Two New California Supreme Court Decisions Will Impact Landscape of Class Action Litigation Against Retailers

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The California Supreme Court recently has issued two decisions that will require many retailers to change their business practices and litigation strategies immediately.

As of Today, Retailers Prohibited From Requesting ZIP Codes From Customers at Point-of-Sale

The California Supreme Court, in its decision in Pineda v. Williams-Sonoma Stores, Inc., has reversed lower court rulings and held that the Song-Beverly Credit Card Act prohibits retailers from requesting ZIP codes from credit and debit card customers at the point-of-sale.

The Song-Beverly provision at issue prohibits a business from requesting that cardholders provide "personal identification information" during credit card transactions, and then recording that information. The statute expressly states that the definition of "personal identification information" includes addresses and telephone numbers. California's lower courts had previously declined to extend this definition to include ZIP codes on the grounds that ZIP codes are not specific to individual customers because they encompass thousands of people living in the same area. Relying on these rulings, many retailers have continued to ask customers for their ZIP codes at the point-of-sale. However, based on the decision today, retailers are advised to cease this practice immediately as the Supreme Court's ruling expressly states that ". . . requesting and recording a cardholder's ZIP code, without more, violates [Song-Beverly]." The Supreme Court also expressly stated that its interpretation of the law will be applied retroactively, putting retailers that have been requesting ZIP codes at risk for civil penalties or class action lawsuits despite best efforts to change practices in response to this opinion. Businesses that violate the law may be subject to civil penalties of up to $250 for the first violation, and up to $1,000 for each subsequent violation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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