Retailers sued for obtaining zip codes

Posted on: July 8th, 2013 by Steve Larson
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Consumer Law Cases 2Retailers, who have faced a wave of class action lawsuits in California for collecting ZIP code information in connection with credit card sales, now face similar suits in Massachusetts. The Massachusetts Supreme Judicial Court—answering questions certified to it by a U.S. District Court—held that requiring customers to provide their ZIP code when making credit card purchases may be an unfair trade practice. (Tyler v. Michaels Stores, Inc.)  That decision is already fueling multiple putative class actions against retailers for collecting ZIP codes, and some observers believe it may spark similar suits in other states.

Putative Class Action Filed in Court
Melissa Tyler, a consumer, filed a putative class action alleging that Michaels Stores had required customers to provide ZIP codes when making credit card purchases in violation of Massachusetts consumer protection law and that the improper conduct constituted a compensable injury in itself. The retailer moved to dismiss the complaint, arguing that a ZIP code is not personally identifiable information, and that the collection of ZIP code information itself, without any identity theft, is not a sufficient to constitute a cognizable injury.

The U.S. District Court for the District of Massachusetts analyzed the policy behind the state’s consumer protection law. It found that the main concern of the law was to protect consumers from identity fraud by prohibiting retailers from using personally identifiable information for credit card purchases that were not required to process the transaction. That is, it found that ZIP codes were protected private information.

Court Certifies Question after Initially Dismissing Complaint
The district court then dismissed the complaint, finding that the mere collection of ZIP codes, while violating the statute, did not constitute a “redressable injury.” The court also suggested that collecting protected information, without economic injury, would not be enough harm to establish standing under Article III of the U.S. Constitution. The plaintiff then moved for the district court to certify the state law questions to the Massachusetts Supreme Judicial Court. The district court granted that motion.

The Massachusetts high court found that the purpose of the law was both to prevent identify fraud and to protect consumer privacy. The court found that ZIP codes are personal information because the law was intended to protect consumers who use credit cards from receiving unwanted commercial solicitations from merchants with access to their identifying information. The court found that ZIP codes were private information protected under the statute. It agreed with the district court that proof that the retailer collected the ZIP code—without more—was not enough to establish a claim for damages under state law. But the court found that a consumer could establish an injury even in the absence of monetary loss or identity theft in two ways: (1) if the consumer actually received unwanted marketing material, or (2) if the merchant sold the personally identifiable information. The high court held that receiving unwanted marketing materials was an invasion of privacy, and, therefore, “the consumer is entitled to the minimum statutory damage award of twenty-five dollars.”