Word Warriors Public Speaking Club

Monday, July 21, 2008

Pretexting! Is it legal?

Before you read the article below, I would like you to understand that the general consensus is that law is not black and white but contains many shades of gray. Laws are open to interpretation by the judge and sometimes the jury, but who really wants to be the test case.

While I want everyone who reads this to make their own decision and conduct their own research regarding the issue of pretexting, the thing that I would like you to keep in mind is what is said in Francie Koehlers interview below as I believe that her reply is the most reasonable and the most applicable. After all, if a PI lost the ability to pretext then investigations would be near impossible. Imagine if law enforcement lost the ability to pretext as well as PI's. How would you get your client's stuff back from con artists, how would you locate missing persons, how would you conduct a quality investigation if you weren't allowed to pretext? .

The article below is a discussion of pretexting in reference to Attorney John Caragozian's letter and it is this letter that caused this discussion. The letter below was taken from the following link:

http://www.privacyrights.org/ar/PIs-Caragozian.htm

Private Investigators in California:
Analysis of the PIA and Case Law

[The response to this article by the California Association of Licensed Investigators, July 2006 is posted below along with my follow-up]

Lawyers often engage private investigators for sensitive assignments, such as conducting surveillance, obtaining admissions, and finding assets. Many lawyers do not know how investigators perform their work; other lawyers do not want to know. However, ignorance may not be bliss for California lawyers and investigators. In fact, it can be dangerous. An investigation that involves deception--even if the investigator has avoided perpetrating an outright lie--may jeopardize an investigator's license. Further, if the investigation invades someone's privacy or is otherwise tortious, both the investigator and the person hiring the investigator may face civil liability. Finally, criminal penalties exist for unlicensed investigators and persons who knowingly hire them.

California's Private Investigator Act (“PIA”)(1) prohibits private investigators from committing "any act constituting dishonesty or fraud."(2)The court of appeal in Wayne v. Bureau of Private Investigators and Adjusters(3) broadly applied this prohibition. In Wayne, an investigator retained by the defendants' insurance companies visited accident victims at home and misled them about who had retained him. The investigator never lied but did not identify his principals. The court of appeal upheld suspension of the investigator's license:

[T]he [investigator] in this case did not act entirely in good faith with the persons he interviewed....[H]e knew the interviewees wanted...to know whom he represented, he knew that he did not tell the interviewees the whole truth about whom in fact he represented, and further he knew from what he told the interviewees that they were mistakenly of the belief that in some capacity or way he was connected or associated with those whose interests were with the interviewees. There was a want of full probity or fairness in the transactions. The [investigator] was acting...to the end that he would gain a benefit to himself and those companies...he represented to the disadvantage of the interviewees or [their] insurance carriers....It was not a simple or casual omission to tell the exact and whole truth on a single occasion, but...was a studied course deliberately to mislead the unwary and by telling part truths thereby to deceive the interviewees into believing that [the investigator] in some respect represented their agents or principals.

There was a disposition to deceive, betray, and mislead the interviewees. In other words, there was a lack of complete integrity.(4)

Wayne does not define the PIA's prohibition narrowly or technically. Rather, "dishonesty may very well be something less than criminality," and "fraud embraces multifarious means whereby one person gains advantage over another.... " Thus, "the conduct complained of constituted dishonesty or fraud...."(5)

Wayne's interpretation of the PIA's "dishonesty or fraud" language has been repeatedly cited by California courts.(6) While investigators may argue that "in pursuing their business [they] must necessarily resort to tricks and ruses" and that investigators "will get nowhere by the direct approach," such arguments have not been accepted.(7) Likewise, the argument that the "dishonesty or fraud" prohibition applies only to investigators' conduct toward their clients and does not apply to their "dealings with opponent's clients" has been rejected.(8)

The California Supreme Court approved and extended Wayne in Redner v. Workmen's Compensation Appeals Board.(9) A workers' compensation insurance carrier retained an investigator who hired someone to pose as a friend of an injured worker. The purported friend plied the worker with alcohol and then induced the worker to go horseback riding, which the investigator captured on film. The carrier proceeded to offer the film as evidence. The supreme court held that "the [workers' compensation] referee should have refused to rely upon [the film] because the carrier obtained it by fraudulent inducement...." Moreover, according to the court:

[T]he carrier should not profit from its own deceitful conduct. The investigators feigned friendship and concealed their employer's identity.... Nothing in the record so much as suggests that in the absence of the fraudulent inducement [the worker] would have taken the ride. Indeed, the referee found that the carrier fraudulently obtained the film by means of violation of [the worker's] rights....(10)

Further, the Redner court held that victims of investigators may seek damages:

[P]rivate investigators may well make an intrusion in to the individual's right of privacy which would be objectionable or offensive to the reasonable man.... Courts have permitted such an individual to maintain an action for damages against the intruders.(11)

In Noble v. Sears, Roebuck and Company,(12) the court of appeal extended Redner by holding that lawyers retaining an investigator may be liable for at least some of the investigator's torts. In Noble, an investigator was retained by Sears's lawyers who had been defending Sears in an underlying personal injury suit. According to the pleadings, the investigator had "gained admittance to a hospital room where plaintiff was confined" and, "by deception," obtained a witness's address. The plaintiff sued Sears, its lawyers, and the investigator, but the trial court sustained a demurrer to the complaint. Ruling on the plaintiff's appeal of the demurrer, the Noble court held that, under the pleaded facts, "an unreasonably intrusive investigation may violate a plaintiff's right to privacy."(13) Further, Sears and the lawyers may have vicarious liability:

[I]t appears that in California the hirer of a detective agency for either a single investigation or for the protection of property, may be liable for the intentional torts of employees of the private detective agency committed in the course of employment.(14)

Also, under the pleaded facts, Sears and Sears's lawyers may have primary liability for their own "negligent supervision" or "negligent entrustment" of the investigator.(15)

Undercover Investigations

In sum, California case law indicates that:

(1) The PIA prohibits investigators from misrepresenting themselves or their principals--whether the misrepresentation occurs affirmatively or by silence and whether or not an investigator actually lies. Violations of this prohibition my lead to suspension of or other action against the private investigator's license.

