AI tools and call recording: Class action lawsuit claims retailer Patagonia invaded customers’ privacy

The US is well-known for its aggressive litigation culture, and privacy allegations are among the most common cause of class action lawsuits.

In a case against outdoor clothing retailer Patagonia, a California resident claims that the company violated her privacy and broke California law by using AI software to record, transcribe, and analyze its customer support calls.

Given California’s constitutional privacy rights and strict wiretapping laws, should businesses using AI tools to process customer data be concerned?

Background to the case

Michelle Gills is a California resident and Patagonia customer, representing a class that includes all California residents who have called the company’s customer support line during the relevant period.

Gills called Patagonia in January 2024, and has since learned that the company used a product called Talkdesk to record and analyze the call.

On its website, Talkdesk describes itself as “a global cloud contact center leader for modern AI-powered customer service that is trusted, flexible, and innovative.”

According to the lawsuit, Patagonia uses a Talkdesk extension called Experience Analytics. The suit alleges that Experience Analytics:

• Transcribes all calls between Patagonia and its customers,
• “Processes customer speech and text patterns”
• Analyses the transcripts “to determine customers’ intent and sentiment”

The software reportedly serves to “help companies to automate tasks”—and allegedly “mine customer data.”

Patagonia also implemented a Talkdesk add-on called “Quality Management”, which the complaint describes as “a comprehensive tool for monitoring and evaluating call interactions, including real-time call and screen recording.”

The lawsuit also alleges that Patagonia used Copilot, a generative AI-powered assistant that “listens, guides, and assists contact-center agents during customer interactions, automatically transcribing conversations and suggesting relevant responses based on the content of customers’ communications.”

Did Patagonia get consent from customers?

The plaintiff alleges that Patagonia recorded and analyzed her calls without consent.

“Individuals contacting Patagonia expect that their communications are confidential,” the complaint claims.

While Patagonia notifies callers that calls “may be recorded for quality training purposes,” the plaintiff alleges that this suggests that calls will only be used by Patagonia for internal purposes.

According to the complaint, the disclosure “does not tell reasonable consumers that a third-party (Talkdesk) will intercept, listen to, record, and use the call for its own purposes.”

Are these practices illegal?

The plaintiffs allege that Patagonia’s non-consensual use of Talkback to record customer service calls violates the following laws:

• California Invasion of Privacy Act (CIPA): This law prohibits “wiretapping”, which essentially means recording a communication without the consent of (in California) all parties. The law is increasingly cited in class action lawsuits, including for allegations involving cookies.
• Invasion of Privacy under the California Constitution: California provides a constitutional right to privacy at the state level. Depending on how far this case goes, the court may determine that Patagonia’s actions violate Californians’ privacy rights.
• Intrusion Upon Seclusion: Patagonia is alleged to have violated this “tort”, which prevents people from infringing on others’ private lives.

Businesses across the US face a barrage of litigation alleging violations of these decades-old (or sometimes centuries-old) laws, that are being reinterpreted to protect people’s privacy in the digital age.

Whether Patagonia’s use of AI tools to analyze customer support phone calls violates these laws remains to be seen. But to mitigate the risk of costly and time-consuming lawsuits, businesses should think carefully before collecting data – on their websites, apps, or phone lines – without consent.