law360 - Stubbs Alderton & Markiles, LLP

Consider Legal Ramifications Before Recording Video Calls

With 95% of the country subject to various stay-at-home orders and countless employees working from home for the foreseeable future, an important issue has arisen that must be considered by those conducting business online: How confidential are the conversations that we have through online videoconferencing platforms such as Zoom, Microsoft Teams, and Skype?

While video conferencing has been available for quite some time, the recent stay-at-home orders issued as a result of the COVID-19 outbreak undoubtedly have increased the popularity of such tools. In fact, within the last month, videoconferencing platforms such as Zoom have become the preferred method of conducting not only business meetings, but also school lessons, therapy sessions, religious services, birthdays and even happy hours.

In light of the perceived novelty of these videoconferencing platforms, as well as the fact that people have been forced to embrace this technology seemingly overnight, there is a concern that users of these platforms may not fully comprehend the legal implications that accompany their use.

In light of the recent spate of news about Zoombombing — whereby strangers pop in on meetings, shout obscenities, and sometimes even record it to post on TikTok and other social media platforms — professionals appear to be gaining some level of awareness that such platforms may not be private after all. In fact, this has led to a number of recently filed lawsuits against Zoom.

These same professionals that rely on online video conferencing platforms like Zoom, Microsoft Teams and Skype may not, however, be aware of how their use of this technology can expose them to civil or criminal liability.

One obvious way in which users can unwittingly risk liability is by unlawfully recording videoconference calls. The vast majority of states, including New York and New Jersey, are one-party consent states, which means that it is lawful to record conversations so long as one party to the conversation consents.[1] However, California, like a handful of other states, is a two-party consent state.

Two-party consent states require that all parties to a confidential communication consent to the recording.[2] Courts have applied the term “communication” as used in Section 632 of the California Penal Code broadly to include not only audio recordings of conversations, but also video recordings.[3][4]

A communication is considered “confidential” where a party “has an objectively reasonable expectation that the conversation is not being overheard or recorded.”[5] Failure to obtain consent before recording the communication can lead not only to civil liability but also to criminal penalties such as fines and even jail time.[6]

While many people know that consent should be obtained before recording a confidential phone conversation, such as in the context of a call with a customer care representative or when wanting to record a conversation in a two-party consent state, the applicability of such laws to videoconferencing platforms may not be intuitive to all participants.

Indeed, the ease with which a videoconference can be recorded without the use of third-party applications may lull one into recording the communication without even considering legal ramifications.

For example, a host on Zoom can record the conference with a single click of a button — which merely results in a tiny red circle popping up on the participants’ screen with the word “recording” in small font. This warning may be easy to miss and could lead to disputes over whether the participants have the requisite notice that they are being recorded.

On Microsoft Teams, the ability to record a conference is not limited to the host but instead extends to any individual within the same organization as the host.

When a user records a conversation via Microsoft Teams, a banner appears notifying all participants of the recording via a message that reads: “Recording has started. By joining the meeting, you have given consent for it to be recorded.” Similarly, a recording on Skype is documented by a banner notifying the users that the call is being recorded.

There also may be confusion regarding whether a participant in a videoconference has a “reasonable expectation” of privacy.

For example, whereas just a few weeks ago it might have been reasonable to assume that videoconference participants were situated in private offices or conference rooms secluded from third parties, the stay-at-home orders have forced workers to participate in videoconferences from their homes — where the conversations may be readily overheard by roommates, significant others and children.

In such quasi-public circumstances, is it reasonable to assume that the video conference is confidential? Perhaps not.

Nevertheless, regardless of where the participants are located or whether the platform provides an obvious or discrete warning that the videoconference is being recorded, from a best-practices standpoint, the prudent course of action is to treat a videoconference the same way you would treat a conference conducted in person or via telephone.

In other words, before recording a conference with your clients, your co-workers, students, patients or fellow happy hour revelers, make sure to obtain their consent before hitting the record button — especially if one or more of the participants is located in a two-party consent state.

