California retailers have been issued another cautionary tale about the pitfalls of requesting personal information from customers at the point-of-sale (POS). The law at issue – the Song-Beverly Credit Card Act, California Civil Code section 1747.08 – prohibits retailers from requesting and recording personal identification information from customers during the course of a credit card transaction. With an ambiguous statute and little case law, California retailers have found complying with California’s Song-Beverly Act much easier said than done. Particularly troublesome is that no court has articulated when a credit card “transaction” ends such that the retailer may properly request customer personal information in compliance with the law. The ground for retailers has become even shakier following a recent opinion from the Southern District of California, which held that POS software that signals to the sales associate when the transaction ends, following which the customer’s personal information is requested, is not enough to avoid Song Beverly liability.

In Juhline v. Ben Bridge Jeweler, Inc., No. 11cv2906-WQH-NLS, 2012 U.S. Dist. LEXIS 129413 (S.D. Cal. Sept. 11, 2012) the defendant jewelry retailer moved for summary judgment on the grounds that the plaintiff could not prove all the elements necessary to show a violation of Song-Beverly. Specifically, the defendant retailer argued that the company’s POS software had separate sections: “Sales,” “Tender” and “Customer Information.” The company contended that the sales associate would use the “Sales” and “Tender” screens on the POS system to ring up the goods and process the customer’s credit card. Thereafter, the sales associate would be presented with the “Customer Information” window, which “pop[ped] up after exiting the tender section of the transaction.” The sales associate would then request personal information, and if the customer provided the information, then the sales associate entered it into the POS system via the “Customer Information” window. After this process, the receipt would print.

Relying on the titles and chronology of the POS software as defining exactly when the credit card transaction ended, the defendant argued that a Song-Beverly violation in this circumstance was precluded. The defendant argued that because the personal information was requested under the POS “Customer Information” window, which occurred after the initial POS “Sales” and “Tender” functions, the associate was waiting until the credit transaction was completed before making the request. According to the defendant retailer, it was “physically impossible for the store sales associates to record any personal information until the sales transaction is completed and payment is tendered.”

Unfortunately for Ben Bridge Jewelers, the court found otherwise. In his order filed September 11, 2012, Judge Hayes cited the Florez v. Linens ‘N Things, Inc., 108 Cal. App. 4th 447 (Cal. Ct. App. 2003) case and its determination that liability turns on whether a customer could “perceive” the store’s request for information as a condition of the use of a credit card. Since the customer had no idea what POS screens the sales associate was currently utilizing at any given time during his trip to the check-out counter, the POS screens could do nothing to inform the customer whether his personal information was required to complete the transaction. Perhaps fatal for the defendant’s argument, the retailer waited until after the “Customer Information” screen popped up to print the receipt and hand over the purchased merchandise. The court specifically pointed out the fact that the retailer requested personal information before the receipt printed and merchandise changed hands. Without a receipt and goods in hand, a customer could very well have a reasonable perception that his participation at the POS (and any associated request for personal information) was still required in order to complete his credit card transaction. The court denied summary judgment, and the Song-Beverly case against Ben Bridge Jewelers will proceed.

Interestingly, the Juhline court’s interpretation is in striking contrast with the conclusion of the Los Angeles Superior court in a similar Song-Beverly class action case brought against Ben Bridge Jewelers in 2009. In that case, the court granted summary adjudication in favor of Ben Bridge Jewelers, and explicitly “decline[d] to read into the statute a requirement that no personal identification information can be requested or recorded until after a retailer prints the sales receipt and gives it, along with the merchandise, to the customer.” As another example of the continuing confusion in the Song-Beverly landscape, the Los Angeles Superior Court order stated that it was also relying on Florez when coming to the directly opposite conclusion of Judge Hayes. (Judge Hayes also found that since the Los Angeles Superior Court case was adjudicated on the merits prior to class certification, and the plaintiff in the instant action was not a named party in the prior state action, the state court action had no collateral estoppel effect on the case before Judge Hayes in the district court.)

While this opinion does not give California retailers clear guidance on when a credit card transaction ends and a customer’s personal information may be requested, it does offer helpful observations as to what types of POS procedures a future defendant retailer will need in order to raise a defense. Judge Hayes specifically noted that the personal information request occurred before the “receipt was printed” and “the purchased merchandise was handed to him by the sales associate.” Had the personal information request occurred after the receipt and goods were in the customer’s hand, Ben Bridge Jeweler would have had an easier time arguing that the customer could not have had a reasonable perception that the personal information was required to complete the transaction. In fact, the plaintiff’s own declaration stated that “it is my experience as a consumer that a sales transaction is not complete until I have possession of the merchandise and can freely leave the store.” While not ruling that handing the receipt and goods to the customer before requesting personal information will protect a retailer from liability, this opinion does imply that such procedures would be a more careful practice than requesting personal information before handing the customer the receipt and goods.

Of course, the district court’s ruling is not binding, and this is an area of law where the Supreme Court of California could dramatically change the judicial landscape overnight. (For more information, read our prior article titled "Two New California Supreme Court Decisions Will Impact Landscape of Class Action Litigation Against Retailers.") Until the expectations of the law are better defined, relying on the labels and chronology of the POS software to define the parameters of the credit card transaction will not assist a retailer in avoiding liability under Song Beverly. With the continued development of the case law, and the onslaught of class-action Song-Beverly lawsuits recently filed against California retailers, we recommend that all retailers consult with California attorneys who specialize in this area to ensure that their POS practices are not putting them at risk for a class action lawsuit.