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Reaching out and touching someone with a telephone call is one thing. Recording the conversation is another. That’s what the state Supreme Court indicated Thursday during oral arguments in San Francisco in a case involving competing privacy right statutes in California and Georgia. At issue was whether callers in the Peach State, where telephone calls can be recorded with the permission of a single person, violate California criminal and civil statutes by taping calls placed to the Golden State, where consent of all parties is required before recording. “How do we protect the interests of each?” Chief Justice Ronald George asked. “And which should prevail?” In 2002, Salomon Smith Barney Inc. was sued by California residents Kelly Kearney and Mark Levy after they discovered the investment banking giant’s Atlanta-based brokers had tape recorded their telephone conversations about stock options. They argued that the actions of SSB, now known only as Smith Barney, violated California’s unfair competition law and its 39-year-old Invasion of Privacy Act, a criminal statute which prohibits the recording of any communication without the consent of all parties. Violators face up to $2,500 in fines or a year in jail. San Francisco Superior Court Judge A. James Robertson II dismissed the suit in 2003. A year later, the First District Court of Appeal affirmed, holding that under conflict-of-law principles the Georgia statute prevailed. On Thursday, it appeared the Supreme Court didn’t agree, with Justice Ming Chin scoffing at Georgia’s one-person consent statute even though about 40 other states have the same law. “Isn’t that a little ridiculous?” Chin asked. “Aren’t we trying to protect the privacy of all parties to a call?” Echoing other justices’ earlier comments, Chin said he couldn’t understand why it would be burdensome for out-of-state callers to simply warn that a conversation would be tape recorded. “How many of those warnings have you heard when calling your credit card company?” he said. “Or when making reservations?” Orrick, Herrington & Sutcliffe partner William Alderman, representing Smith Barney, had argued that no crime had been committed in California and that the “only issue is the lawfulness of recording the call in Georgia.” He insisted the focus of the debate should be on where the conduct � the actual recording in Atlanta � took place. “The conduct being attacked here,” he said, “was only in Georgia.” That logic didn’t sit well with Justice Carol Corrigan, who pointedly stated that the people answering the Atlanta brokers’ calls were in California. “You can’t record anything if your call doesn’t come into California,” she said. “So the conduct does occur in California.” Corrigan also said that if companies want to do business in California, they need to learn the lay of the land. “Figure out what the law is here, and apply it,” she said. “What’s the big burden here?” The justices’ questions dovetailed nicely into the arguments of Edward Zusman, a partner in the San Francisco office of Markun Zusman & Compton who represented Kearney and Levy. He argued that Georgia law, aimed at protecting its own citizens, had no role in a case about California privacy rights. He also said advising callers that they were being recorded was the “simplest of burdens” and would give them the opportunity to “opt in or opt out of that communication.” Disagreeing with his opponent, Zusman also argued that applying California’s privacy right statute to extra-territorial calls doesn’t violate the federal Commerce Clause.i “The burden amounts to notifying parties that you are recording their call,” he said. “That minimal burden is far outweighed by protecting the expectations of privacy.” Chief Justice George made the observation that it would be difficult to limit the state’s privacy right statute to calls made by Californians. “How could you parse the California law that finely,” he asked, “and still make it enforceable?” Justice Marvin Baxter said he could understand why states might allow one-person consent for recording calls in the family law realm. When one spouse makes threatening calls to another, he said, it’s important “to have a clean record of what was said.” But he didn’t understand an across-the-board one-consent rule. “In that respect,” Baxter said, “it seems Georgia’s interests would vary based on the nature of the recording.” The high court’s leanings will be troubling for businesses. In an amicus curiae brief, the Chamber of Commerce of the United States of America had warned that a ruling against Smith Barney could tangle interstate commerce and communication in a Gordian knot. “It is particularly troubling that the use of telecommunications � core interstate conduct � here could serve as the link between California substantive and procedural law and conduct that occurred thousands of miles away,” wrote Donald Falk, a partner in Mayer, Brown, Rowe & Maw’s Palo Alto office. “In the age of the Internet, such a slim nexus cannot carry with it the rules and regulations of every state unless every state may legislate nationwide � which assuredly is not the case in our federal system.” A ruling in Kearney v. Salomon Smith Barney, S124739, is due within 90 days.

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