Retailers Should Use Caution In Collecting Zip Codes From Consumers

by Adler Pollock & Sheehan P.C.

In a recent decision, Tyler v. Michaels Stores, the Supreme Judicial Court of Massachusetts ("SJC") has increased the risk of class action lawsuits under M.G.L. c. 93A against retailers who collect consumers' ZIP codes during credit card transactions and use this information for their own businesses purposes, such as marketing or a subsequent sale to a third party.  Retailers who collect and use ZIP codes for their own business purposes should assess whether this practice is worth the increased risk and whether there are cost-effective steps they can implement to prevent harm to consumers and minimize the risk of a lawsuit.    


In 2011, Melissa Tyler, a customer of Michaels Stores, Inc. filed a lawsuit in the United States District Court of Massachusetts on behalf of herself and a putative class of Michaels' customers.  The complaint alleged that Michaels repeatedly violated M.G.L. c. 93, §105(a) by requesting customers' ZIP code information when processing credit card information, entering this information into an electronic credit card terminal, and then using this information along with other commercially available databases to obtain customers addresses and phone numbers to send them unsolicited and unwanted marketing materials from Michaels.

M.G.L. c. 93 §105(a) provides that a business "that accepts a credit card for a business transaction" shall not "write, cause to be written or require" a credit card holder's personal identification information ("PII") that is "not required by the credit card issuer” on a  “credit card transaction form."  PII is defined to include, but is not limited to, a credit card holder's address or telephone number.  A violation of §105(a) constitutes an unfair and deceptive trade practice, as defined in M.G.L. c. 93A § 2. 

Michaels' motion to dismiss the complaint was granted by the District Court.  However, at the Plaintiff's request, the District Court certified three questions to the SJC, two of which are the most significant for retailers' purposes:

  1. Does a ZIP code constitute PII under the §105(a)?
  2. Can a plaintiff bring an action for such a privacy right violation absent identity fraud under M.G.L. c. 93, § 105(a)?

Supreme Judicial Court Decision

After determining that "the principal purpose of §105(a) ... is to guard consumer privacy in credit card transaction, not to protect against credit card identity fraud," the SJC answered both questions affirmatively.     

ZIP Codes are PII, according to the SJC, because, the complaint alleges that a consumer's ZIP code along with the consumer's name provides the merchant with enough information to identify the consumer's address or telephone through publicly available databases.  Addresses and telephone numbers are the categories of PII that businesses are expressly prohibited in § 105(a) from writing on a credit card transaction form when accepting a credit card, so the SJC concluded that the statute would be rendered "hollow" by not counting ZIP codes as PII.

With respect to the second question, the SJC found that a plaintiff does not need to allege identity fraud in order to bring a privacy action under §105(a), but must allege and ultimately prove that she has suffered a "distinct injury or harm" apart from the §105(a) violation in order for the conduct to qualify as an actionable "unfair and deceptive trade practice" under M.G.L. c. 93A.   Two types of actionable injuries or harm were explicitly recognized by the SJC:      

                (1) The consumer receives unwanted marketing materials as a result of the merchant's unlawful              collection of the consumers PII;

                (2) The merchant sells a customer's PII to a third party. 

If a plaintiff alleges and proves that she suffers either injury as the result of a §105(a) violation, the SJC found that a consumer would be entitled to, at least, the statutory minimum of $25 for damages under M.G.L. c. 93A. 


As a result of the SJC's ruling, retailers should expect a wave of privacy litigation in Massachusetts.  In 2011, the California Supreme Court held in Pineda v. Williams-Sonoma Stores, that ZIP codes qualify as PII under the California Song-Beverly Credit Card Act.  The California statute is similar to §105(a), and more than 240 privacy class action lawsuits were filed in California after the Pineda ruling. 

There is no reason to believe that a similar wave of class action lawsuits will not follow the Tyler decision, particularly since under M.G.L. c. 93A, the Massachusetts Consumer Privacy Act, violations carry a minimum statutory damage of $25 per injury, treble damages, and an award of potential attorneys’ fees and costs.  The initial trickle has already begun, as Melissa Tyler has filed yet another class action complaint in the U.S District Court of Massachusetts alleging that Bed Bath & Beyond violated §105(a) by collecting ZIP codes from customers during credit card transactions and sending unwanted junk mail. 

Retailers should also be prepared for similar privacy lawsuits in other jurisdictions, as at least 13 other states have similar laws restricting the collection of customers' personal information in collection with a credit card transaction.  In light of the consumer-friendly decisions in California and Massachusetts, businesses that collect ZIP codes in these other jurisdictions will likely face lawsuits in the future.   

Minimizing the Risk

Retailers operating in Massachusetts should immediately assess their data collection policies to determine if they run afoul of §105(a) by collecting ZIP codes or other PII during consumers' credit card transactions and recording this information on credit card transaction forms.  If a retailer collects and records PII, then its needs to assess whether this practice serves a legitimate business purpose and whether the benefits outweigh the risks of a class action lawsuit.  By far, the best way to eliminate the risk of a potential lawsuit is to stop collecting and recording ZIP codes in connection with consumers' credit-card transactions. 

However, if a business wants to continue collecting ZIP codes and other PII, an attorney should be consulted as there may be cost-effective steps that can be implemented to mitigate the harm to the consumer and the risk of a class action lawsuit.   Retailers should consider posting clear and conspicuous notices of the retailers' PII data-collection practices at the location(s) where customers are asked to provide ZIP Codes or other PII.  These notices should be readily understandable to the consumer and should clearly and accurately explain why the retailer is collecting the consumers' PII and provide consumers with the right to opt-out of providing the requested information.

The ultimate success of this strategy is unclear in light of the recentness of the Tyler decision.  Retailers who wish to continue collecting PII such as ZIP codes should stay tuned to future developments and consult with their attorneys regarding the most effective way to reduce harm to consumers and the risk of a possible class action lawsuit.  

Retailers who have collected ZIP code information in the past should also plan proactively for the expected wave of class action suits against retailers.   Class action suits under 93A will raise many issues that can eventually result in the defeat of such class actions, including lack of standing, whether actual harm must be shown, whether common issues predominate, and whether there is a class measure of damages.  Even if a class is certified there are still issues under 93A that may limit awards such as whether damages are limited to the 93A statutory minimum of $25, whether multiple damages are permitted or required under 93A, and if liability is shown then the amount of attorneys’ fees that are justified under 93A.

About the Author 

Attorney Mark A. Bross, Ph.D. is an associate at Adler, Pollock & Sheehan and a Certified Information Privacy Professional, United States (CIPP/US) with the International Association of Privacy Professionals.  Mark concentrates his practice in complex commercial litigation and has a particular interest in helping clients manage and reduce the litigation, reputational and government enforcement risks that can arise from a company’s handling of individuals’ personal information.   Mark also works closely with Michael C. Gilleran, a shareholder of Adler Pollock & Sheehan and the author of The Law of Chapter 93A (Thomson Reuters).  

Adler Pollock & Sheehan P.C.

175 Federal Street

Boston, MA 02110

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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