Supreme Court of California Justia
Citation 56 Cal. 4th 128 (2013); 151 Cal. Rptr. 3d 841 (2013)

Apple v. Super. Ct.



Filed 2/4/13



IN THE SUPREME COURT OF CALIFORNIA



APPLE INC.,

Petitioner,

S199384

v.

Ct.App. 2/8 B238097

THE SUPERIOR COURT OF LOS

ANGELES COUNTY,

Los Angeles County

Super. Ct. No. BC463305

Respondent;

DAVID KRESCENT,

Real Party in Interest.



The Song-Beverly Credit Card Act of 1971 (Credit Card Act) governs the issuance

and use of credit cards. (Civ. Code, § 1747 et seq.; all further statutory references are to

the Civil Code unless otherwise indicated.) One of its provisions, section 1747.08,

prohibits retailers from ―[r]equest[ing], or requir[ing] as a condition to accepting the

credit card as payment . . . , the cardholder to write any personal identification

information upon the credit card transaction form or otherwise.‖ (§ 1747.08, subd. (a)

(hereafter section 1747.08(a)).) It also prohibits retailers from requesting or requiring the

cardholder ―to provide personal identification information, which the [retailer] . . . writes,

causes to be written, or otherwise records upon the credit card transaction form or

otherwise,‖ and from ―[u]tiliz[ing] . . . a credit card form which contains preprinted

spaces specifically designed for filling in any personal identification information of the

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cardholder.‖ (Ibid.) In Pineda v. Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524

(Pineda), we considered whether section 1747.08 is violated when a retailer requests and

records a customer‘s ZIP code during a credit card transaction. Relying on the statute‘s

language, legislative history, and purpose, we concluded that a ZIP code constitutes

―personal identification information‖ within the meaning of the statute and that the Credit

Card Act forbids a retailer from requesting or recording such information. (Pineda, at

pp. 527–528.)

Like Pineda, this case involves an asserted violation of section 1747.08. David

Krescent, the plaintiff in this case, alleged in his complaint that defendant Apple Inc.

requested or required him to provide his address and telephone number as a condition of

accepting his credit card as payment. However, unlike Pineda, which concerned the

purchase of a physical product at a traditional ―brick-and-mortar‖ business, this case

concerns the purchase of an electronic download via the Internet. We must resolve

whether section 1747.08 prohibits an online retailer from requesting or requiring personal

identification information from a customer as a condition to accepting a credit card as

payment for an electronically downloadable product. Upon careful consideration of the

statute‘s text, structure, and purpose, we hold that section 1747.08 does not apply to

online purchases in which the product is downloaded electronically.

Our dissenting colleagues warn that today‘s decision ―relegate[s] to the dust heap‖

the ― ‗robust‘ consumer protection . . . at the heart of section 1747.08‖ (dis. opn. by

Kennard, J., post, at p. 6) and represents a ―major loss for consumers‖ (id. at p. 1) that

―leaves online retailers free to collect and use the personal identification information of

credit card users as they wish‖ (dis. opn. by Baxter, J., post, at p. 1). These ominous

assertions, though eye-catching, do not withstand scrutiny. As we explain, existing state

and federal laws provide consumers with a degree of protection against unwanted use or

disclosure of personal identification information. The Legislature may believe these

measures are inadequate and, if so, may enact additional protections. Or the Legislature

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may believe that existing laws, together with market forces reflecting consumer

preferences, are sufficient. It is not our role to opine on this important policy issue. We

merely hold that section 1747.08 does not govern online purchases of electronically

downloadable products because this type of transaction does not fit within the statutory

scheme.

I.

Because this case comes to us following summary denial of a writ of mandate after

the denial of a demurrer, we assume as true all facts alleged in the operative complaint.

(Sheehan v. San Francisco 49ers, Ltd. (2009) 45 Cal.4th 992, 996.) Petitioner Apple Inc.

(Apple), defendant below, operates an Internet Web site and an online iTunes store

through which it sells digital media such as downloadable audio and video files. In June

2011, plaintiff below, David Krescent, sued Apple on behalf of himself and a putative

class of similarly situated individuals for alleged violations of section 1747.08.

Specifically, Krescent alleged that he purchased media downloads from Apple on various

occasions and that, as a condition of receiving these downloads, he was required to

provide his telephone number and address in order to complete his credit card purchase.

He further alleged that Apple records each customer‘s personal information, is not

contractually or legally obligated to collect a customer‘s telephone number or address in

order to complete the credit card transaction, and does not require a customer‘s telephone

number or address for any special purpose incidental but related to the individual credit

card transaction, such as shipping or delivery. 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.‖

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In September 2011, Apple filed a demurrer, arguing that the Credit Card Act does

not apply to online transactions and that deciding otherwise would undermine the

prevention of identity theft and fraud. After a hearing, the trial court overruled the

demurrer. The court noted that ―the Act itself is silent on exempting online credit card

transactions from its purview (and otherwise does not address online credit card

transactions specifically).‖ While acknowledging that Apple‘s ―assertions with respect to

preventing fraud have definite appeal (a problem which the Court acknowledges is

widespread in credit transactions generally, and in online credit card transactions

specifically),‖ the trial court said it ―is not prepared, at the pleading stage, to read the

[Credit Card] Act as completely exempting online credit transactions from its reach.‖

The court also found, pursuant to Code of Civil Procedure section 166.1, that appellate

resolution of the issue might materially assist the resolution of the litigation.

Apple filed a petition for writ of mandate seeking review of the trial court‘s order,

which the Court of Appeal summarily denied. We granted Apple‘s petition for review

and ordered the trial court to show cause why the relief sought in the petition for writ of

mandate should not be granted.

II.

We review de novo questions of statutory construction. In doing so, ― ‗our

fundamental task is to ―ascertain the intent of the lawmakers so as to effectuate the

purpose of the statute.‖ ‘ ‖ (Mays v. City of Los Angeles (2008) 43 Cal.4th 313, 321.) As

always, we start with the language of the statute, ―giv[ing] the words their usual and

ordinary meaning [citation], while construing them in light of the statute as a whole and

the statute‘s purpose [citation].‖ (Pineda, supra, 51 Cal.4th at pp. 529–530.)

A.

We begin with the text of the statute. Section 1747.08(a) provides: ―Except as

provided in subdivision (c), no person, firm, partnership, association, or corporation that

accepts credit cards for the transaction of business shall do any of the following: [¶] (1)

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Request, or require as a condition to accepting the credit card as payment in full or in part

for goods or services, the cardholder to write any personal identification information

upon the credit card transaction form or otherwise. [¶] (2) Request, or require as a

condition to accepting the credit card as payment in full or in part for goods or services,

the cardholder to provide personal identification information, which the person, firm,

partnership, association, or corporation accepting the credit card writes, causes to be

written, or otherwise records upon the credit card transaction form or otherwise. [¶] (3)

Utilize, in any credit card transaction, a credit card form which contains preprinted spaces

specifically designated for filling in any personal identification information of the

cardholder.‖ Section 1747.08, subdivision (b) (hereafter section 1747.08(b)) defines

― ‗personal identification information‘ ‖ as ―information concerning the cardholder, other

than information set forth on the credit card, and including, but not limited to, the

cardholder‘s address and telephone number.‖

The prohibitions codified in section 1747.08(a) are subject to various exceptions

set forth in section 1747.08, subdivision (c) (hereafter section 1747.08(c)). Subdivision

(c) provides that the requirements of subdivision (a) do not apply to ―[c]ash advance

transactions‖ or ―[i]f the credit card is being used as a deposit to secure payment in the

event of default . . . or other similar occurrence.‖ (§ 1747.08(c)(1), (2).) Nor do the

requirements of subdivision (a) apply if the person, firm, partnership, association, or

corporation accepting the credit card ―is contractually obligated to provide personal

identification information in order to complete the credit card transaction‖; ―uses the Zip

Code information solely for prevention of fraud, theft, or identity theft‖ in a ―sales

transaction at a retail motor fuel dispenser or retail motor fuel payment island automated

cashier‖; or ―is obligated to collect and record the personal identification information by

federal or state law or regulation.‖ (§ 1747.08(c)(3)(A)–(C).) Personal identification

information may also be collected if it ―is required for a special purpose incidental but

related to the individual credit card transaction, including, but not limited to, information

5



relating to shipping, delivery, servicing, or installation of the purchased merchandise, or

for special orders.‖ (§ 1747.08(c)(4).)

Finally, section 1747.08, subdivision (d) (hereafter section 1747.08(d)) provides

the following general qualification to the statute‘s requirements: ―This section does not

prohibit any person, firm, partnership, association, or corporation from requiring the

cardholder, as a condition to accepting the credit card as payment in full or in part for

goods or services, to provide reasonable forms of positive identification, which may

include a driver‘s license or a California state identification card, or where one of these is

not available, another form of photo identification, provided that none of the information

contained thereon is written or recorded on the credit card transaction form or otherwise.

If the cardholder pays for the transaction with a credit card number and does not make the

credit card available upon request to verify the number, the cardholder‘s driver‘s license

number or identification card number may be recorded on the credit card transaction form

or otherwise.‖

At the outset, we observe that the text of section 1747.08 makes no reference to

online transactions or the Internet. This is not surprising because former section 1747.8,

section 1747.08‘s predecessor, was enacted in 1990 (Stats. 1990, ch. 999, § 1, p. 4191),

before the privatization of the Internet (see Frischmann, Privatization and

Commercialization of the Internet Infrastructure: Rethinking Market Intervention into

Government and Government Intervention into the Market (2001) 2 Colum. Sci. & Tech.

L.Rev. 1, 20) and almost a decade before online commercial transactions became

widespread (see, e.g., McDonough v. Toys “R” Us, Inc. (E.D.Pa. 2009) 638 F.Supp.2d

461, 468).

Although section 1747.08 does not explicitly reference online transactions, both

parties maintain that the Legislature‘s intent is apparent from the plain meaning of the

statute‘s terms. Krescent contends that the language of section 1747.08(a) ―must be read

as an all-inclusive prohibition on every businesses [sic] regardless of the form of the

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transaction.‖ According to Krescent, in directing the statutory prohibition at any ―person,

firm, partnership, association, or corporation that accepts credit cards for the transaction

of business‖ (§ 1747.08(a)), the Legislature intended to include all retailers without

exception. If the Legislature intended to exempt online retailers, he contends, it could

have done so.

Apple, on the other hand, argues that the first sentence of section 1747.08(a) must

be construed in light of other language in the statute indicating that the Legislature had in

mind only in-person business transactions. For example, section 1747.08(a)(1) prohibits

a retailer from requesting or requiring a ―cardholder to write any personal identification

information upon the credit card transaction form or otherwise.‖ (Italics added.) Section

1747.08(a)(2) prohibits a retailer from requesting or requiring the cardholder to provide

such information, which the retailer ―writes, causes to be written, or otherwise records

upon the credit card transaction form or otherwise.‖ (Italics added.) And section

1747.08(a)(3) prohibits the retailer from utilizing ―a credit card form which contains

preprinted spaces.‖ (Italics added.) Apple says the terms ―write‖ and ―forms‖ imply, by

their physicality, that section 1747.08 applies only to in-person transactions. Apple

further argues that the definition of ―credit card‖ in section 1747.02 — ―any card, plate,

coupon book, or other single credit device existing for the purpose of being used from

time to time upon presentation to obtain money, property, labor, or services on credit‖ —

indicates that the Legislature contemplated only those transactions in which the card is

physically presented or displayed to the retailer. (§ 1747.02, subd. (a), italics added.)

