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Yes, Walmart, You Are in Fact Responsible for What You Sell

posted by Bob Lawless

The Consumerist posted a story about a man who purchased prepaid debit cards from Walmart only to discover that the debit cards in the package were not Vanilla MasterCards as labeled but instead gift cards from other stores that had virtually no stored value left on the card. OK, so someone had tampered with the cards, and Walmart refunds the money. Nope, Walmart denied any responsibility, saying that its customer's recourse had to be against Vanilla MasterCards, the company that sells the cards. Amazingly, Walmart stuck to that position even after the local NBC affiliate got involved (like the Consumeristit seems a good idea to warn readers that the link autoplays a video).

Every now and again I see these sorts of stories where a merchant is trying to put legal responsibility for a product back on its supplier. It does not work that way. The customer's contract is with the merchant. If the product is not as warranted, the merchant has to make good with its customer and then seek recourse back to the supplier. A merchant might be able to sometimes disclaim these responsibilities in advance, but in the typical consumer setting, it would be unusual that these disclaimers will have occurred in a manner that would make them effective. The problem is that the consumer is almost always stuck if the merchant refuses to make good because the dollar amounts involved do not justify the lawsuit that would be needed to vindicate the consumer's rights.

This incident reminded me of an experience of my own from a few years back. I had purchased a computer monitor from a local Circuit City store, and it failed within a few weeks. The manager at the Circuit City store refused to exchange the monitor. He agreed the monitor was defective, but insisted that I had to deal with the manufacturer. Knowing that an appeal to legal authority would only worsen my chances of getting satisfaction, I said that a huge advantage of dealing with a bricks-and-mortar location was to have a place to go to when something went wrong and that if Circuit City was not going to stand behind the products it sold there was no reason not to just buy at the lowest price from an online retailer. The store manager could only plead their low profit margins in response. I wonder how that worked out for Circuit City?

Unfortunately, an expectancy of schadenfreude is about all a consumer can hope for in these situations.

Comments

Small claims court is often an alternative that folks forget about. You dont need a lawyer and filing fees are relatively low. Companies don't want this sort of action, and will most likely make you whole.

If your local media has some consumer affairs reporter, send her/him a copy of the lawsuit.

There should be some liability here, but the question is under what theory? Unjust enrichment? Implied warranty of merchantability? Implied covenant of good faith and fair dealing?

My first inclination is to think that the UCC Article 2 implied warranty of merchantability resolves this, but I'm not sure. Is the sale of a gift card covered by Article 2 or Article 9? Is a sale of a gift card a sale of goods and thus covered by Article 2 and an implied warranty of merchantability? Or is it a sale of something else? Money? An Account? A Payment Intangible? If it is of the latter items, it is covered by Article 9, which does not have any implied warranty provisions equivalent to Article 2. But maybe there's some common law implied warranties.

More generally, I wonder if this problem reflects a change in the retail industry in which retailers are really just renting shelf space and therefore don't see themselves as responsible for the products they are selling.

Adam, I think you are overanalyzing this. The store did not sell a gift card but a piece of plastic in the shape of a gift card (at best) that it represented was a gift card. The claim would be that what was delivered was not was promised, not that was delivered did not perform as promised. I am not even sure it is a warranty claim any more than a claim that I paid for a car and you gave me a bicycle is a warranty claim.

As to Article 9, the gift card is probably a general intangible, but I think the scope provision pretty clearly takes the transaction out of Article 9. (The gift card is not money or an account, but if it were, the same reasoning would apply). But, even if Article 9 did apply for some bizarre reason, I don't see why it would preclude ordinary contractual remedies between the parties.

P.S.--And, if you don't like any of that, how about restitution as a remedy.

The reason it matters and is worth "over-analyzing" is that nobody is going to take the case unless you find some violation of a fee-shifting statute...

SYSM, I did not mean to imply the question did not matter. Indeed, it was my blog post to begin with! Rather than "over-analyzing," maybe it would be clearer to say that I don't think it is as complicated as the previous commenter implies.

If someone does need to bring a legal claim similar to these facts, I would make three arguments (in order):

1. Breach of contract (i.e., you promised to sell me item A and you gave me item B (or nothing at all))

2. Breach of warranty (i.e., the item was not as warranted, also remembering there are implied warranties)

3. Restitution (i.e., I gave you money and got nothing in return and therefore you have been unjustly enriched)

Were this to happen to me, I would cheerfully file in small claims court, serene in the knowledge that it was costing the retailer more to send someone down to the courthouse to defend the case than it would for them to just make good. Admittedly, I am a litigation paralegal, and so better equipped to do this than a random person off the street. On the other hand, I don't know jack about UCC, so my advantage isn't all that great. The point the first commenter made is well taken. The idea that a case like this is too small to litigate seems to assume that the plaintiff is going to hire a litigation team. This is just the sort of thing small claims exists for. If you lose, you are out the filing fee (28 bucks in Maryland) and half a day of your time.

Richard, the marginal value of half a day of my time (=0.25% of my total annual income) is FAR greater than the marginal value of a lawyer's time to WalMart.

The comments to this entry are closed.

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