Class Action Defense Cases–Pineda v. Williams-Sonoma: California Supreme Court Holds ZIP Codes Constitute “Personal Identifiable Information” Within Meaning Of California’s Song-Beverly Act

Mar 24, 2011 | By: Michael J. Hassen

Trial Court Erred in Dismissing Class Action Complaint because Retailer Request for ZIP Codes Violated Song-Beverly Consumer Protection Statute California Supreme Court Holds

Plaintiff filed a putative class action against retailer Williams-Sonoma alleging that it violated California’s Song-Beverly Credit Card Act of 1971 (one of the State’s consumer protection statutes) by asking her for her ZIP code at the time of her purchase. Pineda v. Williams-Sonoma Stores, Inc., 51 Cal.4th 524 (Cal. 2011) [Slip Opn., at 1]. In relevant part, Song-Beverly “prohibits businesses from requesting that cardholders provide ‘personal identification information’ during credit card transactions, and then recording that information.” Id. According to the allegations underlying the class action complaint, plaintiff provided her ZIP code because she believed it was required in order to complete her credit card purchase. Id., at 1-2. More importantly, the class action alleged that Williams-Sonoma “subsequently used her name and ZIP code to locate her home address.” Id., at 2. Defense attorneys demurred to the class action complaint on the grounds that a ZIP code is not personal identification information within the meaning of Song-Beverly. Id., at 3. The trial court sustained the demurrer, and the Court of Appeal affirmed based, in part, on Party City Corp. v. Superior Court, 169 Cal.App.4th 497 (Cal.App. 2008), which had previously held that “a ZIP code, without more, does not constitute personal identification information.” Id., at 3-4 (citation omitted). The California Supreme Court granted review and reversed.

As noted above, the class action complaint alleged that defendant requested that customers provide ZIP codes at point of sale. Pineda, at 2-3. The thrust of the class action complaint was that “[a]t the end of the transaction, defendant had plaintiff’s credit card number, name, and ZIP code recorded in its database.” Id., at 3. The Supreme Court summarized the critical facts as follows: “Defendant subsequently used customized computer software to perform reverse searches from databases that contain millions of names, e-mail addresses, telephone numbers, and street addresses, and that are indexed in a manner resembling a reverse telephone book. The software matched plaintiff’s name and ZIP code with plaintiff’s previously undisclosed address, giving defendant the information, which it now maintains in its own database. Defendant uses its database to market products to customers and may also sell the information it has compiled to other businesses.Id. (italics added). It is undisputed that defendant could not, consistent with Song-Beverly, have asked plaintiff for her home address; the issue presented was whether defendant could, consistent with Song-Beverly, have asked plaintiff for her ZIP code and then use it to obtain her home address.

Thus, the class action complaint alleged that defendant utilized plaintiff’s ZIP code and computer software to obtain through a backdoor what Song-Beverly plainly prohibited defendant from obtaining through the front door. Considered in this light, it is not surprising that the Supreme Court had little difficulty in reversing the trial court’s ruling. The trouble with the Court’s opinion is its breadth. Rather than limit its holding to the facts before it, or add qualifying language such as the “without more” phrase used in Party City, the Court purported to address a bare request for a ZIP code under any and all circumstances. Indeed, the language of the opinion is so broad that many plaintiff lawyers have interpreted it as overruling, by judicial fiat, California Civil Code section 1747.08(c)(3) to the extent that statute allows gasoline stations to request ZIP codes as a condition to allowing customers to “pay at the pump” with a credit or debit card.

Song-Beverly defines “personal identification information” as “information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder’s address and telephone number.” Cal. Civ. Code, § 1747.08(b). The Supreme Court believed that “the outcome of this case hinges on whether a cardholder’s ZIP code, without more, constitutes personal identification information within the meaning of [Song-Beverly].” Pineda, at 6 (italics added). That is untrue: the case hinged on whether requesting a ZIP code and using it to reverse engineer the consumer’s home address violates Song-Beverly. Because the facts of the case dictated the outcome – that is, the trial court clearly erred in permitting the retailer to use customer ZIP codes to reverse engineer home addresses, which is explicitly prohibited by Song-Beverly – and because the Court defined the issue in unnecessarily broad terms, the Supreme Court found itself twisting its legal analysis to fit the outcome it needed to reach. Again, this would not have been necessary had the Court analyzed the case under the facts presented rather than in a legal vacuum, purporting to address every conceivable circumstance under which a retailer may request a ZIP code from its customers.

The Supreme Court acknowledged that the purpose of Song-Beverly was to prevent “the misuse of personal identification information for, inter alia, marketing purposes.” Pineda, at 9 (citing Absher v. AutoZone, Inc., 164 Cal.App.4th 332, 345 (Cal.App. 2008) (italics added). The Court even stressed this fact, noting that the Legislature’s goal was “to address the misuse of personal identification information for, inter alia, marketing purposes,” and that “[t]he statute’s overriding purpose was to ‘protect the personal privacy of consumers who pay for transactions with credit cards.’” Id., at 11-12 (citations omitted). This is consistent with its quotation from another appellate opinion, “‘The obvious purpose of the 1991 amendment was to prevent retailers from “requesting” personal identification information and then matching it with the consumer’s credit card number.’” Id., at 13 (citation omitted) (italics added).

The author notes that there are legitimate reasons for a business to request ZIP code information and that, so long as it is not used to reverse engineer home addresses or telephone numbers, such use should not be held to violate Song-Beverly. One such use recognized by the California Legislature is where the entity accepting the credit card “is contractually obligated to provide personal identification information in order to complete the credit card transaction or is obligated to collect and record the personal identification information by federal law or regulation.” Cal. Civ. Code, § 1747.08(c)(3). Another use is to combat fraud. See, Bray, H., “ZIP Code turns into a fraud deterrent” (The Boston Globe, March 17, 2006). Still another such use is for a retailer to determine the geographic distribution of its customers for use in determining where to open future stores. It would be absurd to believe that the California Legislature intended to prohibit retailers from opening stores in locations that are more convenient for its customers. On the contrary, as the Supreme Court repeatedly stressed, the purpose of Song-Beverly was to prohibit the use of personal information for “marketing purposes.” That goal is not undermined by allowing a retailer to use ZIP code information solely for the purpose of opening new stores closer to its customers.

In sum, the Supreme Court reached the correct result with respect to its conclusion of whether the trial court erred in dismissing the class action complaint there at issue, because the defendant’s use of plaintiff’s ZIP code to obtain her home address for marketing purposes plainly violated Song-Beverly. But the Supreme Court fell into the trap that “bad facts make bad law” by drafting an overly broad opinion that, on its face, may be interpreted so as to include within its sweep any request for ZIP codes for any purpose, which is clearly not what the Legislature intended.

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