We think the text of section 1747.08(a) alone is not decisive on the question

before us. The statutory language suggests that the Legislature, at the time it enacted

former section 1747.8, did not contemplate commercial transactions conducted on the

Internet. But it does not seem awkward or improper to describe the act of typing

characters into a digital display as ―writing‖ on a computerized ―form.‖ In construing

statutes that predate their possible applicability to new technology, courts have not relied

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on wooden construction of their terms. Fidelity to legislative intent does not ―make it

impossible to apply a legal text to technologies that did not exist when the text was

created. . . . Drafters of every era know that technological advances will proceed apace

and that the rules they create will one day apply to all sorts of circumstances they could

not possibly envision.‖ (Scalia & Garner, Reading Law: The Interpretation of Legal

Texts (2012) pp. 85–86.)

For example, in O’Grady v. Superior Court (2006) 139 Cal.App.4th 1423, the

Court of Appeal considered whether an online news magazine constitutes a ―periodical

publication‖ for purposes of California‘s journalism shield law, which was enacted well

before the advent of ―digital magazines.‖ (Id. at p. 1461.) The court considered the

argument that ―the shield law only applies to ‗periodical publications‘ in print, because

that was a common feature of newspapers and magazines at the time the law was

enacted.‖ (Id. at p. 1462.) But the court did not regard that meaning as dispositive,

instead finding the statutory term ambiguous enough to encompass the Web site at issue.

(Id. at pp. 1463–1466.) The court ultimately found the shield law applicable to the Web

site through a careful examination of the Legislature‘s purpose in enacting the statute, not

on the basis of the plain meaning of ― ‗periodical publication.‘ ‖ (Id. at pp. 1462–1463;

see id. at p. 1465 [―Given the numerous ambiguities presented by ‗periodical publication‘

in this context, its applicability must ultimately depend on the purpose of the statute‖].)

In Ni v. Slocum (2011) 196 Cal.App.4th 1636, 1649 (Slocum), the Court of Appeal

considered ―whether the use of electronic signature qualifies as ‗personally affix[ing]‘ the

signature‖ on an initiative petition as that phrase is used in the Elections Code. (See Elec.

Code, § 100 [―Each signer shall at the time of signing the petition or paper personally

affix his or her signature, printed name, and place of residence . . . .‖].) The county

argued that a signer must ―physically ‗attach[]‘ the signature to the petition by inscribing

it with a writing utensil,‖ whereas the petitioner claimed that the statutory requirement

can be satisfied by ―tracing one‘s signature and address on the face of a smartphone in

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response to online instructions accompanying a copy of the petition.‖ (Slocum, supra,

196 Cal.App.4th at pp. 1649–1650.) Although the statute was enacted in 1933, long

before electronic signatures existed, the Court of Appeal found ―no reason to reject either

of these definitions solely on the basis of the plain language of the statute.‖ (Id. at

p. 1650; see id. at p. 1652 [―Statutory interpretation must be prepared to accommodate

technological innovation, if the technology is otherwise consistent with the statutory

scheme‖].)

Rather, the court in Slocum ultimately concluded that an electronic signature

system was ―not entirely consistent with the present statutory scheme for the endorsement

of initiative petitions because . . . electronic signature software deletes the circulator from

the signature collection process‖ by allowing ―voters to gain access to petitions from the

Internet and execute them without the assistance or intervention of a circulator.‖

(Slocum, supra, 196 Cal.App.4th at pp. 1652–1653.) The court explained that the

―Elections Code requires each petition submitted to county election officials to be

accompanied by the declaration of the circulator, attesting to the genuineness of the

signatures on the petition,‖ and that ―the Legislature viewed the participation of the

circulator as a protection against fraud in the collection of signatures.‖ (Id. at p. 1652.)

Thus, the court concluded that ―the electronic signature system is partially incompatible

with the current statutory scheme‖ because it ―eliminates from the signature collection

system one of its primary protections against fraud.‖ (Id. at p. 1653.)

In this case, as in O’Grady and Slocum, the plain meaning of the statute‘s text is

not decisive. An examination of the statutory scheme as a whole is necessary to

determine whether it is applicable to a transaction made possible by technology that the

Legislature did not envision.

B.

We recently considered the history and purpose of the Credit Card Act in Pineda,

supra, 51 Cal.4th 524. There we said ―[t]he statute‘s overriding purpose was to ‗protect

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the personal privacy of consumers who pay for transactions with credit cards.‘ ‖ (Id. at p.

534, quoting Assem. Com. on Finance and Ins., Analysis of Assem. Bill No. 2920 (1989–

1990 Reg. Sess.) as amended Mar. 19, 1990, p. 2.) Specifically, the Legislature ―sought

to address the misuse of personal identification information for, inter alia, marketing

purposes, and found that there would be no legitimate need to obtain such information

from credit card customers if it was not necessary to the completion of the credit card

transaction.‖ (Absher v. AutoZone, Inc. (2008) 164 Cal.App.4th 332, 345, quoted in

Pineda, at p. 535.) ―To protect consumers, the Legislature sought to prohibit businesses

from ‗requiring information that merchants, banks or credit card companies do not

require or need.‘ ‖ (Pineda, at p. 534, quoting Assem. Com. on Finance and Ins.,

Analysis of Assem. Bill No. 2920 (1989–1990 Reg. Sess.) as amended Mar. 19, 1990,

p. 2.)

While it is clear that the Legislature enacted the Credit Card Act to protect

consumer privacy, it is also clear that the Legislature did not intend to achieve privacy

protection without regard to exposing consumers and retailers to undue risk of fraud. The

legislative history shows that the Legislature enacted the statute‘s prohibitions only after

carefully considering and rejecting the possibility that the collection of personal

identification information by brick-and-mortar retailers could serve a legitimate purpose

such as fraud prevention. In particular, the Senate Judiciary Committee considered the

standard procedure followed by brick-and-mortar retailers in the 1990s to verify the

identity of credit card users — which included ―verify[ing] the identification of the

cardholder by comparing the signature on the credit card transaction form with the

signature on the back of the card‖ and ―contact[ing] the credit card issuer‘s authorization

center [to] obtain approval‖ for sales above a specified ―floor limit‖ — and concluded

that the collection of personal identification information was not a necessary step in that

procedure. (Sen. Judiciary Com., Analysis of Assem. Bill No. 2920 (1989–1990 Reg.

Sess.) as amended June 27, 1990, p. 3.) This finding supported the Legislature‘s

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judgment that brick-and-mortar retailers in the 1990s had no genuine need to collect

personal identification information and would instead use such information primarily for

unsolicited marketing. (See id. at pp. 3–4 [noting that the ―problem‖ the bill was

designed to address was retailers‘ practice of leading consumers ―to mistakenly believe

that [personal identification information] is a necessary condition to complete the credit

card transaction, when, in fact, it is not‖ and ―acquir[ing] this additional personal

information for their own business purposes — for example, to build mailing or

telephone lists which they can subsequently use for their own in-house marketing efforts,

or sell to direct-mail or tele-marketing specialists, or to others‖]; id. at pp. 5–7

[explaining that retailers had no genuine need for personal identification information to

address problems such as billing errors, lost credit cards, and product problems].) We

cannot assume that the Legislature, had it confronted a type of transaction in which the

standard mechanisms for verifying a cardholder‘s identity were not available, would have

made the same policy choice as it did with respect to transactions in which it found no

tension between privacy protection and fraud prevention.

Further, the Legislature in 1991 ―added a provision (former § 1747.8, subd. (d))

. . . substantially similar to the subdivision (d) now in section 1747.08, permitting

businesses to require cardholders to provide identification so long as none of the

information contained thereon was recorded.‖ (Pineda, supra, 51 Cal.4th at p. 535, citing

Stats. 1991, ch. 1089, § 2, p. 5042.) The adoption of this provision was described as ―a

clarifying, nonsubstantive change.‖ (State and Consumer Services Agency, Enrolled Bill

Rep. on Assem. Bill No. 1477 (1991–1992 Reg. Sess.) Sept. 9, 1991, p. 3.) As

previously noted, section 1747.08(d) makes clear that nothing in the statute prevents

retailers from requiring customers to provide positive identification — ―which may

include a driver‘s license or a California state identification card, or where one of these is

not available, another form of photo identification‖ — as a condition of accepting a credit

card as payment. In addition, although section 1747.08(d) generally prohibits a retailer

11



from recording information contained on a customer‘s photo identification card, a retailer

may record the customer‘s driver‘s license number or similar information when the

customer does not make the credit card available for verification, presumably so that the

customer may be identified and located in the event of a problem with the use of the

credit card. Section 1747.08(d) shows that while the Legislature indeed sought to protect

consumer privacy, it did not intend to do so at the cost of creating an undue risk of credit

card fraud. Rather, section 1747.08(d) demonstrates the Legislature‘s intent to permit

retailers to use and even record personal identification information when necessary to

combat fraud and identity theft — objectives that not only protect retailers but also

promote consumer privacy.

The safeguards against fraud that are provided in section 1747.08(d) are not

available to the online retailer selling an electronically downloadable product. Unlike a

brick-and-mortar retailer, an online retailer cannot visually inspect the credit card, the

signature on the back of the card, or the customer‘s photo identification. Thus, section

1747.08(d) — the key antifraud mechanism in the statutory scheme — has no practical

application to online transactions involving electronically downloadable products. We

cannot conclude that if the Legislature in 1990 had been prescient enough to anticipate

online transactions involving electronically downloadable products, it would have

intended section 1747.08(a)‘s prohibitions to apply to such transactions despite the

unavailability of section 1747.08(d)‘s safeguards.

Krescent‘s complaint reinforces our conclusion insofar as it failed to allege that

Apple does not require any personal identification information to verify the identity of

the credit card user. His complaint merely alleged that ―the credit card transaction would

be permitted to proceed without any further information‖ and that Apple ―is not

contractually obligated to provide a consumer‘s telephone number and/or address in order

to complete the credit card transaction,‖ thereby rendering inapplicable the exception set

forth in section 1747.08(c)(3)(A). Even if credit card transactions may proceed without

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any personal identification information under the contractual terms that bind retailers and

credit card companies, the fact remains that the Legislature saw fit to include section

1747.08(d)‘s safeguards against fraud in the statutory scheme. The inclusion of section

1747.08(d), separate and apart from the exception in section 1747.08(c)(3)(A), reflects

the Legislature‘s judgment that consumers and retailers have an interest in combating

fraud that is independent of whatever security measures are (or are not) required by

contracts between retailers and credit card issuers. Consistent with this legislative

judgment, both parties acknowledged at oral argument that retailers often bear the risk of

loss from fraudulent credit card charges.

