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June 9 — Redbox Automated Retail LLC's collection of customers' ZIP codes when they use credit cards to rent movies or video games from its kiosks doesn't violate California's Song-Beverly Credit Card Act, the U.S. Court of Appeals for the Ninth Circuit held June 6.
The company's collection of ZIP codes falls under one of the act's exceptions, where “ ‘the credit card is being used as a deposit to secure payment in the event of default, loss, damage, or similar occurrence,' ” Judge Richard R. Clifton wrote, quoting Cal. Civ. Code § 1747.08(c)(1).
The Song-Beverly Act, at Cal. Civ. Code § 1747.08, prohibits retailers from requiring that a cardholder provide “personal identification information” as a condition for accepting a credit card for payment. The California Supreme Court has held that a ZIP code constitutes personal information (Pineda v. Williams-Sonoma Stores Inc., 246 P.3d 612 (Cal. 2011)).
When a customer attempts to rent a disc at a Redbox kiosk, the kiosk prompts the customer to enter the ZIP code associated with his or her card's billing address for “security reasons,” the court explained. The plaintiffs alleged that Redbox collected this information for purposes of market research in violation of Section 1747.08.
A district court dismissed the case, holding that the act doesn't reach transactions taking place at unattended, standalone kiosks.
The Ninth Circuit affirmed the lower court's dismissal of the putative class action, but on different grounds. The California Supreme Court would likely hold that Redbox's collection of ZIP codes at the time of rental transactions as exempt under Section 1747.08(c)(1), the appellate court said.
The credit card is being used as a deposit to secure payment because the “card information permits Redbox to collect the additional amount owed should the customer choose to keep the movie or game for additional days or if it is never returned,” the court said.
It rejected the plaintiffs' argument that the situation doesn't fit within the exception because Redbox doesn't charge a deposit in advance and then credit excess funds when the customer returns a disc. The dictionary definition of “deposit” includes “something given as a pledge or security,” the court said.
“We see no reason to differentiate between particular forms of credit card deposits, whether they be a current transfer, a hold, or merely the ability to run a charge in the future,” the court said. “Nothing indicates that the legislature intended such a distinction, and Plaintiffs have not provided a logical explanation for such a distinction.”
Chief Judge Alex Kozinski joined in the opinion.
Judge Stephen Reinhardt dissented, saying that Redbox's charges were unrelated to “default, loss, damage, or similar occurrence” within the meaning of the Song-Beverly Act exception because “every payment secured by the credit card is part of the anticipated transaction.” The maximum charge that a customer would incur if he or she failed to return a DVD would be $25.00 after 25 days, after which the customer would own the DVD, he said.
After failing to find a statutory exception that would apply to the situation, Reinhardt said he would have reversed the district court's ruling.
Qualls & Workman LLP represented plaintiff John Sinibaldi. Ridout Lyon + Ottoson LLP represented plaintiff Nicolle DiSimone. Perkins Coie LLP represented Redbox.
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Full text of the court's opinion is available at http://www.bloomberglaw.com/public/document/JOHN_SINIBALDI_and_NICOLLE_DISIMONE_individually_and_on_behalf_of.
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