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Wednesday March 2 2011 Making Sense of the California Song-Beverly Act: What Retailers Need to Know About Collecting Personal Information in Credit Card Transactions ©2011 Fulbright & Jaworski L.L.P. Wednesday , March 2, 2011 Web Seminar

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Page 1: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Wednesday March 2 2011

Making Sense of the California Song-Beverly Act:

What Retailers Need to Know About Collecting Personal Information in

Credit Card Transactions

©2011 Fulbright & Jaworski L.L.P.

Wednesday, March 2, 2011Web Seminar

Page 2: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Speakers

Bill DombrowskiPresident and CEO

California Retailers [email protected]

+1 916 443 1975

James R. EvansPartner, Los AngelesFulbright & Jaworski [email protected]+1 213 892 9322

©2008 Fulbright & Jaworski L.L.P.

Margaret GladsteinLobbyist

Capitol [email protected]

+1 916 444 0400

Jeffrey B. MarguliesPartner, Los AngelesFulbright & Jaworski [email protected]+1 213 892 9286

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Page 3: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Continuing Legal Education Information

We have applied for one hour of California, Minnesota, Texas, and Virginia CLE and New York non-transitional CLE credit. Newly admitted New York attorneys may not receive non-transitional CLE credit. For attendees in other states, we will supply a certificate of attendance that may be used to apply for CLE credit with the applicable bar or other pp y ppaccrediting agency.

Fulbright will supply a certificate of attendance to all participants who:

1. Participate in the web seminar by phone and via the web.2. Complete our online evaluation, which we will send to you after

the web seminar (required by some states).

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Page 4: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Administrative Information

Today’s program will be conducted in a listen-only mode. To ask an online question at any time throughout the program, simply click on the question mark icon located on the tool bar in the bottom right side of your screen. We will try to answer your question during the session.

Everything we say today is opinion. We are not dispensing legal advice, and listening does not establish an attorney-client relationship. This discussion is off the record. You may not quote the speakers without our express written permission. If the press is listening, you may contact us, and we may be able to speak on the record.

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Page 5: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

OVERVIEW AND INTRODUCTION

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Page 6: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Goals of This Presentation

Understanding What Retailers Can Do Under Current Law

Understanding the Pineda decision and its implications

Understanding Potential Issues Relating to Point of Sale Practices

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Page 7: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Goals of This Presentation

Understanding Potential Implications for Internet Retailing

Developing Practices/Strategies to Best Defend Against Lawsuits

Discussion of Potential Legislative Action

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Page 8: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

An Overview Of Section 1747.08

No one that accepts credit cards for the transaction of business shall:● Request or require the cardholder to write any personal

identification information upon transaction form or otherwise

● Request or require the cardholder to provide personal identification information which the merchant writes or records upon transaction form or otherwise

● Utilize a credit card form which contains preprinted spaces designated for personal identification information of cardholder

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Page 9: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

What is Personal Identification Information?

Anything specific to the cardholder that is not set forth on the credit card● Name

● Address [or any portion of it]● Address [or any portion of it]

● Phone Number

● E-mail address

● Driver’s license number

● Date of birth

● Anything else unique to the cardholder

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Page 10: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

The Exceptions

“Special Purpose Incidental To Credit Card Transaction”● Shipping information● Delivery● Servicingg● Installation● Special Orders

Cash Advance/Lay-Away Transactions“Contractually Obligated” or “Legally Required” To ProvideReturns

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Enforcement

Civil Penalties● Up to $250 for first violation

● Up to $1,000 for each subsequent violation

Injunction by Public Prosecutor

Potential Enforcement under Unfair Competition Law

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Page 12: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

The Policy Issues

Legislative History

Concerns with invasion of privacy

Concerns with aggressive marketing

The technological changes since 1747.08 was adopted

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Page 13: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Pineda And Its Fall Out

Zip Codes Are Personal Information Subject to Civil Code section 1747.08

Ruling Applies Retroactively notwithstanding published Party City opinion

In two weeks since Pineda was published, more than 100 class action lawsuits have been filed across the state

Lawsuits challenging not only point-of-sale practices, but also online sales and gas station sales

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THE CASE LAW

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The Case Law

Powers v. Pottery Barn, Inc., 177 Cal. App. 4th 1039 (4th Dist. 2009) ● Federal CAN-SPAM Act does not preempt an action

alleging that collecting email violates Song-Beverly Act

The TJX Companies Inc v Superior Court 163 CalThe TJX Companies, Inc. v. Superior Court, 163 Cal. App. 4th 80 (4th Dist. 2008) (reh’g denied)● One year statute of limitations applies to 1747.08

transactions because penalties are mandatory

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The Case Law

Saulic v. Symantec Corp., 596 F. Supp. 2d 1323 (S.D. CA 2009)● Interpreting California law, District Court ruled that online

transactions not subject to Civil Code section 1747.08Watkins v. Autozone Parts, Inc., 2009 U.S. Dist. LEXIS 89745 (S.D. Cal. Sept. 29, 2009) ( p , )● 1747.08 does not prohibit collection of personal identifying

information in connection with warranty registrationLinder v. Thrifty Oil Co., 23 Cal. 4th 429 (2000) ● The civil penalty provision of the Song-Beverly Credit Card Act

of 1971 does not mandate fixed penalties; rather, it sets maximum penalties of $250 for the first violation and $1,000 for each subsequent violation, thus providing an entire range of available penalties