In addition, Krescent suggested in his complaint and expressly conceded at oral

argument that Apple may need at least a valid billing address, if not a telephone number,

to verify the credit card. However, according to Krescent‘s own allegations, there would

be no way for Apple to collect this information under the statute. As noted, Krescent

alleged that Apple is neither contractually nor legally obligated to collect such

information; hence, the exceptions in section 1747.08(c)(3)(A) and (C) do not apply.

Krescent also alleged that Apple does not require a customer‘s address for a special

purpose incidental but related to the credit card transaction, such as shipping, because the

product is electronically downloadable; hence, the exception in section 1747.08(c)(4)

does not apply. Likewise, the exceptions concerning motor fuel retailers, cash advance

transactions, and transactions in which a credit card is used as a form of security have no

applicability to this case. (§ 1747.08(c)(1), (2), (3)(B).)

At oral argument, Krescent suggested that Apple might be able to collect a

customer‘s billing address as a ―reasonable form[] of positive identification‖ under

section 1747.08(d). But section 1747.08(b) includes ―the cardholder‘s address‖ as a type

of personal identification information retailers are forbidden to collect. Moreover,

Krescent‘s view cannot be squared with the full text of section 1747.08(d), which says

retailers may require the cardholder ―to provide reasonable forms of positive

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identification, which may include a driver‘s license or California state identification card,

or where one of these is not available, another form of photo identification, provided that

none of the information provided thereon is written or recorded on the credit card

transaction form or otherwise.‖ A billing address is not a ―form of photo identification.‖

(See Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 743 [―Under the

principle of statutory construction known as ‗ejusdem generis,‘ the general term

ordinarily is understood as being ‗ ―restricted to those things that are similar to those

which are enumerated specifically‖ ‘ ‖].) And Krescent‘s own complaint alleged that

Apple ―records each consumer‘s personal information, including, but not limited to a

telephone number and address, in line with each credit card transaction, and keeps

records of such personal information.‖ In short, section 1747.08(d) does not permit

Apple to collect a billing address in the course of an online transaction.

In his brief (but not in his complaint), Krescent argued that requiring a customer to

provide his or her name, credit card number, card expiration date, and credit card

identification number suffices to prevent fraud. But it is clear that the Legislature has

disagreed. A customer‘s name, credit card number, expiration date, and security code are

all apparent to a ―brick-and-mortar‖ retailer on the credit card itself when the card is

presented during an in-person transaction. Yet the Legislature expressly authorized

retailers to request additional information — namely, a driver‘s license, state

identification card, or another form of photo identification — in order to combat fraud.

(§ 1747.08(d).) The Legislature has thus decided that the information on the credit card

is not necessarily sufficient by itself to protect consumers and retailers against fraud.

Our dissenting colleagues offer various arguments against the conclusion that the

statute, if applied to the online transaction in this case, would prohibit Apple from

collecting information necessary to combat fraud. Justice Kennard cites section

1747.08(c)(3)(A), which allows retailers to collect personal identification information

that they are ―contractually obligated to provide . . . in order to complete the credit card

14



transaction,‖ as one ―layer of protection against fraud.‖ (Dis. opn. by Kennard, J., post,

at p. 7.) But Krescent‘s complaint stated that Apple is not contractually obligated to

collect any such information, and we must accept this allegation as true on demurrer.

(See ante, at p. 13.) Justice Kennard also notes that the second sentence of section

1747.08(d) allows retailers ―to record the number appearing on the buyer‘s driver‘s

license or similar identification.‖ (Dis. opn. by Kennard, J., post, at p. 7.) But the second

sentence of section 1747.08(d) allows a retailer to record such information when a buyer

―pays for the transaction with a credit card number and does not make the credit card

available upon request,‖ presumably so that the buyer may be tracked down if the use of

the credit card number turns out to be improper. This provision contemplates that the

retailer can verify that the driver‘s license or identification card belongs to the buyer;

indeed, section 1747.08(d) makes clear that a driver‘s license or identification card has

significance in this context as a ―form of photo identification.‖ In an online transaction,

even if the retailer were to collect a driver‘s license number, the retailer has no way to

verify that the number corresponds to the person using the credit card number.

In his dissent, Justice Baxter asserts that we indulge an unwarranted ―factual

assumption — that the personal identification information defendant allegedly demanded

and collected here, i.e., cardholder addresses and telephone numbers, are ‗necessary to

combat fraud and identity theft‘ in online credit card transactions.‖ (Dis. opn. by Baxter,

J., post, at pp. 7–8.) In fact, we do nothing of the sort. We express no view as to what

type of information — whether an address, telephone number, or something else — is

essential to verify a cardholder‘s identity. We hold only that the statutory scheme and

legislative history make clear the Legislature‘s concern that there be some mechanism by

which retailers can verify that a person using a credit card is authorized to do so. No

such mechanism would exist in the context of online purchases of electronically

downloadable products if the statute were read to apply to such transactions. Because the

statutory scheme provides no means for online retailers selling electronically

15



downloadable products to protect against credit card fraud, we conclude that the

Legislature could not have intended section 1747.08 to apply to this type of transaction.

We have no occasion here to decide whether section 1747.08 applies to online

transactions that do not involve electronically downloadable products or to any other

transactions that do not involve in-person, face-to-face interaction between the customer

and retailer. Our dissenting colleagues contend that section 1747.08 must apply to online

transactions because the Legislature intended it to apply to ―other card-not-present

transactions‖ such as mail order and telephone order (MOTO) transactions. (Dis. opn. by

Baxter, J., post, at pp. 9–10; see dis. opn. by Kennard, J., post, at pp. 4–6.) We express

no view on whether the statute governs mail order or telephone order transactions, as that

issue is not presented and has not been briefed in this case. In any event, even if the

statute does apply to MOTO transactions, we do not think such transactions, which often

involve ―shipping [or] delivery . . . of the purchased merchandise‖ (§ 1747.08(c)(4)), are

readily likened to online purchases of electronically downloadable products with respect

to possible means of preventing or detecting fraud.

III.

Krescent contends that the text and legislative history of a 2011 amendment to the

Credit Card Act show that section 1747.08 applies to online transactions. As explained

below, we disagree.

In 2011, the Legislature amended the Credit Card Act to add section

1747.08(c)(3)(B), which provides that the prohibitions of section 1747.08(a) do not apply

if ―[t]he person, firm, partnership, association, or corporation accepting the credit card in

a sales transaction at a retail motor fuel dispenser or retail motor fuel payment island

automated cashier uses the Zip Code information solely for prevention of fraud, theft, or

identity theft.‖ This amendment applies to ―pay-at-the-pump‖ transactions in which no

employee or other seller of the agent is present. (See § 1747.02, subd. (n) [defining

― ‗retail motor fuel dispenser‘ ‖ as ―a device that dispenses fuel . . . , that processes the

16



sale of fuel through a remote electronic payment system, and that is in a location where

an employee or other agent of the seller is not present‖]; § 1747.02, subd. (o) [defining

― ‗retail motor fuel payment island automated cashier‘ ‖ in similar terms].) Krescent

argues that because the 2011 amendment creates a narrow exception for a certain type of

remote transaction, it would have been unnecessary surplusage if the statute was never

intended to apply to remote transactions in the first place. In his view, the 2011

amendment confirms that all retailers, including retailers conducting business remotely,

are governed by the statute.

The logic of Krescent‘s argument holds only if one assumes that a remote

transaction conducted at a gas station stands on equal footing with an online transaction,

and that by addressing the former in 2011, the Legislature necessarily signaled the

statute‘s applicability to the latter. But there are good reasons to doubt this assumption.

As Apple points out in its brief, ―the customer engaging in a pay-at-the-pump transaction

has physical possession of the card, which must be swiped,‖ and ―is capable of being

seen, either because an employee is at the gas station, or because there is video

surveillance of the pump.‖ Thus, pay-at-the-pump transactions arguably present less risk

of fraud than online transactions because a customer engaged in an online transaction

need not possess a physical card and can complete the transaction in the privacy of his or

her own home. It seems counterintuitive to posit that the Legislature created a fraud

prevention exemption only for pay-at-the-pump retailers while leaving online retailers

unprotected, when online retailers — a multibillion-dollar industry by the year 2011 —

have at least as much if not more need for an exemption to protect themselves and

consumers from fraud.

17



The more logical inference is that the Legislature did not address pay-at-the-pump

transactions in 2011 against the backdrop of the statute‘s applicability to all remote

transactions, including online transactions, but rather that the Legislature addressed pay-

at-the-pump transactions against the backdrop of the statute‘s applicability to in-person

transactions at ordinary brick-and-mortar retailers, the paradigmatic type of transaction

addressed by the statute‘s text. Compared to ordinary brick-and-mortar retailers, gas

stations with payment island automated cashiers may indeed have heightened fraud

concerns, and it would make sense for the Legislature to grant them more leeway to

record personal identifying information. Indeed, the 2011 amendment supports the view

that the Legislature‘s policy behind the statute has been, and continues to be, to protect

consumer privacy without putting retailers in the position of having to accept credit card

payments when they are unable to confirm that the person using the card is authorized to

do so.

We acknowledge that the legislative history of the 2011 amendment contains some

indications that appear to support Krescent‘s position. The gas station exemption became

law with the passage of Assembly Bill No. 1219 (2011–2012 Reg. Sess.). One version of

the bill proposed to ―amend the Song-Beverly Credit Card Act in a manner that would

restrict its application to instances in which a card is ‗physically presented‘ to a retailer,

apparently with the intent of allowing retailers to collect personal information for fraud

prevention purposes where the card is not physically presented, as in an on-line or other

electronic transaction.‖ (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 1219

(2011–2012 Reg. Sess.) as amended May 4, 2011, p. 1, italics omitted.) In reviewing this

version, the Assembly Committee on Judiciary concluded it ―sweeps too broadly in

effectively removing on-line and telephonic transactions from the scope of the existing

law‘s protection.‖ (Ibid., italics omitted.) Because ―this was not the bill‘s intent‖

according to its sponsor, the committee said it ―strongly recommends that this language

come out of the bill.‖ (Id. at p. 5, underlining omitted.) Consistent with that

18



recommendation, Assembly Bill No. 1219 (2011–2012 Reg. Sess.) was enacted without

the restrictive language. (§ 1747.08, as amended by Stats. 2011, ch. 690; see also Sen.

Judiciary Com., Analysis of Assem. Bill No. 1219 (2010-2011 Reg. Sess.) as amended

June 22, 2011, p. 2.) As passed, the bill provided a specific exemption for automated

cashiers at gas stations.

For several reasons, however, we do not find this legislative history persuasive on

the meaning of section 1747.08 as enacted in 1990. First, ―[t]he declaration of a later

Legislature is of little weight in determining the relevant intent of the Legislature that

enacted the law.‖ (Peralta Community College Dist. v. Fair Employment & Housing

Com. (1990) 52 Cal.3d 50, 52). This is especially true where, as here, ―a gulf of decades

separates the two [legislative] bodies.‖ (Western Security Bank v. Superior Court (1997)

15 Cal.4th 232, 244.) We thus give little weight to the views of the Legislature of 2011

as to what the Legislature of 1990 intended.

