Recording a telephone conversation without the other party(ies)'s consent is likely a violation of the Penal Code. See California Penal Code Section 632 et seq.
Under California law, recording a conversation without consent carries with it potential monetary penalties and imprisonment.
Additionally, a person "injured" by the recording can bring a civil action to recover, the greater of, $5,000.00 per violation (recording), or three times actual damages, if any, suffered. Notably, there is not a prerequisite showing that a person actually suffered actual damages in order to recover the $5,000.00 penalty.
However, not all recordings are illegal, for example, a recording to obtain evidence related to a commision by one of the parties to the communication a crime like extortion, kidnapping or bribery. Calif. Civil Code Section 633.5. Also, while there is a general prohibition on the use of illegal recordings at a court proceeding, California has created certain exceptions to this rule (for example, potentially for impeachment purposes, or to use to discover other admissible evidence).
One other general point to consider is that not all states treat surreptitious recordings the same as California. In New York, for example, only one party's consent is needed to record a conversation.
The question arises whether an unauthorized recording with an out-of-state person is illegal. Here in California it is. The case, Kearney v. Salomon Smith Barney, Inc. (2006) 39 Cal 4th 95 dealt with a situation where the conversations between California residents/clients were recorded by a company's Georgia office without their consent. In Georgia, that type of recording was lawful. The Californians sued for invasion of privacy. The California Cour of Appeal determined that even though the recording was lawful in Georgia, that application of section 630 et seq. was proper.
Many times in business, real property or any other transaction, for whatever reason, one party might feel compelled to secretly record a conversation. Even though California law provides for potentially substantial recoverable civil penalties in favor of the victim, it should be noted that discrete exceptions in the law exist that might allow the introduction of the statements into evidence despite their illegal origin. Conversely, though a party may be willing to risk that civil penalty and secretly record a conversation to develop evidence, generally such evidence may likely be subject to exclusion.
Whether you are a victim of a secret recording or you have secretly recorded a conversation in order to develop some kind of claim of your own despite the potential for a counter-claim against you, good investigation, analysis, law and motion, and discovery by an experienced attorney can aid you in determining what the legal ramifications might be of a potential illegal recording.
Tuesday, November 23, 2010
Tuesday, November 16, 2010
Does Your Business Have Important Confidential Information It Wants to Protect From Others?
If so, you may have a Trade Secret.
California Civil Code Section 3426.1 defines a trade secret as:
"information, including a formula, pattern, compilation, program, device, method,
technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally
known to the public or to other persons who can obtain economic value from its disclosure
or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy."
As you can tell, the definition is very broad. A trade secret can comprise many things from the tangible or intangible like a software program/source code, recipe, or a compilation of even publicly client or customer list. A customer list is a simple example of what any business might have that could constitute its trade secret. Some of the characteristics/information that establish that a customer list might be a trade secret include:
• Customer information that is not “readily ascertainable” to competitors;
• Customers’ particular requirements/preferences;
• Customers particular habits; and
• Key contacts of the client (if an entity).
Many businesses or persons might have a trade secret without even knowing it. However, merely something calling a trade secret is not sufficient, though it is a starting point. Businesses must identify its potential trade secrets and then examine what if anything it has done, does or should do to make sure it remains a secret. A business should also examine how it has treated and potentially distributed the trade secret material in the past. Frequently, a business will disclose its trade secret as a necessary part of providing its services, or as a marketing tool. That type of disclosure could destroy its status of a trade secret if done improperly.
Businesses should therefore take care in how they treat their confidential materials. Some points to consider include the following.
• Identify important materials that you believe to be your trade secret.
• Analyze the value of the material and whether it is valuable because it is secret.
• Have you disclosed the material that is potentially a trade secret to others who are not
under an obligation to keep its secrecy? For example, have you disclosed to employees
without a effective employee agreement; clients without a client agreement; on the web or in
marketing materials, etc.? If so, it might not qualify as a trade secret.
• Potential trade secrets that have been disclosed in a piecemeal fashion may not qualify as a
trade secret.
• What have you done to try to keep the information secret?
- Implement and enforce confidentiality agreements with clients, employees, etc.
- Keep the material under physical lock and key.
- Limit access to the material to just those who need to know it.
- Inform employees what materials are trade secret so that everyone in your business
knows to help protect the materials’ secrecy.
Businesses should work to protect its valuable information. It is advisable to consult with an attorney to help determine whether you have a trade secret, whether the business has taken adequate steps to protect its secret information, and whether its confidential secret information has been stolen. If you have a trade secret, call Darwin Bustarde to speak with an attorney extremely knowledgeable in trade secret/misappropriation law to help you protect your trade secrets or to help prosecute your rights if someone has stolen or is threatening to improperly use your trade secret, i.e. a former employee at his or her new employer/competitor.
California Civil Code Section 3426.1 defines a trade secret as:
"information, including a formula, pattern, compilation, program, device, method,
technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally
known to the public or to other persons who can obtain economic value from its disclosure
or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy."