In the context of these recorded conversations, consent can easily be obtained regardless of which videoconference platform is being used by simply announcing at the beginning of the videoconference — once all participants have joined — that you are recording the conversation. By continuing in the recorded conference, the participants are deemed to have consented.

For this very reason, a person recording a videoconference on Skype will see a message at the top of their screen urging them to “[a]void legal snags by telling people they’re being recorded,” despite the banner disclosing the fact that the call is being recorded.

Alternatively, Zoom has its own consent feature that requires participants to click on a consent button before recording can begin. Though it is not necessary to use this feature to obtain consent, it may nevertheless remove any ambiguity as to whether or not the participants are deemed to have consented.[7]

Attorneys should not only avail themselves of one of these simple means of obtaining consent prior to recording a videoconference, but also should advise their clients to do the same.

Clients preoccupied with responding to and resolving various business emergencies caused by COVID-19 may not have call recording laws at the top of their mind when participating in videoconferences. Accordingly, now more than ever, clients may appreciate prospective advice on ways to avoid civil and criminal liability.

Separately, attorneys should review their written discovery requests to confirm that they are expressly requesting copies of any recorded videoconferences. Because videoconferencing is now a necessary component of how many businesses communicate, and in light of the user-friendly recording options discussed above, obtaining copies of recorded videoconferences may be a useful tool in civil litigation — whether or not the conference was recorded with consent.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

We will continue to closely monitor developments regarding these matters. You can view prior alerts and additional guidance regarding COVID-19-related matters at our resource center.

To view the published article on LAW 360 visit here.

Daniel Rozansky is a Partner of the firm in the Business Litigation Practice.

Clients engage Dan before disputes ever arise to advise on strategies to minimize litigation risk and to put clients in a position for a successful outcome if litigation does arise. For example, he regularly reviews television pilots, screenplays and other material in development to assist those clients in identifying and avoiding potential liabilities; he advises clients, including Fortune 100 companies, on best practices for recording communications; he counsels clients on best practices to protect trade secrets and other confidential information; and he guides clients contemplating exiting unfavorable business relationships. When disputes arise, Dan brings his decades of experience at AmLaw 100 and 200 firms and his relentless approach help achieve the best possible outcome for his clients. This approach has led Dan to be recognized as an industry leader, including being listed as a top entertainment and media litigator in Chambers USA (2011-2019). In 2013, 2014, and 2016, he was featured in Variety’s “Legal Impact Report,” which names the top attorneys who are making a significant impact in the entertainment industry.

In areas of entertainment and media litigation, Dan Rozansky represents clients across multiple platforms including film, television, music, concerts and touring, and digital media. As a result of his well-recognized skills, Dan has prevailed in a number of high-stakes entertainment cases, including some of Hollywood’s most significant cases in the areas of copyright, trademark, First amendment, profit participation, reality television, right of publicity, rights of privacy and breach of implied contract.

Crystal Jonelis is Senior Counsel in the Firm’s Business Litigation Practice. Crystal is well-versed in all aspects of business and commercial litigation, having overseen numerous cases from inception to winning verdicts (and even the subsequent winning appeals). However, her primary focus is in the area of entertainment and media litigation, with particular emphasis in the anti-SLAPP arena.

Crystal has represented a wide variety of clients on both the plaintiff and defense side, including television and motion picture producers, reality television production companies, radio stations, film financiers, banks, investment firms, transportation companies, and credit card companies.

Crystal takes pride in her ability to help clients reach their endgame in the most efficient way possible, without sacrificing the quality of work product. Crystal is cognizant that cases often take left turns, and she is able to quickly adapt to respond to any obstacle that is thrown her way during the complex litigation process.

Crystal is a board member and secretary of Ballet For All Kids, a non-profit that provides national classical ballet and dance instruction to children of all abilities and needs.

