Williams-Sonoma Skates On ZIP Code Privacy Lawsuit, Federal Judge Rules

Attorney Mark D. Rasch is the former head of the U.S. Justice Department's computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.

About a year ago, Williams-Sonoma got into legal trouble in California for having its cashiers ask people using credit cards to provide their ZIP codes (to be used for marketing purposes) in violation of a California statute that made it unlawful to ask for "personal information" as a condition of accepting a credit card. In late September, a federal court in New Jersey let Williams-Sonoma off the hook for doing the exact same thing in the Garden State, leaving the state of the law of ZIP codes at best uncertain.

Several states have laws that restrict either in whole or in part the use of certain personal information as a condition of accepting a credit card. For example, NJ Stat. Ann. 56:11-17 provides in relevant part that, "No person which accepts a credit card for a consumer transaction shall require the 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, any personal identification information that is not required by the issuer to complete the credit card transaction, including, but not limited to, the credit card holder's address or telephone number, or both; provided, however, that the credit card holder's telephone number may be required on a credit card transaction form if the credit card transaction is one for which the credit card issuer does not require authorization."

This language is virtually identical to the language the California Supreme Court upheld when it declared that Williams-Sonoma's collection of ZIP codes constituted "personal identification information" and, therefore, a violation of California law. So why would the Kardashians win in Beverly Hills but Snookie lose in Asbury Park?

Unlike California law, the New Jersey statute did not itself create a "private right of action." In other words, what the law said was that merchants were prohibited from collecting personal information; if they did so, well, there was nothing you could do about it. The state itself, either through a prosecutor or the Attorney General, would have to sue to enforce the statute—an "injured" party could not. So in the New Jersey case, called Kerry Feder v. Williams-Sonoma Stores, the plaintiffs attempted to sue in a class action case under a different New Jersey statute—the Truth-in-Consumer Contract, Warranty and Notice Act—which the court noted "prohibits any seller from offering, entering into, giving or displaying a written consumer contract or notice that violates a clearly established right of the consumer or responsibility of the seller as established by New Jersey or Federal law."

So Feder argued there was a right to privacy under New Jersey law. And that right included the right not to be asked for or to be forced to produce personal information (including ZIP code) and, therefore, the actions of Williams-Sonoma violated that right.

Aye, there's the rub. The New Jersey TCCWNA (say it three times fast) requires a written contract, which violates a consumer's right. The only thing written was the sales receipt, which contained the consumer's ZIP code—and that wasn't a contract itself, but evidence of a contract. Even though the plaintiff may have been required to give up her right to privacy (in violation of New Jersey law) as a condition of entering into the contract, that requirement was oral (the clerk saying "give me your ZIP code") not in writing as the statute requires. Therefore, no violation of TCCWNA, no class action, no lawsuit.

Of course, Williams-Sonoma and other merchants in New Jersey are not necessarily out of the woods. If asking for ZIP code information in New Jersey is "personal information" and if asking for it violates New Jersey law, it is possible that Williams-Sonoma or others could be in trouble with Paula Dow, the New Jersey Attorney General. But at least they don't have to worry (for the moment) about potential class actions.

In light of the California and New Jersey ZIP code rulings, merchants should do a state-by-state evaluation of laws relating to the collection of personal information (like possibly ZIP codes), along with the remedies afforded by these states, and adjust their data collection practices accordingly. And, at least in Joyzey, "don't put it in writing."

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.