Consumer Perception Matters: California Court of Appeal Clarifies Legal Standard Under Song-Beverly Credit Card Act

Although litigation under California’s Song-Beverly Credit Card Act has largely slowed to a trickle, businesses continue to have questions surrounding compliance and litigation risk and exposure. A recent ruling by a California Court of Appeal ushered in two significant developments for businesses navigating the Act, which prohibits businesses from requesting or requiring customers to provide personal identification information (PII) as a condition to accepting a credit card for payment, and then recording that information.[1] In deciding Williams‑Sonoma Song-Beverly Act Cases,[2] the Court of Appeal first clarified how “consumer perception” factors into determining liability under Song-Beverly. Second, by endorsing a “consumer perception” standard that focuses on the circumstances surrounding each transaction, the ruling provides businesses with additional ammunition to oppose class certification. 

The confusion regarding whether “consumer perception” matters stems largely from Florez v. Linen ‘N Things, Inc.,[3] a 2003 California Court of Appeal decision. In Florez, the Court of Appeal considered whether the plaintiff had sufficiently alleged a violation of Song-Beverly based on Linen ‘N Things’ practice of requesting PII before a customer announced the manner in which she preferred to pay for her purchases.[4] In analyzing the issue, the Florez court considered the statutory language and concluded “[w]hat does matter is whether a consumer would perceive the store’s ‘request’ for information as a ‘condition’ of the use of a credit card.”[5] 

Despite that, the court also found that the Act prohibits a request for PII “in conjunction with the use of a credit card” and concluded that a preliminary request for PII is barred by the Act.[6] Decisions following Florez that also concluded that customer perception matters involved post‑payment transactions, leaving the inconsistencies in Florez unresolved.[7] As a result, plaintiffs have read Song-Beverly to prohibit any request for PII during a credit card transaction, essentially reading the “customer perception” requirement out of the Act, requiring businesses to take a conservative approach to Song-Beverly compliance. 

In Williams-Sonoma Song-Beverly Act Cases, however, the Court of Appeal finally addressed Florez head-on, concluding that it is in error to read Florez as standing for the proposition that “any request for [PII] made during a credit card sale” violates Song-Beverly.[8] On appeal following the trial court’s decision to decertify the class, the case involved Williams-Sonoma’s requests for PII during sales transactions before tender of payment.[9] Analyzing both Florez and Song-Beverly’s legislative history, the Williams-Sonoma court concluded that the Act does not categorically prohibit businesses from requesting customers’ PII during credit card transactions.[10] The Court of Appeal “considered, and rejected” the argument that “a request for [PII] during a credit card sale violates the Act without regard to whether the customer would reasonably perceive the information was required.”[11] (Ibid.)

Having clarified that customer perception is relevant to determining liability under the Act, the Court of Appeal confirmed the trial court’s findings on decertification, concluding that there was “substantial evidence that the conditions relevant to a reasonable customer’s understanding of whether [PII] was required for a credit card sale varied between individual transactions.”[12] In particular, the court focused on the fact that Williams-Sonoma:   

• Employees had discretion over whether to request PII, and were not subject to discipline if they did not request the information;
• Employees often gave customers verbal advisements that Williams-Sonoma would use the requested PII solely for marketing purposes; and
• Required all of its California stores to prominently post signs and stickers at cash registers stating that customers were not required to provide PII and trained employees to point customers to these displays.[13] 

Given this evidence, the Court of Appeal found that the circumstances of each transaction, and the perceptions a reasonable consumer would draw from them, varied.[14] As a result of these differences, the Court of Appeal concluded that liability could not be determined on a classwide basis, affirming the decertification order.[15] 

The California Supreme Court subsequently denied the Williams-Sonoma plaintiffs’ requests to de-publish the Court of Appeal’s opinion and review the case, leaving the decision intact and citable as precedent. In clearing the haze around Florez, Williams-Sonoma clarifies that Song-Beverly does not categorically prohibit businesses from requesting and recording customers’ PII during credit card transactions, and provides Song-Beverly defendants additional grounds to defeat class certification. Practically speaking, the decision also provides some guidance regarding the circumstances under which businesses can request PII from credit-card paying customers and comply with California’s Song-Beverly Credit Card Act.

Morrison & Foerster associate Zachary Maldonado co-authored this client alert.

[1] Cal. Civ. Code § 1747.08.

[2] 40 Cal. App. 5th 647 (2019).

[3] Florez v. Linen ‘N Things, Inc., 108 Cal. App. 4th 447 (2003).

[4] Id. at 453.

[5] Id. at 451.

[6] Id. at 451-3.

[7] See, e.g., Harrold v. Levi Strauss & Co., 236 Cal. App. 4th 1259 (2015) (concluding that Song-Beverly does not prohibit collection of PII after a credit card transaction is complete).

[8] Williams-Sonoma, 40 Cal. App. 5th at 653.

[9] Id. at 650-51.

[10] Id. at 653.

[11] Id. at 654.

[12] Id. at 657.

[13] Id. at 650. 

[14] Id. at 657.

[15] Id. at 658.