Thursday, March 12, 2015

FYI: 11th Cir Confirms "Business Extension" Exception to Nonconsensual Call Recordings Prohibition Under Florida Security of Communications Act

The U.S. Court of Appeals for the Eleventh Circuit recently affirmed summary judgment in favor of a vendor under the Florida Security of Communications Act’s (“FSCA”) “business extension” exception where the vendor's company policy mandated recording all phone calls with a separate digital recorder connected to its telephone system.

 

A copy of the opinion is available at:  http://media.ca11.uscourts.gov/opinions/unpub/files/201410872.pdf

 

A consumer sued a company (“Vendor”) claiming that the Vendor intercepted and recorded phone calls placed to the consumer’s Florida home about certain credit-card accounts without the consumer’s consent in alleged violation of the FSCA.  It was the Vendor’s company policy to record all incoming and outgoing calls between its employees and third-party account holders.  The Vendor recorded the calls using a digital recording system, or “logger” -- a separate piece of equipment connected to the telephone system.  The Vendor did not dispute that it made and recorded several outgoing calls to the consumer in accordance with its company policy and without the consumer’s consent.

 

The district court granted summary judgment in favor the Vendor pursuant to the FSCA’s “business extension” exception.

 

The Eleventh Circuit noted that the FSCA prohibits the interception of wire, oral, or electronic communication.  See Fla. Stat. § 934.03(1).  The FSCA defines “intercept” as the “aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device.” See id. § 934.02(3)  The phrase “electronic, mechanical, or other device” includes “any device or apparatus which can be used to intercept a wire, electronic, or oral communication.” See id. § 934.02(4). 

 

However, under the “business extension” exception, the term “electronic, mechanical, or other device” does not include telephone equipment that is “[f]urnished to the subscriber or user by a provider of wire or electronic communication service in the ordinary course of business and being used by the subscriber or user in the ordinary course of its business.”  See id. § 934.02(4)(a)(1).

 

The Eleventh Circuit noted that the district court relied on Royal Health Care Serv., Inc. v. Jefferson-Pilot Life Ins. Co. in determining that the business extension exception applied.  See 924 F.2d 215 (11th Cir. 1991).  In Royal Health, the plaintiff alleged a violation of the FSCA based on defendant’s automatic recording of outgoing calls to the plaintiff without plaintiff’s consent.  See id. at 216.  The Royal Health defendant asserted that is conduct fell under the FSCA’s business extension exception, and thus no “interception” occurred under the Act.  See id.

 

To determine whether the business extension exception applied, the Circuit Court first considered whether the alleged interception was made by the telephone extension used to make the calls or by the recorder used to record the calls.  See id. at 217. 

 

Based both on Florida case law and the Eleventh Circuit’s precedent interpreting the Federal Wiretap Act (upon which the FSCA is modeled), the Circuit Court concluded that the calls were intercepted (under the term’s common meaning) by the telephone extension, not the recording device.  See id. at 217-18. 

 

Because (1) the telephone used was supplied by a provider of wire or electronic communication service in the ordinary course of its business, and (2) the calls were recorded pursuant to the defendant’s company policy in the ordinary course of business, the business extension exception applied.  See id.  Thus, no “interception” within the meaning of the FSCA occurred, and the defendant Vendor was entitled to summary judgment.  See id. at 218.

 

Next, the Eleventh Circuit noted that the consumer did not dispute that the facts in Royal Health were materially distinguishable from the case at hand.  Rather, the consumer asked the Circuit Court to certify questions to the Florida Supreme Court about the proper application of the FSCA.

 

The consumer contended that since Royal Health was decided, five other federal circuit courts (interpreting the Federal Wiretap Act) and various non-Florida state courts (interpreting analogous state statutes) – contrary to the reasoning in Royal Health – concluded that a telephone call is “intercepted” for purposes of the pertinent federal and statute statutes by the recording device, not the telephone.  The consumer argued that the intervening foreign decisions casted sufficient doubt on the Eleventh Circuit’s earlier interpretation of Florida law that certification to the Florida Supreme Court was warranted.

 

However, the Eleventh Circuit noted that under its prior-precedent rule, it was bound by an earlier panel’s decisions unless it was overruled by the Circuit Court sitting en banc or “if subsequent decisions of the United States Supreme Court or the Florida courts cast doubt on [the Appellate Court’s] interpretation of state law.” See Venn v. St. Paul Fire & Marine Ins. Co.,  99 F.3d 1058, 1066 (11th Cir. 1996) (emphasis in original). 

