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Inside Privacy Updates on Developments in Global Privacy & Data Security from Covington & Burling LLP

Key Decision in Nike Song-Beverly Litigation

Posted in Litigation, United States

Businesses should take note of this week’s decision in Gormley v. Nike, Inc., a lawsuit under California’s Song-Beverly Credit Card Act, in which plaintiffs allege that Nike violated the Act by requesting ZIP codes from them during credit card transactions in Nike’s retail stores.  Judge Susan Illston of the Northern District of California denied Nike’s motion for summary judgment, holding that genuine issues of material fact existed as to whether the plaintiffs reasonably would have perceived Nike’s request for ZIP codes as suggesting that providing that information was a condition of being able to use a credit card.  

Nike argued that the specifications for its point-of-sale (“POS”) software, as well as store policies and procedures, showed that any request for ZIP codes would have occurred after a credit card transaction was complete; thus, no reasonable consumer would have believed that his or her ZIP code was being requested as a condition ofbeing able to use a credit card.  However, the court noted that the specifications for the POS software suggested that the software would prompt a cashier to request a ZIP code after the “receipt had started printing.”  The court therefore concluded that “under the POS system in place during the relevant time period, it was possible for a cashier to request a customer’s ZIP code prior to giving the customer his or her receipt and merchandise.” 

As businesses explore options for complying with Song-Beverly, they should consider the holding of the Nike case.