Song-Beverly credit card opinion highlights need for retailers to review their procedures for credit card transactions

May 27, 2015

Retail Alert

Author(s): Karl D. Belgum

Retailers take note—having clear and uniform procedures for requesting personal data at the point of sale can save litigation headaches.  That’s how Levi Strauss & Co. recently defeated a class action for improper solicitation of personal data in connection with credit card transactions under the Song-Beverly Credit Card Act.

A recent California Court of Appeal opinion highlights the need for retailers to have appropriate procedures in place for handling credit cards at cash registers. In the recent opinion—Harrold v. Levi Strauss & Co., (1st Appellate District, May 19, 2015)—the defendant had appropriate procedures in place and was able to defeat a class action brought under the Song-Beverly Credit Card Act. But the opinion makes clear that “the devil is in the details” when it comes to handling credit cards at checkout.

In that case, plaintiff Harrold alleged that the clerk at a Levi’s Only store asked her for her e-mail address when she went to pay for her purchase with a credit card. She sued under the Song-Beverly Credit Card Act of 1972 (Civil Code § 1747 et seq.), which makes it unlawful for a merchant to “request, or require as a condition to accepting the credit card as payment … the cardholder to provide personal identification information…” (Id. at 1747.07(2).) The case was brought on behalf of a class of Levi’s retail customers who, plaintiff alleged, had all been exposed to the same improper practice.

Levi’s admitted that a customer’s e-mail address counted as personal identification information, but argued that class certification should be denied because Levi’s official policy for soliciting personal information for marketing purposes complied with the Song-Beverly Act, that the policy was generally followed within the company and that there was no evidence in the record that any significant number of customers—indeed, any customers—had been exposed to a violation of the policy or the Act except the named plaintiff.

The company policy was that clerks were not to ask customers to voluntarily provide their e-mail address for marketing purposes until the credit card transaction was concluded, i.e., the receipt and goods had been handed over to the customer. That way, argued Levi’s, no customer could conclude that acceptance of the card was contingent on providing that piece of personal information.

Absent any evidence that the policy was violated with any frequency by Levi’s clerks, the plaintiff was forced to argue that the policy itself violated the statute. Plaintiff argued that the plain language of the statute made it unlawful to request personal information at any time in connection with an in-person credit card transaction, whether the customer thought turning over such information was required to complete the transaction or not. But the court concluded otherwise. It adopted a test that focuses on whether a reasonable consumer would understand that the acceptance of the card was contingent on turning over the personal information. The prohibition applies “at all times prior to the completion of the transaction.” But once the transaction is completed it is a different story. Asking for personal information is permitted “if the request is not made under circumstances suggesting that a credit card will not be accepted as payment without such information.”

Levi’s policy of waiting until the receipt and goods are handed over to the customer passed muster, just as Nike’s policy did, in another case, of not asking for personal information until the “receipt was printing.” See Gormley v. Nike (N.D. Cal., Jan 29, 2013, No. C. 11-893 SD 2013 SI) 2013 U.S. Dist. LEXIS 11278). As a result, no class of Levi’s customers could be certified. Plaintiff’s counsel was left with a case on behalf of a single plaintiff, based on the allegation that neither the Act nor company policy had been adhered to in her unique transaction.

The main takeaway from this case for retailers is that Levi’s was saved from an expensive class action by having a clear written policy in place that complied with the statute, and plaintiff was not able to find any evidence that the policy was not generally adhered to. Clear instructions in the employee handbook and at the register requiring register clerks make it clear that personal information is only solicited for marketing purposes after the transaction is completed, and is not a condition to acceptance of a customer’s credit card, can save litigation headaches later.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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