Second, ―[u]npassed bills, as evidences of legislative intent, have little value.‖

(Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379, 1396).

Although plaintiff contends that the never-enacted provisions were premised on the

Legislature‘s understanding that section 1747.08 applies to online transactions, the

Legislature‘s decision not to enact those provisions plausibly supports the opposite

inference: the Legislature may have concluded that it was unnecessary to remove online

transactions from the statute‘s coverage because such transactions were never covered by

the statute in the first place.

Third, the legislative history on whether the statute applies to online transactions is

conflicting. For example, when the 2011 amendment was first proposed, a federal district

court had already ruled in Saulic v. Symantec Corp. (C.D.Cal. 2009) 596 F.Supp.2d 1323

that section 1747.08 does not apply to online transactions, and ―the Legislature is deemed

to be aware of existing laws and judicial decisions in effect at the time legislation is

enacted and to have enacted and amended statutes ‗ ―in the light of such decisions as have

19



a direct bearing upon them.‖ ‘ ‖ (People v. Overstreet (1986) 42 Cal.3d 891, 897.) In

addition, an Assembly analysis of proposed Senate amendments noted that ―this bill

simply creates an express exemption in current law from the prohibition on collecting zip

code information in a retail credit card transaction at a motor fuel dispenser so long as the

zip code information is used to prevent fraud, theft or identity theft,‖ an exemption that

―the courts may determine in current litigation . . . always existed.‖ (Assem. Floor

analysis, Assem. Bill No. 1219 (2011–2012 Reg. Sess.) Sept. 8, 2011, p. 3, italics added.)

Similarly, the sponsor of the unenacted proposal to remove online and telephonic

transactions from the statute‘s coverage indicated that the proposal was ―intended to

clarify existing law.‖ (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 1219

(2011–2012 Reg. Sess.) as amended May 4, 2011, p. 2.)

Fourth, in contrast to the conflicting evidence and legally dubious inferences from

the 2011 legislative history as to whether the 1990 statute applies to online transactions,

what is clear from the legislative history is that the 2011 amendment was enacted to

address a very specific problem. Our 2011 holding in Pineda, supra, 51 Cal.4th 524, that

a ZIP code constitutes ―personal identification information‖ within the meaning of

section 1747.08(b) applied retroactively to uses of the ZIP code prior to our ruling. The

California Retailers Association, the sponsor of Assembly Bill No. 1219, ―claim[ed] that

about 150 lawsuits [had] been filed against retailers in the wake of the Supreme Court

decision, including against gas stations that collect zip codes for fraud prevention

purposes.‖ (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 1219 (2011–2012

Reg. Sess.) as amended May 4, 2011, p. 1, italics omitted.) The Western States

Petroleum Association argued to the Legislature that ―[w]ithout specific language

expressly exempting fraud prevention, . . . its member companies ‗may face years of

costly litigation.‘ ‖ (Id. at p. 8; see also Assem. Com. on Banking and Finance, Analysis

20



of Assem. Bill No. 1219 (2010–2011 Reg. Sess.) as amended Apr. 25, 2011, p. 2 [―The

need for this bill arises from . . . Pineda v. Williams-Sonoma Stores, Inc. . . .‖].) In

response, the Legislature created an ―express exemption from the prohibition against the

collection and retention of zip code information when the zip code is used solely for

prevention of fraud, theft, or identity theft in a sales transaction at a retail motor fuel

dispenser or retail motor fuel payment island automated cashier.‖ (Assem. Floor

analysis, Assem. Bill No. 1219 (2011–2012 Reg. Sess.) Sept. 8, 2011, p. 1.)

Thus, the problem the Legislature sought to address in 2011 was a narrow one:

how to deal with lawsuits filed against traditional brick-and-mortar retailers, particularly

gas stations, that had been collecting ZIP codes for years under the mistaken belief that

they were not prohibited from doing so under section 1747.08. Given the Legislature‘s

specific focus, it is not surprising that the Assembly Committee on Judiciary

recommended that the bill be written narrowly, without the use of broad language

unnecessary to address the particular problem faced by gas stations that use automated

cashiers. In sum, we cannot draw any firm conclusion concerning the applicability of

section 1747.08 to online transactions from the legislative history of the 2011 gas station

exemption for the simple reason that the Legislature in 2011 was not presented with that

issue.

IV.

Finally, the California Online Privacy Protection Act of 2003 (COPPA) shows that

the Legislature knows how to make clear that it is regulating online privacy and that it

does so by carefully balancing concerns unique to online commerce. COPPA provides

that ―[a]n operator of a commercial Web site or online service that collects personally

identifiable information through the Internet about individual consumers residing in

California who use or visit its commercial Web site or online service shall conspicuously

post its privacy policy on its Web site . . . .‖ (Bus. & Prof. Code, § 22575, subd. (a).)

The privacy policy must: ―(1) Identify the categories of personally identifiable

21



information that the operator collects through the Web site or online service about

individual consumers who use or visit its commercial Web site or online service and the

categories of third-party persons or entities with whom the operator may share that

personally identifiable information. [¶] (2) If the operator maintains a process for an

individual consumer who uses or visits its commercial Web site or online service to

review and request changes to any of his or her personally identifiable information that is

collected through the Web site or online service, provide a description of that process.

[¶] (3) Describe the process by which the operator notifies consumers who use or visit its

commercial Web site or online service of material changes to the operator‘s privacy

policy for that Web site or online service. [¶] (4) Identify its effective date.‖ (Bus. &

Prof. Code, § 22575, subd. (b).)

Although it is theoretically possible to construe COPPA as imposing requirements

on online transactions that go above and beyond the requirements of section 1747.08, we

find no evidence of such a legislative intent. Instead, there is evidence to the contrary.

The Senate Rules Committee‘s third reading analysis of COPPA indicated that this

legislation was necessary because ―[e]xisting law does not directly regulate the privacy

practices of online business entities.‖ (Sen. Rules Com., 3d reading analysis of Assem.

Bill No. 68 (2003-2004 Reg. Sess.) as amended Sept. 3, 2003, p. 2.) The bill‘s author

explained that because ―many consumers refuse to do business online because they have

little protection against abuse,‖ online retailers should be required at least to disclose in

their online privacy policies what personal information may be collected and how it is

used. (Assem. Com. on Business and Professions, Analysis of Assem. Bill No. 68

(2003–2004 Reg. Sess.) as amended Apr. 28, 2003, p. 2; see also Assem. Com. on

Judiciary, Analysis of Assem. Bill No. 68 (2003–2004 Reg. Sess.) as amended Apr. 2,

2003, p. 3 [―Any policy will do. The bill simply requires that an operator have a policy

and then follow it‖].) According to the bill‘s author, this disclosure regime would

―provide[] meaningful privacy protection[] that will help foster the continued growth of

22



the Internet economy.‖ (Assem. Com. on Business and Professions, Analysis of Assem.

Bill No. 68 (2003–2004 Reg. Sess.) as amended Apr. 28, 2003, p. 2.)

The enactment of COPPA suggests that when the Legislature intends to address

online transactions, it does so unambiguously. In addition, the fact that COPPA enacts

merely a disclosure regime suggests that the Legislature in 2003 sought to proceed

cautiously in regulating online commerce or, at least for the time being, to strike a

different policy balance than the Credit Card Act did in 1990 for the collection of

personally identifiable information.

COPPA also refutes our dissenting colleagues‘ assertion that today‘s decision will

leave online retailers ―free to require personal identification information as a condition of

credit card acceptance and to use such information for whatever purposes they wish.‖

(Dis. opn. by Baxter, J., post, at p. 12; see dis. opn. by Kennard, J., post, at pp. 1, 6.) As

noted, COPPA requires online retailers to ―conspicuously post‖ their privacy policies, to

disclose ―the categories of personally identifiable information‖ they collect, and to

identify ―the categories of third-party persons or entities with whom [they] may share that

personally identifiable information.‖ (Bus. & Prof. Code, § 22575, subds. (a), (b).) If a

consumer is not satisfied with the policy of a particular retailer, he or she may decline to

purchase a product from that retailer. The Legislature could have reasonably believed

that its disclosure regime creates significant incentives, in light of consumer preferences,

for online retailers to limit their collection and use of personally identifiable information.

Federal law also provides some degree of protection against the use of personal

identification information for unwanted commercial solicitation. The Telephone

Consumer Protection Act of 1991 (TCPA; Pub.L. No. 102–243 (Dec. 20, 1991) 105 Stat.

2394) was enacted ―to protect the privacy interests of residential telephone subscribers by

placing restrictions on unsolicited, automated telephone calls to the home and to facilitate

interstate commerce by restricting certain uses of facsimile . . . machines and automatic

dialers.‖ (Sen.Rep. No. 102-178, 1st Sess., p. 1, reprinted in 1991 U.S. Code Cong. &

23



Admin. News, p. 1968; see 47 U.S.C. § 227.) ―[T]he TCPA instructs the [Federal

Communications Commission] to issue regulations ‗concerning the need to protect

residential telephone subscribers‘ privacy rights to avoid receiving telephone solicitations

to which they object.‖ (Charvat v. NMP, LLC (6th Cir. 2011) 656 F.3d 440, quoting 47

U.S.C. § 227(c)(1).) ―In 2003, two federal agencies — the Federal Trade Commission

(FTC) and the Federal Communications Commission (FCC) — promulgated rules that

together created the national do-not-call registry. [Citations.] The national do-not-call

registry is a list containing the personal telephone numbers of telephone subscribers who

have voluntarily indicated that they do not wish to receive unsolicited calls from

commercial telemarketers. Commercial telemarketers are generally prohibited from

calling phone numbers that have been placed on the do-not-call registry, and they must

pay an annual fee to access the numbers on the registry so that they can delete those

numbers from their telephone solicitation lists.‖ (Mainstream Mktg. Servs. v. FTC (10th

Cir. 2004) 358 F.3d 1228, 1233–1234, fns. omitted.) Thus, federal legislation limits the

commercial use of customer telephone numbers.

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. 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.‖ (New Models of NeXT Computer Lauded; Users,

Analysts Praise Changes in Hardware, Software, Rocky Mountain News (Sept. 23, 1990)

p. B8; see Isaacson, Steve Jobs (2011) pp. 211–237, 293–294 [discussing Jobs‘s

attempted innovations in personal computing during the late 1980s and early 1990s].)

Today, retail ―e-commerce‖ sales in the United States approach $200 billion a year (see

U.S. Census Bur., E-Stats (May 12, 2012) pp. 3–4 <http://www.census.gov/econ/estats/

2010/2010reportfinal.pdf> [as of Feb. 4, 2013]), and it has been estimated that iTunes

24



alone will generate as much as $13 billion in revenue for Apple in 2013 through the sale

of apps, music, movies, and e-books (see Gobry, Apple Will Generate $13 Billion in

iTunes Revenue in 2013, Says Analyst, Business Insider, July 5, 2011

<http://www.businessinsider.com/apple-itunes-revenue-2013-2011-7> [as of Feb. 4,

2013]). Although ―[s]tatutory interpretation must be prepared to accommodate

technological innovation,‖ this is only possible ―if the technology is otherwise consistent

with the statutory scheme.‖ (Slocum, supra, 196 Cal.App.4th at p. 1652.) 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.

