Friday, February 11, 2011
Supreme Court: Retailers Cannot Ask for Customer ZIP Codes
From Staff and Wire Service Reports
The California Supreme Court yesterday revived a putative class action against the Williams-Sonoma company, clarifying that consumer protection statutes prohibit retailers from asking customers paying with a credit card to provide their ZIP code.
In its 15-page, unanimous decision, the high court said Jessica Pineda’s claims based on the company’s alleged violations of the Song-Beverly Credit Card Act of 1971 should have survived demurrer and sent the case back to the San Diego Superior Court for further proceedings.
Pineda asserted that a cashier at a Williams-Sonoma store had asked for her ZIP code while she was making a purchase in 2008, and at the end of the transaction, made a record of her credit card number, name, and ZIP code.
Williams-Sonoma subsequently used this information to obtain her home address, which was inserted in a database the company used to market products and to sell to other businesses, she claimed.
She sued on her behalf and other similarly situated customers, alleging, among other claims, violation of the Song-Beverly Credit Card Act of 1971, which prohibits retailers from recording a customer’s “personal identification information” in a credit card transaction. The act provides for a civil penalty of up to $250 for the first violation and $1,000 for each subsequent violation.
San Diego Superior Court Judge Ronald S. Prager sustained Williams-Sonoma’s demurrer to the complaint, finding a ZIP code did not constitute “personal identification information” defined in Business & Professions Code Sec. 17200 as “information concerning the cardholder…including, but not limited to, the cardholder’s address and telephone number.”
The Fourth District Court of Appeal, Div. One, affirmed, but the Supreme Court, said a broader interpretation of the statute was required in light of the statutory language, as well as the legislative history and evident purpose of the statute.
Justice Carlos R. Moreno, who is slated to retire later this month, reasoned that a ZIP code “is readily understood to be part of an address” since “when one addresses a letter to another person, a ZIP code is always included.”
He said the word “address” in Sec. 17200 “should be construed as encompassing not only a complete address, but also its components,” or else a business could ask “for the cardholder’s street and city in addition to the ZIP code, so long as it did not also ask for the house number,” and which would “render the statute’s protections hollow.”
Additionally, since a ZIP code can be used to locate a customer’s address or telephone number, Moreno said allowing retailers to request customer’s ZIP codes would allow them to “obtain indirectly what they are clearly prohibited from obtaining directly, ‘end-running’ the statute’s clear purpose.”
The justice added that the statute provided constitutionally adequate notice of proscribed conduct and therefore yesterday’s decision would apply retroactively.
Pineda’s attorney, Gene Stonebarger of Folsom, remarked that the decision “really bolsters and further protects the privacy rights of California consumers,” although he cautioned the ruling would not bar all retailers from requesting customer’s ZIP codes.
Gas stations, for example, are exempt since they do not record the sales transaction, and transactions where the ZIP code information is sent directly to the banks and credit card companies as a security measure will not be affected, he said.
Bill Dombrowski, president of the California Retailers Association, which filed a friend-of-the-court brief in support of William-Sonoma, said he thought the decision was ‘terrible.”
Dombrowski said it was too soon to know how disruptive the ruling will be to businesses that routinely require patrons to supply their ZIP codes to authorize a transaction as a fraud prevention measure.
Attorney Mike Burns, who represents the retailer Michaels Stores in a similar lawsuit, said that several class action lawsuits on the ZIP code issue are pending throughout the state. He predicted more will be filed because of the ruling.
He predicted yesterday’s ruling is “going to have a significant impact on California retailers” and noted that the question of whether merchants can ask for similar information when patrons are paying with cash, debit cards and gift cards has yet to be decided.
The case is Pineda v. Williams-Sonoma Stores, Inc., 11 S.O.S. 821.
Copyright 2011, Metropolitan News Company