Domino’s Pizza and ConverseNow – The Latest Companies to Face Potential Liability Under California’s Privacy Laws Due to Recording Customer Phone Calls

Earlier this year, a lawsuit was filed against Patagonia for the alleged use of customer communications being recorded and analyzed without the permission or consent of the customers. Recently, a class action lawsuit was filed against Domino’s Pizza (“Domino’s”) due to similar allegations – that Domino’s intercepted and recorded customer calls with the assistance of artificial intelligence (“AI”).

Domino’s has been accused of using AI technology from the company ConverseNow (a co-defendant in the lawsuit), allowing them to wiretap and process orders from customers without the customers’ prior consent. According to their LinkedIn profile, ConverseNow describes its product as “Conversational AI Shaping the Future of Restaurants. Answer Limitless Phone Call. Speed Up Drive-Thru Lines. Outsmart the Labor Shortage.”[1] ConverseNow is alleged to have aided Domino’s by assisting with phone orders and using customer data to enhance its AI technology. Additionally, ConverseNow does not notify the Domino’s customers of its data collection practice.

The lawsuit filed on behalf of California residents claims that Domino’s violated California’s Invasion of Privacy Act (“CIPA”), alleging that Domino’s “aids, agrees with, employs, or conspires” to give access to communications with its customers to ConverseNow. CIPA states that a “person who, without the consent of all the parties to the communication, intercepts or receives and intentionally records, or assists in the interception or reception of and intentional recordation of” a telephone conversation, will be found liable. (Cal. Penal Code § 632.7(a).)

The claim states that while ConverseNow’s AI technology was used to process phone orders, the phone calls were recorded and analyzed to refine the capabilities of the AI technology. By collecting this data, ConverseNow can improve the ability of the AI technology in suggesting additional items and upselling the customer.

The claims made against Domino’s and ConverseNow are similar those made against Patagonia in the lawsuit filed earlier this year. In both instances, AI technology was used to record customer information and conversations without the consent of the customers.

It was previously stated by an industry member that Patagonia was “just the tip of the iceberg,” and that statement appears to be true.[2] AI technology continues to play a large role in the evolution of many professional fields. However, for AI to continue to improve and become as effective as possible, it must rely on data from customers. As a result, companies must remain aware of privacy and related laws when it comes to using customer data to train AI technologies.

In September 2024, California Governor Gavin Newsome approved Assembly Bill No. 1008, amending California Civil Code § 1798.140 (the California Consumer Privacy Act of 2018 (“CCPA”)). The assembly bill extended the CCPA to cover generative AI systems, meaning companies using such systems must comply with the same CCPA standards required for other forms of data use.

As AI continues to improve and become more widely adopted, companies will need to ensure that any use of AI and customer data collection meets the standards of privacy laws set forth where they are conducting business.