Making Sense of the California Song-Beverly Act: What Retailers Need to Know About Collecting Personal Information in Credit Card Transactions

Transcription

1 Making Sense of the California Song-Beverly Act: What Retailers Need to Know About Collecting Personal Information in Credit Card Transactions Wednesday, March 2, 2011 Web Seminar 2011 Fulbright & Jaworski L.L.P.

2 Speakers Bill Dombrowski President and CEO California Retailers Association James R. Evans Partner, Los Angeles Fulbright & Jaworski L.L.P Margaret Gladstein Lobbyist Capitol Advocacy Jeffrey B. Margulies Partner, Los Angeles Fulbright & Jaworski L.L.P Fulbright & Jaworski L.L.P. 2

3 Continuing Legal Education Information We have applied for one hour of California, Minnesota, Texas, and Virginia CLE and New York non-transitional CLE credit. Newly admitted New York attorneys may not receive non-transitional CLE credit. For attendees in other states, we will supply a certificate of attendance that may be used to apply for CLE credit with the applicable bar or other accrediting agency. Fulbright will supply a certificate of attendance to all participants who: 1. Participate in the web seminar by phone and via the web. 2. Complete our online evaluation, which we will send to you after the web seminar (required by some states). 3

4 Administrative Information Today s program will be conducted in a listen-only mode. To ask an online question at any time throughout the program, simply click on the question mark icon located on the tool bar in the bottom right side of your screen. We will try to answer your question during the session. Everything we say today is opinion. We are not dispensing legal advice, and listening does not establish an attorneyclient relationship. This discussion is off the record. You may not quote the speakers without our express written permission. If the press is listening, you may contact us, and we may be able to speak on the record. 4

5 OVERVIEW AND INTRODUCTION 5

6 Goals of This Presentation Understanding What Retailers Can Do Under Current Law Understanding the Pineda decision and its implications Understanding Potential Issues Relating to Point of Sale Practices 6

7 Goals of This Presentation Understanding Potential Implications for Internet Retailing Developing Practices/Strategies to Best Defend Against Lawsuits Discussion of Potential Legislative Action 7

8 An Overview Of Section No one that accepts credit cards for the transaction of business shall: Request or require the cardholder to write any personal identification information upon transaction form or otherwise Request or require the cardholder to provide personal identification information which the merchant writes or records upon transaction form or otherwise Utilize a credit card form which contains preprinted spaces designated for personal identification information of cardholder 8

9 What is Personal Identification Information? Anything specific to the cardholder that is not set forth on the credit card Name Address [or any portion of it] Phone Number address Driver s license number Date of birth Anything else unique to the cardholder 9

10 The Exceptions Special Purpose Incidental To Credit Card Transaction Shipping information Delivery Servicing Installation Special Orders Cash Advance/Lay-Away Transactions Contractually Obligated or Legally Required To Provide Returns 10

11 Civil Penalties Enforcement Up to $250 for first violation Up to $1,000 for each subsequent violation Injunction by Public Prosecutor Potential Enforcement under Unfair Competition Law 11

12 Legislative History The Policy Issues Concerns with invasion of privacy Concerns with aggressive marketing The technological changes since was adopted 12

13 Pineda And Its Fall Out Zip Codes Are Personal Information Subject to Civil Code section Ruling Applies Retroactively notwithstanding published Party City opinion In two weeks since Pineda was published, more than 100 class action lawsuits have been filed across the state Lawsuits challenging not only point-of-sale practices, but also online sales and gas station sales 13

14 THE CASE LAW 14

15 The Case Law Powers v. Pottery Barn, Inc., 177 Cal. App. 4th 1039 (4 th Dist. 2009) Federal CAN-SPAM Act does not preempt an action alleging that collecting violates Song-Beverly Act The TJX Companies, Inc. v. Superior Court, 163 Cal. App. 4th 80 (4 th Dist. 2008) (reh g denied) One year statute of limitations applies to transactions because penalties are mandatory 15