In light of our holding today, the Legislature may wish to revisit the issue of

consumer privacy and fraud prevention in online credit card transactions, just as it

revisited the use of ZIP codes in the wake of our 2011 decision in Pineda. 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

25



fit a round hole, we must conclude that online transactions involving electronically

downloadable products fall outside the coverage of the statute.

CONCLUSION

For the foregoing reasons, the Court of Appeal‘s judgment summarily denying the

petition for writ of mandate or prohibition is reversed, and the matter is remanded to that

court with directions to issue a writ consistent with this opinion.

LIU, J.


WE CONCUR: CANTIL-SAKAUYE, C. J.


WERDEGAR, J.

CORRIGAN, J.

26












DISSENTING OPINION BY KENNARD, J.




To protect consumer privacy, California statutory law prohibits retail sellers from

recording the personal identification information, such as home addresses and telephone

numbers, of their credit-card-using customers. (Civ. Code,1 § 1747.08, subd. (a).) The

statute does not exempt online sales of downloadable products from this prohibition, and

on its face the statute applies to sales conducted over the Internet just as it does to sales

conducted face-to-face or by mail or telephone. Yet the majority holds that online sales

of downloadable products are not covered by the statute, thus leaving Internet retailers

free to demand personal identification information from their credit-card-using customers

and to resell that information to others. The majority‘s decision is a major win for these

sellers, but a major loss for consumers, who in their online activities already face an ever-

increasing encroachment upon their privacy.

Unlike the majority, I conclude that the statute means just what it says and

contains no exemption, express or implied, for online sales of downloadable products.

The majority‘s expressed concern that this plain-meaning construction of the statute

leaves online sellers with no way to detect and prevent fraudulent purchases is

unjustified, as I explain.


1

All undesignated statutory references are to the Civil Code.

1



I

David Krescent filed a complaint alleging that on four occasions in 2010, he

bought downloadable products from Apple, Inc. (Apple); that he used a credit card to pay

for those products; and that Apple, as a condition of completing those purchases and in

violation of section 1747.08, required him to provide his home address and telephone

number, which he did. Krescent seeks statutory penalties for those alleged violations.

He also seeks certification of a class comprising all individuals who within the year

preceding the filing of the complaint purchased downloadable products from Apple, paid

by credit card, and were required by Apple to give home addresses and telephone

numbers.

Section 1747.08‘s predecessor was enacted in 1990 as former section 1747.8.

(Stats. 1990, ch. 999, § 1, p. 4191.) The Legislature has since then amended the statute

several times and renumbered it in 2004. (Stats. 2004, ch. 183, § 29, p. 981.) The statute

prohibits sellers from recording their credit-card-using customers‘ ―personal

identification information‖ (§ 1747.08, subd. (a)), such as the cardholder‘s address and

telephone number (§ 1747.08, subd. (b)). It applies to any ―person, firm, partnership,

association, or corporation that accepts credit cards for the transaction of business.‖

(§ 1747.08, subd. (a).)

Apple filed a demurrer. A demurrer is, in essence, a request that the case be

dismissed because the facts alleged in the complaint are insufficient as a matter of law to

justify any relief. In this situation, ―we review the allegations of the operative complaint

for facts sufficient to state a claim for relief.‖ (C.A. v. William S. Hart Union High

School Dist. (2012) 53 Cal.4th 861, 866.) In support of its demurrer, Apple argued that

section 1747.08 does not apply to Internet transactions, because the Internet as we know

it today did not exist in 1990 when the Legislature enacted the statutory provisions at

issue. Apple contended that the statute contemplates a transaction involving the physical

presentation of a credit card (or something similar) and the recording of data from that

2



card onto a paper credit card transaction form, neither of which is possible in a

transaction done electronically over the Internet.

In overruling Apple‘s demurrer, the trial court said it was ―not prepared, at the

pleading stage, to read [section 1747.08] as completely exempting online credit

transactions from its reach,‖ thus indicating that any ruling in Apple‘s favor would

require a more developed factual record than what had been presented at that early stage

of the proceedings. Apple petitioned the Court of Appeal for a writ of mandate, which

the court summarily denied. This court then granted Apple‘s petition for review.

II

Section 1747.08‘s broad language (see p. 2, ante) applies to any ―person, firm,

partnership, association, or corporation that accepts credit cards for the transaction of

business.‖ (§ 1747.08, subd. (a).) Apple comes within that definition. The Legislature

made some express exceptions in the statute (id., subd. (c)), but none pertains to a

categorical exemption for online transactions. Nevertheless, the majority here exempts

online sellers of downloadable products from complying with the statutory prohibition

against a seller‘s recording of the personal identification information of its credit-card-

using customers. The majority reasons that the Legislature could not have intended

section 1747.08 to apply to such online sellers, and it repeatedly emphasizes the novelty

of Internet-based commerce. (See, e.g., maj. opn., ante, p. 11 [―We cannot assume that

the Legislature, had it confronted a type of transaction in which the standard mechanisms

for verifying a cardholder‘s identity were not available, would have made the same policy

choice as it did with respect to transactions in which it found no tension between privacy

protection and fraud prevention.‖]; id., p. 12 [―We cannot conclude that if the Legislature

in 1990 had been prescient enough to anticipate online transactions involving

electronically downloadable products, it would have intended section 1747.08(a)‘s

prohibitions to apply to such transactions despite the unavailability of section

1747.08(d)‘s safeguards.‖]; id., p. 25 [―[W]e are unable . . . to conclude that the

3



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.‖].)

No significant difference exists between a purchase conducted over the Internet

and one conducted through the mail or by telephone. In both cases, the credit card is not

physically presented to the seller, who nevertheless has limited ways of confirming the

buyer‘s identity. Also, in some mail and telephone sales (as with online sales of

downloadable products) the seller does not need the purchaser‘s mailing address for

shipping purposes. Some examples: when the buyer has a gift sent to a third party‘s

address, or pays for news, entertainment, or other information to be conveyed by

telephone. (See maj. opn., ante, p. 16.) Although modern-day Internet commerce did not

exist in 1990, when the statutory provisions at issue were enacted, by that time mail order

and telephone order transactions (hereafter also referred to as MOTO transactions) were

well established. (See, e.g., Winn, Clash of the Titans: Regulating the Competition

between Established and Emerging Electronic Payment Systems (1999) 14 Berkeley

Tech. L.J. 675, 688 (hereafter Winn) [―decades of MOTO transactions‖ preceded the

advent of Internet commerce].)

Jane K. Winn (the Charles I. Stone Professor at the University of Washington

School of Law) has written numerous academic publications on electronic commerce and

is considered a leading international authority in that field. In the article cited above,

Professor Winn observes that merchants who accepted credit cards as payment in mail

order and telephone order transactions developed ―sophisticated security systems . . . to

keep fraud and error losses to a minimum‖ (Winn, supra, at p. 688), thus accommodating

the desire of these merchants to conduct business remotely. After the Internet‘s

emergence, the same antifraud practices that had applied to mail order and telephone

4



order transactions were ―transferred [to the Internet] to manage risks with Internet-based

commerce.‖ (Ibid.)

The Law Revision Commission‘s comment on Evidence Code section 450 allows

reliance on academic publications like Professor Winn‘s article: ―Under the Evidence

Code, as under existing law, courts may consider whatever materials are appropriate in

construing statutes . . . . That a court may consider legislative history, discussions by

learned writers in treatises and law reviews, materials that contain controversial

economic and social facts or findings or that indicate contemporary opinion, and similar

materials is inherent in the requirement that it take judicial notice of the law. In many

cases, the meaning and validity of statutes . . . can be determined only with the help of

such extrinsic aids. . . .‖ (Italics added.)2

Although Professor Winn‘s factual assertions are not part of the meager record

before us, further development of the factual record could establish those assertions

beyond question. By holding in Apple‘s favor and ending the litigation, the majority

precludes such further development of the record.

Succinctly put, the similarity between online transactions and mail order or

telephone order transactions belies the majority‘s insistence that its holding exempting

online sellers such as Apple from compliance with section 1747.08 is necessary to protect

these sellers from consumer fraud.


2

I note the majority‘s reliance on assertions of fact in various publications. (See

maj. opn., ante, p. 6, citing Frischmann, Privatization and Commercialization of the
Internet Infrastructure: Rethinking Market Intervention into Government and
Government Intervention into the Market
(2001) 2 Colum. Sci. & Tech. L.Rev. 1, 20;
maj. opn., ante, pp. 24-25, citing New Models of NeXT Computer Lauded; Users,
Analysts Praise Changes in Hardware, Software
, Rocky Mountain News (Sept. 23, 1990)
p. B8, Isaacson, Steve Jobs (2011) pp. 211–237, 293–294, and Gobry, Apple Will
Generate $13 Billion in iTunes Revenue in 2013, Says Analyst
, Business Insider, July 5,
2011 <http://www.businessinsider.com/apple-itunes-revenue-2013-2011-7> [as of
February 4, 2013].)

5



The majority‘s focus on fraud protection for sellers is at odds with this court‘s

recent statement in Pineda v. Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524 that

section 1747.08‘s ―overriding purpose was to ‗protect the personal privacy of consumers

who pay for transactions with credit cards.‘ [Citation.]‖ (Pineda, supra, at p. 534, italics

added.) That ―robust‖ consumer protection (id. at p. 536), at the heart of section 1747.08,

is now largely relegated to the dust heap. As a result of the majority‘s decision, online

sellers of downloadable products can collect unlimited personal information concerning

their credit-card-using customers and sell that information to, or share it with, other

companies, which, for marketing purposes, can then construct detailed consumer profiles.

The majority concedes that ―[t]he Legislature may believe [existing privacy protections]

are inadequate and, if so, may enact additional protections‖ (maj. opn., ante, p. 2), but the

majority overlooks the fact that the Legislature already did enact additional protections.

It enacted section 1747.08. The majority eviscerates those protections by rejecting the

plain meaning of the statute. The majority‘s policy-driven construction of the statute

contradicts its claim that ―[i]t is not our role to opine on this important policy issue‖ (maj.

opn., ante, p. 3) and ―we express no view on this significant issue of public policy‖ (id.,

p. 25).

Moreover, application of section 1747.08 to sellers of downloadable products

would not prevent these sellers from taking protective measures against fraud. Because

of the remote nature of the Internet transaction, the buyer cannot physically present a

credit card to the seller. This is why in that situation the seller is expressly permitted

under the second sentence of section 1747.08‘s subdivision (d), added in 1995, to record

the number appearing on the buyer‘s driver‘s license or similar identification.3 And a

different provision of the same statute allows online sellers of downloadable products to


3

This statutory provision indicates that, contrary to the majority‘s assertion, section

1747.08 was intended to apply to remote transactions, not just face-to-face transactions.

