Consumer Advocate Legal Update : Class Action Lawyers & Attorneys : Khorrami Pollard & Abir Law Firm : Mass Torts, Products Liability

A recent ruling by the California Supreme Court has unleashed a rash of lawsuits against big retailers that ask their customers to provide zip codes when making purchases with a credit card.

Lawyers representing store customers filed lawsuits last week against Best Buy Co., Coach Inc., Nordstrom Inc. and Macy's Inc., among other retailers.

The lawsuits come on the heels of a Feb. 10 ruling by California's highest court that found Williams-Sonoma Inc. violated the state's credit-card law by asking a customer for her zip code when making a purchase in 2008. The customer sued the home-goods retailer, contending that it used the zip code to determine her address, which is now contained in the company's database.

Stores regularly mine customer data as a way to measure buying habits and target promotions. They also sometimes sell the information to other companies.

Companies that violate the state law face fines of $250 for the first violation and as much as $1,000 for each subsequent violation. Plaintiffs in the cases are seeking those penalty fees.

The case was based on the state's 1971 credit-card law that prohibits merchants from requesting or requiring a cardholder's "personal identification information" as a condition of accepting the card for payment. The court determined that a zip code qualifies as that type of information because it is part of the cardholder's address.

Retailers routinely ask customers for their zip codes as a security measure to guard against fraudulent transactions. The practice is particularly common at gas stations, where customers often must enter their zip codes when filling up their own tanks.

After handing down its ruling, the California Supreme Court sent the Williams-Sonoma case back to a lower court, which will rule on a motion for class-action status. The lower court will also determine potential civil penalties in the case.

More information on lawsuits over zip code question can be found here and here.

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If you use a credit card, you’ve almost certainly been asked to provide your ZIP code when processing the transaction. Yesterday, the California Supreme Court ruled in Pineda v Williams Sonoma Stores, Inc. 2011 LEXIS 1355 (Feb. 10, 2011) that the collection of a ZIP code violates California Civil Code §1747.08, (Credit Card Act), thereby subjecting the retailer to maximum penalties of $250 for the first violation and $1000 for subsequent violations. The Supreme Court reversed a Court of Appeal finding otherwise.

Justice Moreno, writing for the Court, found that in light of the statute's plain language, protective purpose, and legislative history, a ZIP code constitutes "personal identification information" as that phrase is used in section 1747.08. Thus, requesting and recording a cardholder's ZIP code, without more, violates the Credit Card Act.

Justice Moreno sought to quell concerns of possible financial ruin expressed by the business community by noting that the Supreme Court had already held that section 1747.08, subdivision (e), "does not mandate fixed penalties; rather, it sets maximum penalties and that the amount of such penalties. Linder v. Thrifty Oil Co. 23 Cal.4th 429, 448. (2000). Moreover, many consumer class action settlements do not provide the payment of monetary penalties but rather provide for the award of a gift card to the consumer as compensation.

The Court also noted that Section 1747.08 contains some exceptions permitting the collection of ZIP code information, including when a credit card is being used as a deposit or for cash advances, when the entity accepting the card is contractually required to provide the information to complete the transaction or is obligated to record the information under federal law or regulation, or when the information is required for a purpose incidental to but related to the transaction, such as for shipping, delivery, servicing, or installation.

Finally, and very significantly, the Supreme Court rejected Williams-Sonoma’s request that its decision not be applied retroactively because Williams-Sonoma claimed it was operating under the assumption that its conduct was legal. The Supreme Court held that a single Court of Appeal decision could not provide a basis to depart from rule that opinions apply retrospectively.

Accordingly, this important decision protecting the privacy of California consumers brings life to more than a dozen class actions filed several years ago against various retailers who collected and recorded ZIP codes. It will likely spur more given the prevalence of the practice and the significant penalties for violating the statute.

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   Clad in Cheeseheads and Steel Curtain t-shirts, the football faithful flocked to Arlington, Texas this past Sunday for the forty-fifth annual competition between the two top teams in the NFL. Despite many nearly being unable to attend due to snowstorms across the nation cancelling 300 flights into Dallas-Fort Worth Airport, many airlines gave priority to those travelling to the Super Bowl. Tickets with face values of $800 were being resold by scalpers at triple that value initially and rising to $4,000 for non-premium seats shortly before game time. Some even paid $200 just to watch the game on the jumbo screen outside of the stadium in the cold. Despite an estimated $170 million being generated just by the sale of all seats and luxury suites, somehow 1,250 seats were never set up, leaving 850 people in alternate seats and 400 without any seats at all.

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