When you check out at your local retail store, it has been the custom of many retailers to ask customers for the zip code of where they reside. However, retailers may start to think twice about continuing to ask customers for their zip code, as it may subject them to litigation from their customers. There are currently at least two pending lawsuits [Party City Corp. v. Superior Court, (2008) 169 Cal.App. 4th 497 and Fogelstrom v. Lamps Plus, Inc. (2011) DJDAR 7276] where customers (of the aforementioned retailers) have filed suit. In both lawsuits, the plaintiff customers are claiming that the practice of asking them for their zip code is not only illegal, but also violates their right to privacy.

Who hasn’t been asked (at the point of sale), may I have your zip code please? After securing this information the retailer then provides these zip codes to Experian Marketing Service (and perhaps others), which then matches the information to Experian’s list of consumers’ home addresses. Experian then uses these addresses to mail marketing materials to the consumers.

In the above-referenced cases, the plaintiffs allege that this practice violates California’s Song-Beverly Credit Card Act of 1971, as well as their common law right to privacy.

The Party City Corp. case was recently accepted for review by the California Supreme Court to determine whether the above practice by retailers actually violates California’s Song-Beverly Credit Card Act of 1971 and/or constitutes an invasion of privacy. One of the key questions to be determined by the California Supreme Court is whether a zip code constitutes “personal identification information” as the plaintiffs’ contend.

It will be interesting for both consumers and large retailers when the California Supreme Court renders its opinion. If the California Supreme Court’s ruling favors the plaintiffs, will this be a significant financial blow to marketing service companies (like Experian)? Will it be an indirect blow to large retailers who have for many years reaped the benefits of marketing service companies?

Within the past month, in response to concerns about the above-litigation and its effect on California businesses, the California Assembly introduced Assembly Bill 1219 (California Business Protection Act of 2011 – introduced by Henry T. Perea [D-Fresno]). The Act, if it becomes law, will provide clarification in the rules on collecting zip codes so that businesses that are collecting zip codes for legitimate purposes can function without the fear of lawsuits.

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