6



collect personal identification information about a cardholder if ―contractually obligated‖

to do so (§ 1747.08, subd. (c)(3)(A)), thus providing another layer of protection against

fraud — depending on the terms of the contracts between the seller, the payment

processor, the merchant bank, and the bank that issued the credit card.4

A final point: The majority states that when the Legislature wants to regulate

online businesses, it must do so expressly, as it did in the California Online Privacy

Protection Act of 2003. (Maj. opn., ante, p. 23.) Under that reasoning, the civil rights

protections of the Unruh Civil Rights Act (§ 51) would not apply to online businesses

because that act does not refer to those businesses expressly; similarly, under the

majority‘s reasoning the Commercial Code would not apply to online businesses because

the code does not mention those businesses expressly.

III

As noted (see p. 6, ante), 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.,

supra, 51 Cal.4th at p. 534.) 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


4

The majority notes that real party in interest Krescent‘s complaint alleges that

Apple is not contractually obligated to collect personal identification information. (Maj.
opn., ante, p. 15.) True. But the question here is not whether Apple availed itself of the
fraud-prevention provisions that the statute offers; rather, the question is whether the
statute offers some fraud-prevention possibilities. Therefore, that specific allegation of
the complaint is not relevant here. That Apple has voluntarily chosen to do business in a
way that precludes it from using the antifraud provisions that the Legislature has
provided cannot support the majority‘s justification for a general exemption from the
statute.

7



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.

KENNARD, J.

WE CONCUR:

BAXTER, J.
JONES, J.*


*

Presiding Justice of the Court of Appeal, First Appellate District, Division Five,

assigned by the Chief Justice pursuant to article VI, section 6 of the California
Constitution.

8









DISSENTING OPINION BY BAXTER, J.




I respectfully dissent.

Section 1747.08 of the Civil Code1 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.

I.

Because this case comes to us on a demurrer, ―we review the allegations of the

operative complaint for facts sufficient to state a claim for relief. In doing so, we treat

the demurrer as admitting all material facts properly pleaded. ‗ ―Further, we give the

complaint a reasonable interpretation, reading it as a whole and its parts in their

context.‖ ‘ [Citations.]‖ (C.A. v. William S. Hart Union High School Dist. (2012) 53

Cal.4th 861, 866.)


1

All further statutory references are to this code unless otherwise indicated.

1



Plaintiff seeks statutory penalties for defendant‘s alleged violations of section

1747.08, a statute enacted to ― ‗protect the personal privacy of consumers who pay for

transactions with credit cards.‘ ‖ (Pineda v. Williams-Sonoma Stores, Inc. (2011) 51

Cal.4th 524, 534 (Pineda); see Archer v. United Rentals, Inc. (2011) 195 Cal.App.4th

807, 827.) Subdivision (a) of section 1747.08 (section 1747.08(a)) provides: ―Except as

provided in subdivision (c), no person, firm, partnership, association, or corporation that

accepts credit cards for the transaction of business shall do any of the following: [¶] . . .

[¶] (2) Request, or require as a condition to accepting the credit card as payment in full or

in part for goods or services, the cardholder to provide personal identification

information, which the . . . corporation accepting the credit card . . . records upon the

credit card transaction form or otherwise.‖ For purposes of the statute, subdivision (b) of

section 1747.08 (section 1747.08(b)) defines ―personal identification information‖ as

―information concerning the cardholder, other than information set forth on the credit

card, and including, but not limited to, the cardholder‘s address and telephone number.‖

Subdivision (c) of section 1747.08 (section 1747.08(c)) states in pertinent part that

section 1747.08(a) does not apply if, among other things, the person or entity accepting

the credit card is contractually obligated to provide personal identification information in

order to complete the credit card transaction (§ 1747.08(c)(3)(A)), or is obligated by

federal or state law or regulation to collect and record such information

(§ 1747.08(c)(3)(C)), or requires the information ―for a special purpose incidental but

related to the individual credit card transaction, including, but not limited to, information

relating to shipping, delivery, servicing, or installation of the purchased merchandise, or

for special orders‖ (§ 1747.08(c)(4)).

Plaintiff‘s complaint contains the following allegations, some of which are based

on information and belief. Plaintiff purchased media downloads from defendant on

various occasions in 2010. Defendant‘s Web site would not permit plaintiff to obtain his

purchases by credit card unless he first provided his telephone number and address. Such

2



personal information was not required by the credit card processing company to complete

the transaction. But even if the credit card processing company required a valid billing

address and credit card identification number, under no circumstance would plaintiff‘s

telephone number be required to complete the purchase transaction. Defendant ―records

each consumer‘s personal information, including, but not limited to a telephone number

and address, in line with each credit card transaction, and keeps records of such personal

information.‖ Defendant ―is not contractually obligated to provide a consumer‘s

telephone number and/or address in order to complete the credit card transaction,‖ nor is

defendant required to record such personal information under federal or state law or

regulation or for any incidental purpose such as shipping.

Assuming the truth of these allegations, they establish that defendant required and

recorded plaintiff‘s personal identification information when plaintiff used his credit card

to make purchases, and that none of the exceptions listed in section 1747.08(c) applied, at

least as to some of the information taken. Accordingly, plaintiff‘s complaint adequately

states a cause of action for violation of section 1747.08.

II.

The majority implicitly agrees that defendant‘s conduct falls within the plain terms

of section 1747.08(a). (See maj. opn., ante, at p. 7.) The majority holds, however, that

plaintiff was not entitled to protection of his personal identification information because

online credit card purchases of electronically downloadable products are categorically

exempt from the statute‘s application. (Maj. opn., ante, at pp. 2, 12, 26.) Although

recognizing this is a question of statutory construction, the majority reaches a result that

is contrary to the terms, purpose, and legislative history of section 1747.08.

The rules governing statutory construction are uncomplicated and settled. When

construing a statute, our goal ―is to ascertain the intent of the lawmakers so as to

effectuate the purpose of the statute.‖ (Estate of Griswold (2001) 25 Cal.4th 904, 910.)

We look first to the language of the statute, mindful that the words ― ‗ ―should be given

3



the meaning they bear in ordinary use. [Citations.]‖ ‘ ‖ (Dicampli-Mintz v. County of

Santa Clara (2012) 55 Cal.4th 983, 992.) Judicial construction, and judicially crafted

exceptions, are appropriate only when literal interpretation of a statute would yield

absurd results or implicate due process. (Cassel v. Superior Court (2011) 51 Cal.4th 113,

124; In re C.H. (2011) 53 Cal.4th 94, 107.) Otherwise, a statute ―must be applied in strict

accordance with [its] plain terms.‖ (Cassel, at p. 124.) ― ‗ ―Only when the statute‘s

language is ambiguous or susceptible of more than one reasonable interpretation, may the

court turn to extrinsic aids to assist in interpretation.‖ [Citation.]‘ ‖ (In re Ethan C.

(2012) 54 Cal.4th 610, 627.) Under no circumstance, however, may the court ― ‗under

the guise of construction, rewrite the law or give the words an effect different from the

plain and direct import of the terms used.‘ [Citation.]‖ (Dicampli-Mintz, at p. 992.) In

this regard, the court ― ‗ ―must assume that the Legislature knew how to create an

exception if it wished to do so . . . . [Citation.]‖ ‘ ‖ (Ibid.)

Section 1747.08(a) contains language broadly stating that ―no person, firm,

partnership, association, or corporation that accepts credit cards‖ shall request or require

the cardholder to provide personal identification information and cause it to be recorded.

Section 1747.08(a) flatly states its proscriptions shall apply ―[e]xcept as provided in

subdivision (c).‖ Section 1747.08(c) lists various business-related reasons for which the

requesting, requiring, or recording of personal identification information does not violate

section 1747.08(a). Virtually all of these exceptions could apply either in online credit

card purchase transactions, or in face-to-face purchase transactions occurring at brick-

and-mortar establishments.2 There is nothing in subdivision (a), (b), or (c) suggesting a


2

E.g., section 1747.08(c)(1) (credit card used as deposit to secure payment); section

1747.08(c)(2) (cash advance transactions); section 1747.08(c)(3)(A) (personal
identification information contractually required to complete the credit card transaction);
section 1747.08(c)(3)(C) (information required by federal or state law or regulation);


(footnote continued on next page)

4



literal construction of section 1747.08 would implicate due process or result in absurd

consequences.

Subdivision (d) of section 1747.08 (section 1747.08(d)) lists one additional

proviso to the statute‘s application. It clarifies that no person or entity subject to the

statutory proscriptions is prohibited ―from requiring the cardholder, as a condition to

accepting the credit card as payment in full or in part for goods or services, to provide

reasonable forms of positive identification,‖ such as a driver‘s license or other form of

photo identification, ―provided that none of the information contained thereon is written

or recorded.‖ (Ibid.) Section 1747.08(d) further provides that if the cardholder uses a

credit card number to pay for the transaction without making the ―card available upon

request to verify the number, the cardholder‘s driver‘s license number or identification

card number may be recorded.‖ Unlike section 1747.08(c), section 1747.08(d) makes no

allowance for the recording of a cardholder‘s address or telephone number. Instead, it

permits retailers to require presentment of reasonable forms of positive identification, and

when the credit card itself is not made available, to write down a license number or other

photo identification card number.

Had section 1747.08(d) been written to require retailers to demand and visually

inspect a cardholder‘s driver‘s license or other photo identification card as a condition of

accepting a credit card, then one might reasonably infer the proscriptions of section

1747.08(a) could have no application to online credit card transactions given the asserted

impossibility of complying with the statutory commands. As it stands, however, section

1747.08(d) is merely permissive and thus poses no barrier or difficulty to an online



(footnote continued from previous page)

section 1747.08(c)(4) (information necessary for special purpose incidental but related to
the individual credit card transaction, such as shipping, servicing, or installation).

5



retailer‘s compliance with the entirety of the statute. Moreover, section 1747.08(d) does

not, in any event, permit the recording of addresses or telephone numbers for card-not-

present purchases at brick-and-mortar establishments.3 Finally, there is nothing in this or

any other subdivision in section 1747.08 that requires retailers, of any sort, to accept

credit cards for purchases when they deem the risk of fraud or identity theft unacceptable.

Hence, the statutory terms reflect a legislative determination that heightened privacy

interests in personal information such as addresses and telephone numbers outweigh the

necessity or usefulness of such information for any supposed fraud prevention purpose in

card-not-present transactions.

In sum, applying section 1747.08(a) to online retailers flows logically from the

plain meaning of the statute, is not absurd, and fully promotes the legislative objective to

protect the personal identification information of credit card users against exploitation by

retailers. Under these circumstances, we are bound to construe section 1747.08 ―in strict

accordance with [its] plain terms.‖ (Cassel v. Superior Court, supra, 51 Cal.4th at p.

124.)

Undeterred by the plain language of section 1747.08, the majority emphasizes the

substantive provisions of section 1747.08 were first enacted ―almost a decade before

online commercial transactions became widespread.‖ (Maj. opn., ante, at p. 6.) From

this the majority posits ―[w]e cannot assume that the Legislature, had it confronted a type

of transaction in which the standard mechanisms for verifying a cardholder‘s identity

were not available, would have made the same policy choice as it did with respect to

transactions in which it found no tension between privacy protection and fraud

prevention.‖ (Id. at p. 11.) The majority views section 1747.08(d) as demonstrating ―the


3

Consistent with this conclusion, the majority concedes ―section 1747.08(d) does

not permit Apple to collect a billing address in the course of an online transaction.‖ (Maj.
opn., ante, at p. 14.)