For more information on our Business Litigation Practice, contact Daniel Rozansky at

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[1] See, e.g., N.Y. Penal Law §§ 250.00, 250.05; N.J. Stat. §§ 2A:156A-3, 2A:156A-3-4.

[2] Cal. Pen. Code § 632.

[3] See People v. Gibbons , 215 Cal. App. 3d 1204, 1209 (1989) (“we find that ‘communication’ as used in the privacy act is not limited to conversations or oral communications but rather encompasses any communication, regardless of its form, where any party to the communication desires it to be confined to the parties thereto.”).

[4] Whether a video recording is considered as communication by a particular state is largely irrelevant in the context of the video recorded conference call as there is an aural component in all of the communications.

[5] Flanagan v. Flanagan , 27 Cal. 4th 766, 777 (2002).

[6] Cal. Pen. Code §§ 632(a), 637.2.

[7] Although Zoom’s consent feature is not part of the default setting, Consumer Reports recently recommended that Zoom change its default recording setting to require the prior consent of all participants in the conference. See https://www.consumerreports.org/video-conferencing-services/zoom-teleconferencing-privacy-concerns

Stubbs Alderton & Markiles' attorneys were featured this week in Law360 for their article entitled "The Fight For Clarity On Calif. Worker Classification Law". The featured article can be viewed on their website.

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Since taking effect on Jan. 1, A.B. 5 has received its share of criticism and legal challenges. While the law may be well-intentioned, opponents claim it goes too far and restricts workers’ abilities to earn a living.

Steep penalties can result from noncompliance. As a result, many businesses are frustrated by the lack of guidance on how to appropriately conform to A.B. 5, especially considering the high number of exemptions and the potential for more to come.

Even for exempted professions, like freelance writers and photographers and fine artists, certain requirements must be met for said exemptions to apply. Rather than risking penalization for failing to properly conform or increasing their own costs to convert workers to employees, some businesses have opted to outsource work out of state.

These sentiments, among others, have necessitated a growing number of challenges to A.B. 5 in both California state and federal courts and the state’s Legislature. In light of these challenges, discussed in more detail below, California appears to be headed toward a series of much-needed judicial interpretations and legislative wrangling whereby the precise parameters of A.B. 5 will hopefully be clarified.

Generally, these challenges appear to signal a gradual erosion of the text of A.B. 5 as passed (i.e., more exemptions) and clear(er) guidance on how courts will interpret workers’ or public enforcement claims.

Specifically, a few of the currently unanswerable questions that will hopefully become clearer through 2020 include, but are in no way limited to:

• For purposes of qualifying under the professional services exemption, what does it mean to be "customarily engaged in the same type of work … with another hiring entity"?
• Relatedly, what exactly qualifies as a "fine artist" or "graphic design" worker?
• To apply under the business-to-business exemption, how must the hiring business demonstrate that the contracting business is free from its "control and direction"?
• Relatedly, will that phrase be interpreted the same as when applied to the referral agency exemption?

Below are brief summaries of a few of the most significant pending lawsuits challenging A.B. 5 enforcement.

Olson v. California
Two independent workers who used the Postmates and Uber applications to earn a living have filed suit in the U.S. District Court for the Central District of California claiming that A.B. 5 violates the California and U.S. Constitutions.[1] Postmates Inc. and Uber Technologies Inc. joined in the action as well.

They argue that there is no rational basis for determining the numerous professions that the bill exempts from applying the strict ABC test established by the California Supreme Court's 2018 decision in Dynamex Operations West Inc. v. Superior Court of Los Angeles County, thereby violating the equal protection clauses of the California and U.S. Constitutions. On Feb. 10, the court denied the plaintiff s’ request to halt A.B. 5’s enforcement, citing the state’s need to police misclassification as outweighing any harm to the companies and allowing the case to proceed to a determination on the merits.

