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“What’s the Danger in Asking for a Zip Code?” by Liz McNulty

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More bad news for companies doing business in California from one of my law partners, Liz McNulty. My engineer Adam just noted that we enter zip codes every time we buy gas. Are all those stations now subject to lawsuit as well? Read on:

“What’s the Danger in Asking for a Zip Code?” by Liz McNulty

So you thought that California couldn’t do anything more to sabotage business in the state? Think again. In a ruling issued February 10, 2011 entitled Pineda v. Williams-Sonoma, Inc., the California Supreme Court opened the class action litigation floodgates against businesses big and small who have ever requested a customer’s zip code at point of sale. Interpreting California’s Song-Beverly Credit Card Act of 1971 (hereinafter, the “Act”) (codified in Civil Code sec. 1747), the Court, overturning the opinions of two lower courts, held that zip codes are “personal identification information” entitled to protection under the Act. As a result, entities that request or have ever requested zip code information as part of a credit card transaction are liable for a maximum of $250.00 for the first violation and $1000.00 for each subsequent violation.[# More #]

In Pineda, plaintiff claimed that she went to a Williams-Sonoma store and purchased an item. When she went to pay for the item, the cashier asked plaintiff for her zip code. Apparently believing she was required to provide the requested information, plaintiff provided her zip code. The cashier entered the zip code into the cash register and completed the transaction. At the end of the transaction, Williams-Sonoma had her credit card number, name and zip code recorded in its database. Plaintiff claims that Williams-Sonoma subsequently used customized computer software to perform reverse searches, matching plaintiff’s name and zip code with plaintiff’s previously undisclosed address, giving them the information which it now maintains in its database and uses to market products and potentially even sell to other businesses. The Court, reasoning that zip code information fell well within the parameters contemplated by the Legislature of “personal identification information”, held that the request for zip code information was a direct violation of the Act.

Responding to due process concerns over the potential litigation and assessed penalties that could result from a retroactive application of the interpretation, the Court simply concluded that the penalty amounts were merely maximum limits and that the amount of the actual penalties assessed rested in the “sound discretion of the trial court”-as if that was meant to provide some comfort. Ensuring that business would find no safe harbor in the ruling, the Court went further and proclaimed that defendants state wide have been provided constitutionally adequate notice of proscribed conduct, even though two lower courts disagreed over the very same interpretation and the language of the Act did not specifically list zip code as proscribed information.

What is particularly disturbing in the opinion is the total lack of acknowledgement or discussion that a consumer can simply decline to provide their zip code when requested. Where is the imposition of personal responsibility on consumers? Why didn’t Ms. Pineda, like many others, simply refuse to provide the zip code information? Is it that hard to assume that people are capable of protecting their own interests? According to big brother in Sacramento, the obvious answer is absolutely no. Consumers are simply incapable. At some point, the Courts and Legislature of California must realize that their liberal interpretations of new and existing laws imposing onerous financial burdens on businesses attempting to survive in the current economic climate will simply lead to an exodus of business from California, an increase in the cost of goods for already strapped consumers and a decline in the already bankrupt economy of the California.

While the purpose of the Act, to “impose[] fair business practices for the protection of the consumers” (Young v. Bank of America (1983) 141 Cal.App.3d 108, 114) is a well reasoned and noble pursuit, the Court’s expansion of the interpretation of “personal identification information” to include zip code information and simultaneous open invitation for plaintiffs to file class action litigation does not further that goal. All it has accomplished is laying the groundwork for the fleecing of hundreds if not thousand of plaintiffs’ counsel’s pockets. Proof positive is the onslaught of class action filings over this week in courts up and down the Coast. Don’t think for one minute those suits were filed by well meaning litigants seeking to protect their “personal identification information”. Business beware.


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