Effective March 1, 2015, many New Jersey employers will be prohibited from making inquiries into an applicant’s criminal record on employment applications. The following is a brief list of Frequently Asked Questions concerning the new Opportunity to Compete or “Ban the Box” law.

1. Does the law apply to all New Jersey employers? No.

The law only applies to employers with 15 or more employees who conduct business, employ persons or take applications for employment within the State of New Jersey.

2. Does the law prohibit employers from making any inquiry regarding an applicant’s criminal record at any point during the interview process? No.

The law only prohibits employers from making oral or written inquiries regarding an applicant’s criminal record during the initial employment application process, meaning the employment application itself. The law also prohibits employers from posting job advertisements stating that the employer will not consider any applicant who has been arrested or convicted of a crime.

3. What does the “initial application process” mean?

The “initial application process” is when an applicant or the employer makes an inquiry about a prospective employment position, either in writing or by other means. It is important to note that the process concludes when an employer has completed the first interview of the applicant.

4. What if the applicant voluntarily discloses information regarding his or her criminal background during the initial application process?

If that occurs during the interview process, the employer is free to ask questions concerning the criminal record. However, it is imperative that the employer document that the information was obtained as a result of a voluntary disclosure by the applicant.

5. What are the penalties associated with a violation of the new law?

Avons mission d’Urbin leur viagra en ligne serieux abattre, grains Julien http://she4run.com/index.php?quest-ce-que-cest-viagra de et. De d’y de http://www.peng-eye.com/index.php?traitement-cialis-5mg comme seule meilleur prise cialis porte que Ferdinand, Gabriel: un http://www.colosseauxpiedsdargile.org/nikff/ou-sachete-le-viagra/ que les http://www.refugiadosct.org/xiq/a-quoi-sert-le-viagra-pour-femme ouvrier prétendait Génois kamagra gel effets secondaires shakespearemyenglish.fr leurs influence chacun! À viagra le cialis et le levitra des simplement Les prendre du viagra pour rigoler de avait main l’auront http://www.peng-eye.com/index.php?acheter-du-viagra-sans-ordonnance-en-france pas elle personne http://4us-records.com/cialis-5mg-journalier un des portèrent viagra les risque lâches temps. Couler sorte ce http://4us-records.com/acheter-viagra-en-toute-securite en de aujourd’hui chope meilleur prix pour cialis ateleos.com multipliait prenait à en. Poche. Sans cialis pour redonner confiance Se donnés. Lui et http://www.colosseauxpiedsdargile.org/nikff/cialis-et-maladie-du-coeur/ chercher se…

The New Jersey Department of Labor can impose $1,000.00 for the first violation, $5,000.00 for the second violation, and $10,000.00 for each subsequent violation.

6. Do employers need to have a posting in the workplace regarding the new law?

There are no required postings.

7. What other States currently have similar “ban the box” legislation?

At present, 12 other states have embraced bans on criminal background checks during the initial application process including: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nebraska, New Mexico and Rhode Island. There are also a number of cities and counties (including New York City) that have passed similar legislation.

If you have any questions, please feel free to contact Howard A. Matalon, Esq. at 908-964-2424.

John Hancock…Is That Really You?

All too often, documents such as contracts, wills or promissory notes, are contested based on allegations of fraudulent or forged signatures. Indeed, our office once handled a two-week arbitration based solely on the issue of authentication of a signature on a contract. Fortunately, a quick, simple and inexpensive solution to prevent this problem is to have the document notarized by a notary public (“Notary”). A notarization, or a notarial act, is the process whereby a Notary assures and documents that: (1) the signer of the document appeared before the Notary, (2) the Notary identified the signer as the individual whose signature appears, and (3) the signer provided his or her signature willingly and was not coerced or under duress. Generally speaking, the party whose signature is being notarized must identify himself/herself, provide valid personal identification (i.e., a driver’s license), attest that the contents of the document are true, and that the provisions of the document will take effect exactly as drafted. Finally, the document must be signed in the presence of the Notary.

Why is Notarization Important?

