On February 4, the California Supreme Court held, in a 4-3 split ruling, that the personal privacy protections afforded consumers by the Song-Beverly Credit Card Act do not apply when the item purchased is downloaded via the Internet. Apple Inc. v. Sup. Ct. Los Angeles Cty., No. S199384, 2013 WL 406586 (Cal. Feb. 4, 2013). However, the court did not consider whether the Song-Beverly Act privacy provisions apply to the broader category of online transactions that do not involve a downloadable product. In this case, a customer filed a putative class action against an online digital media retailer, alleging that the retailer’s practice of requiring customers to provide their telephone number and address before accepting credit card payment for downloadable media purchases violates Section 1747.08 of the Song-Beverly Act, which prohibits retailers from requiring personal information as a condition to completing credit card transactions. Citing the statutory language and legislative history, the court explained that while Song-Beverly was intended to protect personal privacy, it was not meant to do so at the risk of increasing fraud. Further, the court determined that fraud protections provided in Song-Beverly, which allow retailers to request proof of identification, are not available to online retailers selling downloadable products. The court also reasoned that in later enacting the California Online Privacy Protection Act, the state legislature demonstrated that it can unambiguously address online transactions, and that it sought to strike a different balance between privacy protections and online commerce than did the Song-Beverly Act. Therefore, the court held, online transactions involving downloadable products fall outside the scope of Song-Beverly. The court invited the legislature to revisit consumer privacy in connection with online transactions.

On January 28, the U.S. District Court for the Northern District of California denied a motion for class certification filed by a group of plaintiffs seeking to challenge, on behalf of similarly situated individuals, a retailer’s policy that required cashiers to request consumer zip codes in connection with a purchase transaction. Gormley v. Nike, Inc., No, 11-893, 2013 WL 322538 (N.D. Cal. Jan. 28, 2013). The court held that the named plaintiffs failed to demonstrate typicality because their experiences were inconsistent with the policy they sought to challenge. The court explained that while the policy required cashiers to request zip codes after providing the purchased merchandise and a receipt to the customer, each plaintiff testified that the cashier asked for a zip code prior to providing those items. The court disagreed with the plaintiffs’ argument that the timing of the request was irrelevant based on the plaintiffs’ assertion that the California Supreme Court held in  Pineda v. Williams-Sonoma Stores Inc. that a request for a card holder’s zip code violates the Song-Beverly Credit Card Act. The court explained that Pineda only addressed whether zip codes constituted personal identification information, and then chose to follow subsequent district court decisions holding that the Song-Beverly Act prohibits only a request for personal identification information as a condition to completing a credit card transaction.

On January 11, the U.S. District Court for the Northern District of California approved a settlement between a retailer and a class of customers to resolve allegations that the retailer violated the California Song-Beverly Credit Card Act by collecting customer zip codes as part of credit card purchase transactions and storing that information in a customer databases. Burdewick v. Kohl’s Dep’t Stores, Inc., No. 12-119, Final Order and Judgment (Jan. 11, 2013). The settlement is the most recent in a series following the California Supreme Court’s 2011 decision in Pineda v. Williams-Sonoma Stores Inc. that zip codes constitute “personal identification information” under the Act. In this case, class members can submit claims to obtain a gift card from a common $650,000 fund. The exact amount of the gift card will depend upon the number of valid claims, but actual payments are expected to far exceed the $10-$20 amounts typically provided by most similar settlements to date. Moreover, the settlement places no restriction on the use or transferability of the cards. The court also approved a $215,000 award to class counsel, and a $7,500 incentive award to the class representative.