Friday, March 30, 2018

Walmart's allegedly secret customer return blacklist could be misleading, unfair

Maestas v. Wal-Mart Stores, Inc., No. 16-cv-02597-KJM-KJN, 2018 WL 1518762 (E.D. Cal. Mar. 28, 2018)

Maestas allegedly bought a car battery from Wal-Mart that purportedly came with a replacement and refund warranty. When the battery malfunctioned and he tried to return it, Wal-Mart allegedly refused to give plaintiff a replacement or refund because his name appeared on an internal fraud database (based on allegations that he tried to use a bad check at a Colorado Wal-Mart in 2000, thirteen years before his purchase).  Because he wasn’t warned of his ineligibility for the warranty, he sued under the usual California statutory claims on behalf of two putative classes of California consumers whose names also appear in Wal-Mart’s fraud database. The court denied a motion to dismiss. 

Maestas adequately alleged an unfair business practice under Rule 8(a). He explained how the alleged unlawful business act or conduct was “immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.” The applicable test asks whether “the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided.”  Maestas clearly identified the practice at issue: Consumers on the fraud database buy products in reliance on express replacement and refund warranties without any warning that the policies do not apply to them, then Wal-Mart refuses to honor the agreements when the consumers try to use those policies. He alleged that this practice of profiting from false promises didn’t benefit consumers, and that consumers cannot reasonably discover and avoid the injury because only Wal-Mart knows the information that will lead it to reject warranty claims.

For alleged fraudulent practices, Maestas also satisfied Rule 9(b). The question was whether the public was likely to be deceived. Maestas identified what specific misrepresentations and omissions allegedly deceived him: his ineligibility for the warranties was omitted from all receipts and contracts, and he bought in reliance on the warranties.  When he tried to return the battery, a Wal-Mart employee allegedly told him his ineligibility covered “any products” for as long as he remained in the fraud database.

Wal-Mart also argued that, because the proposed class entitled to refunds included consumers who bought products other than the battery Maestas purchased, he hadn’t suffered an injury similar enough to his proposed class members to confer class standing. The court disagreed: the injury wasn’t based on the battery, it was based on the list and allegedly covered all product lines. Nor would the court strike class allegations; the certification stage was the more appropriate time to do that if appropriate.

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