Legal Question in Business Law in California

Hello, I am a minority shareholder in a private company (COMPANY A) structured and operating as a California S-Corp. I physically attended the company's private shareholders' meeting several months ago. The meeting was held in California. I audio-recorded the entire meeting without anyone's knowledge nor consent. In the meeting, the CEO clearly admitted and acknowledged the proper interpretation of a key section (SECTION X) of an asset purchase agreement that this company had with another company (COMPANY B) that i am also a shareholder and additionally a director of.

More recently, and not to our surprise, COMPANY A is in our opinion now in breach of the asset purchase agreement with COMPANY B. The CEO of COMPANY A's current verbal position on the interpretation of SECTION X is completely opposite and negates what he said in the shareholders' meeting regarding SECTION X and thus what was clearly recorded in digital audio by me.

My questions are: 1) is it legal for me to have audio-recorded the shareholders' meeting in the first place? -AND- 2) if so, is the audio recording admissible in California arbitration proceedings and/or court?

Hopefully these questions are of some interest to dig into. Best Regards!

Asked on 9/11/13, 11:12 pm

5 Answers from Attorneys

Charles Perry Law Offices of Charles R. Perry
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A secret recording (meaning without the consent of the other parties to the dialogue) of a "confidential communication" is illegal pursuant to California Penal Code Section 632, and is punishable by a fine of $2,500.00. The audio recording would be inadmissible in any proceeding, pursuant to that same code section.

The key question is whether the presentation was "confidential." The meeting was "private," though there was a large group of people. "Confidential" generally means "an intent that it be confined to the parties thereto," pursuant to the Code section. Much more about the meeting needs to be explored before knowing whether it will be considered "confidential."

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9/11/13, 11:36 pm
Anthony Roach Law Office of Anthony A. Roach
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I agree whole heartedly with Mr. Perry.

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9/12/13, 7:17 am
Frank Natoli Natoli-Lapin, LLC
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I agree with counsel regards to the recording. It is just not clear whether there was that expectation of privacy in the meeting.

Regards to the underlying issue, even if the recording was admissible, what will it demonstrate exactly? That fact that the CEO now has a different position may not be dispositive of anything other than he changed he mind once he became more informed. For example, perhaps legal counsel was sought and what he thought was the right legal interpretation was proven incorrect.

I think the question is bit too abstract to offer any meaningful insights. You should probably reach out to some lawyers for some insights. Most of us here offer a free phone consultation.

Kind regards,

Frank

www.LanternLegal.com

866-871-8655

frank@lanternlegal.com

DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis of this posting.

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9/12/13, 7:31 am
Edward Hoffman Law Offices of Edward A. Hoffman
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I agree with my colleagues. But there is one exception to the bar on using a secret recording as evidence: If the person who made the recording is prosecuted, the recording will be admissible in that case.

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9/12/13, 2:06 pm
Keith E. Cooper Keith E. Cooper, Esq.
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The code section referenced above, which is aimed at eavesdropping or spying on others, would not apply in your case. You attended a gathering of shareholders where you were entitled to be, so the statements could hardly be said to have been made in confidence--the speaker intended you to hear them, made them "on the record," and minutes were (or should have been) kept. Unless there is some rule in your company against recording meetings, you would be entitled to do so, at least for your own use. Whether it would be admissible as evidence in arbitration is another question, since, presumably, the speaker wasn't testifying under penalty of perjury. Such a recording would probably be most useful to you in proving that the person actually made the statements if you wanted to confront him about honoring the contract you described.

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9/17/13, 12:31 pm

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