What Law Governs When Recording Conversations State to state? February 8, 2013

What Law Governs When Recording Conversations State to state? 

 February 8, 2013

 

    Central stations record phone conversations all the time between the operators and subscribers, operators and 911 and fire department dispatchers and who knows who else.  Wholesale central stations typically operate in many if not all states.  There are generally two laws that apply to eavesdropping or recording conversations.  Either you're in a one party state or an all party state.  One party means only one party to the conversation needs to consent to the eavesdropping or recording.  In an all party state, all parties to the conversation must consent.  The distinction is significant because it's often easy to get one party to consent.  For example, all of your employees can consent to recording conversations in their Employment Contract [which happens to be covered in the Standard Employment Contract].  As long as they are talking to someone in a one party state, such as New York, they can legally record the conversation.  But if an operator from a one party state who has consented to recording conversations is talking to someone in Illinois, an all party state, can the conversation be recorded?

    I confess I would have guessed wrong on this one, at least according to the finding of a Federal Court in New York.  The court held that a New Yorker calling into Illinois would, at least in this case, be governed by the Illinois law.  Excerpts from the decision are below.  This court found that the "tort" was committed in Illinois to the Illinois resident; that the New Yorker knew the other party was in Illinois.  The decision recognizes that the law is certainly not settled on this issue.  Even though the court found there was liability, it questioned the actual damages, requesting further submission by the injured party.  

    The Standard Form Contracts have addressed this issue for a long time.  The subscriber consents to the recording of conversations.  As the court below noted, it's likely that additional laws need to be enacted to protect the caller from one state calling into another.  In the mean time, check your contracts.

    Here is the excerpt from the case:

 VII. Eavesdropping Under Illinois Law

 Defendant moves for summary judgment on its counterclaim that Plaintiff and Rucker are liable for violating the Illinois eavesdropping statute. Plaintiff and Rucker respond that this claim is governed by New York — and not Illinois — law, and even if the Illinois eavesdropping statute does apply, their conduct did not violate the statute.5

 New York permits conversations to be recorded with the consent of only one party. N.Y. Penal Law § 250.00; People v. Lasher, 58 N.Y.2d 962, 963, 447 N.E.2d 70, 460 N.Y.S.2d 522 (1983). By contrast, Illinois law provides that:

(a) A person commits eavesdropping when he:

 (1) Knowingly and intentionally uses an eavesdropping device for the purpose of hearing or recording all or any part of any conversation or intercepts, retains, or transcribes electronic communication unless he does so (A) with the consent of all  [*28] of the parties to such conversation or electronic communication or (B) in accordance with Article 108A or Article 108B of the "Code of Criminal Procedure of 1963" . . . .

Ill. Rev. Stat. ch. 38 § 14-2. Put simply, HN9the Illinois eavesdropping statute currently in effect prohibits the recording of conversations without the consent of all parties. The statute calls for civil and criminal liability for violators and provides for civil remedies to parties who are injured by such eavesdropping. Carroll v. Lynch, 698 F.3d 561, 564 (7th Cir. 2012). A corporation may pursue a claim for unlawful eavesdropping pursuant to the statute. See, e.g., Int'l Profit Assocs., Inc. v. Paisola, 461 F. Supp. 2d 672, 677-78 (N.D. Ill. 2006).

 Before the current version of this statute took effect in 1994, the Illinois Supreme Court had held that a party to a conversation could record that conversation without running afoul of this statute. See People v. Beardsley, 115 Ill. 2d 47, 503 N.E.2d 346, 349-50, 104 Ill. Dec. 789 (Ill. 1986). However, courts have recognized that the statute was amended in response to Beardsley to prohibit the recording of conversations without the consent of all parties. Carothers v. Starbucks Coffee Co., No. 96 Civ. 3849 (PEP), 1998 U.S. Dist. LEXIS 9125, 1998 WL 325262, at *7 (N.D. Ill. June 11, 1998)  [*29] (citing People v. Siwek, 284 Ill. App. 3d 7, 671 N.E.2d 358, 362-63, 219 Ill. Dec. 444 (Ill. App. Ct. 1996)). Thus, Plaintiff's repeated reliance on Beardsley and other decisions that predate the 1994 amendment to the statute is misplaced. (Opp'n 16.)

 Because there is no dispute that Silverstein did not consent to having his conversations with Rucker recorded (Def. 56.1 ¶¶ 59-63), the recordings violated Illinois law but not New York law. Accordingly, there is a direct conflict between New York and Illinois law, and the Court must conduct a choice of law analysis.