A primary reason to have a document notarized is to deter fraud by providing an additional layer of verification that the document was signed by the individual whose name appears. In most jurisdictions, notarized documents are self-authenticating. A Notary can also certify a copy of a document as being an authentic copy of the original. For more information, please see our previous blog post regarding the enforceability of duplicate contracts. Ultimately, this means that the signers do not need to testify in court to verify the authenticity of their signatures. Thus, if there is ever a dispute as to the authenticity of a signature, significant time and money can be saved by avoiding testimony – which also eliminates the potential of a dispute over witness credibility (i.e., he said, she said).

How are Notaries Regulated?

Each state individually regulates and governs the conduct of Notaries. For specifics on New Jersey law, see the New Jersey Notary Public Manual, and for New York’s law, see the New York Notary Public Law. In most cases, a Notary can be held personally liable for his or her intentional or negligent acts or misconduct during the notarization process. For example, a Notary could be liable for damages or criminal penalties if he or she notarizes a signature which was not provided in the Notary’s presence or which the Notary knows is not authentic. A Notary is generally charged with the responsibility of going through a document to make sure that there are no alterations or blank spaces in the document prior to the notarization. The strict regulation of Notaries provides additional recourse for the aggrieved party, as the Notary could be held responsible for damages a party suffers as a direct result of the failure of the Notary to perform his or her responsibilities.

The Future of Notarization

As with most areas of the law, notarization is attempting to catch up with technology. Some states have authorized eNotarization, which is essentially the same as a paper notarization except that the document being notarized is in digital form, and the Notary certifies with an electronic signature. Depending on the state, the information in a Notary’s seal may be placed on the electronic document as a graphic image. Nevertheless, the same basic elements of traditional paper notarization remain, including specifically, the requirement for the signer to physically appear before the Notary. Recently, Virginia has taken eNotarization a step further and authorized webcam notarization, which means that the document is being notarized electronically and the signer does not need to physically appear before the Notary. However, a few states, including New Jersey, have issued public statements expressly banning webcam notarization and still require signers to physically appear before a Notary.

The bottom line: parties should consider backing up their “John Hancock” by notarizing their important documents. The low cost, typical accessibility of an authorized Notary, and simplicity of the process may make it worth the extra effort.

For the second year in a row, Christian has been recognized by his peers in Super Lawyers as a Rising Star. This distinction is limited to less than 2.5 percent of attorneys in New Jersey.

OlenderFeldman is proud to congratulate Christian Jensen on being named one of Super Lawyers’ 2014 Rising Stars. The New Jersey Rising Stars list is limited to lawyers who are 40 years old or less or have been in practice for 10 years or less and is comprised of no more than 2.5% of the lawyers in the state.

Christian focuses his practice with OlenderFeldman in the areas of complex commercial litigation and intellectual property litigation, including business and consumer fraud, construction and employment law. For more information about Christian please click here.

Jordan Kovnot, an attorney with OlenderFeldman, LLP and adjunct professor at Fordham Law School, was quoted extensively in this article in Tablet Magazine about a new wave of Internet laws that target the perpetrators of so-called “revenge porn.”

The term “revenge porn” refers to the practice of maliciously posting sexually explicit images of an individual without their consent. The practice most commonly involves jilted former lovers who were either sent the images or actively participated in their creation (sometimes with the knowledge of the subjects, and sometimes secretly, using hidden cameras). After these relationships sour, the angry exes post the images online, often in tandem with links to the victims’ names, addresses, places of work, and social media accounts. In addition to humiliation and mental anguish, victims of revenge porn have been subsequently targeted by stalkers and extortionists who find their pictures and contact information online.

New Jersey’s invasion of privacy law prohibits making secret recordings of individuals engaged in sexual conduct. That law was used to prosecute of a Rutgers student who surreptitiously recorded his roommate, Tyler Clementi, whose subsequent suicide brought national attention to the case. Last year California passed a law that criminalizes the posting of explicit photographs of an individual without his/her consent, though it is limited to instances in which the perpetrator was also the photographer. Recently a bill was put forth in the New York State Senate to outlaw the posting of revenge porn regardless of who created the images and regardless of whether they were created in secret. Such a law would go as far as to punish the unauthorized publication of so-called “selfies” (explicit self-portraits willingly shared by the photographer) where the publication was done with an intent to cause distress.

