U.S. Supreme Court Opens New Retail Privacy Defense

Attorney Mark D. Rasch is the former head of the U.S. Justice Department's computer crime unit and today is a lawyer in Bethesda, Md., specializing in privacy and security law.

When the U.S. Supreme Court on Monday (June 17) ruled on a personal information privacy case involving driver's license information, it opened an entirely new defense strategy for retailers. In effect, it flipped privacy laws around to where chains can use privacy laws to prevent shoppers from accessing the chain's information about them.

The Supreme Court in this case used federal privacy laws to protect a car dealership from being sued in a class action lawsuit. But the facts could also serve to help, for example, Target trying to defend itself against a consumer lawsuit about a defective product, where the chain could say that privacy laws prevent its revealing key information to the plaintiffs. The court indicated its intention to read exceptions to general privacy laws narrowly and, in an unusual way, used privacy laws not just to protect privacy, but to protect businesses themselves.

After a series of high profile stalking cases, Congress in 1994 passed the Driver’s Privacy Protection Act, 18 USC 2721. The statute mandated that states restrict access to driver’s license databases (including photographs, names, addresses, etc.) only for those circumstances where either the driver had consented to the access, or where certain exception applied.

One of these exceptions permitted access to DMV records (including names, addresses, vehicle registration forms, and other information) "for use in connection with any civil, criminal, administrative, or arbitral proceeding in any Federal, State, or local court or agency or before any self-regulatory body, including the service of process, investigation in anticipation of litigation, and the execution or enforcement of judgments and orders, or pursuant to an order of a Federal, State, or local court."

When some trial lawyers in South Carolina sued car dealerships for violation of consumer protection laws, they sought to use DMV records to discover the names of people who had purchased certain kinds of vehicles from certain dealerships during a certain period of time. They filed a Freedom of Information lawsuit against the SC DMV to obtain the records, and then sent a letter, approved by the SC Bar Counsel, (well, at least registered with them) soliciting those individuals to join a class action lawsuit against the car dealerships.

The law firm got the class action – but not the one they wanted. Recipients of the solicitation letters (and subsequent phone calls) sued the law firm for violating the privacy statute by using their DMV records to solicit them for participation in the class action lawsuit against the car dealerships.

The Supreme Court agreed. It found that the law firm’s attempt to certify a class of plaintiffs was not made as part of an investigation “in anticipation of litigation.” Seems like the reason the law firm wanted the DMV records was “in anticipation of litigation,” right? I mean, their goal was to file a lawsuit – litigation. They wanted to certify a class of plaintiffs in litigation. Right? Not according to the Supreme Court.

The Court noted: If (b)(4) [the litigation exception] were read to permit disclosure of personal in¬formation whenever any connection between the protected information and a potential legal dispute could be shown, it would undermine in a substantial way the DPPA’s purpose of protecting an individual’s right to privacy in his or her motor vehicle records. The “in connection with” language in (b)(4) must have a limit. A logical and neces¬sary conclusion is that an attorney’s solicitation of pro¬spective clients falls outside of that limit.

What the court essentially said was that attorney’s solicitation of clients was, as a practical matter, no different than anyone else’s potential solicitation of clients. So just as a pharmacist couldn’t use DMV records to solicit clients, lawyers can’t either. Except of course that lawyers solicit clients for the purposes of litigation – something Congress seemed to permit.

The decision is significant in a few ways. First, the Court indicated that it was going to read exceptions to privacy laws narrowly. The goal of privacy laws is, well, to protect privacy. Exceptions to privacy laws will generally be read narrowly and this means that retailers and others will have to respect privacy laws more assiduously. This means that retailers need to be clear about the nature and type of information they collect and how they use it.

Second, however, the case represents the use of privacy law as a shield for companies. The car dealerships in this case got to use the fact that the DMV and sales records were private to protect themselves from potential class action litigation. In previous cases, doctors have refused to produce records relating to patients (in the context of investigations of the doctors) citing the patient’s privacy.

With more data being covered by privacy laws, companies can use these laws to prevent unwanted persons from having access to data. This can include investigators, prosecutors, lawyers or others. “Gee, I really wish I could comply with the subpoena, but I really need to protect the privacy of my customers.” Privacy law becomes a shield not for the data subject, but for the company that collected the data.

If you disagree with me, I'll see you in court, buddy. If you agree with me, however, I would love to hear from you.