California Trucking Association v. Becerra
The California Trucking Association has challenged A.B. 5 on preemption grounds in another lawsuit filed in the U.S. District Court for the Southern District of California, asserting it is inconsistent with the Federal Aviation Administration Authorization Act.[2] The suit gained steam on Jan. 16, when the court extended a previously granted temporary injunction that bars enforcement of the law on the trucking industry.

Separately, in an identical case brought by the California Trucking Association in Los Angeles Superior Court, the court there held that A.B. 5 is indeed preempted by the FAAAA on Jan. 8.[3]

American Society of Journalists and Authors Inc. v. Becerra
Freelance journalists have also challenged A.B. 5 in the U.S. District Court the Central District of California, arguing that their exemption, which allows for no more than 35 submissions per year in order to remain governed by the more flexible Borello test, violates the First Amendment.[4] In that case, the court denied injunctive relief in early January.

Proposed Legislation
While these litigation proceedings, and many others, are still working their way through the courts, California legislators have wasted no time introducing bills to upend the effects of A.B. 5. The following proposed bills, if passed, would take effect Jan. 1, 2021:

• S.B. 868 seeks to eliminate the 35-submission cap for freelance journalists and photographers, allowing all in the profession to remain independent contractors pursuant to satisfying the far less stringent Borello test regardless of how many pieces of content a freelance journalist submits to a given employer within a year.
• S.B. 867 seeks to make permanent the temporary exemption that A.B. 5 extends to newspaper distributors and carriers, which currently lasts until Jan. 1, 2021.
• S.B. 875 seeks to exempt interpreters, translators and court reporters, allowing them to remain independent contractors pursuant to passing the Borello test.
• S.B. 881 seeks to exempt persons providing services as a musician and music industry professionals, except where a collective bargaining agreement applies, also allowing them to remain independent contractors pursuant to passing the Borello test.
• A.B. 1925 would exempt small businesses, defined as independently owned and operated businesses with fewer than 100 employees and average gross receipts of $15 million or less over the previous three years, pursuant to their satisfying Borello.
• A.B. 1928 would overturn A.B. 5 in its entirety. Unlike the bills discussed above, A.B. 1928 would take immediate effect upon its passage. Specifically, A.B. 1928 seeks to reinstate Borello as the generally applicable standard for separating employees from independent contractors. However, A.B. 1928 would not nullify the Dynamex decision wherein the California Supreme Court held that the ABC test applies to claims brought under California wage order laws.

Lastly, Uber Technologies, Lyf t Inc. and DoorDash Inc. are the primary funders behind the Protect App-Based Drivers & Services Act, an initiative currently gathering signatures in order to make its way onto the November 2020 California ballot. If successful, this act would classify app-based ride-share and delivery drivers as independent contractors for all purposes, subject to meeting certain flexibility-based requirements, in exchange for minimum wage, health care, anti-discrimination, and insurance-based protections.

For now, companies should consider at least the following to ensure compliance with this new framework:

1. A.B. 5 and the ABC test presume that anyone performing a service is an employee; therefore, it is imperative to evaluate how workers are classified. Misclassification can be costly. Unless there is a recognized exemption, independent contractor status is very difficult.
2. If you are concerned that someone has been misclassified, determine what action needs to be taken to avoid being penalized. This can include reclassifying an independent contractor as an employee and providing, among other things, compensation for missed meal breaks, overtime pay, and any tax obligations or contributions to unemployment insurance.
3. The Dynamex decision could be given retroactive effect by the California Supreme Court this year, which would result in the ABC test’s application to wage order law claims going back four years. Even if Dynamex is not determined to be retroactive, the ABC test would still apply to these claims going back to the date of the Dynamex decision in April 2018. The impact that this retroactivity decision will have on A.B. 5 enforcement, which explicitly states it is not retroactive aside from applying for exemptions, remains unclear. Accordingly, classification practices over the previous four years should be evaluated to determine potential liability.
4. Review your situation if you currently or historically have classified, someone, as an independent contractor and paid them accordingly.[5]

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Jeffrey F. Gersh is a Partner of the firm. Before joining Stubbs Alderton & Markiles, LLP, Jeffrey was Managing Partner of the Gersh Law firm, Inc. for over 10 years and a partner for 25 years with a major national litigation law firm. Jeffrey has been named a Thomson Reuters “Super Lawyer” for more than 7 years by his peers; an honor only achieved by less than 2.5% of attorneys in California.