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The Case Law

Shabaz v. Polo Ralph Lauren Corp., 586 F. Supp. 2d 1205 (2008, CD Cal.)● District Court rules that consumer has no right to jury trial because

1747.08 is not compensatory—pure penalty

Florez v. Linens 'N Things, Inc., 108 Cal. App. 4th 447 (2003, Cal. App. 4th Dist.), review deniedApp. 4th Dist.), review denied ● retailer cannot avoid application of 1747.08 by asking for phone

number before ringing up purchases on a credit card● Section 1747.8 “is remedial in nature and in the public interest [and]

is to be liberally construed to the end of fostering its objectives.”

Korn v. Polo Ralph Lauren Corp. (2008, ED Cal.) 2008 U.S. Dist. LEXIS 47034 (injunctive relief not available in consumer’s action)● Contra: B&P 17200

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The Case Law—Florez

Florez dictum is helpful to retailers who “unlink” (make clear that there is no nexus between) the request for information and the credit card transaction:

“As evidenced by the 1991 amendment, section 1747.8 is designed to prevent a ‘request’ for personal information, because a customer might perceive that request as a condition of credit card payment.” Id at 453.

Under no circumstances should the information be requested before the transaction is complete:p“…the 1991 amendment simply clarified that a "request" for personal identification information was prohibited if it immediately preceded the credit card transaction, even if the consumer's response was voluntary and made only for marketing purposes.”

“Based on our review, we conclude the addition of the word ‘request’ to section 1747.8 bars a preliminary request for personal identification information.”

Requesting the information after the transaction is completed, and then linking it to the transaction, will run afoul of Flores:“The obvious purpose of the 1991 amendment was to prevent retailers from ‘requesting’ personal identification information and then matching it with the consumer's credit card number.”

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NOW WHAT?

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Page 20: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Potential Legislative Solutions

The importance of collective effort

Bill DombrowskiPresident and CEO

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California Retailers [email protected]+1 916 443 1975

Page 21: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

How Do You Solve A Problem Like Pineda?

The separation of the sales transaction

No pre-transaction requests for PII for any reason other than for authorized purpose? Florez

Post transaction requests● Customer Loyalty Programs

● Warranty

● Mailing Lists

● No reverse appending of purchase transaction data

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Page 22: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Developing Defenses For Online Retailing

Symantec

Developing the “contractually obligated” argument● examining Credit Card/Retailer Agreement terms

● other contractual obligations● other contractual obligations

Developing the “special purpose” argument● fraud prevention (no card present)

● extended warranty offer

Requirements of State or Federal Law22

Page 23: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

POST-PINEDA CLASS ACTION LITIGATION

The Lawsuits Filed Against Brick and Mortar Retailers

The Attack on Internet Retailing

The Attack on PayPal

The Attack on Gas Station Sales

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Preparing For The Class Action

CAFA Removal?Coordination?Complex RulesVetting Your Judge

d l h● Judge In A Flash

Preparing for the Class Certification Motion● The plaintiff’s transaction data● The plaintiff’s deposition● The plaintiff and his/her attorney

Background investigationApple issues

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Page 25: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Preparing For The Class Action

• Developing Individualized IssuesGathering Company Policy Documents concerning the collection of data

Understanding the point of sale transaction sequence

Point of sale disclosures (oral and written)

C i li iCompany privacy policies

Understanding the use of the data collected from consumers

Identifying the key employees

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Page 26: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Questions?

Bill DombrowskiPresident and CEO

California Retailers [email protected]

+1 916 443 1975

James R. EvansPartner, Los AngelesFulbright & Jaworski [email protected]+1 213 892 9322

©2008 Fulbright & Jaworski L.L.P.

Margaret GladsteinLobbyist

Capitol [email protected]

+1 916 444 0400

Jeffrey B. MarguliesPartner, Los AngelesFulbright & Jaworski [email protected]+1 213 892 9286

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Page 27: Making Sense of the California Song-Beverly · PDF fileDiscussion of Potential Legislative Action 7. ... District Court rules that consumer has no right to jury ... Making Sense of

Continuing Legal Education Information

If you are requesting CLE credit for this presentation, please record the number given during the program and respond to the survey that Fulbright will email within the next day.

Completion of the above-mentioned survey is required in i b i C dicertain states to obtain CLE credit.

If you are viewing a recording of this web seminar, most state bar organizations will only allow you to claim self-study CLE credit. Please refer to your state's CLE rules. If you have any questions regarding CLE approval of this course in your applicable bar, please contact your bar administrator.

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