Metropolitan News-Enterprise


Friday, July 14, 2006


Page 3


California Telephone Privacy Rights Trump Foreign Law—S.C.


By a MetNews Staff Writer


Out-of-state callers must abide by California law prohibiting the recording of telephone conversations without all parties’ consent when calling someone in California, even law of the state they are calling from is different, the California Supreme Court unanimously ruled yesterday.

Several California clients of Salomon Smith Barney filed suit against the brokerage firm for injunctive relief and damages arising out of the practice of the firm’s Atlanta office of recording all telephone calls, including those to and from California, without notifying the other party.

Lead plaintiffs Kelly Kearney and Mark Levy had filed claims against Salomon with the National Association of Securities Dealers, alleging malfeasance, fraud, and breach of fiduciary duties in providing advice to them, the record showed.

Kearney and Levy, who were previously told that their accounts were being handled by the firm’s Atlanta office, learned of that office’s practice of recording all calls during the NASD litigation.

Kearney and Levy then filed suit against Salomon in San Francisco Superior Court, alleging that plaintiffs engaged in numerous telephone conversations regarding their personal financial affairs, had an expectation of privacy in those conversations, were not informed or aware that the conversations were being recorded, and did not consent to the recording of such conversations.

San Francisco Superior Court Judge A. James Robertson II sustained Salomon’s demurrer to the complaint, based upon Georgia law which allows calls to be recorded where one party consents. The Court of Appeal affirmed Robertson’s order, and the Supreme Court reversed in part, and affirmed in part.

Chief Justice Ronald M. George, writing for the court, noted that:

“These facts give rise to a classic choice-of-law issue, because the relevant California privacy statute generally prohibits any person from recording a telephone conversation without the consent of all parties to the conversation, whereas the comparable Georgia statute does not prohibit the recording of a telephone conversation when the recording is made with the consent of one party to the conversation.”

The court held that, with respective to plaintiff’s request for injunctive relief, California law governs. Applying California’s choice-of-law rules, George reasoned that:

“[I]n light of the substantial number of businesses operating in California that maintain out-of-state offices or telephone operators, a resolution of this conflict permitting all such businesses to regularly and routinely record telephone conversations made to or from California clients or consumers without the clients’ or consumers’ knowledge or consent would significantly impair the privacy policy guaranteed by California law, and potentially would place local California businesses (that would continue to be subject to California’s protective privacy law) at an unfair competitive disadvantage vis-à-vis their out-of-state counterparts.”

He concluded that:

“[F]ailure 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.”

However, the court limited application of California law to plaintiffs’ request for injunctive relief. With respect to their claim for damages for past calls, the court determined that Georgia law governs.

George wrote:

“[I]t is appropriate in this instance to apply California law in a restrained manner that accommodates Georgia’s reasonable interest in protecting persons who in the past might have undertaken actions in Georgia in reasonable reliance on Georgia law from being subjected to monetary liability for such actions.”

However, George warned:

“In light of our decision, of course, 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 the recording 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.”

The case is Kearney v. Salomon Smith Barney, Inc., 06 S.O.S. 3660.


Copyright 2006, Metropolitan News Company