Redbox Automated Retail L.L.C. did not break a California consumer data protection law by requiring customers to provide their ZIP codes when using its self-serve rental kiosks, a federal appeals court has ruled.
A divided three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco last week upheld a lower court's ruling rejecting a proposed class action accusing Redbox — a subsidiary of Bellevue, Washington-based Outerwall Inc. — of violating California's Song-Beverly Credit Card Act of 1971, which prohibits retailers from collecting customers' personal identification information in connection with credit card transactions.
The plaintiffs in the case, California residents John Sinibaldi and Nicolle DiSimone, originally sued Redbox in a Los Angeles U.S. District Court in 2011 for requiring customers who use their kiosks to rent movies and video games to submit their ZIP codes in order to complete transactions.
The case was later combined with a previous proposed class action brought by another California resident, Michael Mehrens. The consolidated lawsuit ultimately was dismissed in 2012.
In a 2-1 ruling issued on June 6, the appellate judges concurred with the district court's position that Redbox's ZIP code requirement did not violate the Song-Beverly act, since the law exempts transactions in which customers' credit cards are used to secure deposits for “payment in the event of default, loss, damage or similar occurrence.”
“The district court held that the Act does not apply to Redbox's unmanned kiosk transactions because, in light of the potential for fraud in such transactions, the legislature could not have meant for them to fall within the statutory privacy protection scheme,” Judge Richard Clifton wrote in the court's majority opinion.
“When a Redbox customer swipes a credit card at the time of rental, the customer promises to be responsible for additional charges that might be owed if the disc is returned late or not at all,” Judge Clifton wrote. “That promise is secured with the credit card. Redbox will use the credit card information already provided by the customer to charge the customer's credit card account for the balance owed. In both literal and practical terms, the credit card serves as security.”
A copy of the 9th Circuit's ruling is available here.