6



Legislature‘s intent to permit retailers to use and even record personal identification

information when necessary to combat fraud and identity theft‖ (maj. opn., ante, at p. 12),

but finds such provision has no application to online transactions because ―an online

retailer cannot visually inspect the credit card, the signature on the back of the card, or

the customer‘s photo identification‖ (ibid.). According to the majority, the Legislature

did not intend for section 1747.08 to apply to online credit card transactions, ―[b]ecause

the statutory scheme provides no means for online retailers . . . to protect against credit

card fraud . . . .‖ (Maj. opn., ante, at pp. 15-16.)

Even assuming resort to extrinsic aids is appropriate, the majority bases its

construction of section 1747.08 on two critical, but flawed, assumptions. The first

assumption is that the legislative intent underlying the statute is not limited to protecting

consumer privacy, but also extends to protecting consumers and retailers from ―undue

risk of fraud.‖ (Maj. opn., ante, at p. 10.) The second is a factual assumption — that the

personal identification information defendant allegedly demanded and recorded here, i.e.,

cardholder addresses and telephone numbers, are ―necessary to combat fraud and identity

theft‖ in online credit card transactions. (Maj. opn., ante, at p. 12.) As demonstrated

below, there is no legislative source to support the former assumption, and no factual

basis in the complaint or judicially noticeable materials to support the latter.

The language of section 1747.08 reflects its underlying purpose is to safeguard

consumer privacy by prohibiting any person or entity from requiring, requesting, or

recording personal identification information when such information is unnecessary to

complete a credit card transaction. That section 1747.08 has no primary antifraud

purpose is demonstrated by its terms: the statute does not purport to require retailers to

take antifraud measures; nor does it condition its protections on a retailer‘s ability to

protect against credit card fraud.

The legislative history is in accord. As we recently explained in our unanimous

opinion in Pineda, supra, 51 Cal.4th 524, the Legislature enacted the predecessor to

7



section 1747.08 in order ―to provide robust consumer protections by prohibiting retailers

from soliciting and recording information about the cardholder that is unnecessary to the

credit card transaction.‖ (Pineda, at p. 536.) The precise concern prompting the

Legislature‘s action was that retailers were acquiring this additional but unnecessary

personal information ― ‗for their own business purposes — for example, to build mailing

and telephone lists which they can subsequently use for their own in-house marketing

efforts, or sell to direct-mail or tele-marketing specialists, or to others.‘ ‖ (Id. at pp. 534-

535.)4

Significantly, neither Pineda nor the legislative history itself mentions a legislative

intent to protect retailers from undue risk of fraud. That is not surprising, because the

Legislature enacted the consumer privacy protections with the understanding that a

retailer was not put at risk of loss from fraud, so long as the retailer complied with the

card issuer‘s operating procedures for credit card transactions. (See Dept. of Consumer

Affairs, Enrolled Bill Rep. on Assem. Bill No. 2920 (1989-1990 Reg. Sess.) July 21,

1990, p. 2 (Enrolled Bill Report) [―the credit card issuer guarantees payment to the

retailer if proper procedures are followed (even if the consumer does not pay the credit

card company)‖].) Thus, notwithstanding counsel‘s factual assertions at oral argument

(see maj. opn., ante, at p. 13), the relevant legislative history undercuts the majority‘s

theory that retailer protection was a principal objective of section 1747.08.

Although the legislative history discloses a concern about credit card fraud, such

concern pertained specifically to the circumstance that recordation of unnecessary

personal information posed a fraud risk to the cardholder, not the retailer, because the

information could be used ―in conjunction with the credit card number to order goods by


4

At this stage in the proceedings, defendant has not filed an answer or given an

explanation as to why it collects the addresses and telephone numbers of cardholders and
what it does with such information.

8



phone or mail and charge it to the cardholder‖ or ―to apply for other sources of credit in

the cardholder‘s name.‖ (Enrolled Bill Rep., supra, at p. 2 [―By the time the subterfuge

is discovered, the consumer‘s credit and credit history could be severely damaged.‖].)

Yet, despite this awareness in 1990 that credit cards were being used to ―order goods by

phone or mail‖ (ibid.), the Legislature provided no exception to section 1747.08‘s

applicability for mail order and telephone order (MOTO) purchases.

Like retailers that accept credit cards for online purchases, those that accept credit

cards for MOTO transactions have no opportunity to visually inspect a driver‘s license or

other forms of photo identification as allowed by section 1747.08(d). That online and

MOTO retailers appear similarly situated in this regard renders implausible the majority‘s

theory that the Legislature would not have intended ―section 1747.08(a)‘s prohibitions to

apply to [online] transactions despite the unavailability of section 1747.08(d)‘s

safeguards.‖ (Maj. opn., ante, at p. 12.) The majority offers no reason, cogent or

otherwise, why the Legislature, having enacted section 1747.08‘s privacy protections

without an exception for MOTO transactions, would not also contemplate applicability of

the statutory protections to other card-not-present transactions such as those occurring

online.

The majority additionally views section 1747.08(d) as demonstrating ―the

Legislature‘s intent to permit retailers to use and even record personal identification

information when necessary to combat fraud and identity theft.‖ (Maj. opn., ante, at p.

12, italics added.) But again, neither the language nor the history of section 1747.08

indicates this to be the case, and we may assume the Legislature knew how to create such

an exception had it intended to do so. (Dicampli-Mintz v. County of Santa Clara, supra,

55 Cal.4th at p. 992.) In any event, this matter comes to us on a demurrer, and there is

nothing in the record from which we may discern that both cardholder addresses and

telephone numbers are necessary to combat online fraud and identity theft. Because the

necessity issue is a factual one that appears open to reasonable debate, it seems a

9



particularly inappropriate basis for sustaining a demurrer and judicially limiting the plain

reach of section 1747.08.

Finally, the majority views the enactment of the California Online Privacy

Protection Act of 2003 (Bus. & Prof. Code, § 22575 et seq.; COPPA) as signifying that

―when the Legislature intends to address online transactions, it does so unambiguously.‖

(Maj. opn., ante, at p. 23.) This conclusion appears incongruous with the majority‘s

express acknowledgement that courts do not rely on ―wooden construction of [statutory]

terms‖ when ―construing statutes that predate their possible applicability to new

technology.‖ (Id. at pp. 7-8; see also id. at p. 8 [― ‗Drafters of every era know that

technological advances will proceed apace and that the rules they create will one day

apply to all sorts of circumstances they could not possibly envision.‘ ‖]; e.g., O’Grady v.

Superior Court (2006) 139 Cal.App.4th 1423 [holding that petitioners‘ Web sites qualify

as periodical publications under the California reporter‘s shield law].)

COPPA‘s disclosure requirements do nothing to restrict an online retailer‘s use of

a consumer‘s personal identification information; nor do they prevent the sharing or sale

of such information. True, consumers who are not satisfied with a retailer‘s posted

privacy policy may always decline to purchase the retailer‘s products. But today‘s

decision deprives consumers of section 1747.08‘s additional safeguards, which in

contrast to COPPA make retailers bear the burden of privacy protection. The majority‘s

interpretation of section 1747.08 foists this burden onto consumers, leaving consumers

unable to freely use their credit cards for online purchases without surrendering their

personal identification information.

III.

Pure and simple, a literal interpretation of section 1747.08 that includes online

credit card transactions within its scope promotes the Legislature‘s intent to scrupulously

protect the privacy of credit card users and is not absurd. This interpretation is also

consistent with our unanimous opinion in Pineda, supra, 51 Cal.4th 524, which

10



recognized that section 1747.08‘s ―overriding purpose was to ‗protect the personal

privacy of consumers who pay for transactions with credit cards‘ ‖ (Pineda, at p. 534)

and ―to provide robust consumer protections by prohibiting retailers from soliciting and

recording information about the cardholder that is unnecessary to the credit card

transaction‖ (id. at p. 536). I see no reason to depart from Pineda‘s conclusion that

protecting consumer privacy is the ―evident purpose of the statute.‖ (Ibid.)

If defendant and other retailers wish to demonstrate that section 1747.08 is ill-

suited to the online industry because the collection of personal identification information

presently serves a valid antifraud function, they may make their case to the Legislature.

Unlike this court, the Legislature would have the opportunity to take evidence on the

issue, to weigh the antifraud utility of such information against the potential of its misuse

and exploitation, and, if appropriate, to craft a balanced statutory exception that preserves

the privacy interests of consumers while responding to legitimate antifraud and identity

theft concerns of online retailers. Unfortunately, today‘s decision relies on speculation

and debatable factual assumptions to wholly strip online credit card users of the statutory

consumer privacy protections, leaving online retailers free to require personal

identification information as a condition of credit card acceptance and to use such

information for whatever purposes 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.













BAXTER, J.

WE CONCUR:

KENNARD, J.

JONES, J.*

________________

* Presiding Justice, Court of Appeal, First Appellate District, Division Five, assigned by
the Chief Justice pursuant to article VI, section 6 of the California Constitution.

11



See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Apple, Inc. v. Superior Court
__________________________________________________________________________________

Unpublished Opinion

Original Appeal
Original Proceeding XXX
Review Granted
Rehearing Granted

__________________________________________________________________________________

Opinion No.
S199384
Date Filed: February 4, 2013
__________________________________________________________________________________

Court:
Superior
County: Los Angeles
Judge: Carl J. West

__________________________________________________________________________________

Counsel:

Gibson, Dunn & Crutcher, Daniel M. Kolkey, S. Ashlie Beringer, Austin V. Schwing, Timothy W. Loose and Molly
Cutler for Petitioner.

Willenken Wilson Loh & Delgado, William A. Delgado and Eileen M. Ahern for Ticketmaster LLC as Amicus
Curiae on behalf of Petitioner.

Drinker Biddle & Reath, Sheldon Eisenberg and Kristopher Davis for eHarmony, Inc., as Amicus Curiae on behalf
of Petitioner.

Sidley Austin, Mark E. Haddad, David R. Carpetner; Paul Hastings, Thomas P. Brown and Kristin M. Hall for eBay,
Inc., Walmart.com USA, LLC, California Retailers Association and NetChoice as Amici Curiae on behalf of
Petitioner.

No appearance for Respondent.

Schreiber & Schreiber, Edwin C. Schreiber and Eric A. Schreiber for Real Party in Interest.










Counsel who argued in Supreme Court (not intended for publication with opinion):

Daniel M. Kolkey
Gibson, Dunn & Crutcher
555 Mission Street, Suite 3000
San Francisco, CA 94105
(415) 393-8200

Eric A. Schreiber
Schreiber & Schreiber
16501 Ventura Boulevard, Suite 401
Encino, CA 91436-2068
(818) 789-2577


Petition for review after the Court of Appeal denied a petition for peremptory writ of mandate. The court issued an order to show cause. Apple present the following issue: Does the Song-Beverly Credit Card Act of 1971 (Civ. Code, Section 1747 et seq.), which prohibits retailers from recording a customer's personal identification information when the customer uses a credit card in a transaction, preclude on-line retailers from obtaining and recording a purchaser's address and telephone number as a prerequisite to accepting a credit card as payment for a purchase of an item that does not need to be shipped to the purchaser?

