Zip Codes and Class Actions: A Blossoming Relationship.

The number of class actions against retailers who request customers' ZIP codes is growing. The potential liability of those retailers may be growing, as well.

Earlier this year, we reported on a California Supreme Court decision making it illegal for retailers to request customers' ZIP codes when they pay by credit card. (See "Does Whole Foods Sell Organic ZIP Codes? A Consumer Class Wants To Know," Sept. 1, 2011.) We suspected that litigation on this issue would proliferate, and it has. In fact, as two new California cases illustrate, it's not just the number of lawsuits that's growing -- the scope of retailers' liability may be expanding, as well.

A federal district judge in California has just ruled that retailers violate California's Song-Beverly Credit Card Act (the statutory predicate for these ZIP code lawsuits) even if they don't tell customers that they must offer up their ZIP codes. Indeed, in the complaint against Office Depot, plaintiffs did not allege that Office Depot told them they needed to supply their ZIP codes: they allege only that Office Depot "requested" the information and that they "believed the requested information was necessary" in order to consummate their credit card transaction. On this basis alone, the plaintiffs appear to have survived a motion to dismiss (the judge's ruling was "tentative").

This ruling may faithfully apply certain language from the California Supreme Court's decision from earlier this year, but one has to wonder if this is the kind of broad liability the court had in mind. The plaintiffs in the Office Depot case do not even allege any specific injury from the defendant's alleged violations of California law. They do not allege that their personal information was sent to marketing firms without their consent, or that Office Depot had a regular practice of doing so. Nor do they allege that any such information was hacked or stolen by a third party. They allege only that their lawsuit will "enforce important rights affecting the public interest" and "confer a significant benefit, whether pecuniary or non-pecuniary, on a large class of persons." But since when is that enough to confer standing? How have these plaintiffs been harmed? (Another class action just filed against Ann Taylor, the clothing retailer, similarly lacks allegations of particularized injury.)

As more and more ZIP code lawsuits are filed against national retailers doing business in California, the chances of these issues being revisited by the California Supreme Court (or lower appellate courts) increase. And that may be a good thing: retailers should know precisely under what circumstances they may face liability -- liability that can easily be in the millions of dollars.