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Law360 (November 9, 2020, 8:11 PM EST) -- Walmart can't shake all of a proposed class action over its temporary return policy amid the COVID-19 pandemic, a California federal judge has ruled, saying the retail giant's managers inconsistently applied its rules about whether consumers can return goods.
U.S. District Judge Jesus G. Bernal said on Friday that Walmart Inc. offered a flawed argument in its bid to dismiss the suit brought by California customers Danielle Hubmer, Kelly Schwalbach and Angela O'Brien, finding that the temporary return policy posted on Walmart's website isn't the same policy that the retailer's store managers used when refusing to give full refunds for items purchased up to seven days earlier.
Judge Bernal said Walmart had at least three return policies in place — a posted 90-day policy, an "amorphous" temporary return policy posted on the retailer's website and a policy as actually reported and enforced by store managers — which damaged its future credibility and gave the customers standing to sue.
"Defendant claims that its online temporary return policy 'did not ban returns,' but its store managers told plaintiffs that they would never be able to return their goods," Judge Bernal wrote. "Defendant's managers across multiple stores were clearly implementing a different policy than is posted on its website. Posting that policy would have clarified things for plaintiffs — and for defendant's own employees."
Judge Bernal's order followed Walmart's Sept. 28 bid to dismiss the suit after Hubmer and the other plaintiffs filed an amended complaint on Sept. 4. The proposed class is composed of "thousands, if not tens of thousands" of members, based partly on "the hundreds of internet complaints which are substantially similar to plaintiffs' claim," according to the complaint.
Hubmer claims that she bought clothes and exercise equipment on April 25 at a Walmart store in Temecula, California, for $151.99. But when she tried to return her purchases two days later, the store manager cited a new COVID-19 return policy and refused to accept her items, according to her suit. The manager told her that the items would never be eligible for a refund, yet this policy wasn't posted in the store, Hubmer said.
Schwalbach similarly claims that she bought clothes in June from a Walmart in Upland, California, and was stymied in her attempt to return the items when store managers cited a new COVID-19 return policy. O'Brien claims to have bought clothes in April and May at stores in San Jacinto and Murrieta, California, and she also alleges that she was prevented by managers from making returns based on an unposted policy.
The amended complaint alleged six causes of action, including violation of California's Consumers Legal Remedies Act, fraudulent and unfair business practices, as well as unlawful business practices in violation of the California Business and Professions Code, breach of contract, violation of a state law requiring "conspicuous display" of a retailer's return and exchange policy and negligent misrepresentation.
Judge Bernal dismissed the first three counts of state business law violations, but gave Hubmer and the other plaintiffs leave to amend their counts and cure their factual deficiencies. The breach-of-contract and "conspicuous display" counts remain, but the judge tossed the negligent misrepresentation count, saying it's barred by the economic loss doctrine.
The lead plaintiffs and proposed class seek compensatory damages as a result of Walmart's alleged breach of contract and restitution and compensatory damages as a result of the retailer's purportedly unfair and fraudulent business practices.
Walmart spokesman Randy Hargrove told Law360 on Monday, "We are pleased the court dismissed several of the plaintiffs' claims, and we plan to defend the company against those that remain."
A lawyer for Hubmer and the other plaintiffs, Mitch Kalcheim of Kalcheim Law Group PC, told Law360 in an email Tuesday afternoon that his clients are pleased that the judge "recognized the flaws in Walmart's legal arguments."
"Had Walmart simply taken the minimal steps proscribed by California law and posted a conspicuous return policy within its stores, we would not be here today," Kalcheim wrote. "However, the senior policymakers at Walmart failed to instruct its store managers to do so. That failure created confusion and deprived plaintiffs and many other consumers the ability to return items they did not want or need."
Judge Bernal has given the plaintiffs until Nov. 25 to file an amended complaint.
Hubmer and the other plaintiffs are represented by Mitch Kalcheim of Kalcheim Law Group PC.
Walmart is represented by Jeffrey A. Rosenfeld, Rachel E.K. Lowe, Lisa Garcia and Stuart Plunkett of Alston & Bird LLP.
The case is Danielle Hubmer v. Walmart Inc. et al., case number 5:20-cv-01369, in the U.S. District Court for the Central District of California.
--Editing by Nicole Bleier.
Update: This story has been updated with a comment from Hubmer's legal counsel.
For a reprint of this article, please contact reprints@law360.com.