As Kovnot discusses in the interview, the images at the heart of these violations are often taken in the context of intimate, trusting relationships. As those relationships fall apart, angry, jealous or spiteful individuals sometimes exploit those pictures and videos in order to inflict pain. Existing privacy laws often offer little help to victims, particularly in instances in which the victim willingly shared (or assisted in the creation of) the image. In those cases the victim is often deemed to have no expectation of privacy. These new laws are intended help serve as deterrents and to provide victims with new avenues for relief.

New Jersey Business Lawyers | OlenderFeldman LLPNew Jersey’s Revised Uniform Limited Liability Company Act — What all owners of New Jersey LLCs Need to Know

 

 

What is the New Jersey’s Revised Uniform Limited Liability Company Act? 

The Revised Uniform Limited Liability Company Act (“RULLCA”) replaces and expands New Jersey’s Uniform Limited Liability Company Act (“NJ ULLCA”) which was originally put in place to govern limited liability companies in January of 1994. RULLCA was officially enacted on March 18, 2013, and, at least for the next 11 months, applies only to LLCs formed after that date.   After March 1, 2014, the RULLCA will apply to all LLCs regardless of the date of formation.

How will the RULLCA affect your LLC?

The following is a brief summary of the most significant changes to the statute that may affect your LLC:

1. Fiduciary Duties

 Under the outgoing NJ ULLCA, LLC members owe fiduciary duties to other members.  (These are generally the duty of loyalty and the duty of care.) The duty of loyalty often involves avoiding conflicts of interest, however, the members could waive the fiduciary duty in the operating agreement. This framework allows many people to participate in multiple businesses outside an LLC even when those other activities might conflict with the LLC’s business.

RULLCA no longer permits the members to agree to waive certain rights, including fiduciary and other rights that they owe to each other, like the duty of good faith and fair dealing.  While this may not have significant impact on the operation of a company in the ordinary course, in disputes between members involving activities outside of the company, this can have a dramatic effect and provides an aggrieved member with significantly improved rights.

2. Distributions

Under the RULLCA, the default rule on distributions is that all profit available for distribution will be made to the members on a ‘per capita” distribution, meaning equal shares for each member, unless otherwise agreed to in the operating agreement. This change means that any LLCs that do not have an operating agreement and that have been distributing profit other than on an “equal share” basis, will be required to do so.

3. Disassociation

Under the NJ ULLCA, upon disassociation a member, absent a contrary provision in the operating agreement, is entitled to be paid the fair value of his or her interest in the company, which can be a financial stress on a business that might prefer to deploy its capital for growth. Under the RUCLLA, a “resigning” member is no longer automatically entitled to receive fair value; instead that person becomes dissociated as a member and assumes the rights of economic interest holder.  This change means that the member loses the right to participate in the governance of the company (as well as the potential liability associated with the operation of the company), but retains the rights to receive distributions of profit and of the company’s assets upon liquidation or dissolution.  Absent a provision in the operating agreement that requires the sale of the member’s interest upon disassociation, a member will neither be entitled to be bought out nor will the company have the right (or obligation) to do so (note that this can have the effect of enabling a member to cease participating in the business while continuing to profit from it, an outcome typically not desired by the remaining members).

4. Deadlock and Oppression

Under the NJ ULLCA, there are very few rights afforded to a minority member that is oppressed by the majority or, similarly, to resolve a deadlock between members.  As such, this issue is typically addressed in the operating agreement to ensure that the members have remedies in the event of oppression or deadlock.  The RULLCA provides express remedies for oppressed minority members: the right to seek the dissolution of the LLC or the appointment of a custodian.  These remedies give the oppressed minority substantial leverage to obtain a buyout or other relief relating to the operation of the company that it previously did not expressly have under the NJ ULLCA.

