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August 2016

Gordon & Rees San Diego Attorneys Win Complete Defense Verdict in Major Consumer Privacy Class Action Trial

Gordon Rees Scully Mansukhani successfully obtained a class action defense verdict on behalf of a multinational clothing corporation in a case facing more than $1 billion of exposure and a $288 million demand. The plaintiffs alleged that the firm's client violated the Song-Beverly Credit Card Act by asking customers to provide their ZIP codes when making a purchase in their California stores. In the plaintiffs’ opening statement of the six-day bench trial, they asked the court to award $288 million to the class, and then increased their request to $800 million in their post-trial statement (the maximum penalty of $1,000 per violation for 800,000 alleged violations of the Act).

The trial team was led by Miles Scully, and included partners Timothy Branson, William Rathbone, Richard Spirra and Joseph Goodman, senior counsel James Danaher, and paralegal Steven Christianson.

This was one of hundreds of lawsuits filed against retailers in California related to the requesting and recording of ZIP codes at the point-of-sale, which was a lawful practice until the California Supreme Court in 2011 ruled that ZIP codes were personal identification information and that the practice of requesting and recording ZIP codes violated the Song-Beverly Act. The California Supreme Court also took the rare step of applying its decision retroactively, leading to hundreds of pretrial settlements by retailers in California during the past five years. The firm's client refused to settle and took the case to trial, only the third such case to go to trial in California since a consortium of plaintiffs’ attorneys began to file these lawsuits in early 2011.

At trial, Gordon & Rees established that its client had a standard series of steps that employees followed when accepting credit card payments. In this standard series of steps, the registers prompted the cashier to ask the customer for his or her ZIP code after the credit card had been swiped, processed and approved, and after the customer had signed the screen indicating that he or she accepted the charges. Gordon & Rees also presented numerous witnesses at trial, including store managers, cashiers, and the director of operations at both brands, to demonstrate that the ZIP code request was a purely voluntary procedure. Based on the evidence, the court found that no consumer could reasonably perceive that a request for a ZIP code that was made after the card had already been accepted was a “condition to accepting the credit card as payment.” (§ 1747.08(a)(2).)

Gordon & Rees also established that the testimony of the named plaintiffs was unreliable, including their testimony about ZIP Code requests that occurred earlier in the transaction process than the client's standard procedures, and about ZIP code requests that never actually occurred. None of the three class representatives could recall the details of their transaction, except that a ZIP code was requested at some point in the transaction. As the court concluded, “the plaintiffs were ‘all over the map’ as to the details of the transactions,” and therefore “the Court finds that their testimony was unreliable.”

Through exhaustive cross-examinations of the plaintiffs’ experts, Gordon & Rees also demonstrated that the plaintiffs had failed to meet their burden of proving on a classwide basis that class members used credit cards (as opposed to signature debit cards) and that ZIP codes were actually requested and recorded from customers (as opposed to clerks simply entering the store’s ZIP code, dummy ZIP codes, or other random numbers in order to bypass the procedure).

The court ruled that “Defendants are the prevailing party under all theories” and entered a verdict against plaintiffs and class and in favor of Gordon & Rees's client. This is the first defense verdict in California state courts related to the collection of ZIP codes and one of the top defense verdicts of 2016. More than 100 similar cases have been filed in California against retailers, yet this was the first defense verdict at trial. Verdicts and settlements in similar cases against smaller companies ranged from $25 million to more than $80 million.

To read the final decision, please click here.

Gordon & Rees was recognized as the fastest growing AmLaw 200 firm in the country. A national litigation and business transactions firm, Gordon & Rees has more than 700 lawyers and 38 offices in 24 states. In 2016, Law360 ranked the firm 53rd on its list of the largest U.S. firms. The American Lawyer ranked the firm at No. 39 on its Diversity Scorecard. Founded in 1974, Gordon & Rees has been recognized as a “Go-To Law Firm” for Fortune 500 companies.


Timothy K. Branson
Miles D. Scully
Richard R. Spirra