Jeffrey successfully litigates, arbitrates, or mediates for both plaintiffs and defendants complex business and commercial matters, whether for individuals, public or private corporations, partnerships, limited liability companies and/or its members, shareholders and partners. Jeffrey successfully handles disputes regarding contract matters, trade secrets, intellectual property (trademarks, copyrights and trade dress) negligence and fraud, employment, real estate, license agreements, the apparel and garment industry, and general business matters.

Jeffrey approaches his litigation practice from a business perspective, rather than purely transactional. In addition to representing his clients in litigation and dispute resolution matters, Jeffrey handles many of their various transactional matters relating to general business, trademarks, trade dress, copyrights and other intellectual property matters, trade secret matters, and employment matters to name a few.

Jeffrey has been directly involved in litigation and business matters for clients not only in California, but also in New York, Nevada, Texas, Arizona, London, Australia, and Estonia and other places. He litigates cases from inception through trial and in some cases appeal, directly responsible for all aspects of the prosecution, defense, and resolution of his client’s complicated and sophisticated matters in both state and federal courts. As a result of his commitment to his client’s needs, he has enjoyed long-standing client relationships.

Garett Hill is an Associate of the Firm. His practice focuses on all stages of business litigation.

Prior to joining the firm, Garett was a certified law clerk with the Re-Entry Clinic at Loyola Law School where he successfully represented Los Angeles residents seeking to expunge or seal their prior convictions or trying to obtain or restore a license that had been negatively impacted by prior convictions. Garett completed the Corporate Law Concentration at Loyola Law School where he excelled learning within the various substantive areas of business law. Additionally, Garett worked as a legal intern in-house at AECOM, where he primarily focused on corporate governance and construction law matters. He also worked as a law clerk at Girardi & Keese where he gained invaluable exposure to high-volume litigation.

[1] Olson v. California, 2:19-CV10956 (C.D. Cal., filed December 30, 2019).
[2] California Trucking Association v. Becerra, 3:18-CV02458 (S.D. Cal., filed Oct. 25, 2018).
[3] The People of the State of California v. Cal Cartage Transp. Express, Cal. Super. Ct. No. BC689320, order 1/8/20.
[4] American Society of Journalists and Authors, Inc. v. Becerra, 2:19-CV10645 (C.D. Cal., filed December 17, 2019).
[5] This article is not intended to be a complete recitation of the law regarding the Dynamex decision or the impacts of A.B. 5. Each business has its own unique issues and circumstances that need to be separately evaluated by an attorney

Calif. Justices Create Arbitration Compromise Conundrum

The California Supreme Court’s recent decision in Heimlich v. Shivji[1] provides litigants in arbitration valuable guidance on when and how to notify arbitrators of existing offers to compromise made pursuant to California Civil Procedure Code Section 998.

As most know, Section 998 is a cost-shifting statute intended “to encourage the settlement of litigation without trial, by punishing the party who fails to accept a reasonable settlement offer from its opponent.”[2] More specifically, Section 998 imposes mandatory and discretionary penalties on a party that declines to accept a settlement offer made under Section 998 and then fails to obtain a more favorable judgment at trial or arbitration.

