A judge in the U.S. District Court for the Central District of California denied class action claims against The Retail Equation and other major retailers, including Sephora, The Gap, and TJ Maxx. The complaint alleged violations of the federal Fair Credit Reporting Act and state statutes, including the CCPA, and the Unfair Competition Law of California. The case revolved around the data sharing between the retailers and The Retail Equation and the risk scores that resulted in the retailers denying consumers’ merchandise returns.
The case is Shadi Hayden et al. v. The Retail Equation et al., (No. 8:20-cv-01203) U.S.D.C., C.D. Calif.
The federal judge said the complaint was “too vague” about the data that is collected and he dismissed all claims against The Retail Equation, including invasion of privacy and violations of the FCRA. He also allowed the plaintiffs time to amend the complaint. Law 360 added that “a slew of major retailers named as co-defendants…have also filed their own motions to dismiss or compel arbitration that the court has yet to rule on.”
The judge wrote that “[a]lthough personal identification information collected by retailers at the point of sale may be subject to consumers’ privacy interests, plaintiffs fail to state a claim for violation of privacy. The amended complaint is simply too vague.”
The judge added, “Plaintiffs allege that the retailer defendants collect large amounts of data about their consumers and share the collected data with TRE without the consumers’ consent, but the amended complaint does not specify what kind of data is collected.”
The amended complaint included a claim under the California Consumer Privacy Act, which allows consumers to bring suits when their personal data “is subject to an unauthorized access and exfiltration, theft, or disclosure” by businesses that fail “to implement and maintain reasonable security procedures and practices.” But the consumers have since voluntarily dismissed the CCPA claim against TRE.
As reported by Law 360, the consumers argued that The Retail Exchange (TRE) is a consumer reporting agency under the FCRA because “for monetary fees, it regularly engages in the practice of assembling or evaluating information on consumers for the purpose of furnishing consumer reports to third parties.”
TRE argued that the consumers failed to properly allege that it is a consumer reporting agency liable under the FCRA. The judge said the question of the FCRA applying in this case “appears to be a matter of first impression.” He also said that the FCRA applies to “consumer reporting agencies” and “consumer reports” as outlined in the U.S. Code Section 1681, but that their exact definitions can be unclear.
But the judge also ultimately determined that the court “need not decide the exact scope” of the definition at this time.
The consumers pled that TRE knew the retailer defendants were using the consumer reports for a purpose not listed in section 1681b, which outlines the various reasons information can be used that make it a consumer report, such as employment purposes, the underwriting of insurance, licensure or other government benefits, existing credit obligations and a more catch-all “legitimate business need for the information.”
The judge said that the consumers argued that TRE knew the retail defendants were using the consumer reports for a purpose not listed in section 1681b, but that they also cited a subsection of 1681b to establish that TRE’s risk score is a consumer report.
“Since the amended complaint pleads that [1681b] is not one of the purposes for which the alleged consumer report was distributed, the amended complaint fails to plead facts that, if true, could show that TRE’s risk score is a consumer report,” the judge said.
On the invasion of privacy claim, the judge said that “[s]ince the amended complaint does not plead what information TRE actually collects, it fails to state a claim for violation of privacy, and the court need not reach TRE’s additional argument that TRE did not disseminate or misuse plaintiffs’ information.”
Eric J. Ellman is Senior Vice President for Public Policy and Legal Affairs at the Consumer Data Industry Association (CDIA) in Washington, DC. He also served for eight months as Interim President and CEO of the Association. More