CNN reports that California is a 2-party state. If she did not tell Sterling she was was recording the conversation, she could face prosecution, but the remarks still could be used in a lawsuit.
Update: April 30
It is reported that Sterling knew about the taping and had consented to it, but then tried to keep it a secret. The woman's lawyer says that the taping was legal.
And (above) here it is, in large part.
This incident reminds me of the Don Imus scandal in 2007 (the remark about "nappy headed hos"), discussed here April 14, 2007. This is related to what I have called "implicit content".
Update: May 2
Jeffrey Toobin weighs in on the legal questions, as does an article that says the taping was legal if Sterling knew about it, link here.