In Kearney v. Salomon Smith Barney (July 13, 2006), the California Supreme Court found that the state’s two-party-consent electronic-recording statute, Penal Code § 632, prohibits the out-of-state recording of telephone calls made into California, even if a call is made from and is recorded in a one-party-consent state. Accordingly, the Court enjoined defendant Salomon Smith Barney from secretly recording telephone calls made from its Atlanta office to clients in California, even though such recording is legal under Georgia law. While the Court held that the plaintiffs could not recover damages from Salomon Smith Barney because Section 632’s reach was uncertain when the brokerage recorded the calls, it suggested that damages may be imposed for such conduct in the future. Following the Court’s unanimous decision in Flanagan v. Flanagan four years ago, its unanimous decision in Kearney reaffirms its broad construction of Section 632, and underscores the risks of surreptitiously recording telephone calls that have any connection to this state.
California is one of a minority of states that requires the consent of all parties to record a telephone conversation. Under California Penal Code § 632, “[e]very person who, intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, … records the confidential communication” may be held criminally or civilly liable. (Emphasis added.) Subsection (c) provides that “the term ‘confidential communication’ includes any communication carried on in circumstances as may reasonably indicate that any party to the communication desires it to be confined to the parties thereto,” but excludes communications made in any “circumstance in which the parties to the communication may reasonably expect that the communication may be overheard or recorded.” As the statute makes clear, and as the Court confirmed in Kearney, a business that advises all parties of its intent to record a telephone call at the outset of the conversation does not violate Section 632. The provision simply prohibits a party from secretly recording the conversation.
The language of Section 632 does not address whether the statute applies when a caller from a one-party-consent state surreptitiously records a telephone call placed to a party in California. This is the issue that was presented in Kearney. The trial court and the Court of Appeal held that Georgia law governed because the calls were placed from and recorded in that state, which requires only one-party-consent to record telephone conversations. But the California Supreme Court disagreed. The Court found that the statute’s purpose of “protect[ing] the privacy of the people of this state” supported its application where an out-of-state caller secretly recorded a call into California, even if the call originated from and was recorded in a one-party-consent state. The court emphasized that “[t]he privacy interest protected by the statute is no less directly and immediately invaded when a communication within California is secretly and contemporaneously recorded from outside the state than when this action occurs within the state.” Thus, the court found that Section 632 “applies when a confidential communication takes place in part in California and in part in another state.”
The California Supreme Court’s decision expanding the reach of Section 632 has serious ramifications for companies doing business in the state. It affects not only companies that record telephone conversations as a means of protecting themselves from false claims of malfeasance or misconduct, but also a wide range of businesses and individuals that routinely record telephone calls for a variety of reasons. For example, the Kearney decision will likely affect, among others:
- Producers of reality shows and other entertainment programs who may record calls from one-party-consent states into California;
- Reporters from one-party-consent states who call interview subjects in California and may wish to record their conversations; and
- Telemarketers who call into California from one-party-consent states and who may record conversations for quality-control purposes.
It is important to note that while the Court’s decision potentially affects any business that records calls that have a connection to California, it may not significantly alter many businesses’ practices. As the California Supreme Court pointed out, “[a] business that adequately advises all parties to a telephone call, at the outset of the conversation, of its intent to record the call would not violate the provision.” Nevertheless, the Kearney decision demonstrates that a business cannot rely on another state’s one-party-consent statute when recording calls made into California, and serves as a reminder that recording calls having any connection to this state without the consent of all parties may expose one to civil and criminal liability.1
1 A spokesman for Citigroup Smith Barney refused to comment on a possible petition for certiorari to the U.S. Supreme Court, but complained that “[t]he California Supreme Court’s decision is a new interpretation that extends California law beyond its borders.” Los Angeles Times, July 14, 2006. Several business groups also have criticized the Court’s ruling as an extraterritorial application of California law.