For example, if a plaintiff declines a defendant’s Section 998 offer to settle the matter for $50,000, but then recovers only $30,000 at trial, the plaintiff is prevented from recovering any costs she incurred after the defendant made the 998 offer.[3] In addition, the plaintiff must pay the defendant for all his post-offer costs, even though the plaintiff ultimately prevailed in the matter.[4] The court or arbitrator also has discretion to order the plaintiff to pay the defendants’ reasonable post-offer expert costs.[5]

The decision to issue or accept a 998 offer can alter the economics of a case where the prevailing party is entitled to attorney fees as a matter of law or contract. If there were a prevailing party fee provision, the prevailing plaintiff in the above example would be limited to recovering only those attorney fees predating the offer, whereas the defendant would be entitled to all his attorney fees postdating the offer.[6] Either party can make a 998 offer up to 10 days prior to trial or arbitration.[7] Critically, a 998 offer is not admissible to prove liability.[8]

In Heimlich, the plaintiff and respondent Alan Heimlich, an attorney, sued his former client, the defendant and appellant Shiraz Shivji, for outstanding legal fees. Shivji made a 998 offer, offering to pay Heimlich $30,001 to settle the case, which Heimlich rejected.[9] Later, the court granted Shivji’s motion
to compel arbitration pursuant to an arbitration clause in the parties’ retainer agreement. In the arbitration, Shivji also filed claims against Heimlich, seeking a refund of fees already paid, and made a second 998 offer, offering to pay Heimlich $65,001, which Heimlich did not accept.[10]

The arbitrator issued a final award, granting $0 to both Heimlich and Shivji and directing that “each side will bear their own attorneys’ fees and costs.” Within six days of the issuance of the award, Shivji informed the arbitrator of the two prior 998 offers to Heimlich.[101] Accordingly, because Heimlich had failed to obtain a more favorable result, Shivji sought costs from Heimlich. The arbitrator, however, took the position that because he had issued his final arbitration award, he no longer had jurisdiction to take any further action in the matter.[12]

Shivji filed a motion to confirm the award with the trial court, attaching a memorandum of costs seeking $76,684.02 from Heimlich. The trial court confirmed the award but refused to add costs, stating that a request for costs under Section 998 in connection with an arbitration must be resolved by the
arbitrator.[13]

The court of appeal reversed, holding that Shivji timely submitted his post-award request to the arbitrator.[14] The appellate court noted that a determination regarding a 998 offer must necessarily follow an arbitration award and that Shivji could not have notified the arbitrator of the 998 offer prior to the award, as such offers are not admissible in trial or arbitration. The appellate court further held that the trial court had authority to vacate the arbitrator’s award because the arbitrator had refused to hear evidence material to the controversy.[15]

The California Supreme Court granted review and first determined that Shivji was required to request costs from the arbitrator.[16] The court then examined whether Shivji was required to make the request before or after the arbitrator issued his award. The court found that the appellate court erred by determining that Shivji was prevented from revealing the 998 offer prior to the issuance of an award.[17] In particular, though Section 998 provides that a 998 offer “cannot be given in evidence upon the trial or arbitration,”[18] the court found a 998 offer may nevertheless be admissible to prove unrelated matters. Thus, Shivji could have informed the arbitrator of the 998 offer prior to the issuance of the award.[19]

The court further held, however, that Shivji was not obligated to inform the arbitrator of the offer prior to the issuance of the final award.[20] The court acknowledged that notifying an arbitrator of a 998 offer prior to the arbitrator issuing his or her final award is enough to potentially influence the arbitrator’s award. In particular, the admission that a party made a 998 offer, even if the amount of the offer is not disclosed, “could influence a merits determination by signaling that the defendant is willing to pay at least some amount.”[21]

Moreover, even if a party alerts an arbitrator of the existence of the 998 offer without disclosing the amount or the identity of the party that actually made the offer, the arbitrator nevertheless may logically assume that the party informing the arbitrator is the party who has the incentive to ensure that the arbitrator is aware of the offer; that is, “the party whose offer was rejected.”[22] Accordingly, requiring parties to inform an arbitrator of a 998 offer prior to the issuance of the award could cause parties reservations about making a 998 offer, thereby undermining the very purpose of Section 998, which is
to promote settlement.[23]