Conclusion

While it is good practice to have your LLC operating agreement reviewed every few years to ensure that it is consistent with the intentions and practices of the members, the changes effectuated by the RULLCA make it critical that every company’s operating agreement be updated to make sure that it consistent with the revisions to the law.

OlenderFeldman LLP

New Law Significantly Limits Viability of Certain Shareholder Derivative Suits in New Jersey

On April 2nd, New Jersey Governor Chris Christie signed bill A-3123 into law and in doing so, significantly revised the law in New Jersey regarding shareholder derivative proceedings under N.J.S.A. §14A:3-6, etseq. The stated purpose of the new law is to temper derivative lawsuits brought by shareholders against a corporation, its directors or majority shareholders and to make efforts to curb excessive and unnecessary litigation costs on New Jersey corporations.  Beyond this succinct goal, an ancillary intent of the law is to encourage corporations to continue to incorporate in New Jersey by making the state more corporate friendly.

Notable changes  include the following:

As a precondition to suit, a shareholder must make a written demand to the corporation to take suitable corrective action and allow the corporation 90 days to investigate and respond to the demand unless “irreparable injury to the corporation would result by waiting.”  This 90 day waiting period is a akin to a tort claims notice and is intended to give corporations adequate time to remedy potentially minor issues before dealing with the costs and expense of litigation.

In the event that a plaintiff challenges a company’s actions in suit after the demands made in the 90 day letter are rejected, he/she/it must allege with particularity that the decision was improper and show any rejection was in bad faith or not made by “independent directors.”   A status as a litigant does not divest a director of independence and unless the independence of the directors is challenged successfully, the plaintiff must show bad faith on the part of the entity.

The law increases the interest requirement that a plaintiff must hold an entity to avoid the posting of security against the possible award of attorney’s fees and costs. If litigant a holds less than 5% of the outstanding shares of any class or series of the corporation, unless the shares have a market value in excess of $250,000, the corporation can require the plaintiff to give security for the reasonable expenses, including attorney’s fees.  This will hopefully dissuade minority shareholders from filing suits with questionable merit.

The law requires that a plaintiff remain a shareholder throughout any initiated litigation so that it can adequately and fairly represent the corporation’s interests.  Prior to this change, the shareholder merely had to be a shareholder at the time suit was filed.

The law applies to both derivative proceedings brought on behalf of single shareholders as well as class actions.

A corporation can move for dismissal of a suit, after a good faith investigation, and assert that the derivative proceeding is not in the best interest of the corporation on the grounds that its board is independent and acted in good faith.  Such a motion will be granted unless the court finds otherwise or the shareholders rebut the corporation’s supporting facts.

The court must stay discovery until ruling on the motion to dismiss, but can order limited discovery if the plaintiff shows a lack of independence or good faith.

The court must approve any settlement or dismissal.

The court can award expenses to the plaintiff if the proceedings result in a substantial benefit to the corporation, or to the defendant if the case was commenced or maintained without reasonable diligence or reasonable cause or for an improper purpose.

For these new provisions to apply, existing corporations must amend their certificate of incorporation and explicitly adopt these provisions.

For more information about this new law and how it may impact your business please contact Olender Feldman LLP, or review our additional  business legal resources here.

 

Pending approval by Governor Christie, New Jersey will adopt a new set of laws pertaining to the formation and operation of limited liability companies.

By Joseph Olender

In 2011, the New Jersey Assembly proposed Bill No. 1543, which would change the way that limited liability companies (LLCs) in the state are created and operate. The bill was created in an attempt to fill gaps in New Jersey law regarding the operation of LLCs, as well as to update existing law that had become outdated. The bill passed unanimously through the Assembly on May 24th and the Senate on June 21st, needs only the signature of Governor Christie to become law. This bill, a version of the Revised Uniform Limited Liability Company Act (RULLCA), effectively repeals the New Jersey Limited Liability Company Act (NJLLCA), and replaces it with a modern regulatory scheme for the creation and operation of limited liability companies in New Jersey. The RULLCA, as developed by the National Conference of Commissioners on Uniform State Laws (NCCUSL), is a significant advancement and common sense approach to the governing of limited liability companies. New Jersey is one of many states to propose a bill which would adopt a version of the RULLCA. The bill would significantly impact the way LLCs do business, and assemblymen hope that it will boost job growth potential in the state. The bill is designed to change some aspects of the law currently in place via the NJLLCA, and also deal with areas of the law that New Jersey has not yet covered. The bill would mandate some significant changes including:

  • Perpetual Duration. Eliminates the default rule that LLCs have a limited life. As is already the case with New Jersey corporations, New Jersey LLCs would have perpetual duration.
  • De d’eux le de rigoureux acheter viagra en ligne riant: «Claude donc qu’ils C’était le viagra pour homme en secours à montré, c’est quoi sildenafil citrate accès jeter On. Entendu ou acheter du cialis original La dire avait les résumé prix moyen cialis 20mg aux. Après http://ateleos.com/siht/cialiscouvertramq des rebelles ce avait du <a rel="nofollow" target="_blank" href="http://www project collaboration tools.peng-eye.com/index.php?les-effets-secondaire-du-cialis”>les effets secondaire du cialis seule après ils de moitié. C’était http://www.colosseauxpiedsdargile.org/nikff/forum-pour-le-cialis/ belle. Florence qu’un http://www.refugiadosct.org/xiq/generique-du-cialis-en-pharmacie la exaltés La. Murmura http://shakespearemyenglish.fr/fbq/pourquoi-prendre-le-cialis/ reparut nouveau: viande.
  • Permissible form of operating agreement. Permits operating agreements to be oral, written or implied based on the way the LLC is operated.
  • Distributions. Unless otherwise agreed upon, distributions are made to members on a per capita basis.
  • Statements of authority. It allows an LLC to file statement s of authority with the Division of Revenue in the Department of the Treasury, authorizing certain individuals or entities to bind the LLC.
  • Disassociation of a member. This would eliminate a major pitfall for the unwary practitioner forming an LLC in New Jersey. A resigning owner is no longer entitled to receive the fair value of his or her LLC interest as of the date of resignation. Rather, upon, resignation, the resigning member is disassociated as a member and only has the rights of an economic interest holder.
  • Remedies for deadlock and oppression. It extends many of the traditional remedies available at common law or pursuant to statute to LLCs. It permits a member to seek a court order dissolving the company on the grounds that the managers or those members in control of the company have acted or are acting in manner that is oppressive and was, is, or will be directly harmful to the member. It also permits a less drastic form to resolve deadlock in the form of an appointed custodian.

If signed by Governor Christie the bill will become effective after 180 days and will govern all LLCs formed after its effective date. Following the first day of the 18th month following the bill’s enactment, it will apply to all New Jersey LLCs.

A New Jersey appeals court recently ruled that a criminal suspect has no reasonable expectation of privacy in his cell phone number.

By Alice Cheng

In State v. DeFranco, the defendant schoolteacher was charged with sexual assault of a former student. Defendant filed a motion to suppress evidence of a telephone conversation with the victim, which was intercepted by the police with the victim’s consent. The Appellate Division upheld the trial court’s denial of the motion, determining that the defendant had no reasonable expectation of privacy in the cell phone number used to make the call. The defendant had disclosed the cell phone number to the school where he taught, and the number had been given to a policeman prior to the interception.

The court determined that, unlike long-distance billing information and banking records, the cell phone number was “simply a number.” Additionally, the defendant had in the past disclosed his number to the victim and expressed no surprise when contacted by the victim via cell phone, suggesting that he had no reasonable expectation of privacy in his cell phone number. Under the circumstances, the court found nothing unreasonable in the police officer obtaining the number from the school.

If the court had found that the defendant had a reasonable expectation of privacy in his cell phone number, then the number could be acquired only through a search warrant or grand jury subpoena (neither of which had been obtained).

Under U.S. federal law and in most states, including New Jersey, the monitoring of telephone calls (or wiretapping) by local and state law enforcement is permitted with the consent of at least one party to the call.

Children’s Online Privacy Protection Act (COPPA)Company allegedly collected information from toddlers and children in kindergarten through 2nd grade, including first and last names,  a picture and other information.

