California Supreme Court Prohibits Recording Telephone Calls Made To or Received From California Without First Informing All Parties That the Conversation Is Being Recorded
Under a recent California Supreme Court ruling, those who record conversations with California residents without their knowledge will be subject to civil liability. If a business makes a routine practice of recording its calls with California customers without notice, it may be an easy target for a class action lawsuit. Fortunately, there is an easy solution to this problem: make it standard operating procedure to notify all callers whenever you intend to make a recording.
Businesses dealing with California residents over the phone take heed: do not surreptitiously record your conversations, even if you are not located in California. Under a recent California Supreme Court ruling, those who record conversations with California residents will be subject to civil liability. If your business makes a routine practice of recording its calls with California customers without notice, you may be an easy target for a class action lawsuit. Fortunately, there is an easy solution to this problem: make it standard operating procedure to notify all callers whenever you intend to make a recording.
On July 13, 2006, the California Supreme Court issued its opinion in Kelly Kearney, et al v. Salomon Smith Barney, Inc. In this case, the plaintiffs alleged that employees of the Atlanta branch of Salomon Smith Barney repeatedly recorded telephone conversations with California clients without the clients’ knowledge or consent in violation of Section 632 of the California Penal Code. The plaintiffs sought both damages and injunctive relief. The trial court sustained Salomon Smith Barney’s demurrer on the basis that the conduct of the Atlanta-based employees was and is permissible under Georgia law and dismissed the complaint. The court of appeals affirmed the judgment. The California Supreme Court granted review to consider the “novel choice of law issue” present by the case.
The court held that a true conflict existed between California and Georgia law and that “as a general matter, the failure to apply California law in this context would impair California’s interest in protecting the degree of privacy afforded to California residents by California law more severely than the application of California law would impair any interests of the State of Georgia.”
Having come to this conclusion, the court held that Section 632 applies when a confidential communication takes place in part in California and in part in another state and that California has a “strong and continuing interest in the full and vigorous application of the section of Section 632 prohibiting the recording the telephone conversations without the knowledge or consent of all the parties to the conversation.”
In dicta, the court indicated that the application of California law in this case would only affect telephone conversations with clients or customers in California and would not compel any action or conduct with regard to non–California clients or consumers. Also, although no federal law was at issue, the court opined that federal law does not preempt the application of California’s more protective privacy provisions. In this context, the defendant contended that in some instances federal law requires recording of telephone conversations, citing NASD Rule 3010. The court found that nothing in Rule 3010 precluded a firm from informing a client that the conversation was being recorded.
So what is required of an out-of-state party that wishes to record a call with California participants? The court provides some assistance. If an out-of-state caller discloses at the outset of a call made or to be received from a California customer or client that the call is being recorded, the parties will not have a reasonable expectation that the call is not being recorded and the recording would not violate Section 632, because the parties would have no expectation of privacy.
Turning to damages, citing legal uncertainty prior to its decision, the court refused to impose damages for conduct undertaken in the past in reliance on the law of another state. However, the Court strongly warns that “out-of-state companies that do business in California now are on notice that, with regard to future conduct, they are subject to California law with regard to recordings of telephone conversations made to or received from California, and that the full range of civil sanctions afforded by California law may be imposed for future violations” (emphasis added).
Section 637.2 of the California Penal Code Section 637.2 creates a private right of action for violations of Section 632, and provides for damages in the amount of the greater of $5,000 or three times the amount of actual damages, if any, sustained by the plaintiff. Note, however, that it is not a necessary prerequisite to an action under Section 637.2 that the plaintiff has suffered, or be threatened with, actual damages. As a result, the court held that in a class action filed under Section 637.2, both the named plaintiffs and members of the proposed class allegedly are direct victims of the unlawful conduct, and not simply unharmed person suing on behalf of the general public.
Section 637.2 also provides for injunctive relief, and the court in Kearney, while upholding the dismissal of the plaintiffs’ claims for damages and restitution, allowed the plaintiffs to proceed with their request for injunctive relief.
It should be kept in mind that Penal Code Section 632 is a criminal statute. Because Kearney was a civil case, however, the court did not rule on the possible imposition of criminal penalties on out-of-state persons. The court did note that “the imposition of criminal punishment on the basis of conduct that occurs in part outside of California presents potential constitutional and statutory questions different from those” that arise in a civil case, but it did discuss these questions. Accordingly, readers should note that surreptitious recording of telephone conversations is a misdemeanor in California and that it is unclear whether there are circumstances in which out-of-state violators might be subject to criminal prosecution in California.
- Section 632(a) provides in full: “(a) Every person who, intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, eavesdrops upon or records the confidential communication, whether the communication is carried on among the parties in the presence of one another or by means of a telegraph, telephone, or other device, except a radio, shall be punished by a fine not exceeding two thousand five hundred dollars ($2,500), or imprisonment in the county jail not exceeding one year, or in the state prison, or by both that fine and imprisonment. If the person has previously been convicted of a violation of this section or Section 631, 632.5, 632.6, 632.7, or 636, the person shall be punished by a fine not exceeding ten thousand dollars ($10,000), by imprisonment in the county jail not exceeding one year, or in the state prison, or by both that fine and imprisonment.” Section 637.2 of the California Civil Code Section 637.2 creates a private right of action for violations of Section 632, and provides for damages in the amount of the greater of $5,000 or three times the amount of actual damages, if any, sustained by the plaintiff.
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- While Section 632 of the California Penal Code provides that all parties to the a telephone conversation must be informed of or consent to the recording of the conversation, Georgia law, similar to privacy statutes in a majority of states as well as comparable federal law, requires only one of the parties to the call to consent (which may be the party that is recording the call).
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- The court cited its decision in People v. Conklin ((1974) 12 Cal. 3rd 259, 270-273), which held that Congress intended that states be allowed to enact more restrictive laws designed to protect the right of privacy than the provisions of title III of the Federal Omnibus Crime Control and Safe Streets Act of 1968 (18 USC §§ 2510-2520) relating to wire tapping and telephone conversations.
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- Further, in a footnote, the court made it clear that the present case does not address whether secret recordings that were made prior to Kearney would or would not be admissible in a judicial proceeding. Additionally, the court did not determine how its analysis would apply in a case involving the isolated recording of a personal telephone call by an out-of-state individual in a nonbusiness setting, or the recording of a phone call by an out-of-state business that has a reasonable, individualized basis for believing that a particular caller is engaged in criminal or wrongful conduct.
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