Legal Alert Snell & Wilmer L.L.P.
January 18, 2012
 

Timothy J. Toohey
Timothy J. Toohey
213.929.2637
ttoohey@swlaw.com
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Court Holds Song-Beverly Act’s Prohibition on Collecting ZIP Codes Does Not Apply to On-line and Automated Transactions

The United States District Court for the Central District of California in two recent cases has limited the applicability of the credit card data collection provisions of California’s Song-Beverly Act (the Act) to “brick and mortar” transactions. In orders dismissing with prejudice Mehrens v. Redbox Automated Retail LLC and Salmonson v. Microsoft Corporation et al., the court ruled that the collection of ZIP codes with credit card transactions at self-service unattended kiosks and on-line Internet transactions did not fall within Section 1747.08 of the Act which prohibits collection of certain “personal identification information” from credit cardholders.

In reaching this conclusion, the court interpreted the Act’s prohibition against collection of “personal identification information,” including ZIP codes, as limited only to situations involving “pen and paper transactions” requiring the “cardholder to write personal identification information on the credit card form, requiring the cardholder to provide personal identification information that merchants then write on the credit card form and utilizing forms with preprinted spaces for personal identification information.” (Emphasis in original.) In Redbox, the court dismissed plaintiff's claim that the collection of ZIP codes for credit card transactions at Redbox's self-service DVD rental and purchase kiosks violated the Act. Similarly, the same judge in the separate Microsoft case dismissed a claim that Microsoft's collection of ZIP codes for a credit card purchase of downloaded software violated the Act.

The Redbox and Microsoft decisions will likely be of interest to some of the estimated 200 companies that were sued for collecting ZIP codes from customers after the California Supreme Court in Pineda v. Williams-Sonoma Stores, Inc. ruled in 2011 that ZIP codes were “personal identification information” under the Act. Although the court in Redbox and Microsoft dismissed both complaints at the pleading stage, it remains to be seen whether these holdings will have a significant effect on the numerous pending ZIP code cases.


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