(Photo: IlliniGradResearch via Wikimedia Commons.)

A federal appeals court has dismissed a proposed class action filed on behalf of Redbox customers in California, after concluding the kiosk retailer didn’t illegally ask for their ZIP codes.

The U.S. Court of Appeals for the Ninth Circuit held on Friday that Redbox Automated Retail LLC, which rents out DVDs and video games for $1 per day from red kiosks, does not violate California’s Song-Beverly Credit Card Act of 1971 because its credit card transactions, which require customers to enter their ZIP codes, are used as deposits in case they fail to return the products.

“The credit card information permits Redbox to collect the additional amount owed should the customer choose to keep the movie or game for additional days or if it is never returned,” Circuit Judge Richard Clifton wrote.

The panel rejected the plaintiffs’ view that no deposit actually occurred because Redbox doesn’t actually charge the credit card at the time the customer enters his or her ZIP code.

“The credit card of the Redbox customer is given as a pledge or security, whether or not any funds are actually drawn by Redbox from the customer’s account in advance,” Clifton wrote. “Nothing indicates that the Legislature intended such a distinction, and plaintiffs have not provided a logical explanation for such a distinction.”

Redbox attorney Eric Miller, co-chairman of the appellate practice at Seattle’s Perkins Coie, declined to comment. Robin Workman of San Francisco’s Qualls & Workman, who represented the named plaintiffs, did not return a call for comment.

The decision was the latest to carve out case law over the Song-Beverly Credit Card Act, which prohibits retailers in California from collecting certain personal identification information when customers use their credit cards for purchases. In 2011, the California Supreme Court found in Pineda v. Williams-Sonoma Stores Inc. that ZIP codes were “personal identification information” under the act.

In a dissent, Circuit Judge Stephen Reinhardt wrote that Redbox, which caps rentals at $25 no matter what happens to the DVD or video game, asks customers for their ZIP codes as part of their purchase—not to ensure a deposit. He also disagreed with U.S. District Judge Jacqueline Nguyen’s dismissal of the case, which was based on a separate finding that the Song-Beverly Act did not apply to kiosk or online transactions.

Contact Amanda Bronstad at abronstad@alm.com.