(2) Evidence obtained as a result of misrepresentation might be excluded in civil proceedings.

(3) Victims of torts related to misrepresentations may seek damages against investigators.

(4) Victims of intentional torts may seek damages against attorneys or others hiring the investigators.

(5) Victims of negligently supervised or entrusted investigators may seek damages from attorneys or others hiring the investigators.

Indeed, this case law might possibly be read as precluding all undercover investigations--that is, those investigations in which the investigators fail to disclose their true status, pose as someone they are not, and thereby seek to obtain admissions or other evidence. If so, then investigators who conduct undercover investigations--with the possible exception of investigations into certain insurance claims(16)--might be engaging in "dishonesty or fraud" under the PIA.

The breadth of this possibility is significant. The use of investigators in today's business climate may be exemplified by two scenarios. In the first, a business owner experiencing a loss of inventory and suspecting theft by workers retains a private investigator to pose as a worker in order to observe and learn whether employees are indeed involved in theft. The investigator usually avoids telling lies but engages in casual conversations that serve to encourage his or her acceptance by the other workers and elicit approaches by would-be thieves. (For example, the investigator might say, "I could use some extra money," or "How secure is this warehouse?")

In the second, a business suspects that a competitor is misrepresenting itself and hires an investigator to pose as a prospect for the competing business. The investigator, without disclosing his or her true role, asks questions as a means of gathering information about how the competitor is describing its status and activities. For example, an accredited vocational school may want to discover whether an unaccredited vocational school is misleading prospective students by claiming to be accredited. The investigator might say, "I am thinking about your school, but I want to know if it is accredited." By asking this question, the investigator is avoiding a direct lie but is being misleading. The investigator clearly wants to know about the school's accreditation, but he or she wants to be perceived as a real potential student.

In both scenarios, investigators do not disclose that they are investigators and do not reveal who has hired them. Moreover, investigators deliberately mislead others into believing that they are something they are not. Indeed, they are not fellow workers or business prospects. Investigators use the misconceptions about their identity to obtain evidence that most likely would not have been forthcoming if they had disclosed that they were investigators.

If these scenarios portray prohibited conduct, then many investigators and their principals will have difficulty in ferreting out wrongdoing and wrongdoers. On the other hand, if the scenarios portray permitted conduct, then courts may have difficulty in articulating objective standards that allow private investigators to pose as colleagues or prospective customers but not as allies (as in Wayne) or friends (as in Redner). Of course, Wayne also included in-home visits, Redner involved intoxication, and Noble featured a hospital room visit, but the case law did not expressly indicate that, absent these particular facts, the subject investigations would have been permissible.

In addition to the general prohibition of dishonesty or fraud, the PIA provides for denial, suspension, and revocation of an investigator's license for specific types of misconduct. These include: impersonating a law enforcement officer; using a badge; using a uniform, insignia, or identification card "to give an impression" of connection with the government; committing assault, battery, or kidnaping, or using "force or violence without proper justification"; committing any violation of the California Privacy Act,(17) which outlaws secret wiretapping, eavesdropping, and recording; "using illegal means" in debt collection; or accepting employment "adverse to a client or former client" relating to a matter about which the investigator obtained "confidential information."(18)

Protections and Risks

While the PIA does not expressly confer privileges or immunities on private investigators, the Civil Code accords every person a qualified privilege against some tort liability if his or her conduct consisted of a communication "to a person interested therein..." who "requested...the information"(19) and an absolute privilege if the conduct was in a "judicial...or...other proceeding authorized by law."(20) However, no reported case has held that investigators have any greater claim to these privileges than other persons.

Accordingly, investigators may be liable for torts such as fraud, trespass, invasion of privacy, battery, and false imprisonment. Likewise, investigators may be liable for violating statutes such as the Uniform Trade Secrets Act.(21) Other persons may be vicariously liable for any of this wrongdoing by retaining an investigator, especially if the investigator had advertised his or her capabilities for working undercover. The advertising may impute notice to the hirers of the investigator of potential Wayne-type problems.

Also, no per se private investigator-client privilege or private investigator work product doctrine has been held to exist. The PIA does provide that, in the absence of a client's consent, an investigator "shall not divulge..., except as he or she may be required by law..., any information acquired..." (though "criminal offense" information "may" be divulged to law enforcement officers).(22) Thus, investigators have a duty of confidentiality, but the case law expressly leaves open the question of whether this duty creates any corresponding privilege against discovery.(23) Nevertheless, investigators must allow relevant discovery of the identity of their clients.(24)

Without the certainty of a privilege, private investigators face the possibility that their work product and communications with clients might be discoverable. Investigators are not entirely vulnerable in this area, however. There are two grounds for objection to discovery that investigators may be able to utilize. First, an investigator (or the investigator's client) may assert a constitutional privacy objection.(25)

Second, while investigators might not have their own protections, investigators retained by lawyers might avail themselves of the lawyers' protections. Investigators retained by lawyers in litigation may assert the attorney work product doctrine to prevent disclosure of the lawyer's or the investigator's "impressions, conclusions, opinions, or...theories."(26) Similarly, communications between a lawyer's client and an investigator who is the lawyer's agent may be protected by the lawyer-client privilege.(27)

Lawyers retaining investigators face their own set of prohibitions and risks. For example, a lawyer may not compensate an investigator by "directly or indirectly" sharing fees from the lawyer's client.(28) Also, lawyers must be careful not to violate Rule 2-100 of the California Rules of Professional Conduct, which prohibits a lawyer from "directly or indirectly" communicating "about the subject of the representation" with a party represented by another lawyer. A violation of Rule 2-100 can occur if a lawyer engages an investigator to communicate with a party that the lawyer knows to be represented by another lawyer.

