News & Updates

Retailers Beware: Class Action Suit Allowed to Proceed Based on Collection of Zip Code Information September 21, 2011

A New Jersey State Court recently refused to dismiss a class action lawsuit against Harmon Stores based on alleged violation of privacy law, arising from requesting zip code information from consumers. This is another attempt by plaintiffs’ class action attorneys to tie an alleged violation of a statute to New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA), and thereby recover minimum statutory damages for all class members.

The TCCWNA (N.J.S.A. 56:12-14, et seq.) prohibits sellers from entering into contracts with consumers that include any provisions violating a “clearly established right” under federal or state law. N.J.S.A. 56:12-15. The TCCWNA provides for minimum statutory penalties of $100 even where the consumer has no actual damages, effectively resulting in punitive damages when applied in a class context.

In this case, plaintiffs allege that the TCCWNA statutory penalties are recoverable based on a violation of N.J.S.A. 56:11-17 (personal information not required for credit card transaction), which states:

No person which accepts a credit card for a consumer transaction shall require the credit card holder, as a condition of using a credit card in completing the consumer transaction, to provide for recordation on the credit card transaction form or any other form, any personal identification information that is not required by the issuer to complete the credit card transaction, including, but not limited to, the credit card holder's address or telephone number, or both; provided, however, that the credit card holder's telephone number may be required on a credit card transaction form if the credit card transaction is one for which the credit card issuer does not require authorization.

Similar class actions have been trending since February, when the Supreme Court of California determined that Williams-Sonoma Inc. violated the state's credit-card law by asking a customer for her zip code when making a purchase. The customer sued the home-goods retailer, contending that it subsequently used the zip code to determine her address, which is now contained in the company's database.

UPDATE – September 29, 2011

In a separate federal court class action venued in the District of New Jersey, Feder v. Williams-Sonoma Stores Inc., involving the same “zip code” claims against Williams-Sonoma Stores, District Judge William Walls dismissed the Complaint for failure to state a cognizable claim.  Judge Walls concluded that the request for zip code information in connection with a credit card transaction does not violate the TCCNWA because the transaction does not involve a written contract.

Plaintiff will purportedly challenge this ruling by way of a motion for reconsideration and or appeal, and will cite the Harmon Stores ruling as an example of a New Jersey court’s interpretation of a New Jersey law. 

While the issue remains in dispute, it appears advisable for retailers to forego requests for zip code information from New Jersey consumers in connection with credit card transactions, unless required for purposes of the purchase (such as an address for delivery of goods or services).

We will keep you updated on related developments.

For more information on how this may impact your business, please contact a member of Goldberg Segalla’s Class Action Litigation Practice Group.

Author: Thomas J. O’Grady (609.986.1360; togrady@goldbergsegalla.com)