Class Action Alleging Violations of California’s Song-Beverly Act Limited by One-Year Statute of Limitations Period and cannot Encompass Customers from Whom Information was Sought as Part of Merchandise Return Transactions because Song-Beverly does not Apply to Returns, only Point of Sale, California State Court Holds
Plaintiffs filed a putative class action against TJX, TJ Maxx, Marshalls and other defendants alleging violations of California’ Song-Beverly Act, Civil Code § 1747 et seq., which prohibits businesses from requiring customers to provide certain personal information in connection with credit card purchases, and which “bans the use of forms that facilitate the obtaining of such information”; the class action complaint purported to represent individuals who had made credit card purchases over the prior three-year period, and the class action purported to seek damages on behalf of customers from whom information was requested as part of merchandise return transactions. TJX Cos., Inc. v. Superior Court, ___ Cal.App.4th ___, 77 Cal.Rptr.3d 114, 2008 WL 213132573, *1 (Cal.App. May 22, 2008). Defense attorneys demurred to the class action complaint on the grounds that “customers who returned merchandise were not covered under section 1747.08,” and sought to strike those portions of the class action complaint that sought to define the class as extending back three years. Id. The trial court overruled the demurrer and motion to strike. Defense attorneys sought petitions for mandate from the appellate court, and the appellate court reversed.
With respect to the limitations period, Song-Beverly provides for statutory penalties “not to exceed two hundred fifty dollars ($250) for the first violation and one thousand dollars ($1,000) for each subsequent violation.” Cal. Civ. Code, § 1747.08(e). Plaintiffs’ lawyer argued that this provision constitutes a “liability created by statute, other than a penalty or forfeiture,” so as to fall within the three-year statute of limitations set forth in California Code of Civil Procedure section 338. TJX, at *3. Defense attorneys, however, argued that the class action’s Song-Beverly Act claims constitute “[a]n action upon a statute for a penalty,” and thus fall within the one-year statute of limitations set forth in California Code of Civil Procedure section 340. Id. The appellate court sided with the defense. It explained that while the amount of penalty to be set in the event of a violation is within the sound discretion of the trial court, “[p]resumably…span[ning] between a penny (or even the proverbial peppercorn we all encountered in law school) to the maximum amounts authorized by the statute,” it does not have discretion to deny awarding damages entirely. Id., at *2-*3. Because the trial court must impose a penalty in the event of a violation, the class action complaint falls within the scope of section 340 and is subject to a one-year limitations period. Id., at *3-*4. Accordingly, the Court of Appeal granted the petition for writ of mandate as to the motion to strike those portions of the class action complaint seeking to impose liability on defendants for more than one year. Id., at *6.
With respect to whether Song-Beverly applies to transactions involving merchandise returns, as opposed to merchandise purchases, as alleged in the class action complaint, the appellate court quoted the statutory language, which by its terms applies to “accepting [a] credit card as payment in full or in part for goods or services.” TJX, at *4 (quoting Cal. Civ. Code, § 1747.08(a)). The court rejected plaintiffs’ argument that the statute’s use of the word “request” – in that the statute prohibits businesses from “request[ing]” information as part of a credit card transaction – means that it must apply to all requests, including requests made when merchandise is returned. Id. Reading the statute as a whole, the Court of Appeal held that Song-Beverly applies only at the point of sale, not when merchandise is returned by a customer. Id., at *5. The Court further held that the purposes of the statute “do not apply to merchandise returns”; on the contrary, when merchandise is returned, “there are substantial opportunities for fraud and it behooves the merchant to identify the person who returns merchandise, which subsequent examination may disclose to have been used, damaged, or even stolen.” Id. (citation omitted). Accordingly, it granted the defense petition for writ of mandate with respect to defendants’ demurrer to the merchandise return allegations. Id., at *6.