A recent decision from the Supreme Court of California supported injunctive relief when a financial services company recorded unwitting customers’ interstate telephone calls, but also clarified resolution of interstate conflict of laws. Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95 (2006). The trial court dismissed an invasion of privacy action brought by clients against a financial services company. The complaint alleged that the company had a continuing practice of recording telephone conversations made to a branch office in Georgia without the callers’ knowledge or consent. The clients who resided in California sought injunctive relief and monetary damages or restitution. Both the trial court and the Court of Appeal dismissed the claims, asserting that the alleged practice was permissible under Georgia law.

The Supreme Court reversed the judgment of the Court of Appeal as to injunctive relief and affirmed as to the dismissal of the claims for monetary damages and restitution. California Penal Code Section 632(a) makes it a crime to intentionally record a telephone call without the consent of all parties. Georgia law only required the consent of one party. When, as in this case, there is a true conflict between California laws and those of another state, the court applies a comparative impairment analysis in which the relative benefits and harm are weighed. California has shown a strong and continuing interest in protecting the privacy of its residents as outlined in its Penal Code, yet Georgia allows a company with a valid business justification to record telephone calls without disclosure under Ga. Code Ann., §§ 16-11-62, 16-11-66. The court determined, however, that the application of California law would not severely impair Georgia’s interests, because compliance with California law could be attained by a Georgia company legitimately recording telephone calls by simply disclosing at the outset of a call made to or received from a California customer that the call was being recorded.

The decision did negate the monetary damages on the basis that Georgia companies should be protected from unexpected liability based on past actions that were lawful in Georgia.