 New York uses an "interest analysis" approach to choice of law, which seeks "to give controlling effect to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation." Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 672 F.3d 155, 158 (2d Cir. 2012) (citation and internal quotation marks omitted); accord Babcock v. Jackson, 12 N.Y.2d 473, 477, 191 N.E.2d 279, 240 N.Y.S.2d 743 (1963). "In the context of tort law, interest analysis distinguishes between conduct-regulating rules, which dictate appropriate standards of conduct, and loss-allocating rules, which prohibit, assign,  [*30] or limit liability after the tort occurs." Fed. Housing Fin. Agency v. UBS Americas, Inc., 858 F. Supp. 2d 306, 335 (S.D.N.Y. 2012) (citation and internal quotation marks omitted). "If conflicting conduct-regulating laws are at issue, the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders." GlobalNet Financial.Com, Inc. v. Frank Crystal & Co., Inc., 449 F.3d 377, 384 (2d Cir. 2006) (citation and internal quotation marks omitted). However, "[e]ven where a law is conduct-regulating, we do not blindly follow the lex loci rule." Amusement Indus., Inc. v. Stern, 693 F. Supp. 2d 301, 313 (S.D.N.Y. 2010) (citation and internal quotation marks omitted).

 Based on the particular facts of this case, the Court is persuaded that Illinois law governs Defendant's counterclaim. First, Rucker recorded the calls with Silverstein knowing that Silverstein was physically present in Illinois. (Def. 56.1 ¶ 63.) In this regard, Rucker knowingly reached into Illinois and committed a tort against an individual and corporate entity in Illinois. Cf., e.g., Hunter v. Derby Foods, 110 F.2d 970, 972 (2d Cir. 1940)  [*31] (applying Ohio law to suit against defendant food manufacturer that reached out and shipped the product that caused the plaintiff's injury to Ohio). Second, the injury caused by the recordings was inflicted in Illinois, where Defendant is located. See Feldman Law Grp. P.C. v. Liberty Mut. Ins. Co., 819 F. Supp. 2d 247, 256 (S.D.N.Y. 2011); Locke v. Aston, 31 A.D.3d 33, 814 N.Y.S.2d 38, 42 (App. Div. 2006). Indeed, a court in Illinois has held that an individual in New York was liable for violating the Illinois eavesdropping statute by recording conversations without the consent of all parties even though the conversation was recorded in New York. Anderson v. Hale, 202 F.R.D. 548, 558-59 (N.D. Ill. 2001).

 Whether New York courts will always apply the law of states — such as Illinois — that take a more restrictive approach to the recording of telephone conversations is an issue of state law that may ultimately need to be resolved by the New York Court of Appeals. In an era of global cellular phone access and number portability, it is certainly conceivable that New York courts will endeavor to protect their citizens from liability in foreign jurisdictions and eschew the lex loci rule, particularly where  [*32] it is difficult for a caller to know with certainty where a party to the call is located. However, because Rucker knew that he was recording a telephone conversation with a party in Illinois, and the injury was sustained in Illinois, the Court is persuaded that, as compared to New York, Illinois has the greater "interest in regulating behavior within its borders," GlobalNet Financial.Com., 449 F.3d at 384, at least with respect to the specific conduct at issue in this case.

 Once the choice of law issue is resolved in favor of Illinois, there can be no dispute that Silverstein did not consent to having his calls with Rucker recorded. (Def. 56.1 ¶¶ 59-63.) As a result, Defendant is entitled to summary judgment on its counterclaim against Rucker and Plaintiff pursuant to the Illinois eavesdropping statute.

 Nevertheless, although Defendant is entitled to summary judgment with respect to liability on its counterclaim, Defendant has offered nothing to establish how it was damaged by the recordings. Accordingly, the parties are directed to make additional submissions as to what damages, if any, are appropriate.

VIII. Conclusion

 For the reasons set forth above, the Court grants Defendant's motion  [*33] for summary judgment and denies Plaintiff and Rucker's cross-motion for summary judgment.

 IT IS HEREBY ORDERED THAT the parties shall submit a joint letter on or before January 4, 2013 setting forth their views as to what damages, if any, are appropriate with respect to Defendant's counterclaim pursuant to the Illinois eavesdropping law.

 2012 U.S. Dist. LEXIS 178878, GOLDEN ARCHER INVESTMENTS, LLC, Plaintiff, VERSUS SKYNET FINANCIAL SYSTEMS, Defendant. No. 11 Civ. 3673 (RJS) UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK 2012 U.S. Dist. LEXIS 178878   December 11, 2012,  Decided       December 12, 2012, Filed

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