United States: Massachusetts Supreme Judicial Court Rules That Retailers May Be Sued For Wrongful Use Of Customer Zip Codes Recorded During Credit Card Sales

Last Updated: March 19 2013
Article by Chip Phinney and Cynthia J. Larose

"May I have your zip code?" is an all-too-familiar question that may be going the way of the dinosaur in Massachusetts. Many retailers commonly ask customers for their zip codes when processing credit card transactions at, for example, a store check-out or a self-serve gas station. A recent decision by the Massachusetts Supreme Judicial Court in Tyler v. Michaels Stores, Inc.1 spotlights this practice, holding that zip codes are "personal identification information" subject to the restrictions of a Massachusetts consumer privacy statute governing credit card transactions. While Massachusetts retailers may properly record customer zip codes when required by credit card issuers or for product delivery, retailers may be sued if they record and use that information for their own business purposes, such as sending customers unwanted marketing materials or selling the information for profit.

The Tyler decision is significant because it sounds an important warning for Massachusetts retailers and contributes to the increasingly complex nationwide web of decisions and regulations governing the use of personal consumer information. Tyler is also noteworthy because it clarifies the nature of the injury that a consumer must allege to maintain a suit under the Massachusetts consumer protection act, Chapter 93A, Section 9.

In light of Tyler, merchants (whether in brick-and-mortar stores in Massachusetts or with online operations) should carefully review their credit card sales practices to determine whether they involve recording customer zip codes and other personal identification information, and if so, whether the company's practices need to be revised to avoid a potential consumer class action suit like Tyler. We suggest some specific points for review further below.

Case Background

The plaintiff consumer in Tyler alleged that she had been asked for her zip code while making credit card purchases at a Michaels retail store. She provided her zip code under the mistaken impression that she was required to do so to complete these transactions, when in fact it was not required by the credit card issuer. She further alleged that Michaels had used her name and zip code in combination with other publicly available databases to find her address and telephone number, and that Michaels had then sent her unsolicited and unwanted marketing materials.

The plaintiff asserted that Michaels' alleged actions violated a Massachusetts statute that regulates the use of personal information in credit card and check transactions, Chapter 93, Section 105. Section 105(a) prohibits businesses from writing "personal identification information" on the credit card transaction form, unless that information is required by the credit card issuer, or requested by the business because it is necessary for shipping, delivery, installation or warranty purposes and is provided voluntarily by the consumer. The statute does not specifically define "personal identification information," but cites a credit card holder's address and telephone number as examples. The statute also provides that violation of this law constitutes an "unfair and deceptive trade practice" under the Massachusetts consumer protection act, Chapter 93A, Section 2.2

The plaintiff initially filed a class action complaint against Michaels in federal district court in Massachusetts. In a decision by Judge William G. Young, the federal court ruled that the suit should be dismissed. Judge Young reasoned that, although the plaintiff's zip code fell within the definition of "personal identification information" under Section 105(a), she had not suffered a legally cognizable injury because, in the court's view, the statute was intended solely to prevent fraud, not to protect consumer privacy.3 Given the novelty of these issues, however, Judge Young did not immediately enter judgment against the plaintiff; instead, at the plaintiff's request, he certified three questions for decision by the ultimate arbiter of Massachusetts law, the Massachusetts Supreme Judicial Court. Briefly stated, they are:

1. Is a zip code "personal identification information" under Section 105(a)?

2. Can a plaintiff sue for a privacy right violation under Section 105(a) absent identity fraud?

3. Do the words "credit card transaction form" in Section 105(a) refer equally to an electronic or a paper transaction form?4

The Massachusetts Supreme Judicial Court's Opinion in Tyler v. Michaels Stores, Inc.

The Massachusetts Supreme Judicial Court (SJC) answered "yes" to all three of Judge Young's questions in a unanimous opinion authored by Justice Margot Botsford.

First, the SJC held that a consumer's zip code constitutes personal identification information under Section 105(a). Given the plaintiff's allegations that a zip code and name are enough to enable a merchant to identify a consumer's address and telephone number – the very information that Section 105(a) identifies as personal identification information – the SJC concluded that to hold otherwise "would render hollow the statute's explicit prohibition on the collection of customer addresses and telephone numbers, and undermine the statutory purpose of consumer protection."5

Second, the SJC held that a plaintiff may bring an action for a violation of Section 105(a) without alleging a claim of identity fraud. Unlike Judge Young, the SJC concluded, based on the statute's language and legislative history, that it is not limited to preventing identity fraud, but also protects consumer privacy.6

Third, the SJC held that the "credit card transaction form" referenced in Section 105(a) includes electronic as well as paper transaction forms. The court left unresolved, however, whether entering personal identification information such as zip codes in an electronic database constitutes recording on a "credit card transaction form" under Section 105(a). The SJC said that this was a factual question to be determined by the federal court.7

The SJC also discussed the nature of the injury that a plaintiff must allege to maintain a private consumer suit under the Massachusetts consumer protection statute, Chapter 93A, Section 9, the statutory vehicle for the plaintiff's suit in Tyler. Consumer plaintiffs suing under Section 9 must prove that they have been "injured" by the unfair or deceptive practice.8 Over the years, however, the SJC has wrestled with the question of whether proof of an underlying statutory violation that constitutes an unfair and deceptive practice is sufficient, by itself, to establish the requisite injury under Section 9, or whether the consumer must plead and prove some further injury that is distinct from, though related to, the statutory violation.