In Jorgensen v. Taco Bell Corporation,(29) the court of appeal found no violation of Rule 2-100 when a prospective plaintiff's lawyer retained an investigator to interview a corporation's employees seven months before the plaintiff sued the corporation. The court expressly rejected the corporation's argument that the lawyer "should have known" that the corporation "would be represented" or had "house counsel."(30) However, the Jorgensen court implied that a closer question would be presented if the investigator had conducted the interviews "on the eve of the filing of the lawsuit" and that a lawyer would violate Rule 2-100 if the lawyer hired an investigator to communicate with a represented adversary or represented witness after filing suit.(31)

Lawyers who violate Rule 2-100 face sanctions by the trial court, including disqualification from any role in the lawsuit at issue.(32) These sanctions are in addition to any disciplinary actions that the State Bar of California may take.(33) However, a Rule 2-100 violation does not give rise to a civil action for damages.(34)

Given these proscriptions, investigators and their principals may wonder if any private investigation is lawful. In California, at least five investigatory activities generally are permissible:

(1) Overt investigations, in which investigators identify their roles and principals and do not otherwise mislead or deceive anyone.

(2) Public records searches.(35)

(3) Physical observations, measurements, and the like.

(4) Protection of a person, if it is "incidental" to an investigation and if the investigator complies with the PIA's firearms and insurance requirements.(36)

(5) Surveillance, even if covert, provided that investigators do not trespass or invade privacy.

The privacy proviso bears careful study, because California has common law,(37) constitutional,(38) and statutory protections against the invasion of privacy. The statutory protections are numerous and scattered, ranging from an antipaparazzi law (banning certain photography of "personal or familial activity")(39) and an antistalking law(40) to a ban on the use of a "telescope, binoculars, camera,...or camcorder" to view the interior of a "bedroom, bathroom,...or the interior of any other area in which the occupant has a reasonable expectation of privacy."(41) To complicate matters further, federal privacy statutes also exist.(42)

Licensing Issues and Exempt Persons

Under the PIA, a private investigator is any person:

(a) [W]ho, for any consideration...whatsoever engages in business or accepts employment to furnish, or agrees to make, or makes, any investigation for the purpose of obtaining, information with reference to:....

(b) The identity, habits, conduct, business, occupation, honesty,... knowledge,... whereabouts,... associations,... acts, reputation, or character of any person.

(c) The location...of lost or stolen property.

(d) The cause or responsibility for fires, libels, losses, accidents, or damage or injury....

(e) Securing evidence to be used before any court....(43)

Private investigators must be licensed by the Bureau of Security and Investigative Services (“BSIS”), which is part of the Department of Consumer Affairs.(44) To obtain a license, an investigator must submit an application, pay a fee, possess certain experience requirements, and pass an examination--and once the license is granted, it must be renewed periodically.(45)

Unlicensed persons (not including those considered exempt under the PIA) who represent themselves as licensed or act as private investigators are committing a misdemeanor and may be jailed for up to one year and fined $5,000.(46) In addition, anyone--presumably including a lawyer--who "knowingly" engages an unlicensed investigator or who conspires to have an unlicensed person operate as an investigator also commits a misdemeanor with the same penalties.(47) Public prosecutors may seek civil remedies against unlicensed investigators, their coconspirators, and anyone who knowingly engages such investigators. The civil remedies include an injunction (for which prosecutors need not "show lack of adequate remedy at law or irreparable injury"), a civil fine of up to $10,000, and reimbursement of BSIS investigation expenses.(48)

The PIA does not contain a private right of action for licensing violations. However, private parties might have at least three indirect remedies. First, a licensing violation would be an "unlawful...business act or practice" under the Unfair Competition Law, which generally affords private parties equitable relief, including an injunction and, if appropriate, restitution.(49) Second, an aggrieved litigant might move to exclude evidence gathered by an unlicensed investigator.(50) Third, a person who contracts with an unlicensed investigator might seek to avoid paying the investigator's fees on the ground that the contract is illegal.(51)

May a licensed investigator employ or contract with unlicensed persons to perform investigative tasks? The answer appears to be a qualified yes. Under the PIA, a licensee may be an individual, partnership, corporation, or other business.(52) If the licensee is a partnership, corporation, or other business, it must designate a licensed "manager," under whose "direction, control, charge, or management the business...is operated."(53) The individual or manager licensee is "legally responsible for the good conduct...of his or her employees or agents...,"(54) and only the licensee, manager, or other person authorized by them may submit a "written report...to a client."(55) Also, employees (though, apparently, not agents) of licensed investigators may provide the "incidental" personal protection.(56)

The PIA exempts several classes of persons from its purview, including its licensing requirement. Among those for whom the PIA does not apply are:

  • Employees "employed exclusively and regularly" by an employer "in connection with the affairs of such employer." While this exemption requires the unlicensed, in-house investigator to be a W-2 employee, no court has interpreted the "affairs of such employer" language. Is the unlicensed employee limited, say, to investigations on the employer's premises or relating to the employer's suppliers, customers, or other employees? Or may the unlicensed employee also visit the employer's competitors and investigate their businesses? May the unlicensed employee investigate prospective employees or potential competitors? No reported case law has addressed these questions.
  • Peace officers who are "off duty" and privately employed (unless they carry firearms).
  • Lawyers. No case law indicates whether lawyers' employees also are exempt.
  • Insurance carriers, agents, brokers, and adjusters.
  • Banks, savings associations, secured creditors seeking repossession, and credit-reporting agencies.
  • Persons obtaining information solely from public records.
  • Process servers.(57)

Beyond the statutory exemptions, some case law holds that at least some experts, consultants, and others performing investigative work also need not be licensed. However, these decisions are neither recent nor fully developed.

In Kennard v. Rosenberg,(58) two licensed chemical engineers and a retired city fire inspector sued Nate Rosenberg to collect their professional fees. Rosenberg had been indicted for arson of his nightclub. His lawyer retained the fire inspector after the inspector had stated that he was not licensed and "acted only in the capacity of consultant or an expert." The lawyer also retained the engineers who conducted tests, examined photographs, prepared court exhibits, and--along with the inspector--attended the preliminary hearing and consulted with the lawyer. Rosenberg's defense for not paying the three was that the PIA required them to be licensed as private investigators. The trial court rejected this defense, and the court of appeal affirmed. The appellate court, announcing that "none of the [three experts/consultants] were engaged in the private detective business," reasoned that the engineers were licensed engineers and thus "were authorized to make investigations in connection with that profession...." Moreover, the court continued:

[T]he private detective license law was not intended...to place a limitation on the right of professional engineers to make chemical tests...and to testify.... A physician, geologist, accountant, engineer, surveyor or a handwriting expert, undoubtedly, may lawfully testify in court in connection with his findings without first procuring a license as a private detective, and...a photographer may be employed to take photographs of damaged premises for use in the court without procuring such a license.(59)

Thus, experts--particularly in recognized, forensic disciplines--may be retained to investigate matters in litigation without being licensed as investigators.

In Mason v. Peaslee,(60) Russell Mason, an unlicensed sound engineer, sued his client Margaret Peaslee after she refused to pay his fees. For eighteen years, Mason had taped "meetings..., speeches,...and personal conversations" for corporations, attorneys, individuals, and law enforcement agencies--"in many instances" without the subjects' knowledge. Peaslee requested Mason to install recording devices in her husband's office to determine if the husband was "dishonest and secreting money" or "a sex pervert." Mason did so. The trial court granted a nonsuit on the ground that the contract was illegal, because Mason lacked an investigator's license. The court of appeal reversed, on two grounds. First, the PIA's requirement of a license for persons who "engage" in the investigation business connotes "frequency of action," and the trial court "could not draw the inference that [Mason's] work in recording conversations for others was done in such a manner as to constitute doing business as a private investigator...."(61) Second, the court noted that Mason did not personally "conduct any investigation...." Indeed, according to the court, "Mason...merely furnished to [Peaslee] the devices with which she could carry out her own investigation and...in operating the devices he acted not as an investigator but as one employed by [Peaslee] to render technical aid to her in operating the devices which she had rented from him."(62)

The Mason court seemed to hold that (1) an investigator need not be licensed to conduct a one-time investigation, and (2) merely furnishing and operating surveillance equipment is not an investigation. Mason's holdings, though, appear unsound. For example, if the word "engage" connotes "frequency," then, using the same logic, an unlicensed person could perform dental surgery on one occasion, because dentists' licenses are required only for persons who "engage in the practice of dentistry...."(63) Unsurprisingly, no court has ever cited Mason's interpretation of the PIA, and it would be risky for unlicensed investigators or anyone contemplating retention of an unlicensed investigator to rely on it.

Persons exempt from the PIA (such as in-house investigators) enjoy not only freedom from licensing, but, ironically, perhaps greater latitude than licensed investigators in undercover investigations. To be sure, exempt persons still must avoid torts and statutory violations, but Wayne holds licensed investigators to higher standards. For example, Wayne suggests that the PIA's "dishonesty or fraud" language could--at least in part--encompass silence, does not expressly require that the victims' reliance be reasonable, and does not mention damages. By contrast, actionable fraud excludes misrepresentations by silence except in limited circumstances,(64) requires that the reliance be reasonable,(65) and requires actual damages.(66) Thus, in Wayne, as well as in the typical types of scenarios in which businesses use undercover investigations, exempt persons might have been able to conduct the investigations, even if licensed investigators could not. In sum, exempt persons might be able to investigate in ways that avoid tort or statutory liability, but licensed investigators must also reckon with Wayne.(67)

In the celebrated 1939 novel and 1946 movie The Big Sleep, Los Angeles private detective Philip Marlowe was retained by General Guy Sternwood to investigate Arthur Geiger, after Geiger had requested payment of some suspect promissory notes. Marlowe's investigation included two visits to Geiger's book shop on Hollywood Boulevard. On the first visit, Marlowe pretended to be interested in buying books; on the second, he pretended to have a book to sell. In neither visit did Marlowe disclose that he was an investigator or that General Sternwood had retained him. Under Wayne and its progeny, Marlowe might well have violated the PIA and risked BSIS discipline and civil liability. The fictional Philip Marlowe could ignore such risks. Nonfictional investigators and lawyers cannot.