As you can tell, the definition is very broad. A trade secret can comprise many things from the tangible or intangible like a software program/source code, recipe, or a compilation of even publicly client or customer list. A customer list is a simple example of what any business might have that could constitute its trade secret. Some of the characteristics/information that establish that a customer list might be a trade secret include:
• Customer information that is not “readily ascertainable” to competitors;
• Customers’ particular requirements/preferences;
• Customers particular habits; and
• Key contacts of the client (if an entity).
Many businesses or persons might have a trade secret without even knowing it. However, merely something calling a trade secret is not sufficient, though it is a starting point. Businesses must identify its potential trade secrets and then examine what if anything it has done, does or should do to make sure it remains a secret. A business should also examine how it has treated and potentially distributed the trade secret material in the past. Frequently, a business will disclose its trade secret as a necessary part of providing its services, or as a marketing tool. That type of disclosure could destroy its status of a trade secret if done improperly.
Businesses should therefore take care in how they treat their confidential materials. Some points to consider include the following.
• Identify important materials that you believe to be your trade secret.
• Analyze the value of the material and whether it is valuable because it is secret.
• Have you disclosed the material that is potentially a trade secret to others who are not
under an obligation to keep its secrecy? For example, have you disclosed to employees
without a effective employee agreement; clients without a client agreement; on the web or in
marketing materials, etc.? If so, it might not qualify as a trade secret.
• Potential trade secrets that have been disclosed in a piecemeal fashion may not qualify as a
trade secret.
• What have you done to try to keep the information secret?
- Implement and enforce confidentiality agreements with clients, employees, etc.
- Keep the material under physical lock and key.
- Limit access to the material to just those who need to know it.
- Inform employees what materials are trade secret so that everyone in your business
knows to help protect the materials’ secrecy.
Businesses should work to protect its valuable information. It is advisable to consult with an attorney to help determine whether you have a trade secret, whether the business has taken adequate steps to protect its secret information, and whether its confidential secret information has been stolen. If you have a trade secret, call Darwin Bustarde to speak with an attorney extremely knowledgeable in trade secret/misappropriation law to help you protect your trade secrets or to help prosecute your rights if someone has stolen or is threatening to improperly use your trade secret, i.e. a former employee at his or her new employer/competitor.
Friday, November 12, 2010
Contracts to Indemnify: The Duty to Defend May Arise Independent from the Duty to Indemnify
Contracts between parties frequently contain indemnification provisions. Potential indemnitors should carefully review indemnification provisions to understand when and for what they may be held liable for. UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App.4th 10 provides an example of how misunderstanding the effect of an indemnity agreement could lead to a serious miscalculation of a party's potential liability.
In UDC v CH2M Hill an engineering consultant contracted with a developer to provide professional services for a condominium developement. The HOA to thenew development sued the developer. The developer filed a cross-complaint against the consultant and others involved in the project.
The consultant agreed to indemnify the developer for losses connected with any negligent act or omission by the consultant. The provision went on to specify that the consultant agrees to defend any action (pay for the litigation and attorney fees) brought against the developer at the developer's written request.
The consultant refused to pay the developer's defense fees and successfully established at trial that it was not negligent. Based on that finding it argued that it should not be responsible for paying the developer's costs of defense. The court disagreed and found that the duty to defend arose when the developer cross-complained against the consultant. Again, this is despite the jury's finding that the consultant was not negligent.
Even though the consultant was ultimately not responsible for general indemnification of the damages paid for by the developer, as you may already know, the costs of litigation can frequently exceed the alleged actual damages in a case.
The message of this case is that contracting parties must avoid broad indemnity language whenever possible. The potential indemnitor should search for such broad language and at the very least address the danger of it by attempting to limit the scope of indmenification by cleary linking the duty to defend to an adjudication of liability or other finding acceptable to the potential indemnitor.
If you are presented with a contractual provision whose scope of affect is uncertain that you want reviewed, please feel free to contact Bustarde Law to speak to an attorney experienced in contract review, drafting, negotiation and litigation.
In UDC v CH2M Hill an engineering consultant contracted with a developer to provide professional services for a condominium developement. The HOA to thenew development sued the developer. The developer filed a cross-complaint against the consultant and others involved in the project.
The consultant agreed to indemnify the developer for losses connected with any negligent act or omission by the consultant. The provision went on to specify that the consultant agrees to defend any action (pay for the litigation and attorney fees) brought against the developer at the developer's written request.
The consultant refused to pay the developer's defense fees and successfully established at trial that it was not negligent. Based on that finding it argued that it should not be responsible for paying the developer's costs of defense. The court disagreed and found that the duty to defend arose when the developer cross-complained against the consultant. Again, this is despite the jury's finding that the consultant was not negligent.
Even though the consultant was ultimately not responsible for general indemnification of the damages paid for by the developer, as you may already know, the costs of litigation can frequently exceed the alleged actual damages in a case.
The message of this case is that contracting parties must avoid broad indemnity language whenever possible. The potential indemnitor should search for such broad language and at the very least address the danger of it by attempting to limit the scope of indmenification by cleary linking the duty to defend to an adjudication of liability or other finding acceptable to the potential indemnitor.
If you are presented with a contractual provision whose scope of affect is uncertain that you want reviewed, please feel free to contact Bustarde Law to speak to an attorney experienced in contract review, drafting, negotiation and litigation.
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