The SJC took the opportunity in Tyler to clarify and reaffirm that the violation of a consumer's legal right, even where it is expressly declared an unfair or deceptive practice under Chapter 93A, "does not necessarily mean the consumer has suffered an injury or a loss entitling her to at least nominal damages and attorney's fees" under Chapter 93A; "instead, the violation of the legal right that has created the unfair or deceptive act or practice must cause the consumer some kind of separate, identifiable harm arising from the violation itself."9

Thus, in a case such as Tyler, if the merchant obtains the customer's zip code but never uses the information for any purpose thereafter, the customer cannot sue for damages under Chapter 93A, Section 9, even though the merchant's collection of that information may violate Section 105(a) and constitute an unfair or deceptive act.10 By contrast, "[w]hen a merchant acquires personal identification information in violation of § 105(a) and uses the information for its own business purposes, whether by sending the customer unwanted marketing materials or by selling the information for a profit, the merchant has caused the consumer an injury that is distinct from the statutory violation itself and cognizable under G.L. c. 93A, § 9."11

The SJC also noted that, while the consumer's damages in such a case might be difficult to quantify, the consumer would still be entitled to at least the minimum statutory damages award of $25 under Chapter 93A, Section 9(3).12 This is significant because, aggregated in a class action, even such nominal damages can lead to a substantial damages award against a retailer.

Recommendations for Retailers

In light of Tyler, Massachusetts retailers should review their data collection practices in credit card transactions to determine whether they are in compliance with Chapter 93, Section 105(a). The following key points should be considered.

First, Section 105(a) generally prohibits recording customers' personal identification information, such as their address, telephone number, or zip code, on the credit card transaction form, unless that information is (a) required by the credit card issuer, or (b) necessary for shipping, delivery or installation of purchased merchandise or services or for a warranty and is provided voluntarily by the credit card holder online or offline.

Second, Section 105(a) does not prohibit retailers from requesting and recording customers' personal identification information separately from the credit card transaction, where customers provide this information voluntarily.

Third, where the retailer records the customer's personal identification information on the credit card transaction form in violation of Section 105(a), it has by definition engaged in an unfair and deceptive practice. While this practice alone, without more, may not expose the company to a consumer suit, it should be discontinued.

Finally, where the retailer records the customer's personal identification information on the credit card transaction form in violation of Section 105(a), and then uses that information for its own business purposes, such as sending customers unwanted marketing materials or by selling the information for a profit, the company may be subject to a consumer suit under Chapter 93A, Section 9.

Like all areas of data privacy, regulation of consumer information such as zip codes in credit card transactions is a rapidly evolving field that requires constant monitoring. Indeed, the Massachusetts SJC's opinion in Tyler is the latest of several recent and significant decisions concerning the collection of consumer information during credit card transactions. In a similar case involving Williams-Sonoma, the California Supreme Court held in 2011 that a California statute generally barring requests for personal identification information during credit card transactions, except for certain specified reasons, applies to and prohibits requests for consumer zip codes.13 More recently, in February 2013, the California Supreme Court carved out a major exception to this statute, holding in a 4-3 decision that it does not apply to online sales of products that are downloaded electronically, such as the audio and video files sold through the iTunes store of the defendant, Apple, Inc.14 Further, the determination of the SJC in this case leads to the question of whether this holding represents a possible judicial expansion of the definition of "personal information" in Mass. Gen. Laws c. 93H, a breach of which triggers the obligation to notify affected residents of the Commonwealth.

For further discussion of these cases and related issues, see Mintz Levin's client advisories and blog posts at www.privacyandsecuritymatters.com.

Footnotes

1 Tyler v. Michaels Stores, Inc., No. SJC-11145, 2013 Mass. LEXIS 40 (March 11, 2013).

2 See Mass. Gen. Laws c. 93, § 105(d) (cross-referencing Mass. Gen. Laws c. 93A, § 2).

3 Tyler v. Michaels Stores, Inc., 840 F. Supp. 2d 438, 445-446, 449-451 (2012).

4 See id. at 452 n.10; Tyler v. Michaels Stores, Inc., C.A. No. 11-10920-WGY, 2012 U.S. Dist. LEXIS 14100, at *11 (Feb. 6, 2012).

5 Tyler v. Michaels Stores, Inc., 2013 Mass. LEXIS 40, at *16-19.

6 Id. at *6-11, *19-20.

7 Id. at *27-30 & nn.21, 22.

8 See Mass. Gen. Laws c. 93A, § 9(1).

9 Tyler v. Michaels Stores, Inc., 2013 Mass. LEXIS 40, at *22.

10 Id. at *24-25 n.17.

11 Id. at *23.

12 Id. at *26-27 n.20.

13 Pineda v. Williams-Sonoma Stores, Inc., 246 P.3d 612 (Cal. 2011) (construing Cal. Civ. Code § 1747.08, which prohibits requesting and recording personal identification information as a condition for accepting a credit card payment).

14 Apple Inc. v. Superior Court, 56 Cal. 4th 128 (2013).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Chip Phinney
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions