LEGAL NEWSLINE

SAN FRANCISCO (Legal Newsline) - The California Supreme Court has ruled that Apple's solicitation of the addresses and phone numbers of customers purchasing iTunes' downloads is not prohibited under the state's Credit Card Act.

The Court's 4-3 majority opinion, issued Feb. 4, was authored by Justice Goodwin Liu and joined by Chief Justice Tani Cantil-Sakauye and Justices Kathryn M. Werdegar and Carol A. Corrigan.

Dissenting opinions were issued by Justices Joyce L. Kennard and Marvin R. Baxter, each concurring with the other's dissent, with both joined by Justice Barbara J.R. Jones who was sitting on assignment.

In June 2011, David Krescent sued Apple on behalf of himself and a putative class of similarly situated individuals for alleged violations of Civ. Code, § 1747.08, a section of the Song-Beverly Credit Card Act of 1971.

Krescent alleged that he was required to provide his telephone number and address when he purchased media downloads from Apple iTunes and that due to the nature of the transactions, the providing of his personal information was unnecessary.

"Although he alleged that 'the credit card transaction would be permitted to proceed' without any personal identification information, Krescent also contended that 'even if the credit card processing company or companies required a valid billing address and [credit card identification number], under no circumstance would [plaintiff's] telephone number be required to complete his transaction, that is, under no circumstance does [Apple] need [plaintiff's] phone number in order to complete a [media] download transaction.'"

Krescent alleged that the solicitation of his personal information was in violation of section 1747.08.

Apple argued in a demurrer of September 2011 that the Credit Card Act does not apply to online transactions and that deciding otherwise would undermine the prevention of identity theft and fraud.

The trial court stated, while acknowledging that Apple's "assertions with respect to preventing fraud have definite appeal," that it was not prepared to read the Credit Card Act as exempting online credit transactions at the pleading stage of the litigation.

Apple filed a writ of mandate with the Court of Appeal and after the writ was denied, the state's high court granted Apple's petition for review.

"There can be no doubt that retail commerce has changed dramatically since section 1747.08 was enacted and even since COPPA and the federal TCPA were enacted. In 1990, the idea of computerized transactions involving the sale and purchase of virtual products was beyond any legislator's imagination," Liu wrote.

"Such technology was not even a twinkle in Steve Jobs's eye; at the time, Jobs had just begun to experiment with the concept of interpersonal computing.

"Having thoroughly examined section 1747.08's text, purpose, and history, we are unable to find the clarity of legislative intent or consistency with the statutory scheme necessary to conclude that the Legislature in 1990 intended to bring the enormous yet unforeseen advent of online commerce involving electronically downloadable products - and the novel challenges for privacy protection and fraud prevention that such commerce presents - within the coverage of the Credit Card Act.

"We cast no doubt on Krescent's claim that protecting consumer privacy in online transactions is an important policy goal, nor do we suggest that combating fraud is as important or more important than protecting privacy. We express no view on this significant issue of public policy.

"Our role is to determine what the Legislature intended by the statute it enacted. Here the statutory scheme, considered as a whole, reveals that the Legislature intended to safeguard consumer privacy while also protecting retailers and consumers against fraud.

"This accommodation of interests struck by the Legislature would not be achieved if section 1747.08 were read to apply to online transactions involving electronically downloadable products. Because we cannot make a square peg fit a round hole, we must conclude that online transactions involving electronically downloadable products fall outside the coverage of the statute."

In dissent, Kennard wrote, "this court recently held unanimously that the Legislature's 'overriding' purpose in enacting section 1747.08's prohibition against a seller's recording of a credit-card-using customer's personal identification information was to protect a consumer's right to privacy. (Pineda v. Williams-Sonoma Stores, Inc.)

"Whether to limit or to broaden that right is a power that belongs exclusively to the Legislature. The majority here trespasses upon the Legislature's domain by going far beyond the statute's plain language in order to judicially graft upon the statute an exemption for online sellers such as Apple so they need not comply with section 1747.08.

"Unlike the majority, I would affirm the Court of Appeal's judgment summarily denying the petition for writ of mandate, thus upholding the trial court's overruling of Apple's demurrer.

Baxter wrote in dissent, "Section 1747.08 of the Civil Code was enacted to prevent any retailer such as defendant Apple Inc. from collecting and exploiting the personal identification information of consumers who use credit cards to make their purchases.

"Plaintiff's complaint sufficiently states a cause of action under this statute: it alleges that defendant required and recorded plaintiff's address and telephone number as a condition to his online purchases of electronically downloadable products, and that defendant's actions were not otherwise permitted by the statute.

"In holding to the contrary, the majority relies on speculation and debatable factual assumptions to carve out an expansive exception to section 1747.08 that leaves online retailers free to collect and use the personal identification information of credit card users as they wish.

"Rather than fashioning such an expansive exception to section 1747.08, this court should have given effect to its plain terms and left it to the Legislature to address defendant's claims of competing policy interests."

The case is now remanded to the Court of Appeal with directions to issue a writ consistent with the majority opinion.