Opinion Information
Date:Citation:Docket Number:Cross Referenced Cases:
Mon, 02/04/201356 Cal. 4th 128 (2013); 151 Cal. Rptr. 3d 841 (2013)S199384

eHarmony v. S.C. (Luca) (S199406)


Parties
1Apple, Inc. (Petitioner)
Represented by S. Ashlie Beringer, Austin v. Schwing, Timothy W. Loose and Molly Cutler
Gibson, Dunn & Crutcher
2Krescent (Real Party in Interest)
Represented by Edwin C. Schreiber and Eric A. Schreiber
Schreiber & Schreiber

Opinion Authors
OpinionJustice Goodwin Liu
DissentJustice Joyce L. Kennard, Justice Marvin R. Baxter

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Jun 7, 2013
Annotated by Denise Tsai

Facts:

In June 2011, the plaintiff below (and real party in interest), David Krescent, sued Apple, Inc. on behalf of himself and a putative class of similarly situated individuals for alleged violations of the Song-Beverly Credit Card Act of 1971, § 1747.08. Krescent alleged that on four occasions in 2010, he purchased media downloads from Apple and that Apple required him to provide his telephone number and address as a condition of completing his credit card purchase and receiving those downloads. He also alleged that Apple records each customer’s personal information, is not contractually or legally obligated to collect telephone and address information to complete the credit card transaction, and does not require such information for any special purpose related to the credit card transaction, such as shipping or delivery. Krescent and the putative class sought statutory penalties for the alleged violations.

Procedural History:

In June 2011, David Krescent (plaintiff below) sued Apple, Inc., in the Superior Court of Los Angeles County, on behalf of himself and a putative class of similarly situated individuals for alleged violations of the Song-Beverly Credit Card Act. In September 2011, Apple filed a demurrer (request that the case be dismissed because the facts alleged in the complaint are insufficient, as a matter of law, to justify any relief). After a hearing, the trial judge overruled the demurrer. Apple then filed for a petition for writ of mandate with the Court of Appeal (asking the Court of Appeal to direct the trial court to do or not do something), seeking review of the trial court’s order. The Court of Appeal summarily denied the petition. The California Supreme Court then granted Apple’s petition for review and ordered the trial court to show cause why the relief sought in the petition for writ of mandate should not be granted.

Issue:

Do online transactions involving downloadable products fall within the scope of the Song-Beverly Credit Card Act §1747.08, which, in general, prohibits retailers from requesting or requiring personal information from credit cardholders as a condition to accepting credit cards as payment?

Holding:

Section 1747.08 of the Credit Card Act does not apply to online purchases in which the product is downloaded electronically, because this type of transaction does not fit within the Act’s statutory scheme of balancing consumer privacy and the prevention of credit card fraud.

Analysis:

Majority (J. Liu):
The majority used statutory interpretation (steps that courts use to discern what a statute means) to conclude that § 1747.08 of the Song-Beverly Credit Card Act does not apply to online purchases of downloaded products.

The Song-Beverly Credit Card Act (“Credit Card Act”) (Cal. Civ. Code § 1747 et seq) governs the issuance and use of credit cards. The section at issue in the case, § 1747.08, states:

1747.08(a). [N]o person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business shall do any of the following:
(1) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to write any personal identification information upon the credit card transaction form or otherwise.
(2) Request, or require as a condition to accepting the credit card as payment in full or in part for goods or services, the cardholder to provide personal identification information, which the person, firm, partnership, association, or corporation accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.
(3) Utilize, in any credit card transaction, a credit card form which contains preprinted spaces specifically designated for filling in any personal identification information of the cardholder. (b) For purposes of this section "personal identification information," means information concerning the cardholder, other than information set forth on the credit card, and including, but not limited to, the cardholder's address and telephone number.

1747.08(d)
(d) This section does not prohibit any person, firm, partnership, association, or corporation from requiring the cardholder, as a condition to accepting the credit card as payment in full or in part for goods or services, to provide reasonable forms of positive identification, which may include a driver's license or a California state identification card, or where one of these is not available, another form of photo identification, provided that none of the information contained thereon is written or recorded on the credit card transaction form or otherwise. If the cardholder pays for the transaction with a credit card number and does not make the credit card available upon request to verify the number, the cardholder's driver's license number or identification card number may be recorded on the credit card transaction form or otherwise.
[http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1747-1748.95].

In general terms, §1747.08 prohibits retailers from requesting or recording personal information from credit cardholders as a condition of accepting the credit card as payment. The Court held earlier, in the 2011 case Pineda v. Williams-Sonoma Stores, Inc., that a zip code constitutes “personal identification information” under §1747.08, and accordingly, a bricks-and-mortar retailer violates the Act when it requests and records a customer’s ZIP code. [http://scocal.stanford.edu/opinion/pineda-v-williams-sonoma-33947]

Here, unlike in Pineda, the alleged violation of the Act occurred with an online retailer and the customer bought downloaded products. The Court thus engaged in statutory construction – looking at the Credit Card Act’s text, its history and purpose, and legislative history – to conclude that online transactions of downloaded products were not intended to fall within the scope of the Act.

The Court began with the statute’s text, giving the words their ordinary meaning. It first noted that the text of § 1747.08 does not mention online transactions or the Internet, because it was enacted before the Internet was widely available. Krescent argued that the section’s language should be read to include all retailers, including online ones. He argued that the legislature could have exempted certain retailers from § 1747.08’s scope, but it chose not to; instead, the legislature chose to prohibit any “person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business” from collecting personal identification information from customers, and no exception was made. Apple argued that one must read all of the language of § 1747.08 to discern that the legislature only had in mind in-person business transactions, not online ones. For example, § 1747.08(a)(1) prohibits retailers from requesting cardholders to “write” any personal identification information “upon the credit card transaction form.” Apple argued that “write” and “form” implies in-person, physical transactions.

The Court decided that the text alone could not be dispositive of the issue, because it suggested that the legislature simply did not contemplate online transactions at the time it enacted the section. Instead, courts have turned to other statutory interpretation tools when trying to understand the meaning of a statute that predates new technology. For example, in O’Grady v. Superior Court (2006) [see file in "Media" tab], the Court of Appeal held that an online news magazine constituted a “periodical publication” under California’s journalism shield law, which was enacted before digital magazines existed, after examining the legislature’s purpose.

Finding the text ambiguous because of the statute’s enactment prior to the Internet, the Court next turned to the statutory scheme and purpose. Looking through the Credit Card Act’s legislative history, including committee reports, the Court discerned that the Act’s purpose was to protect the personal privacy of consumers paying for transactions with credit cards, while not exposing consumers and retailers to the undue risk of fraud. The enacting legislature decided that physical brick-and-mortar retailers had no genuine need to collect personal identification information and feared that they would instead use the information for unsolicited marketing. At the same time, the legislature recognized that in some instances it would be necessary to verify the cardholder’s identity to prevent fraud, and thus created the exceptions and qualifications in found in § 1747.08(d) (which permits a retailer to visually inspect the credit card, the back signature, and photo identification).

However, these physical means of preventing fraud are not available to an online retailer. If the statute applied to Apple and online retailers, it would prevent them from being able to get the necessary information to protect themselves from fraud. Given the legislature’s dual concerns of consumer privacy and protection against fraud, the Court concluded, the legislature could not have intended § 1747.08 to apply to online transactions of downloadable products. The Court also noted that its decision does not apply to online transactions that do not involve downloadable products, nor to any other transaction that does not involve in-person, face-to-face interaction between the customer and retailer.

Next, the Court decided that a 2011 Amendment to the Credit Card Act does not mean that § 1747.08 applies to online retailers. The 2011 Amendment (§ 1747.08(c)(3)(B)) states that §1747.08 does not apply in a “sales transaction at a retail motor fuel dispenser or retail motor fuel payment island automated cashier [that] uses the Zip Code information solely for prevention of fraud, theft, or identity theft.” [http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1747-1748.95] Krescent argued that because the legislature explicitly made an exception for gas station stands in 2011, and did not make an exception for online retailers, the legislature therefore wanted to signal that the Act applies to online retailers. The Court disagreed with this inference, and instead decided that it was more logical to infer from the 2011 Amendment that the legislature intended to protect privacy without forcing retailers to accept credit cards when unable to verify the customer’s identity.

The Court also dismissed the legislative history of the 2011 Amendment as being unpersuasive regarding the statute’s applicability to online retailers. Instead, it determined that the legislature only wanted to address the narrow problem of how to deal with gas stations that collect zip codes to verify the cardholder’s identity.

Finally, the Court noted that the existence of other state laws, particularly the California Online Privacy Protection Act of 2003 (COPPA) (Cal. Bus. & Prof. Code § 22575) [http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=22001-23000&file=22575-22579], shows that when the legislature wants to regulate online privacy, it knows how to do so unambiguously. In addition, federal laws help protect online consumers.

The Court accordingly held that after considering the statutory scheme as a whole, § 1747.08 of the Credit Card Act does not apply to online transactions involving downloadable products. It then reversed the Court of Appeals’ summary denial of the petition for writ of mandate and remanded the case back to the Court of Appeals to issue a writ consistent with the opinion.

Dissent (J. Kennard):
Justice Kennard dissented from the majority opinion, and opined that the decision is a “major loss for consumers” and their privacy.

Justice Kennard first noted that she would hold that the statute’s plain meaning shows no exception for online retailers. Section 1747.08’s language of “person, firm, partnership, association, or corporation that accepts credit cards for the transaction of business” on its plain terms encompass Apple. In addition, online purchases are similar to purchases made over the mail or telephone (the credit card is not presented in person), which are not exempt from the statute. Lastly, Justice Kennard argued that the protection of consumer privacy was the Act’s “overriding” purpose, and that exempting online retailers from the Act erodes that purpose and trespasses on the legislature’s authority.

Dissent (J. Baxter):
Justice Baxter also dissented from the majority opinion. He believed that § 1747.08 should be read literally and that the language is not ambiguous. Moreover, Justice Baxter critiqued the majority for making two flawed assumptions: that the legislative intent extended beyond protecting consumer privacy to also protecting retailers (not just consumers) from the risk of fraud, and that address and telephone number information (the personal identification information at issue in this case) are necessary to combat fraud in online credit card transactions. Looking at the legislative history, Justice Baxter concluded that § 1747.08 was intended to protect consumer privacy, and that protecting retailers from fraud was not a chief concern. He pointed out that the legislative history only discusses the fraud risk to cardholders, not retailers. He also agreed with Justice Kennard that mail and telephone order transactions are similar to online transactions, and that like mail and telephone order transactions, online transactions should not be exempted from the reach of the statute.

Tags
Demurrer, class action, consumer protection, consumer privacy, credit card fraud, Song-Beverly Credit Card Act, statutory interpretation, legislative history, online retailer, online purchase, electronic download, business law, commercial law, “Apple, Inc.”, online transaction, fraud prevention, personal identification information

Denise Tsai