In addition, the court observed that in amending Section 998 to apply to private arbitrations, the legislature intended “to place parties in arbitration on equal footing with parties in civil actions.”[24] A rule requiring “parties in arbitration to disclose settlement offers before an award is made would contradict the goal of equal treatment.”[25]

Taking all this into account, the court ruled “[c]onsistent with practice in civil litigation, for 15 days after issuance of a final award, a party to an arbitration may submit a cost request asserting rejection of an earlier 998 offer.”[26]

In making this ruling, the court rejected Heimlich’s argument that an arbitrator’s powers automatically terminate upon the issuance of a final award.[27] Rather, relying on both legislation and the Federal Arbitration Act, the court found that, even upon issuance of a final award, the arbitrator has ongoing jurisdiction to “amend the award and address the undecided issue.”[28] Thus, regardless of whether the ruling is designated as interim or final, the “arbitrator has implicit power under section 998 to consider the request [for costs] and amend any award accordingly.”[29]

Unfortunately for Shivji, however, despite the arbitrator’s error in failing to consider Shivji’s timely request for costs, there were no grounds for the court to vacate the arbitrator’s denial of costs. The court noted that “an arbitrator’s legal or factual error in determining which party prevailed may not be reversed.”[30] Thus, although Shivji “was legally entitled” to wait until after the arbitrator issued his award before raising the 998 offer, by doing so “he ran the risk that the arbitrator would erroneously refuse to award costs, leaving him without recourse under the narrow grounds for vacation or correction contained in the statutory scheme.”[31] Thus, the California Supreme Court reversed the appellate court’s judgment.[32]

The California Supreme Court’s ruling leaves parties that made or intend to make a 998 offer in arbitration with difficult choices. More specifically, parties can (1) inform the arbitrator prior to an award being rendered that a 998 offer has been made, and run the risk that the arbitrator’s decision will thereafter be influenced, or (2) wait and timely inform the arbitrator that a 998 offer has been made after an award is issued, and run the risk that the arbitrator will improperly find the request untimely, thereby leaving the party with no grounds to vacate the bad ruling. Moreover, an arbitrator may unknowingly force a party to disclose the existence of a 998 offer by requesting that the issue of attorney fees and costs be included in the parties’ post-arbitration briefs (in which case the party may also be compelled to disclose the amount of the 998 offer prior to the issuance of a final award).

To avoid placing parties in these difficult situations, arbitrators should take a more active role in their case management efforts. In particular, arbitrators should, as a matter of course, inform all parties at the beginning of a case that, in an effort to encourage settlement and the exchange of 998 offers, the arbitrator will issue an interim award. After the issuance of the interim award, the parties may timely inform the arbitrator of any 998 offers before the arbitrator issues his or her final award. Indeed, dispute resolution providers, such as JAMS and AAA, can explicitly incorporate this procedure into their
rules.

In the meantime, parties should take affirmative steps to protect themselves. For example, the court in Heimlich suggested that “[p]arties may also agree to jointly tell an arbitrator, before any award is announced, that a 998 offer was made and rejected, without identifying the terms or who made the offer. Such notice would permit the arbitrator to designate an otherwise final award as interim and then consider the parties’ presentations concerning costs and fees.”[33]

If the opposing party refuses to jointly inform the court, the party making the 998 offer can also notify the case manager, where applicable, and request that the case manager inform the arbitrator that the existence of a 998 offer necessitates that the award be designated as interim. Another option is for a party to preemptively raise the possibility at the initial conference that 998 offers may be exchanged, and request that the arbitrator issue an interim award following the arbitration hearing and allow the parties to subsequently brief issues relating to attorney fees and costs.

To view the article on Law360 visit here.

