and third clauses.

C. Valenzuela fails to state a claim under Section 632.7 (second cause of action).

Section 632.7 prohibits interception or recording of a communication between two phones. See Cal. Pen Code § 632.7(a). It plainly does not apply to the fact pattern Valenzuela alleged. Valenzuela alleged that Nationwide allows Akamai to "eavesdrop" on conversations that occur through the chat feature on Nationwide's Website. See FAC ¶¶ 9, 11. The alleged conversations were not communications between two phones. Accordingly, Valenzuela failed to state a claim pursuant to Section 632.7.

Valenzuela argues that because she vis ited the Website via her smartphone, her conversations through the chat feature are covered by Section 632.7. Her argument relies on the Supreme Court of California's Flanagan v. Flanagan opinion, and on other cases that cite it. See MTD Opp'n at 12-13. In Flanagan, the court wrote that Section 632.7 applies to "a communication involving a cellular phone or a cordless phone." Flanagan v. Flanagan, 27 Cal. 4th 766, 776, 117 Cal.Rptr.2d 574, 41 P.3d 575 (2002). Valenzuela reads Flanagan as suggesting a phone on one end of a communication, as opposed to both ends, is sufficient. MTD Opp'n at 12. But Valenzuela's reading of this quote divorces it from its context. The Flanagan court explained the development of Section 632.7 and related sections: the California Legislature was responding to the problem that newer types of phones did not have privacy protections that previously existed for "landline systems." Id. In response, the legislature sought to safeguard "the privacy of parties to calls involving cellular or cordless tele phones" and so "prohibited the malicious interception of calls from or to cellular or cordless phones (§§ 632.5, 632.6) and the intentional interception or recording of a communication involving a cellular phone or a cordless phone (§ 632.7)." Id. (parentheses in original).

Section 632.7 prohibits intercepting or nonconsensual recording of "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." Cal. Pen Code § 632.7(a). Every type of communication listed in the statute is between two phones. To the extent the meaning was unclear, the California Supreme Court recently clarified that Section 632.7 prohibits intrusions upon "a communication transmitted between a cellular or cordless telephone and another telephone." Smith v. LoanMe, Inc., 11 Cal. 5th 183, 187, 276 Cal.Rptr.3d 746, 483 P.3d 869 (2021) (emphasis added). This reading aligns with the statute's text. Section 632.7 does not apply to communications where there is not a phone on both ends, and Flanagan does not appear to have been intended to suggest that Section 632.7 covers web-based chats "involving a cellular phone." See Flanagan, 27 Cal. 4th at 776, 117 Cal.Rptr.2d 574, 41 P.3d 575. Rather, the Flanagan court was making clear that all phone communications are equally protected, whether they are via landline phone, cordless phone, cell phone, or some combination of different types of phones. See id.

Valenzuela argued in the hearing that Section 632.7, by its text, includes "communications transmitted by voice, data, or image, including facsimile" and is clearly not limited to phone calls. Cal. Pen Code § 632.7(c)(3). Valenzuela urges that the Court read the statute broadly. However, reading it so broadly as to encompass web-based messages sent from the internet browser of a smart phone to another party not using a phone at all would completely divorce it from its clear limits. The Court need not decide the exact contours of what text-based communications Section 632.7 covers; the statute is limited to communications between two phones, and the allegations here do not fit that category.

Valenzuela does not allege that Nationwide, Akamai, or anyone else eavesdropped on a phone communication. She alleged that she "communicated with [Nationwide] using smartphones," which might suggest she called Nationwide. FAC ¶ 33. But all allegations regarding eavesdropping or similar conduct that might violate Section 632.7 relate to communications sent via the chat feature on the Website. See id. ¶¶ 9, 11, 12, 14, 16-19, 28-30, 33-35. Therefore, Valenzuela failed to state a claim under Section 632.7.

The motion is GRANTED as to the Section 632.7 claim, and this claim will be dismissed. The dismissal will be with leave to amend, as it is possible that amending could save this claim. See Manzarek, 519 F.3d at 1031.

CONCLUSION

For the reasons stated herein, the Request for Judicial Notice is GRANTED, and the Motion to Dismiss is DENIED as to the Section 631 claim and GRANTED as to the Section 632.7 claim. The second cause of action (for violations of Section 632.7) is DISMISSED with leave to amend.