Consumers Win Privacy Ruling Against AI Eavesdropper

Case Summary

Consumers brought a class action in California state court alleging that Dialpad's AI-powered call center software secretly eavesdrops on consumer phone calls in violation of the California Invasion of Privacy Act (CIPA). Each named plaintiff called a business that uses Dialpad's platform, including companies like Netflix, Warby Parker, RE/MAX, and AAA. The plaintiffs alleged that Dialpad listened in real time, transcribed the conversation, analyzed customer sentiment, and learned the contents of the call without their knowledge or consent. Plaintiffs contend that Dialpad functions as an undisclosed third-party auditor on these calls, intercepting communications that consumers intended to have solely with the business they called.
‍
Beyond eavesdropping, the complaint alleges Dialpad goes a step further by using the content of those intercepted calls to train its own AI models for its own commercial benefit and for the benefit of its other clients, citing Dialpad's own marketing claims that its speech-recognition model was built on billions of minutes of analyzed voice calls from actual customer calls.

The Telephone Exemption

Because Dialpad is a voice-over-ip (VoIP) operator it argued that it is exempt from liability under CIPA as a telephone provider. Cal. Pen. Code § 631(b)(1). Dialpad argued that its AI products like AI transcription and sentiment analysis are a part of its telephone service.

My co-counsel at Salahi PC lead the charge in litigation and raised several winning arguments. Specifically, that the telephone exemption was intended only to shield a phone company when it intercepts calls for the purpose of operating its communications service, such as checking a line for a malfunction. The exemption does not apply to all services offered by a telephone company.

The court sided with Plaintiffs distinguishing between Dialpad's operation of its VOIP service and its add on Dialpad AI product. The court found that the Dialpad AI product  is a separate software layer that listens to and analyzes the contents of a phone call for collateral business purposes, not as a means to operate Dialpad’s VoIP products.

Major Win For Consumers

This case joins the growing number of authorities holding that AI-based services eavesdropping on consumers' telephone calls violate California's privacy laws. AI is advancing in ways most consumers don't fully realize, often without their knowledge or consent. I am proud of firms like Salahi PC and my own firm for successfully standing up for consumers on this front.

Our firms will continue to litigate this case and advance the rights of consumers. Under the CIPA, consumers may be entitled to financial compensation and recover as much as $5,000 per phone call.

‍