California Insurance Litigation Blog

McKennon Law Group recently filed a case on behalf of Therabotanics, LLC, a subsidiary of Ideal Living, for breach of contract, unfair competition, misappropriation of trade secrets, harmful interference with contract, and conversion of assets against Sephora, USA, Inc. and Solazyme, Inc.  Therabotanics and Solazyme had entered into an exclusive agreement for a joint venture to sell a line of algae-based skin care products through a television infomercial.  The exclusive agreement contained a carve-out that allowed Solazyme to sell a “premium” product with other distributors, but at a higher price and under a specific name.

In January 2010, McKennon Law Group PC was approached by weight loss supplement company TriPharma, LLC, about a dispute involving its exclusive rights to advertise, market and sell a revolutionary patented and clinically studied weight loss product that was manufactured by San Diego based company Imagenetix, Inc.  TriPharma discovered Imagenetix’s multiple breaches of its exclusive license agreement with Imagenetix which had all but destroyed its ability to sell its weight loss product, destroyed much of the goodwill built up for the product, and was threatening to destroy the years of hard work put in developing TriPharma’s one-of-a-kind weight loss beverage, which was due to hit the stores in a few short months.  Shortly thereafter, Imagenetix wrongfully terminated TriPharma’s exclusive license and began to sell product directly to TriPharma’s customers. 

The attorneys at McKennon Law Group PC LLP took immediate action and filed lawsuits in federal court against the companies which were infringing on TriPharma’s exclusive license through product sales of their own, and filed claims in JAMS arbitration against Imagenetix for, among other things, fraud, breach of contract, and injunctive relief, seeking damages as well as reinstatement of the exclusive license agreement

The collection of ZIP codes by retailers may now be prohibited following the recent California Supreme Court decision in Pineda vs. William Sonoma, __ Cal. 4th__ (February 10, 2011).  Writing for a unanimous court, Justice Morena found that ZIP codes are “personal identification information” for the purposes of the Song-Beverly Credit Card Act (“Credit Card Act “).  Under the Credit Card Act, personal identification information may not be recorded nor required of a customer in order to make an in-store purchase using a credit card. 

Initially passed in 1990, the Credit Card Act was enacted “to address the misuse of personal identification information for, inter alia, marketing purposes.”  It prohibits retailers from asking customers for their personal identification information and recording it during credit card transactions.  Specifically, section 1747.08(a) provides that no firm shall “[r]equest, 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 . . . firm . . . accepting the credit card writes, causes to be written, or otherwise records upon the credit card transaction form or otherwise.”  Since its initial passage, there have been multiple class action lawsuits against retailers violating this statute.  As recently as 2008, California 4th District Court of Appeals addressed this specific issue in Party City Corp. v. Superior Court, 169 Cal.App.4th 497 (2008) where it held that ZIP codes were too general to be covered by the Credit Card Act because they pertain to a group of individuals, not a specific individual. 

Not to be deterred, Jessica Pineda brought a class action against Williams-Sonoma for violations of the Credit Card Act “and Business and Professions Code section 17200 et seq.  Her lawsuit was based on a 2008 visit to a Williams-Sonoma Store in California.  While making her purchase, the cashier asked for her zip code, but did not tell her what the information would be used for.  Thinking the information was necessary to complete the transaction, Pineda provided the information.  Later, using specialized computer software, Williams-Sonoma conducted a “reverse lookup” and was able to determine Pineda’s previously unknown mailing address by matching her name and zip code in a third-party database.  This information was then stored in Williams-Sonoma’s own database for use in direct-mail marketing campaigns.  Aware of the court’s prior holding in Party City, Pineda pursued her class action on the grounds that an essential element was missing from the prior cases.  Namely, allegations that Williams=Sonoma actually use of the acquired ZIP code.  Rather than rule that harm was a required element, the court instead overruled Party City altogether.