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Advertising, Marketing & Promotions Alert >> Collection Practices of Customer Data By California Retailers Brought to CA Supreme Court

June 10, 2015

The U.S. Court of Appeals for the Ninth Circuit has asked the California Supreme Court to decide whether California’s Song-Beverly Credit Card Act prohibits retailers from asking for a customer’s personal information at the point of sale after the customer already has paid with a credit card.

Tammie Davis visited a California Lacoste clothing store owned by the Devanlay Retail Group, Inc. Davis brought an item to the cash register for purchase and provided her credit card to the cashier. As Davis was placing her credit card back in her purse, the cashier asked her “What’s your [zip] code?” Davis did not recall whether she had received her receipt when the request was made.

Davis filed a putative class action against Devanlay, alleging that the company had violated Song-Beverly by requesting and recording the personal identification information (PII) of its retail customers who paid with credit cards. The Song-Beverly law prohibits businesses from requesting that cardholders provide PII during credit card transactions and then recording that information.

The U.S. District Court for the Eastern District of California granted summary judgment in favor of Devanlay. The district court reasoned that, under Song-Beverly, the permissibility of a retailer’s request for a customer’s PII turned on “whether a consumer would perceive the store’s ‘request’ for information as a ‘condition’ of the use of a credit card.”

The district court, therefore, evaluated Devanlay’s policy under an “objective standard.” The district court found that, viewed objectively, Devanlay’s policy of waiting until the customer had his or her receipt in hand conveyed that the transaction had concluded and that providing a zip code was “not necessary to complete the transaction.”

Davis appealed to the Ninth Circuit.

Ninth Circuit’s Decision
In its decision, the Ninth Circuit observed that the district court had interpreted Song-Beverly to prohibit a retailer from requesting PII only if an objectively reasonable consumer would perceive the request to mean that providing PII was necessary to complete a credit card transaction. By contrast, the circuit court added, Davis interpreted the law to forbid retailers from requesting PII at the point of sale when the customer paid by credit card, regardless of whether a customer reasonably would perceive the request as announcing a condition of payment by credit card.

The Ninth Circuit said that it found support for both the district court’s and Davis’ interpretations in the decisions of California’s intermediate appellate courts, the statute’s language, and its legislative history. Moreover, the circuit court said, the California Supreme Court had not yet addressed this issue. The Ninth Circuit then certified the following question to the California Supreme Court:

Does [Song-Beverly] prohibit a retailer from requesting a customer’s [PII] at the point of sale, after a customer has paid with a credit card and after the cashier has returned the credit card to the customer, if it would not be objectively reasonable for the customer to interpret the request to mean that providing such information is a condition to payment by credit card?

Implications for Retailers
The answer to the certified question could have a significant impact on the practices of thousands of California retailers, as a broad construction of Song-Beverly could prohibit many retailers’ practice of requesting PII from customers immediately after they have completed a credit card transaction. A ruling against Devanlay might mean, for example, that retailers would not be able to ask a consumer to join a mailing list unless the consumer walks away from the register and returns or signs up at a different location in the store.

Moreover, given past California Supreme Court decisions, a decision broadly interpreting Song-Beverly could lead to a wave of retroactive litigation, seeking significant damages for conduct that occurred even before the court issues its decision.

The Bottom Line

Whether the California Supreme Court will agree to decide the certified question remains to be seen. If it does agree to decide, a ruling likely would not be issued for a year or longer. Nonetheless, the early warning bells now are ringing for retailers.