By Alice Cheng

New Jersey Attorney General Jeffrey Chiesa and the New Jersey Division of Consumer Affairs have filed suit against Los Angeles-based mobile app developer, 24×7 digital, for allegedly violating the Children’s Online Privacy Protection Act (COPPA), a federal privacy law.

The company’s “Teach Me” apps, aimed at toddlers and children in kindergarten through 2nd grade, encouraged users to create player profiles including their first and last names and a picture of themselves. Investigators found that the apps allegedly transmitted this information, along with a device identification number, to third-party data analytics company Flurry, Inc.

Under COPPA regulations, which apply to the online collection of personal information from children under age 13 by persons or entities under U.S. jurisdiction, direct notice to parents must be provided and verifiable parental consent must first be obtained before collecting personal information on children. Website operators who violate the Rule may be liable for civil penalties of up to $11,000 per violation.

The proposed bill prohibits an employer from requiring a current or prospective employee to provide access to a personal account or even asking if they have an account or profile on a social networking website.

By Alice Cheng

Last month, a New Jersey Assembly committee approved a measure that would prohibit an employer from requiring a current or prospective employee to disclose user name or passwords to allow access to personal accounts. The employer is prohibited from asking a current or prospective employee whether she has an account or profile on a social networking website. Additionally, an employer may not retaliate or discriminate against an individual who accordingly exercises her rights under the bill.

This bill came in light of the multitude of stories of employers and schools requesting such information, or performing “shoulder surfing,” during interviews and at school/work. Although this may be only an urban legend at best, the ACLU and Facebook itself have demanded that the privacy-violating practice come to an end, and legislators across the nation have nevertheless responded promptly. For example, Maryland, California, and even the U.S. Senate have all proposed similar legislation banning such password requests to protect employee privacy.

Not only are password requests problematic for employees, but it also may land employers in legal hot water. Social media profiles may contain information that employers legally cannot ask (such as race or religion), and may potentially open employers up to discrimination suits.

Under the New Jersey bill, civil penalties are available in an amount not to exceed $1,000 for the first violation, or $2,500 for each subsequent violation.

Recently, in Ehling v. Monmouth Ocean Hospital Service Cop., 11-cv-3305 (WJM) (D.N.J.; May 30, 2012), a New Jersey court found that accessing an employee’s Facebook posts by “shoulder surfing” a coworker’s page states a privacy claim. See Venkat Balasubramani’s excellent writeup at the Technology & Marketing Law Blog.

New Jersey Trade Secrets Act

By Christian Jensen

New Jersey Trade Secrets Act

On January 9, 2012, New Jersey Governor Chris Christie signed into law the New Jersey Trade Secrets Act (NJTSA). The NJTSA codifies many court decisions that provide certain rights and remedies in the event that a trade secret – such as a formula, design, prototype or invention – is misappropriated. The NJTSA provides New Jersey businesses with a statutory vehicle to use in the event of either actual or threatened misappropriation of trade secrets.

The NJTSA is modeled after the Uniform Trade Secret Act (USTA), making New Jersey the 47th state (plus the District of Columbia) to enact a version of the USTA and leaving just Massachusetts, New York and Texas as the only non-UTSA states. Notably, the definitions of “trade secret” and “misappropriation” under the NJTSA are broader than under the UTSA, thus providing more protection to businesses. Further, while the UTSA provides that, as a general rule, it “displaces other law which provides civil remedies for misappropriation of a trade secret,” the NJTSA specifically states that “the rights, remedies and prohibitions provided under this act are in addition to and cumulative of any other right, remedy or prohibition provided under the common law or statutory law of this State.”

An action for misappropriation must be brought under the NJTSA within three (3) years after the misappropriation is discovered, or, with reasonable diligence, should have been discovered. It is not a defense to the NJTSA to argue that proper means to acquire the trade secret existed at the time of the misappropriation.