Endnotes:

1 Bus. & Prof. Code §§7512-73.
2 Bus. & Prof. Code §7538(b). See also Bus. & Prof. Code §7561.4.
3 Wayne v. Bureau of Private Investigators & Adjusters, 201 Cal. App. 2d 427 (1962). 4 Id. at 437.
5 Id. See also Taylor v. Bureau of Private Investigators & Adjusters, 128 Cal. App. 2d 219, 227-28 (1954) (upholding the bureau's suspension of a license after an investigator truthfully said he was an investigator but lied about who had retained him).
6 See, e.g., Chodur v. Edmonds, 174 Cal. App. 3d 565, 570 (1985).
7 See Taylor, 128 Cal. App. 2d at 227. See also Wayne, 201 Cal. App. 2d at 437-38 (An investigator's admission that, without concealing information from interviewees, "undoubtedly he would have had to return to his office with no statements" is evidence of fraud.).
8 Taylor, 128 Cal. App. 2d at 227-28.
9 Redner v. Workmen's Comp. Appeals Bd., 5 Cal. 3d 83 (1971).
10 Id. at 93-94.
11 Id. at 94 n.13 (citations omitted).
12 Noble v. Sears, Roebuck & Co., 33 Cal. App. 3d 654 (1973).
13 Id. at 660.
14 Id. at 663 (footnote omitted). Noble expressly leaves open the question of whether the "hirer" could be liable for an investigator's "negligent torts." Id. at 663 n.8.
15 Id. at 663-64.
16 See the Insurance Information and Privacy Protection Act, Ins. Code §§791-791.27. The act allows "pretext interviews" (meaning interviewers pretend "to be someone [they are] not," misrepresent their principals' identities, misrepresent the interview's "true purpose," or refuse to identify themselves) to investigate insurance claims "where there is a reasonable basis for suspecting criminal activity, fraud,...or material non-disclosure...." Ins. Code §§791.02(u), 791.03. No reported decisions have considered this language, much less opined whether or how it applies to private investigators.
17 Penal Code §§630-637.9.
18 Bus. & Prof. Code §§7539(d), (e), 7561.1(e), (h), (m), 7561.4(b), (d). See also Penal Code §§631, 632.
19 Civ. Code §47(3).
20 Civ. Code §47(2). How closely related the conduct must be to the proceedings has been the subject of substantial case law. See, e.g., Knoell v. Petrovich, 76 Cal. App. 4th 164 (1999); Rosenthal v. Irell & Manella, 135 Cal. App. 3d 121 (1982).
21 See Civ. Code §§3426-3426.11.
22 Bus. & Prof. Code §7539(a).
23 Flynn v. Superior Court, 57 Cal. App. 4th 990, 993-94 (1997).
24 Id. at 995-96.
25 Cf. Valley Bank of Nev. v. Superior Court, 15 Cal. 3d 652, 658 (1975) (A bank may assert its customers' constitutional privacy rights to prevent discovery of customer records, even absent an Evidence Code privilege.). On the other hand, parties seeking discovery of investigators' records should note that the "personal records" listed in Code of Civil Procedure §1985.3 (which codified Valley Bank of Nevada) do not include investigators' records.
26 See Code Civ. Proc. §2018(c); Fed. R. Civ. P. 26(b)(3). See also Rodriguez v. McDonnell Douglas Corp., 87 Cal. App. 3d 626, 647-48 (1978) (An investigator retained by a defendant's lawyer took notes regarding what a witness stated. The notes would have been discoverable under California law, because they were "nonderivative or noninterpretive." However, the investigator's own "comments about [the witness's] statement" are "protected absolutely from disclosure," and the comments were "so intertwined" with the notes that "all portions...should be held protected...." (emphasis in original)); and O'Connor v. Boeing N. Am., Inc., 216 F.R.D. 640, 652-53 (C.D. Cal. 2003) (A private investigator who interviewed witnesses "on plaintiff's counsel's behalf" was protected by the federal attorney work product doctrine from having to disclose what the witnesses said.).
27 Cf. City & County of S.F. v. Superior Court, 37 Cal. 2d 227, 236 (1951).
28 Cal. Rules of Prof'l Conduct, R. 1-320(A).
29 Jorgensen v. Taco Bell Corp., 50 Cal. App. 4th 1398 (1996).
30 Id. at 1401-02, 1403.
31 Id. at 1402-03.
32 See, e.g., Lewis v. Telephone Employees Credit Union, 87 F. 3d 1537, 1558 (9th Cir. 1996); Mills Land & Water Co. v. Golden West Ref. Co., 186 Cal. App. 3d 116, 133 (1986).
33 See Bus. & Prof. Code §6077.
34 Noble v. Sears, Roebuck & Co., 33 Cal. App. 3d 654, 658 (1973).
35 In obtaining public records, investigators must comport with the Information Practices Act, Civ. Code §§1798-1798.78. The act includes a private right of action against individuals disclosing nonpublic "personal information" from federal or state records. See Civ. Code §1798.53.
36 See Bus. & Prof. Code §7521.5.
37 See, e.g., Briscoe v. Reader's Digest Ass'n, 4 Cal. 3d 429, 533 (1971) (The California Supreme Court expressed concern about, inter alia, "electronic devices with their capacity to destroy an individual's anonymity, intrude upon his most intimate activities, and expose his most personal characteristics....").
38 Cal. Const. art. I, §1. See also Schuman v. Group W Prods., 18 Cal. 4th 200, 231 (1998) (The invasion of constitutional privacy has two elements: "(1) intrusion into a private place, conversation, or matter, (2) in a manner highly offensive to a reasonable person.").
39 Civ. Code §1708.8.
40 Civ. Code §1708.7.
41 Penal Code §647(k).
42 See, e.g., the Electronic Communications Privacy Act, 18 U.S.C. §§2510-22, and the Stored Communications Act, 18 U.S.C. §§2701-11.
43 Bus. & Prof. Code §7521.
44 Bus. & Prof. Code §§7520, 7528.
45 Bus. & Prof. Code §§7525, 7525.1, 7526, 7527, 7541, 7541.1.
46 Bus. & Prof. Code §7523(b).
47 Id.
48 Bus. & Prof. Code §7523.5(a), (c).
49 Bus. & Prof. Code §§17200, 17203.
50 Cf. Peat, Marwick, Mitchell & Co. v. Superior Court, 200 Cal. App. 3d 272, 287 (1988).
51 Cf. Loring & Evans v. Blick, 33 Cal. 2d 603, 607 (1949). But see, e.g., Marshall v. Von Zumwalt, 120 Cal. App. 2d 807, 810 (1953) (ruling in favor of an unlicensed contractor on the ground that "[c]ontracts made in violation of statutes, if not malum in se, are sometimes held valid....").
52 Bus. & Prof. Code §§7512.3, 7520, 7525.1(e).
53 Bus. & Prof. Code §§7512.7, 7525.1(e),(g), (h), 7526, 7527.
54 Bus. & Prof. Code §7531.
55 Bus. & Prof. Code §7539(c).
56 Bus. & Prof. Code §7521.5
57 See Bus. & Prof. Code §7522.
58 Kennard v. Rosenberg, 127 Cal. App. 2d 340 (1954).
59 Id. at 344-45.
60 Mason v. Peaslee, 173 Cal. App. 2d 587 (1959).
61 Id. at 591.
62 Id. at 592.
63 Bus. & Prof. Code §§1625, 1626 (emphasis added).
64 A defendant is liable for silence only when there is (a) a fiduciary relationship giving rise to a duty to disclose, (b) knowledge of material facts to which the plaintiff had no access, or (c) active concealment of material facts. See, e.g., Cooper v. Jevne, 56 Cal. App. 3d 860, 874 (1976); Border v. McClung, 93 Cal. App. 2d 692, 697 (1949); Marine Corp. v. Superior Court, 52 Cal. App. 3d 30, 37 (1975).
65 See, e.g., Wilhelm v. Pray, Price, Williams & Russell, 186 Cal. App. 3d 1324, 1332 (1986).
66 Civ. Code §1709. See also Agnew v. Parks, 172 Cal. App. 2d 756, 768 (1959).
67 Conversely, if the PIA confers a privilege against discovery, then presumably unlicensed persons would not enjoy that privilege. To date, neither the PIA nor case law interpreting the PIA provides licensed investigators with this privilege. See text, infra, and Flynn v. Superior Court, 57 Cal. App. 4th 990, 993-94 (1997).

