NEW YORK Feb 16 (Reuters Legal) - The California Supreme Court's decision last week to bar merchants from requesting customer zip codes has set off a frenzy of class action lawsuits against big-name retailers, including Target, Wal-Mart and Victoria's Secret.
At least twenty class action lawsuits have been filed in California courts since Thursday, when the state's high court ruled that Williams-Sonoma had violated state law by requesting consumer zip codes. The Song-Beverly Credit Card Act of 1971 prohibits retailers from recording a customer's "personal identification information" during a credit card transaction and imposes a civil penalty of up to $1,000 per violation. For the first time, the Supreme Court ruled that such private information includes a cardholder's zip code.
The Supreme Court reversed two lower court opinions and stated that its ruling would apply retroactively even though California appellate courts had previously ruled that zip codes were fair game for merchants. As a result, many retailers that were requesting and recording customer zip codes before last Thursday are now targets of class action suits.
Plaintiffs lawyers reacted quickly to the court's new precedent. Jeffrey Krinsk of the class action litigation firm Finkelstein & Krinsk said his firm has filed four separate class action suits in the past week against Tiffany & Co., The Container Store, Shell and Radio Shack.
"I wasn't anticipating the extent and emphatic nature of (the court's privacy) protections," Krinsk said of the Pineda v. Williams-Sonoma decision. "We thought we had to bring some cases in order to reaffirm the validity of the rule." He said each suit was filed on behalf of different plaintiffs -- all of whom contacted the firm with complaints of retailers requesting their zip codes. He said the firm does not advertise to recruit clients.
MOST CASES SETTLE
San Francisco firm, Nassiri & Jung, filed six class action suits on Monday in San Francisco Superior Court on behalf of a single named plaintiff, Heather Robertson. Defendants in those suits include Old Navy LLC, Target Corp and Macy's.
Krinsk downplayed the burden the decision imposes on retailers. He pointed to a section of the opinion that emphasized the trial court's power to set the penalty anywhere between "a penny" and the maximum $1,000 per violation. "I'm sure the court will exercise its discretion so as not to provide a windfall (to plaintiffs)," Krinsk said. "The intent isn't about putting people out of business or to approach that level of vindictiveness."
Most Song-Beverly suits end up settling, said Stephanie Sheridan of Sedgwick, Detert, Moran & Arnold who has represented numerous retailers in such cases. Defendants don't want to face the risks of a trial, she said, because of the potentially huge penalties and because plaintiffs don't have to prove that they have been harmed. Sheridan said she did not know of a single Song-Beverly case that has made it all the way through trial.
David Faustman of Fox Rothschild in San Francisco said the decision is wreaking havoc for retailers doing business in California. "It's a very unfortunate opinion that's going to plague retailers who collect zip codes for very innocent purposes that have nothing to do with tracking somebody down," Faustman said. "And the potential damages are just massive, amounting to a violation of due process."
Faustman won a dismissal of a similar class action suit against his client, Party City Corp, in 2008 when the California appeals court ruled that merchants could collect zip codes under the statute. In the prior case, the plaintiffs were unable to prove that Party City was using the customers' zip codes to track down their home addresses -- a fact Williams-Sonoma conceded. Faustman now has to defend Party City again over the same conduct in a class action suit filed in Los Angeles Superior Court on Monday.
Faustman said the Williams-Sonoma decision will force defense lawyers to shift their focus and come up with creative new arguments about the scope of damages and the propriety of certifying a class.
(Reporting by Terry Baynes of Reuters Legal; Editing by Amy Singer)
(This article first appeared on Westlaw News & Insight, www.westlawnews.com)