On April 1, 2020, the California Supreme Court granted review in Smith v. LoanMe. Recently, Judge Hayes in Brinkley v. Monterey Fin. Servs., LLC, No. 16-cv-1103-WQH-WVG, 2020 U.S. Dist. LEXIS 70025 (S.D. Cal. Apr. 20, 2020) stayed reconsideration of his ruling in favor of the Plaintiffs, in light of the Supreme Court granting review in Smith. Judge Hayes explained that Monterey sought reconsideration of the Court’s September 13, 2018, Order denying Monterey’s Motion to Dismiss Brinkley’s claim for violations of section 632.7 of the California Penal Code. The District Court had found
that § 632.7 prohibits the unauthorized recording of calls that are received with the other party’s consent. Monterey’s motion to dismiss Brinkley’s claim for violations of § 632.7 is denied. See Ronquillo-Griffin v. TELUS Commc’ns, Inc., No. 17CV129 JM (BLM), 2017 U.S. Dist. LEXIS 99577, 2017 WL 2779329, at *4 (S.D. Cal. June 27, 2017) (denying the defendant’s motion to dismiss because the legislature intended § 632.7 to apply to parties to the communication); Simpson v. Best W. Int’l, Inc., No. 3:12-CV-04672-JCS, 2012 U.S. Dist. LEXIS 162181, 2012 WL 5499928, at *9 [*10] (same). (ECF No. 106 at 10-11 (alterations in original)).
After the Court’s Order on Monterey’s Motion to Dismiss the FAC, the California Court of Appeal decided Smith on December 19, 2019. Judge Hayes explained:
On appeal, the California Court of Appeal “requested supplemental briefing on the issue of whether section 632.7 applies to the recording of a phone call by a participant in the phone call or instead applies only to recording by third party eavesdroppers.” Id. at 847. The appellate court affirmed the trial court’s dismissal of Smith’s action and held that “section 632.7 prohibits only third party eavesdroppers from intentionally recording telephonic communications involving at least one cellular or cordless telephone. Conversely, section 632.7 does not prohibit the participants in a phone call from intentionally recording it.” Id. at 848. The appellate court discussed and “disagree[d] with” this Court’s reasoning in the September 13, 2018, Order on Monterey’s Motion to Dismiss the FAC. Id. at 855. The appellate court stated: The Brinkley court begins by acknowledging that in section 632.7, the phrase “‘without the consent of all parties to a communication”‘ can reasonably be interpreted as modifying “both ‘intercepts or receives’ and ‘intentionally records.'” That is how we interpret it . . . . But the Brinkley court next concludes that the following alternative interpretation is also reasonable: The statute is violated whenever the defendant (1) intercepts and intentionally records a communication without all parties’ consent, or (2) receives and intentionally records a communication without all parties’ consent . . . . We do not agree that such an interpretation of section 632.7 is reasonable. By its terms, section 632.7 is violated by “[e]very person who, without the consent of all parties to a communication, intercepts or receives and intentionally records, or assists in the interception or reception and intentional recordation of, a communication” involving a cordless or cellular phone. The introductory prepositional phrase “without the consent of all parties to a communication” appears on its face to modify the entire verb phrase “intercepts or receives and intentionally records.” We do not believe it is reasonable to suppose that by such language the Legislature intended to enact a criminal prohibition that can be violated by someone who receives a communication with the consent of all parties. The unreasonableness of such an interpretation is apparent when section 632.7 is considered in light of its predecessors, sections 632.5 and 632.6. Sections 632.5 and 632.6 are violated by “[e]very person who, maliciously and without the consent of all parties to the communication, intercepts, receives, or assists in intercepting or receiving a communication” involving a cellular (§ 632.5) or cordless (§ 632.6) phone. The clear and unambiguous effect of the consent requirement is to limit sections 632.5 and 632.6 to third party eavesdroppers—the statutes are violated only if the communication was intercepted or received without all parties’ consent. It is therefore not reasonable to suppose that when the Legislature enacted section 632.7, it used the same language (“without the consent of all parties to the communication, intercepts or receives”) to create a criminal prohibition that can be violated even if the communication was intercepted or received with all parties’ consent. For all of the foregoing reasons, we conclude that the alternative interpretation of section 632.7 identified in Brinkley . .. is not reasonable. Id. at 855-56 (internal citations omitted).
Judge Hayes explained the impact of the state appellate pleadings on a federal court:
The federal court is “bound by the state’s highest court’s interpretation of its own statute.” Briceno v. Scribner, 555 F.3d 1069, 1080 (9th Cir. 2009). “‘In the absence of a pronouncement by the highest court of a state, the federal courts must follow the decision of the intermediate appellate courts of the state unless there is convincing evidence that the highest court of the state would decide differently.'” Id. (quoting Owen ex rel. Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983)). There is currently no “pronouncement” from the California Supreme Court on the interpretation of section 632.7. Id. (quotation omitted). However, on April 1, 2020, the California Supreme Court granted review of the Smith decision and denied pending requests for depublication of the appellate court opinion. Smith, 2020 Cal. LEXIS 2319, 2020 WL 1608928, at *1. The “highest court of the state [may] [*14] decide [Smith] differently. Briceno, 555 F.3d at 1080 (quotation omitted). Whether the California Court of Appeal’s decision in Smith remains “controlling law” that this Court “must follow” will remain uncertain until the California Supreme Court affirms, reverses, or modifies the decision of the California Court of Appeal. Marlyn Nutraceuticals, Inc., 571 F.3d at 880; Briceno, 555 F.3d at 1080 (quotation omitted). A district court has broad discretion to stay proceedings pending before it “to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S. Ct. 163, 81 L. Ed. 153 (1936). The power to stay “calls for the exercise of judgment, which must weigh competing interests and maintain an even balance.” Id. at 254-55 (citations omitted). “Among these competing interests are the possible damage which may result from the granting of a stay, the hardship or inequity which a party may suffer in being required to go forward, and the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.” CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). In this case, the outcome of the California Supreme Court’s decision in Smith has a decisive effect on the viability of one of Brinkley’s two remaining claims, potentially narrowing the issues for trial and simplifying the issues in this case. If the Court grants Monterey’s Motion for Reconsideration, and then the California Supreme Court reverses the decision in Smith, the Court and the parties will expend unnecessary time and resources. In addition, the parties will suffer little damage if this case is stayed. The Scheduling Order in this case was vacated on March 14, 2018 (ECF No. 91), and there is no trial date set. Reconsidering this Court’s Order before the California Supreme Court decides Smith goes against the interests of fairness and judicial economy. The Court determines that a stay pending the California Supreme Court’s resolution of Smith is warranted. Accordingly, Monterey’s Motion for Reconsideration is denied without prejudice to refile. This action is stayed pending the California Supreme Court’s decision in Smith.