-------------------------
* Mr. Caragozian is a member of the State Bar Of California and litigates business and privacy matters. He thanks Ms. Lily Nyland for her assistance in the preparation of this article. A slightly different version of this article appeared in the December, 2004, Los Angeles Lawyer.I spoke to Attorney John Caragozian regarding his letter and asked him about it. Here is the summary of our conversation (paraphrased for brevity):

MILLER: Has your position changed from when you wrote the article?

CARAGOZIAN: No.

M: From this article, you are saying that all pretexting is illegal, is that right?

C: What I was trying to say was that private investigators have no special rights to engage in pretexting or lying to get information. If an ordinary citizen would be liable for pretexting/lying, then private investigators and, perhaps, lawyers and others who hire private investigators also may be liable. On the other hand, the BSIS (the California agency which regulates PIs) has been quoted as saying in 2006 that PIs "can pretend to be someone else as long as they're not pretending to be either a police officer or a government official."

M: With what you are saying, I guess I should be very careful about pretexting anymore until I fully understand what is and isn't legal?

C: Well, don't take my word for it, research the different cases listed in my article and do your own research. You could come up with the conclusion that I am right or I am wrong but again don't take my word for it.

M: There was a bill that was being introduced regarding pretexting that the MPAA struck down a couple of years ago, what do you think about that?

C: I wonder if the same decision would have been made if the bill was introduced after the HP (Hewlett Packard) Scandal.

M: I appreciate you taking time out your day to speak with me.

I spoke to Francie Koehler, a CALI past president and current Legislation Chair and asked her about CALI's rebuttal to the Caragozian letter. Here is our conversation (paraphrased for brevity):

MILLER: Can you give me a response to the Caragozian letter?

KOEHLER: Ed McClain, past president of both CALI and NCISS and legislation committee member of both organizations, wrote the following letter to Jenny Bretschnieder. In 2006 Bretschneider was a staff member for then Senator Debra Bowen, author of SB 1666. SB 1666 prohibited pretexting information contained in business records. Attorney John Carogozian published his original article in Los Angeles Lawyer magazine and was used to shear the argument to prohibit pretexting. I believe it capsulizes CALI’s position:

July 5, 2006

Re: 2004 Article On Private Investigators

Dear Ms. Bretschneider:

I am responding to the article you forwarded to Jerry Desmond entitled “Private Investigators in California.” I read this article shortly after it was first published in Los Angeles Lawyer. My recollection is that the article was greeted by considerable derision from the legal community and particularly from attorneys who work with and direct investigators on a frequent basis.

I am concerned that you may have formed an opinion about private investigators based, in whole or in part, on statements made in this article. If that is so, I hope you will take the time to read this message.