About Daniel Rozansky

Daniel Rozansky is a Partner of the firm in the Business Litigation Practice. Clients engage Dan before disputes ever arise to advise on strategies to minimize litigation risk and to put clients in a position for a successful outcome if litigation does arise. For example, he regularly reviews television pilots, screenplays and other material in development to assist those clients in identifying and avoiding potential liabilities; he advises clients, including Fortune 100 companies, on best practices for recording communications; he counsels clients on best practices to protect trade secrets and other confidential information; and he guides clients contemplating exiting unfavorable business relationships. When disputes arise, Dan brings his decades of experience at AmLaw 100 and 200 firms and his relentless approach help achieve the best possible outcome for his clients. This approach has led Dan to be recognized as an industry leader, including being listed as a top entertainment and media litigator in Chambers USA (2011-2019). In 2013, 2014, and 2016, he was featured in Variety’s “Legal Impact Report,” which names the top attorneys who are making a significant impact on the entertainment industry.

In areas of entertainment and media litigation, Dan represents clients across multiple platforms including film, television, music, concerts and touring, and digital media. As a result of his well-recognized skills, Dan has prevailed in a number of high-stakes entertainment cases, including some of Hollywood’s most significant cases in the areas of copyright, trademark, First amendment, profit participation, reality television, right of publicity, rights of privacy and breach of implied contract.

Dan’s achievements are not limited to the entertainment industry. He has successfully represented clients in the real estate, toy, banking, insurance, restaurant, clothing, luxury goods, and travel industries, in such areas as trade secrets, partnership, contract, and unfair competition disputes. While Dan is known for his willingness to “take it all the way”, Dan’s goal is to design a strategy to put his clients in the best position for early dismissal including through motions to dismiss, anti-SLAPP motions, summary judgment motions, and favorable settlements. As a result, not only has Dan achieved early dismissal of multiple claims and actions, but he has also prevailed in cases short of trial, resulting in significant recoveries. When cases do go to trial, Dan has achieved great success at the state, federal and appellate levels. In all instances when his clients prevail, Dan looks for opportunities to recover their attorneys’ fees and has, in fact, recovered millions of dollars in fees for his clients.

Outside of work, Dan enjoys spending time and traveling with his wife and two daughters. Dan sits on the Board of Directors at Vista del Mar, a non-profit organization founded in 1908 that provides comprehensive, family-centered social, educational, and behavioral health services, which encourage children, adolescents and their families to lead self-reliant, stable, and productive lives.

About Crystal Jonelis
Crystal Jonelis is Senior Counsel in the Firm’s Business Litigation Practice. Crystal is well-versed in all aspects of business and commercial litigation, having overseen numerous cases from inception to winning verdicts (and even the subsequent winning appeals). However, her primary focus is in the area of entertainment and media litigation, with particular emphasis in the anti-SLAPP arena.

Crystal is a board member and secretary of Ballet For All Kids, a non-profit that provides national classical ballet and dance instruction to children of all abilities and needs.

For more information about your Business Litigation Practice, please contact Dan Rozansky at

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[1] 7 Cal. 5th 350 (2019)
[2] See Elite Show Services, Inc. v. Staffpro, Inc., 119 Cal. App. 4th 263, 268 (2004).
[3] See Cal. Civ. Proc. Code § 998(c)(1).
[4] Id.
[5] Id.
[6] See Scott Co. of Cal. v. Blount, Inc., 20 Cal. 4th 1103, 1107 (1999).
[7] Cal. Civ. Proc. Code § 998(b).
[8] Id. at § 998(b)(2).
[9] Heimlich¸ 247 Cal. Rptr. 3d at 607.
[10] Id.
[11] Id.
[12] Id.
[13] Id. at 607-08.
[14] Id. at 608.
[15] Id.
[16] Id.
[17] Id. at 610.
[18] Cal. Civ. Proc. Code § 998(b)(2).
[19] Heimlich¸ 247 Cal. Rptr. 3d at 610.
[20] Id.
[21] Id. at 611.
[22] Id.
[23] See id.
[24] Id.
[25] Id.
[26] Id. at 614.
[27] Id. at 612.
[28] Id.
[29] Id. at 614.
[30] Id. at 616.
[31] Id. at 618.
[32] Id. at 619.
[33] Id. at 615 n.8.