The Year In Review

As the year draws to a close, it’s worth looking back over a range of important legal developments in the world of electronic commerce, a number of which set the stage for fireworks in the months and years ahead.  Wishing all of our readers a wonderful holiday season, and the best and brightest New Year, we hope you enjoy our “top five” list.

Coming in at number five ...

Song Beverly Strikes Again: Email Address Collection Added to Potentially Worrisome Activity

As we've previously blogged, retailers who sell products to consumers in California and Massachusetts, as well as a number of other states, run the risk of costly class action lawsuits if they collect customer zip codes in connection with purchase of goods by credit card.  The prohibitions in those states, as we've explained, often go beyond zip codes, and can include -- in California, for example -- any information that does not appear on the face of the credit card.

A recent decision by the United States District Court in California involved the collection of e-mail addresses in credit card transactions, and found against a retailer on a motion dismiss -- propelling the case to trial.  That decision adopted what some might call an inordinately expansive interpretation of the underlying law by the Supreme Court of California, and made things far worse by adding an apparent misreading of the statute to the mix.  Not for the faint of heart, but certainly important for the prudent direct marketer who hopes to avoid costly and sometimes bogus lawsuits, the decision helps underscore the risks faced by even the most diligent companies -- risks high enough that companies are often forced to settle when they know in their heart of hearts that they're right.

Supreme Court Denies Petitions for Cert of Amazon and Overstock

As we recently wrote, last spring New York State’s highest court, the Court of Appeals, issued a decision upholding the state’s Internet affiliate nexus law after a challenge made by Overstock.com and Amazon.com. The Court of Appeals found that the law, which creates a rebuttable presumption of nexus for out-of-state vendors who employ in-state affiliates, satisfies substantial nexus requirements and does not violate the Due Process clause.

In September, Overstock.com and Amazon.com sought review of the decision of the Court of Appeals by filing petitions for certiorari with the United States Supreme Court. After extensive briefing by the petitioners, the State of New York, and many amicus curiae, on December 2, the Supreme Court denied the petitions for cert. (See the cases’ status here and here.)

This ends the petitioner’s facial constitutional challenge to the New York affiliate nexus law as Overstock.com and Amazon.com have now exhausted their appellate options. The decision by the Supreme Court not to hear the case, however, does not mean that every state’s affiliate nexus law is valid and enforceable. For instance, the Illinois Supreme Court held in October that Illinois’s Internet affiliate nexus statute was preempted by the Federal Internet Tax Freedom Act. The Supreme Court’s decision Monday has no impact on the now unenforceable Illinois law.