OAKLAND, Calif. (CN) - A class action accuses Home Depot of using "demand letter mills" to shake down customers for arbitrary and unjust "damages" for civil shoplifting charges, with false threats of criminal prosecution.
Lead plaintiff Jimin Chen claims Home used civil shoplifting law "to intimidate consumers into paying money to which Home Depot is not entitled."
In his lawsuit in Superior Court, Chen claims he and a friend each used a pair of Home Depot work gloves to load nearly $1,500 worth of merchandise into a cart, then placed the gloves on top of the merchandise in the cart. Chen says he paid the $1,500, but the gloves - worth less than $8 together - were not scanned.
"Immediately after plaintiff paid for his merchandise, a Home Depot employee accosted plaintiff from behind, identified himself as a store security guard, and stated that plaintiff had failed to pay for the two pairs of gloves," Chen says in the complaint.
He says he and his friend were detained for 30 minutes, though they never left the store with merchandise. Chen says he was told he would not be allowed to leave the story unless he signed an "admission" and provided contact information, so he did so.
"Why? So that Home Depot would know where to send its misleading demand letters," Chen says in the complaint.
Chen claims that California's Civil Shoplifting Law allows merchants to demand $50 to $500 in damages from shoplifters. "Many retailers have begun to use the civil shoplifting law as a profit center," he says in the complaint. "They contract with third-party 'recovery services' and law firms to send out standard form letters demanding shoplifting 'damages' that they unilaterally determine and that are entirely arbitrary."
The attorneys and "recovery services" do not investigate the merits of the claims, do not have the authority or intention to sue if the alleged shoplifter fails to pay, and do not initiate actions to recover statutory damages, Chen says. They send the demand letters to shake down the consumers, and split the money with the merchants.
"The demand letters are crafted to frighten consumers into believing that failure to pay the amount demanded may result in criminal prosecution, subject them to a civil suit, and put them at risk of liability for significant additional damages that the merchant has no legal right to recover. Consumers, fearful and ignorant of the falsity of these threats, pay millions of dollars each year in satisfaction of these misleading and unlawful demands," Chen says in the complaint.
Home Depot uses the Florida-based law firm, Law Offices of Palmer, Reifler & Associates, to help it execute this "unlawful scheme," Chen says. He claims that for four years the law office has sent more than a million demand letters a year to Home Depot customers.
The law office is not a party to this lawsuit.
Chen says demand letters to California customer refer to the California penal code, but are not authorized in California.
"Home Depot's demand letters utilize threats and a smoke screen of legalese to intimidate consumers into paying money to which Home Depot is not entitled," Chen says in the complaint.
He says the intimidation begins when customers are detained at the store and accused of shoplifting. Home Depot employees give them a written warning that they may "face both criminal charges and a civil claim," and pay a fine or a civil penalty. The warning says the customers may be subject to further liability if they do not pay, Chen says.
"Days later, Palmer Reifler sends a form demand letter for an arbitrary sum threatening that if 'payment [is] not made on time,' Home Depot may choose to make a higher request or institute litigation in which it 'will likely seek any available attorneys' fees, court costs, and other legal expenses.' [But] Home Depot has no right to recover such fees and expenses under California Law," Chen says in the complaint.
If the customer does not pay or respond to the initial demand letter, the law firm escalates the demand amount and again threatens litigation and liability, Chen says. He claims Home Depot demanded that he pay $350 in the first demand letter, and $625 in the second letter.
"Plaintiff brings this class action to declare Home Depot's practices unlawful, unfair, and fraudulent, to halt the practices, and to obtain restitution for similarly situated California consumers," Chen says in the complaint.
He is represented by Nance F. Becker with Chavez & Gertler, in Mill Valley.
Home Depot did not immediately respond to requests for comment.