Commercial entities across the country are facing a surge in legal threats originating from a 1960s-era statute. The California Invasion of Privacy Act (CIPA), initially enacted to penalize telephone wiretapping, is being leveraged against modern digital business infrastructure. Litigants argue that standard third-party web tracking tools operate as unauthorized electronic surveillance, transmitting communication data between website visitors and site operators to undisclosed external entities.
Because jurisdiction under this framework follows the physical location of the website, companies nationwide face exposure.
“Out-of-state companies that do no business in California are still getting hit with demand letters and threats of litigation,” says David Myers, a Partner at Buckingham, Doolittle & Burroughs, LLC. “Business leaders need to understand what risks these tracking tools present and take action before a plaintiff’s firm finds them first.”
Smart Business spoke with Myers about the litigation risks for commercial website operators from CIPA.
What website features create liability under CIPA?
Liability primarily stems from third-party advertising pixels, analytics tags and session replay software embedded within website architecture. Business entities routinely deploy these technologies through internal marketing teams or external development agencies to enhance site performance, track conversion rates and optimize user experience. When a visitor interacts with a site, these background tools automatically transmit activity data to major technology platforms. These data transmissions are being framed as illegal third-party eavesdropping conducted without explicit user consent.
A second vulnerability involves defective consent management platforms and banner implementations. Many commercial sites display preference banners that fail to function correctly. If a visitor clicks an option to reject tracking, but background tracking mechanisms continue to execute, the site operator faces heightened legal liability. Similarly, executing tracking scripts immediately upon a user landing on the page — prior to any affirmative user consent — creates direct exposure. Banners that present a choice without enforcing backend technical restrictions offer zero legal protection and actively strengthen plaintiff claims.
Why does a California statute apply outside that state?
The framework governing this privacy statute establishes jurisdiction based on the location of the individual accessing the website. If an individual located in California accesses a commercial website hosted by an organization outside the state, statutory protection applies to that interaction. Consequently, geographic distance, lack of physical operations and absence of local sales channels do not grant immunity.
This legislation focuses entirely on the presence of the consumer at the moment of interaction. Because web content is universally accessible, any commercial site operating online represents a potential target for out-of-state demand letters and formal litigation.
How can organizations mitigate claims?
Management must execute a structured, three-step compliance framework to devalue potential legal claims and establish a defensible posture:
- Execute a comprehensive technical audit: Organizations must identify every script, pixel, cookie and tracking mechanism active across their web properties. Marketing initiatives frequently introduce third-party code without centralized oversight, leaving management unaware of actual data flows.
- Test and validate consent controls: Organizations must rigorously verify that consent banners enforce backend restrictions. Selection of a rejection option must actively halt the execution of tracking scripts and all non-essential tracking must remain paused until an affirmative acceptance occurs.
- Align public disclosures with operational reality: Organizations must update website privacy policies and terms of use to mirror actual data practices accurately. Terms of use should incorporate robust arbitration clauses and class-action waivers to limit large-scale litigation risks. ●
INSIGHTS Legal Affairs is brought to you by Buckingham, Doolittle & Burroughs, LLC.
