Federal law and most states only require one party to a phone call to consent to recording it, which means the person recording the call doesn’t need anyone else’s permission; however, a minority of states, including California, require all parties to a call to provide consent.  While you might think you are safe if you do the recording in a one-party consent state, like Georgia, California’s highest court has made clear that California law will apply no matter where you are located if you do business in California and record a call with a California client.  Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95 (2006).

With that precedent in their back pocket, some California residents who called Georgia-based InterContinental Hotels’ reservation center recently filed suit against the hotel in California federal court for recording their calls without notifying them in violation of California law, even though InterContinental’s recording is perfectly legal under Georgia and federal law.  InterContinental moved to dismiss the suit, asserting that California law conflicts with federal law, but the court denied the motion, finding that Congress has allowed states to enact more restrictive privacy laws.  McCabe v. InterContinental Hotels Group Resources, Inc., No. 12-cv-04818 NC, Order Denying Defendants’ Motion to Dismiss (N.D. Cal. Dec. 18, 2012).

The lesson here is that all businesses with a nexus to an all-party consent state,[1] even those located in one-party consent states like Georgia, must follow the all-party rule because modern telecommunications make it impractical to determine where the other party to a call is located.  After all, mobile phones allow calls to occur anywhere regardless of the phone’s area code, and Internet-based calling technology allows consumers to select any area code regardless of their location.  A Georgia business that wants to record a customer service call involving someone with a Georgia area code must still abide by California’s all-party consent rule if they want to ensure they’re not breaking California law.

One potential defense that deserves serious attention arises under the Commerce Clause.  All-party consent statutes like California’s have the practical effect of controlling conduct outside their borders, so they may be invalid under the Commerce Clause.  P. Merch. Shipping Ass’n v. Goldstene, 639 F.3d 1154, 1178 (9th Cir. 2011) (“the Commerce Clause prohibits state legislation regulating commerce that takes place wholly outside of the state’s borders”).  While some courts have rejected this argument, none appear to have addressed the fact that modern technology makes it impractical to reliably determine the other party’s location.

The bottom line is this:  businesses must continue to incur the expense of obtaining all-party consent at the beginning of each call they would like to record and to determine all the areas within their companies where recordings are made.  While there may be a defense under the Commerce Clause, there certainly is an expense to raise it in a lawsuit.

© 2013 Perkins Coie LLP

[1] In addition to California, these 11 states also require all-party consent:  Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania and Washington.