Mass Ct: ZIP Code is Personal Identification Info Under Credit Card Statute But Plaintiff Must Still Allege Harm — Tyler v. Michaels Stores

[Post by Venkat Balasubramani]

Tyler v. Michaels Stores, Inc., 2012 WL 32208 (D. Mass.; Jan. 6, 2012)

Last year, the California Supreme Court held that a ZIP Code is personal identification information for purposes of a statute which restricted the type of information a retailer could collect: “California Supreme Court Rules That a ZIP Code is Personal Identification Information — Pineda v. Williams-Sonoma.” A federal court in Massachusetts recently construed a similar Massachusetts statute to reach the same conclusion, albeit for different reasons. But having found that the retailer in this case technically violated the statute, the court dismisses the case on the basis that the plaintiff failed to allege a cognizable injury.

Is a ZIP Code Personal Identification Information?: Section 105(a) of Massachusetts General Laws provides:

No person, firm, partnership, corporation or other business entity that accepts a credit card for a business transaction shall write, cause to be written or require that a credit card holder write personal identification information, not required by the credit card issuer, on the credit card transaction form. Personal identification information shall include, but shall not be limited to, a credit card holder’s address or telephone number.

The court looks to the legislative history behind the statute and says that the Massachusetts legislature’s intent was different from California’s. While the California legislature was concerned with retailers obtaining personal identification information and using it for marketing purposes, the Massachusetts legislature was more concerned about security and fraud prevention. Thus, while Pineda looked to whether a ZIP Code could be used (together with the customer’s name) to locate the individual, the court in this case focused on whether recordation of this information by a retailer poses the risk of identity theft or fraud. The court looks to Massachusetts’ identity theft statute, which defines personal identifying information as “any name or number that may be used . . . to assume the identity of an individual.” The court says that inputting a ZIP code in the context of a credit card transaction is similar to inputting a PIN number in the context of a debit card transaction. Because the ZIP code is information that can be used along with other card holder information to commit identity theft and criminal fraud, the court says that the ZIP code is personal identification information for purposes of the statute.

Did the Retailer Write the Information on a Transaction Form?: Michaels argued that the statute does not cover electronically stored information and that the transaction form has to be a paper document. The court rejects this argument for several reasons. First, the statute applies to all credit card transactions, whether they are processed manually, electronically, or through other means. The act does not distinguish between paper and electronic forms, and the court says that the risk of identity theft is present regardless of the type of transaction. The statute also permits the retailer to include information in the transaction form that is required by the credit card issuer. The retailer collects information during the transaction process (as required by the credit card issuer) and then issues the receipt, which may contain information different from the transaction form. (For example, the card number has to be truncated on the receipt under FACTA.) “The receipt is a printout of the permissible information on the transaction form, but it is not the transaction form itself.” (For what it’s worth, FACTA is also a statute aimed at curbing identity theft, but does not cover emailed receipts: “FACTA Does Not Cover Emailed Receipts.”)

Has Plaintiff Alleged Cognizable Injury?: The statute in question does not provide for statutory damages. It only says that a violation of the statute is “deemed to be an unfair and deceptive trade practice.” A claim for unfair and deceptive trade practice requires a showing of “injury and loss” and a causal connection between defendant’s practices and plaintiff’s injury. Plaintiff had not been subject to identity theft, so she had to prove injury or loss in other ways. She does not argue that she has an increased risk of identity theft. Instead, she argues that Michaels used her name and ZIP code in conjunction with a commercially available database to determine her address and phone number. The court says that her allegations are insufficient because she does not allege that Michaels acted illegally in accessing the database. She also alleged that she was injured because she received “a deluge of unwanted mail.” The court says that this is not an injury cognizable under the statute since the statute was enacted to prevent fraud. [Although not cited in the order, see Cherny v. Emigrant Bank, for the proposition that the receipt of spam is not in itself a compensable harm.]

Unjust Enrichment: Plaintiff also brought a claim for unjust enrichment. This claim is similar to the “PII-as-valuable-property” claim brought by the RockYou plaintiffs. (“Judge Recognizes Loss of Value to PII as Basis of Standing for Data Breach Plaintiff — Claridge v. RockYou.”) Under this theory, her personal information is a valuable piece of property so plaintiff should receive some compensation when she ‘exchanges’ this information with the retailer. The court says there are two problems with this argument. First, the ZIP code is not itself valuable to Michaels. It derives value only due to “the independent work and cross-referencing necessary to obtain the full address.” Second, the court says that reasonable people would not expect compensation for turning over their ZIP code, and plaintiff did not allege that, had she known all the facts, she would have “charged” Michaels for the ZIP code.


The conclusion that plaintiff did not state a cognizable injury was the most interesting. The court drops a giant footnote saying that it’s not deciding this case the basis of Article III standing, but even if it were, the result would be the same (citing In re iPhone App Litigation; Specific Media; In re Facebook Privacy Litigation). There is a big grey area here, which is whether a violation of a state law alone is enough to support standing, or whether even when plaintiff makes out a prima facie violation of a state statute, a plaintiff has to separately prove damages as a threshold matter. Can state legislatures circumvent Article III standing requirements? Can Congress? The court says that these issues are not implicated since the unfair trade practice statute only confers standing upon those who show that they have been injured. (My gut feeling is that Congress and state legislatures should have the power to define when a plaintiff can sue; at least they do so routinely. The court says that clarity on the standing question is forthcoming, since the Supreme Court granted cert. in Edwards v. First Am. Corp.)

The court’s conclusion on the unjust enrichment claim is also interesting. While one or two decisions accepted (at the motion to dismiss stage) the theory that personal information must be valuable because the defendant monetized it, later decisions, like this one, require plaintiff to more clearly articulate their misappropriation theories. Just because information is valuable in someone else’s hands, does not mean that their use of that information is a misappropriation of your property.

It’s unclear whether the court’s rejection of plaintiff’s injuries is a result of the court’s construction of the credit card statute as aimed to combat identity theft and fraud, or whether it’s because Massachusetts unfair trade practices statute (like California’s) requires some out of pocket loss.

Overall, this decision, like many of the privacy lawsuits we’ve blogged about reflects a reluctance by courts to recognize informational privacy claims where they don’t easily see out-of-pocket losses. The risk of future identity theft is not getting much traction in courts. (See also, Reilly v. Ceridian, a recent 3rd Circuit case which is in the blogging queue.) The “personal information as currency” is also not getting much traction in courts either. When those two theories are taken out of the mix, the plaintiff is left only to allege that the defendant violated the statute and therefore plaintiff is entitled to damages. Courts are requiring privacy plaintiffs to allege more than this.