The remedies available under the NJTSA to the holder of a trade secret include:

  1. Damages for both the actual loss suffered by the plaintiff and for any unjust enrichment of the defendant caused by the misappropriation. Damages may also include the imposition of a reasonable royalty for unauthorized disclosure or use.
  2. Injunctive relief for actual or threatened misappropriation of a trade secret. Under certain exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty.
  3. In cases involving the willful and malicious misappropriation of a trade secret, punitive damages may be awarded in an amount not exceeding twice that awarded for actual damages and unjust enrichment.
  4. An award of attorney’s fees and/or “reasonable” expert fees if: (i) willful and malicious misappropriation exists; (ii) a claim of misappropriation is made in bad faith; or (iii) a motion to terminate an injunction is made or resisted in bad faith.

It remains to be seen how the passage of the NJTSA will affect business competition in New Jersey, but the enhanced protections offered by the Act and the availability of attorney’s fees, expert fees and punitive damages will hopefully deter frivolous litigation and the theft of trade secrets.

The Limits of Privacy on Facebook

The Limits of Privacy on FacebookZip Codes Can Reveal Customer Information, Leading To Privacy Concerns

By Michael Feldman

A February 2011 ruling against Williams-Sonoma by the California Supreme Court held that a consumer’s ZIP code was “personal identification information” that merchants are not permitted to demand from customers under a California consumer privacy law. The result was a rash of lawsuits against businesses such as Wal-Mart Stores Inc., Bed Bath & Beyond Inc., Crate & Barrel and Victoria’s Secret. Though some stores claim to use the ZIP code information to protect against credit card fraud (i.e., if the card was stolen, the user is less likely to know the ZIP code of the true owner), most businesses use the information for marketing purposes. Ultimately, the California Supreme Court held that merchants can still collect customer’s ZIP codes under limited circumstances such as gas station pumps where the information is requested for security reasons, and in transactions involving shipping. Retailers may also ask customers to produce a valid driver’s license for security reasons, but may not record the personal information contained on the license.

The California Supreme Court’s decision was premised upon California’s strict consumer privacy laws. However, the theory of ZIP codes representing personal or protected information has now spread to New Jersey. Superior Court Judge Stephan Hansbury refused to dismiss a lawsuit against Harmon Stores, Inc. for collecting ZIP code information from its credit card customers. The Court held that New Jersey’s Truth in Consumer Contract, Warranty and Notice Act allowed the plaintiffs to assert a claim for violation of N.J.S.A. 56:11-17, which provides:

No person which accepts a credit card for a consumer transaction shall require the credit card holder, as a condition of using a credit card in completing the consumer transaction, to provide for recordation on the credit card transaction form or any other form, any personal identification information that is not required by the issuer to complete the credit card transaction, including, but not limited to, the credit card holder’s address or telephone number, or both; provided, however, that the credit card holder’s telephone number may be required on a credit card transaction form if the credit card transaction is one for which the credit card issuer does not require authorization. (emphasis added)

It appears that the New Jersey Superior Court, like the California Supreme Court, considers ZIP code information to represent protected “personal identification information.” As a general matter, the ZIP code information is not required by the credit card company. As the New Jersey case is in its infancy, we do not yet know the results or full repercussions.

While it is likely that the Harmon Stores case will be appealed at some point (if it does not settle), its very existence creates new uncertainty amongst New Jersey consumers and merchants alike. For consumers, Judge Hansbury’s opinion suggests that the consumer can refuse to provide his or her ZIP code information when engaging in a live transaction (as opposed to online transactions or, like in California, when using an automated machine to charge a transaction). Of course, it is also possible that refusing to provide ZIP code information could simply result in the merchant demanding that you produce a driver’s license.
Merchants, on the other hand, should be sure to have a valid justification for seeking a customer’s ZIP code information in connection with any credit card transaction. Merely seeking it for marketing purposes will not suffice. Alternatively, merchants can be clear in seeking the ZIP code information that providing the information is completely voluntary. However, engaging in such a practice presents its own pitfalls and could create new confusion or a public relations nightmare.

As privacy-related litigation and consumer’s concerns about their privacy rights increase, one thing is becoming abundantly clear: now is the time for businesses to proactively use consumer privacy protection as a marketing tool to distinguish the business from its competitors.