During my career, I have lectured about investigation at a number of colleges and more frequently at educational seminars for private investigators and sometimes attorneys. My lectures have been more about what not to do than tips on how to do it. Two of the three primary cases mentioned by the author, Redner v. Workmen’s Compensation Appeals Board and Noble v. Sears, Roebuck and Company, were usually included in my study materials and discussed in some detail.

It is interesting to note that the three main decisions quoted by the author, Wayne, Redner and Noble were rendered in 1962, 1971 and 1973 respectively. Given the many tens of thousands of investigations conducted every year by the 9,813 licensed investigative agencies in California, the paucity of additional and/or more recent case law pertaining to private investigations indicates to me that for the most part, we are doing something right.

In Wayne v. Bureau of Private Investigators and Adjusters, Mr. Wayne had his license lifted, and rightfully so, in my opinion. He sued our governing bureau to try to get his license reinstated. The court struggled to make Mr. Wayne’s actions fit the PI Act and its prohibition against “dishonesty and fraud,” and opined “the term dishonesty seems to be incapable of exact definition or precise limitation because, among other things, of the infinite variety of circumstances which affect the relations and affairs of mankind in our society.”

We could spend a great deal of time discussing this case, but the bottom line of the decision was that narrowly considering the context of what Mr. Wayne did, his actions were dishonest and a violation. The court did not broadly state that any use of subterfuge by an investigator is a violation of the B & P Code.

Taylor v. Bureau of Private Investigators, a 1954 case is cited in the Wayne decision and similarly is about an investigator trying to get his license back. The underlying action involved blatant trespass and bordered on kidnapping and is not representative of the uses of subterfuge in the tens of thousands of cases since 1954.

I do not disagree with the decisions in Wayne, Taylor, Redner and Noble nor do I dispute the author’s recitation of the rules and regulations governing investigators. But the article contains many suppositions and conclusions that are speculative at best.

In my opinion, this article, though reproduced in a respected legal publication, is couched in an alarmist vein from which the uninitiated could infer that there is currently a serious problem. It is one thing to espouse admonishments about not breaking the law or incurring strict liability, but in my opinion the author has leaped to a great many conclusions from which a reader could get the impression that private investigators are committing violations of law with impunity. In direct contradiction of such a premise are the statistics of the Bureau of Security and Investigative Services which verify that annually, complaints against licensed investigators for alleged violations are few and have been for years, Mr. Pellicano’s aberration notwithstanding..

There are, however, a number of instances each year where individuals are exposed as operating without a valid license. Of these violations, 99% are reported to BSIS by the Unlicensed Practices Committee of the California Association of Licensed Investigators, CALI.

The article contains many assumptions and hypotheses which are not based on fact and are prefaced with “may” and “might be” and “may be liable” and “the possibility.” Still, by taking out of context and interjecting select segments of established case law and excerpts from the Business and Professions Code which governs private investigators, the author is able to create an air of authenticity about his article. This impression is aided by his extensive use of footnotes.

Nowhere does the author acknowledge that every year investigators are conducting literally hundreds of thousands of investigations and the evidence obtained is being accepted by the courts, mostly without question. Nowhere in the article does the author mention that while the courts abhor “unreasonably intrusive investigations,” the courts also admonish all parties that they have a duty to investigate and seek the truth and bring the evidence before the court.

To add insult to injury, the author speculates that Phillip Marlowe in the motion picture The Big Sleep, portrayed by my hero Humphrey Bogart, may have violated the B & P Code and been subject to discipline and liability.

As I said in the beginning, I hope that you are not unduly influenced by this article, which in my opinion, conveys a false impression.

My best advice to anyone trying to understand this article would be to follow the author’s final admonishment: “This document should be used as an information source and not as legal advice.” Thank you very much for your attention.

Sincerely,


Eddy L. McClain



KOEHLER: So CALI does not believe that all pretexting is illegal. There has been some legislation enacted making some pretexting activities prohibited by law.

MILLER: Can you give me an example of these activities?

KOEHLER: You are not allowed to pretext the phone company for phone records and you are not allowed to pretext financial institutions for financial records. There are also some pretexting limitations when it comes to conducting workers comp investigations that I am not personally familiar since I do not conduct investigations concerning workers comp.

Regarding telephone records:

California Senate Bill, SB 202, created Penal Code 638.

638. (a) Any person who purchases, sells, offers to purchase or sell, or

conspires to purchase or sell any telephone calling pattern record or list,

without the written consent of the subscriber, or any person who procures

or obtains through fraud or deceit, or attempts to procure or obtain through

fraud or deceit any telephone calling pattern record or list shall be

punished by a fine not exceeding two thousand five hundred dollars

($2,500), or by imprisonment in a county jail not exceeding one year, or

by both a fine and imprisonment. If the person has previously been

convicted of a violation of this section, he or she is punishable by a fine

not exceeding ten thousand dollars ($10,000), or by imprisonment in a

county jail not exceeding one year, or by both a fine and imprisonment.

Federal bill, H. R. 4709 created the Telephone Records and Privacy Act of 2006 Chapter 47 of title 18, United States Code, is amended by inserting “Sec. 1039 and bans pretexting of telephone companies and their customers for “Confidential Phone Records Information.”

Pretexting financial records is prohibited according to the Gramm-Leach-Bliley Act

SEC. 521. PRIVACY PROTECTION FOR CUSTOMER INFORMA

TION OF FINANCIAL INSTITUTIONS.

