A California federal court recently held that Nike, Inc., must face claims by three consumers that the company illegally collected their ZIP codes when they bought Nike merchandise, in violation of the state's consumer privacy statute, in a case that the claimants tried - and failed - to have certified as a consumer class action. In Gormley v. Nike, Inc., the district court denied the company's motion for summary judgment, finding that factual disputes existed about exactly when during the transactions the company's sales associates could and did ask for the customers' ZIP code information - before or after handing customers their receipts and merchandise - and that Nike had not established that it did not violate privacy laws when its employees asked the three consumers for their ZIP codes when they paid with their credit cards.

The three plaintiffs in these consolidated cases originally brought a putative class action on behalf of themselves and a class of consumers, alleging that defendants Nike, Inc., Nike USA, Inc., and Nike Retail Services, Inc., violated the Song-Beverly Credit Card Act of 1971 by requiring cashiers to request and record ZIP codes when customers paid for merchandise with a credit card. The court previously denied the plaintiffs' motion for class certification, finding that the named plaintiffs were not typical of the class they sought to represent because the putative class action challenged Nike's policy of asking for ZIP codes after handing customers their receipts, while the three named plaintiffs alleged that Nike employees asked for their ZIP codes before giving them their receipts. In its order denying class certification, the court held that the Song-Beverly Act prohibits retailers from requesting personal identification information, including ZIP codes, as a condition precedent to accepting payment by a credit card, but if a customer provides this information voluntarily at the request of a retailer for a purpose unrelated to processing the credit card transaction, the retailer has not violated the statute. The court noted that it applied an objective test to determine whether a consumer would reasonably perceive a retailer's request for personal identification information as a condition of payment by a credit card.

In moving for summary judgment, Nike argued that under its policies and procedures a credit card customer could not have reasonably perceived Nike's request for a ZIP code as a condition to completing a credit card transaction. Specifically, the company offered evidence that both the extensive training of its salespeople and the company's point-of-sale software prevented cashiers from asking customers for a ZIP code until they had completed the sale, so that, under the objective standard, it was clear to consumers that providing the ZIP code was voluntary and not a requirement for paying by credit card. In support of its motion, Nike submitted the technical specifications for the point-of-sale software system used by its cashiers and the declarations of eight Nike sales managers and store employees on the training the company provides to its salespeople, as well as their observations of credit card transactions in their stores. The company also submitted evidence of signs posted in its stores explaining Nike's policies regarding the collection of ZIP codes, including that Nike would ask for ZIP codes during all purchases and returns, for marketing and consumer research, and that providing this information is voluntary and not required to complete transactions. According to Nike, this evidence established that (1) Nike's policies and procedures ensured that any request for ZIP codes occurred only after the transaction was completed and the cashier had given the customer the receipt and merchandise, and (2) consumers could not reasonably perceive that providing their ZIP code information was required for a credit card transaction.

Plaintiffs argued - and the court agreed - that issues of material fact existed as to whether Nike's policy required sales associates to ask for customers' ZIP codes only after handing customers their receipts and merchandise. According to the technical documentation for the point-of-sale software in use, the system would prompt the sales associate to ask for the customer's ZIP code when the credit card transaction was complete - when the customer and cashier exchanged the money and the receipt. Plaintiffs argued, however, that the software permitted sales associates to request ZIP codes while the receipt was printing and before the merchandise was handed to the customer - during, not after the transaction. Plaintiffs submitted declarations that Nike cashiers asked them for their ZIP codes before providing them with their merchandise and receipts, and deposition testimony by Nike employees stating that no written policy or training documents were provided to cashiers requiring that cashiers give customers their merchandise and receipt before requesting their ZIP codes. The court concluded that the possibility that the cashiers could request customers' ZIP codes before giving them their receipt and merchandise precluded summary judgment.

The court also rejected Nike's argument that even if plaintiffs could point to a disputed material fact as to when a Nike sales associate requested their ZIP codes, Nike would be entitled to summary judgment under the "bona fide error" defense under Song-Beverly's safe harbor provision, which protects a retailer from penalties for violations if the defendant shows that the violation was not intentional and resulted from a bona fide error made notwithstanding the defendant's procedures designed to avoid that error. In the court's view, Nike could not rely on the bona fide error defense because, while Nike offered employee testimony about the training they received, the company had not offered any evidence related to the specific transactions with the three plaintiffs.

While it may be reviewed on appeal, the district court's decision indicates that, for the purposes of complying with the Song-Beverly Act, in the immortal words of baseball legend Yogi Berra, "It ain't over 'til it's over!" A retail transaction is not concluded until the customer receives the receipt and merchandise. Retailers in California that desire to collect personally identifiable information from consumers should implement cashiering procedures and training that make clear that cashiers and sales associates should not request any personal information - including ZIP codes - until after they have provided the merchandise and receipt to the customer.

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