Last month, two New Jersey judges issued opposing decisions in class action lawsuits regarding merchants’ point-of-sale ZIP code collection practices. The conflicting orders leave unanswered the question of whether New Jersey retailers are prohibited from requiring and recording customers’ ZIP codes at the point of sale during credit card transactions.

On September 16, 2011, a judge for the Superior Court of New Jersey issued a bench ruling in Imbert v. Harmon Stores, Inc., denying Harmon Stores’ motion to dismiss a class action arising out of the company’s ZIP code collection practices. The complaint filed on April 8, 2011 alleged that Harmon Stores violated New Jersey law by requiring consumers to furnish personal identification information and recording it in connection with credit card transactions. New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) prohibits a seller from “offering … or entering into any written consumer contract or give or display any written consumer warranty, notice or sign … that violates any clearly established right of a consumer … as established by State or Federal Law.” The plaintiff asserted that the relevant “established right” is provided in N.J.S.A. 56:11-17, which prohibits a retailer from requiring a “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” personal information (including the individual’s address or phone number) that is not required by the credit card issuer to complete the credit card transaction.

The Imbert complaint alleges that Harmon Stores violated N.J.S.A. 56:11-17, and in turn violated TCCWNA, by requiring customers “to provide their zip code for recordation on the electronic credit card transaction form as a condition of using a credit card in completing a consumer transaction at Defendant’s stores.” In addition, the complaint asserts that the Bed Bath & Beyond subsidiary violated consumers’ right to privacy by using software that performs reverse appends on the data and “matches the consumer’s name and ZIP code with the consumer’s previously undisclosed address, giving the retailer the private and personal marketing information it seeks. Retailers then use their databases to market products to customers and may, in some instances, sell this private information to other businesses.” Although N.J.S.A. 56:11-17 offers no private right of action, TCCWNA provides for civil penalties of at least $100.00 per affected customer and/or actual damages, as well as reasonable attorney’s fees and court costs.

Less than two weeks after the bench ruling in Imbert, on September 26, 2011, a U.S. District Court judge in New Jersey dismissed a similar putative class action lawsuit against Williams-Sonoma brought under the same New Jersey laws in connection with the retailer’s ZIP code collection practices. According to an unpublished opinion, the court in Feder v. Williams-Sonoma found that the plaintiff failed to identify any provision of a “written consumer contract” violating state or federal law that would establish a claim under the TCCWNA. The court stated that even if the credit card transaction form constitutes a “written consumer contract” to which the TCCWNA applies, a ZIP code does not constitute a contract provision that violates an individual’s rights.

As we reported in February, the California Supreme Court ruled in Pineda v. Williams-Sonoma Stores, Inc. that ZIP codes are “personal identification information” under the state’s Song-Beverly Credit Card Act of 1971. California’s Song-Beverly Credit Card Act differs from other similar state laws in that it prohibits requesting (not solely requiring) personal information in the context of a credit card transaction at the point of sale. This decision has effectively prohibited California businesses from requesting and recording cardholders’ ZIP codes during credit card transactions and has served as a basis for numerous class action suits in California.