 

The consumer failed to cite any such intervening decision of the United States Supreme Court or of the Florida courts that called into question the Circuit Court’s interpretation of the FSCA’s business extension exception in Royal Health.  Thus, Royal Health remained binding precedent.

 

Accordingly, the Eleventh Circuit affirmed the entry of summary judgment in favor of the vendor.

 

 

 

 

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@mwbllp.com

 

Admitted to practice law in Illinois

 

 

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Sunday, March 8, 2015

FYI: Fla App Ct (1st DCA) Reverses Dismissal of Foreclosure as to Borrower Spouse on Statute of Limitations Grounds, When Borrower Spouse Named as "Unknown Spouse"

The District Court of Appeal of the State of Florida, First District, recently reversed the dismissal of a foreclosure action, because the filing date of an amended complaint naming the borrower husband by his full name when he had previously only been named as an “unknown spouse” related back to the filing date of the original complaint for purposes of the statute of limitations.

 

A copy of the opinion is available at:  https://edca.1dca.org/DCADocs/2014/0019/140019_DC13_02262015_120224_i.pdf

 

A bank acting as trustee for an asset securitization trust filed its foreclosure complaint on January 22, 2008.  Approximately 5 months later, the husband and wife borrowers filed their amended answer.

 

After a lengthy period of inactivity, during which the borrowers notified the court of the delays and the court itself moved to dismiss, the bank moved for judgment on the pleadings in late December of 2009. In March of 2009, the trial court entered partial summary judgment in the bank’s favor, denying the husband’s purported defense based on his homestead interest in the property encumbered by the mortgage.

 

In April of 2013, the borrowers’ new counsel moved to dismiss the complaint because only a fictitious name was listed for a party defendant. The trial court granted the motion in June of 2013, giving the plaintiff bank leave to amend within 30 days. At the end of June, 2013, the bank filed its amended complaint, to which the borrower wife responded in July of 2013, with no mention of her husband.

 

The trial was set for October of 2013, but a few days before the borrower husband filed a motion seeking dismissal of the amended complaint based on the statute of limitations, arguing that he had never been properly named as a party defendant prior to the filing of the amended complaint (having been named only as the “unknown spouse”), and the 5-year statute of limitations since the mortgage default expired in September of 2012. The trial court granted the motion and dismissed the foreclosure action against the husband.

 

On appeal, the First District Court of Appeal analyzed Florida’s rule of civil procedure governing amended complaints, which provides that the amended complaint relates back to the date when the complaint was filed if the claim arose of the same conduct, transaction or occurrence, even where the amendment is filed after the statute of limitations has run, so long as the original complaint provides fair notice of the factual basis of the claim.  

 

It also discussed Florida’s settled common law rule that the addition of a new party should be permitted if the new and former parties share an identity of interest.

 

The appellate court then turned to the purpose of Florida’s statute of limitations, which it said was to protect defendants from unusually long delays in the filing of lawsuits and from the unexpected enforcement of stale claims.

 

The Appellate Court noted that the key inquiry in determining whether an amended complaint relates back or is barred by the limitations statute is whether the party in question had notice of the lawsuit before the statute ran, and whether the amendment merely adjusts the status of an existing party or introduces a new defendant.  The Court also noted that, where there is no doubt about the identity of the party intended to be named, it is not unfair to allow the plaintiff to correct its pleading, because the defendant suffers no prejudice.

 

In the case at bar, the Appellate Court held that it made no difference that the defendant husband was substituted in as a defendant, because his legal defenses were not affected by the filing of the amended complaint.  The Court held that his interest in the lawsuit is identical whether he was referred to as the unknown spouse of his co-borrower or by his real name. Because the amended complaint did not name a new party, but only clarified an existing party’s name, and, moreover, because the husband identified himself in his amended answer as the spouse of the co-borrower and participated in litigating the case, the Court held that the defendant husband could be heard to complain about lack of notice or surprise.

 

Because the amended complaint related back to the original filing date, the Appellate Court held that the statute of limitations was not a proper basis for dismissal.

 

Accordingly, the Court reversed the trial court’s order dismissing the amended complaint as to the husband borrower and remanded for further proceedings.

 

 

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@mwbllp.com

 

Admitted to practice law in Illinois

 

 

 

 

 

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