|October 3, 2013|
Previously published on October 2, 2013
There has been a flurry of class actions filed in the last six months against retailers in Massachusetts alleging improper collection of ZIP codes from consumers during credit card purchases. This upsurge follows the March 2013 decision by the Massachusetts Supreme Judicial Court in Tyler v. Michaels Stores. Some twenty-three ZIP code collection class actions have since been filed in Massachusetts state and federal courts, several within recent weeks. It would not be surprising if that number markedly increases in the coming months.
In Tyler, the Court decided that a consumer could establish a violation of the state unfair business practices statute based on a retailer’s collection of her ZIP code at the point of sale if some distinct injury or harm resulted, such as the subsequent receipt by the consumer of unwanted marketing materials. The Massachusetts’ highest court confirmed that ZIP codes are “personal identification information” that may not be collected and recorded as part of a credit card transaction, and observed that ZIP codes when combined with other information in publicly available databases would enable merchants to identify the consumer’s address. In some circumstances, a showing that the plaintiff received unwanted marketing materials from the retailer as a result of the disclosure of her ZIP code may open the door to the potential for awards for statutory (up to treble) damages and attorney’s fees. See Edwards Wildman Client Advisory - March 2013.
While the recently-filed lawsuits are against different retailers (four retailers have been sued twice), they contain similar allegations that the defendant retailers improperly collected and recorded ZIP codes from consumers in card transactions. Fourteen of the lawsuits also assert a common law claim for unjust enrichment. So far, a small number of law firms represent plaintiffs in these multiple lawsuits, and several of the same individual plaintiffs have filed lawsuits against multiple retailers.
The upsurge in the filing of ZIP code collection lawsuits in Massachusetts seems to be tracking the California pattern. Over 150 class actions have reportedly been filed in California against retailers alleging improper collection of ZIP codes from consumers. These suits followed on the heels of a February 2011 decision by the California Supreme Court in Pineda v. Williams-Sonoma Stores, Inc., holding that the practice of collecting ZIP code information during a credit card transaction violated the California Song-Beverly Credit Card Act. See Edwards Wildman Client Advisory - April 2011. Massachusetts and California have somewhat different statutory language, with the former prohibiting "writing" or requiring the cardholder to write the prohibited information on the "credit card transaction form," and the latter restricting requesting, requiring or recording the information as a "condition" of the credit card transaction. The Tyler court in Massachusetts concluded that the credit card transaction form could include an electronic data base, but left it to the trial court to determine whether the plaintiff's ZIP code had in fact been written on the electronic credit card transaction form.
California and Massachusetts are no longer the only jurisdictions in which “ZIP code” collection class actions have been filed. A putative class action was also filed in the federal court for the District of Columbia this June, against two affiliated national retailers, alleging that the stores’ collection of consumer ZIP codes violated a District of Columbia law forbidding requesting or collecting address information during credit card transactions. The plaintiffs also asserted a violation of the D.C. Consumer Protection Act, seeking statutory damages of $500 per violation, and argued that that they are entitled to sue even in the absence of actual damages. The defendant retailers have filed a motion to dismiss, the briefing for which was recently completed. Interestingly, arguments in the D.C. court filings include a defense argument that the D.C. statute is narrowly worded, addresses collection of an "address” and not a ZIP code, and does not use the term "personal identification information."
Several California decisions have clarified when collection of a customer’s ZIP code in credit card transactions does not violate the California law. One federal court decided that collection of a ZIP code after delivery of the receipt to a consumer does not violate the Song-Beverly Act. Other courts in California have held that the prohibition against collecting ZIP codes does not apply (i) to the return of goods; (ii) to online transactions for downloadable products; and (iii) as part of a loyalty program if the customer is made aware that if she does not enroll, her personal identification information will not be collected. It is too early to tell if these exceptions or clarifications will be adopted by courts outside of California.