In the latest developments surrounding consumer class actions brought pursuant to California’s Song-Beverly Act, the Ninth Circuit Court of Appeals certified a question to the state’s highest court.

If a consumer would not reasonably believe that the request for personally identifiable information—such as a zip code—was actually necessary to make a credit card purchase, can retailers ask for it? Seeking guidance, the Ninth Circuit certified this question to the California Supreme Court for an answer.

Tammie Davis visited a retail clothing store owned by Devanlay Retail Group in April 2010. To pay for a purchase, Davis handed her credit card to the cashier. As she was placing the card back in her purse, the cashier asked, “What’s your zip code?” Davis could not recall whether she had already received her receipt when the request was made.

Davis filed a putative class action against Devanlay, alleging that the retailer violated the Song-Beverly Act by requesting and recording her personal identification information. A federal court judge granted summary judgment to the retailer after applying an objectively reasonable consumer test to determine that Davis would not have perceived the store’s request for information as a condition of the use of her credit card.

The plaintiff appealed and the Ninth Circuit—finding no controlling precedent and acknowledging that the “answer to this question could have a significant impact on the practices of thousands of California retailers”—punted the issue to the California Supreme Court.

Section 1747.08(a)(2) of the Act provides that “no person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business shall do any of the following: … Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person, firm, partnership, association, or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.”

A number of federal district courts in California have interpreted this provision of Song-Beverly to require an objective consumer perception test to establish a violation. Davis argued that the statute contains no such standard and the Act should be read as imposing strict liability on violators, regardless of a consumer’s perception.

“We find support for both the district court’s and [Davis’] interpretations in the decisions of California’s Courts of Appeal, as well as in the statute’s language and legislative history,” the Ninth Circuit wrote, adding that the “ambiguous language” of the Act itself offered little guidance.

“Because we find no controlling precedent, and because the meaning of the statute is ambiguous, we are uncertain whether the district courts are correctly applying California law in construing Song-Beverly to require an objective test of consumer perceptions,” the panel said. “We therefore respectfully request that the California Supreme Court answer the [certified question].”

In a second dispute, an appellate panel concluded that a retailer could not be liable under the Act for the collection of a consumer’s personal information during an online credit card transaction when the data was necessary for fraud prevention reasons.

The case involved a customer who purchased alcoholic products on Beverages & More’s Web site and opted to pick them up at the retailer’s physical location. Michael Ambers claimed that the collection of his address and telephone number during the online credit card transaction violated the statute because he had to visit the store to claim his merchandise and his personal identification information was therefore not necessary to complete the transaction.

BevMo responded that Section 1747.08 did not apply to an online purchase transaction where personal identification information is the only means to prevent fraud during the purchase, citing Apple Inc. v. Superior Court, 56 Cal. 4th 128 (2013), for support.

The appellate panel agreed. Under the terms and conditions of the BevMo Web site, the parties agreed that title to the merchandise purchased online transferred to the buyer at the time of purchase—not when the buyer took physical possession.

While Song-Beverly’s primary purpose is to provide consumer privacy protection, “the legislative history also reflected an effort to balance that purpose against the need to protect both consumers and retailers from the risk of fraud,” the court explained. Online retailers need some form of identification to combat fraud and identity theft, the panel added.

The Apple court limited its holding to online purchases of electronically downloadable products, but the panel said the decision’s “reasoning and analysis … apply here with equal force.”

“Like the online retailer in Apple, BevMo had no means, without obtaining plaintiff’s personal identification information, of verifying that plaintiff was an authorized user of the credit card number entered on BevMo’s website before the purchase transaction was completed,” the court said. Verification was “necessary in the instant case because ownership of the merchandise purchased on BevMo’s website passed immediately to plaintiff upon completion of the online transaction, when plaintiff’s credit card was charged.”

The court affirmed judgment for BevMo.

To read the order in Davis v. Devanlay Retail Group, click here.

To read the opinion in Ambers v. Beverages & More, Inc., click here.

Why it matters: Companies should keep a close eye on the Davis case. As the Ninth Circuit noted, the answer to the question could have a “significant impact” on retailers in California, “as a broad construction of Song-Beverly could prohibit many retailers’ practice of requesting personal identification information from customers immediately after they have completed a credit card transaction.” The California Supreme Court has been known to adopt a broad reading of the statute, having started a tidal wave of consumer class actions in 2011 with Pineda v. Williams-Sonoma, where the court held that retailers cannot collect zip codes from consumers who make purchases with their credit cards, as they are considered personal identification information under the Act. As for the Ambers decision, it not only provides online retailers with relief from potential class actions, but also offers a road map to safely collecting information by passing title at the time of purchase.