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April 2, 2013

Legal Update
Paul E. White

Collection of zip codes by Massachusetts retailers constitutes unfair business practice

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Massachusetts highest court has recently issued an important decision concerning the collection of zip code information by retailers that is likely to generate lawsuits against many of the largest retailers that do business in Massachusetts.

In Tyler v. Michaels Stores, Inc. the Massachusetts Supreme Judicial Court (“SJC”) held that collecting non-essential customer information when processing credit card transactions, even if not for the purpose of perpetrating identity fraud, nevertheless violates a Massachusetts statute G.L. ch. 93, §105(a) directed at preventing the collection of unnecessary personal information to complete a credit card transaction. Even more significantly, the SJC held that such a violation shall be deemed to be an unfair and deceptive trade practice within the meaning of the Massachusetts Consumer Protection Statute G.L. ch. 93A, §2. If a plaintiff alleges and proves that she has suffered a distinct injury or harm that arises from the unfair or deceptive act, the court held that such conduct would be the basis for a claim entitling the plaintiff to recover damages and attorneys’ fees. In a particularly alarming decision for retailers, the SJC made clear that where a merchant acquires personal identification information in violation of G.L. ch. 93, §105(a) and uses the information for its own business purpose, whether by sending marketing materials or by selling the information to third parties, the merchant has caused the consumer an injury that is cognizable under G.L. ch. 93A, §9.

It is likely that the legal precedent set by the SJC in the Tyler case will now lead to lawsuits against many Massachusetts retailers and that many of these claims will be filed as class action lawsuits. A similar rush of cases occurred in California after a California Supreme Court decision in 2011, Pineda v. Williams-Sonoma Stores, Inc., led to the filing of hundreds of such class actions against major retailers. Based on the SJC’s broad holding in Tyler, it is likely that Massachusetts retailers will receive a significant number of lawsuits from plaintiffs who can demonstrate that they suffered an injury, such as receiving unsolicited marketing mail, as a result of their personal information being collected.

The Tyler case should sound an alarm for any retailer in Massachusetts that is continuing to collect zip-code information from customers at the point of sale. Retailers that have engaged in this practice should carefully evaluate their situations and seek appropriate legal counsel.

This Alert was prepared for the clients and friends of Sugarman, Rogers, Barshak & Cohen, P.C. It is provided for educational and informational purposes only and is not a substitute for professional advice on your specific legal situation.