5 (a) PROHIBITION ON OBTAINING CUSTOMER INFOR-

6 MATION BY FALSE PRETENSES.—It shall be a violation

7 of this subtitle for any person to obtain or attempt to ob-

8 tain, or cause to be disclosed or attempt to cause to be

9 disclosed to any person, customer information of a finan-

10 cial institution relating to another person—

11 (1) by making a false, fictitious, or fraudulent

12 statement or representation to an officer, employee,

13 or agent of a financial institution;

14 (2) by making a false, fictitious, or fraudulent

15 statement or representation to a customer of a fi-

16 nancial institution; or

17 (3) by providing any document to an officer,

18 employee, or agent of a financial institution, know-

19 ing that the document is forged, counterfeit, lost, or

20 stolen, was fraudulently obtained, or contains a

21 false, fictitious, or fraudulent statement or represent-

22 tation.

23 (b) PROHIBITION ON SOLICITATION OF A PERSON TO

24 OBTAIN CUSTOMER INFORMATION FROM FINANCIAL IN-

25STITUTION UNDER FALSE PRETENSES.—It shall be a vio-

F:\FSA99\REPORT\S900CRPT.005

F:\V6\102899\102899.0H6

October 28, 1999

26

H.L.C.

1 lation of this subtitle to request a person to obtain cus-

2 tomer information of a financial institution, knowing that

3 the person will obtain, or attempt to obtain, the informa-

4 tion from the institution in any manner described in sub

5 section (a).

Further, the Hewlett-Packard case, although touted as pretexting, was actually false personation, or the impersonation of the subscriber who was the owner of the telephone calling record that was accessed. Following the defeat of SB 166 and following the infamous H-P case, SB 328 was introduced with the same language contained in SB 1666. The hearing before the California Assembly Banking & Finance Committee was cancelled at the request of the author June 27, 2007.

MILLER: Has CALI's stance changed from what was put in the rebuttal to the Caragozian letter?

KOEHLER: No, nothing has changed. CALI’s position is that a pretext can still be used in some situations and not used any differently than used by law enforcement personnel. In my opinion, however, a pretext should never include impersonating a specific individual.

This is also from PI BUZZ:

Monday, January 15th, 2007 at 9:23 am

President Bush Signs HR 4709 -Telephone Records and Privacy Act of 2006

President Bush signed H.R. 4709, the “Telephone Records and Privacy Act of 2006″ on Friday, June 12th. This Bill passed the House last April and the Senate on the last of the 109th Congress in December.

In addition - Bryan Wagner, a Colorado “private investigator” formerly in the employ of Action Research Group, was the first “player” in the Hewlett-Packard scandal pled guilty to federal charges. He is expected to testify against others that have or will be charged in connection with obtaining telephone records and computer information. Charges are also pending in the California court.

H.R. 4709 bans pretexting of telephone companies and their customers for “Confidential Phone Records Information.” Chapter 47 of title 18, United States Code, is amended by inserting “Sec. 1039. Fraud and related activity in connection with obtaining confidential phone records on a covered entity.” Key elements in this criminal violation are interstate or foreign commerce, making false statements to a covered entity, its employees, the customer or knowingly providing a false or fraudulent document to the entity or accessing customer accounts via the Internet, or by means of conduct that violate section 1030 of this title, without prior authorization from the customer.

There is a prohibition on the sale and transfer of Confidential Phone Records without prior authorization from the customer. A prohibition also exists in knowingly and intentionally purchasing or receiving (or attempting to do so) such information without prior authorization from the customer or if one has reason to know that such information was fraudulently obtained.

While recognizing that there have been exigent circumstances where accessing telephone toll records by investigators assisted in saving lives, locating abducted persons and recovering stolen property, NCISS still supported H.R. 4709 on the basis that the mood in Congress was to put forth legislation that would have expanded making pretexting illegal in areas other than just obtaining telephone records. The unintended consequences would have outlawed undercover operations in by the private sector; and that is just one example. Our analysis, even prior to the unfavorable publicity generated by the H-P matter, was that if HR 4709 failed to pass in the 109th Congress, in 2007 it would return with additional privacy protections and make the use of pretexting for any reason in a non-law enforcement setting illegal. Such measures could still be introduced in other legislation as the 110th Congress gets underway in 2007.

This week Senator Feinstein introduced two bills that NCISS will be watching very closely, S 238 the Social Security Number Misuse Protection Act and S 239 the Notification of Risk to Personal Data Act of 2007.

Every bill that NCISS took a position against in the Senate and House during the past two- year session of the 109th Congress, failed to be enacted into law. However, we expect our work will be considerably more difficult the next two years with both the Senate and House being controlled by the Democrats.

It is important that NCISS increase its membership and lobbying “war chest.” Any inquiries regarding applications for membership or contributing to the NCISS Legislative Committee Fund may be directed to the contact address below.

Bruce Hulme, NCISS Legislative Director

NCISS
7501 Sparrows Point Blvd.
Baltimore, MD 21219

Tel:
1-800-445-8408
email:
nciss@verizon.net
or go to: www.nciss.org


Summary of the above content tells me that pretexting/lying about your identity, your intentions, etc. while in the midst of an investigation will not be cause for losing your license with BSIS as long as you don't claim to be a member of a government agency which is a no-brainer. In addtion, it seems that you won't go to jail over a pretext as long as it doesn't break one of two federal laws regarding pretexting financial institutions for financial information and pretexting phone companies for phone records. The only exception being insurance-related investigations and criminal defense.

It does seem that the government is trying to protect the consumer but at what point will a legislators kneejerk reaction to an incident further restrict the professional PI's ability to perform a legal and ethical investigation? Only time will tell and as long as there are groups like NCISS to protect PI's nationwide, we will always have someone in our corner.

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