16 The Case Law Saulic v. Symantec Corp., 596 F. Supp. 2d 1323 (S.D. CA 2009) Interpreting California law, District Court ruled that online transactions not subject to Civil Code section Watkins v. Autozone Parts, Inc., 2009 U.S. Dist. LEXIS (S.D. Cal. Sept. 29, 2009) does not prohibit collection of personal identifying information in connection with warranty registration Linder v. Thrifty Oil Co., 23 Cal. 4th 429 (2000) The civil penalty provision of the Song-Beverly Credit Card Act of 1971 does not mandate fixed penalties; rather, it sets maximum penalties of $250 for the first violation and $1,000 for each subsequent violation, thus providing an entire range of available penalties 16

17 The Case Law Shabaz v. Polo Ralph Lauren Corp., 586 F. Supp. 2d 1205 (2008, CD Cal.) District Court rules that consumer has no right to jury trial because is not compensatory pure penalty Florez v. Linens 'N Things, Inc., 108 Cal. App. 4th 447 (2003, Cal. App. 4th Dist.), review denied retailer cannot avoid application of by asking for phone number before ringing up purchases on a credit card Section is remedial in nature and in the public interest [and] is to be liberally construed to the end of fostering its objectives. Korn v. Polo Ralph Lauren Corp. (2008, ED Cal.) 2008 U.S. Dist. LEXIS (injunctive relief not available in consumer s action) Contra: B&P

18 The Case Law Florez Florez dictum is helpful to retailers who unlink (make clear that there is no nexus between) the request for information and the credit card transaction: As evidenced by the 1991 amendment, section is designed to prevent a request for personal information, because a customer might perceive that request as a condition of credit card payment. Id at 453. Under no circumstances should the information be requested before the transaction is complete: the 1991 amendment simply clarified that a "request" for personal identification information was prohibited if it immediately preceded the credit card transaction, even if the consumer's response was voluntary and made only for marketing purposes. Based on our review, we conclude the addition of the word request to section bars a preliminary request for personal identification information. Requesting the information after the transaction is completed, and then linking it to the transaction, will run afoul of Flores: The obvious purpose of the 1991 amendment was to prevent retailers from requesting personal identification information and then matching it with the consumer's credit card number. 18

19 NOW WHAT? 19

20 Potential Legislative Solutions The importance of collective effort Bill Dombrowski President and CEO California Retailers Association

21 How Do You Solve A Problem Like Pineda? The separation of the sales transaction No pre-transaction requests for PII for any reason other than for authorized purpose? Florez Post transaction requests Customer Loyalty Programs Warranty Mailing Lists No reverse appending of purchase transaction data 21

22 Developing Defenses For Online Retailing Symantec Developing the contractually obligated argument examining Credit Card/Retailer Agreement terms other contractual obligations Developing the special purpose argument fraud prevention (no card present) extended warranty offer Requirements of State or Federal Law 22

23 POST-PINEDA CLASS ACTION LITIGATION The Lawsuits Filed Against Brick and Mortar Retailers The Attack on Internet Retailing The Attack on PayPal The Attack on Gas Station Sales 23

24 Preparing For The Class Action CAFA Removal? Coordination? Complex Rules Vetting Your Judge Judge In A Flash Preparing for the Class Certification Motion The plaintiff s transaction data The plaintiff s deposition The plaintiff and his/her attorney Background investigation Apple issues 24

25 Preparing For The Class Action Developing Individualized Issues Gathering Company Policy Documents concerning the collection of data Understanding the point of sale transaction sequence Point of sale disclosures (oral and written) Company privacy policies i Understanding the use of the data collected from consumers Identifying the key employees 25

26 Questions? Bill Dombrowski President and CEO California Retailers Association James R. Evans Partner, Los Angeles Fulbright & Jaworski L.L.P Margaret Gladstein Lobbyist Capitol Advocacy Jeffrey B. Margulies Partner, Los Angeles Fulbright & Jaworski L.L.P Fulbright & Jaworski L.L.P. 26

27 Continuing Legal Education Information If you are requesting CLE credit for this presentation, please record the number given during the program and respond to the survey that Fulbright will within the next day. Completion of the above-mentioned survey is required in certain states to obtain CLE credit. If you are viewing a recording of this web seminar, most state bar organizations will only allow you to claim self-study CLE credit. Please refer to your state's CLE rules. If you have any questions regarding CLE approval of this course in your applicable bar, please contact your bar administrator. 27

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