A federal appeals panel has revived a class action accusing Walmart of fraudulently charging more at checkout registers than what it advertised on store shelves.
In March 2023, U.S. District Judge Sara Ellis had granted Walmart’s motion to dismiss the claim of named plaintiff Yoram Kahn, who alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices and Uniform Deceptive Trade Practices acts, along with other state consumer protection laws and a claim for unjust enrichment. But that ruling affected Kahn’s ability to represent the class, with Ellis noting he could’ve checked his receipt and challenged the prices before leaving the store. She dismissed his claims with prejudice, but allowed for the possibility a different plaintiff could revive the class allegations.
The U.S. Seventh Circuit Court of Appeals reversed that ruling in an opinion filed July 3. Judge David F. Hamilton wrote the opinion; Judges Diane S. Sykes and John Z. Lee concurred.
Like Ellis, the panel noted the issue has dogged Walmart for more than a decade. In 2012 California levied a $2 million fine for Walmart’s violation of a 2008 order to resolve checkout pricing errors. In 2021, the North Carolina Department of Agriculture and Consumer Services fined two Wilmington Walmarts “after an investigation found repeated and excessive scanning errors that caused customer overcharges on between 3 and 7 percent of purchases each month,” Ellis wrote in March 2023. “An additional five Walmart stores, including one of the previously fined stores, had to pay over $15,000 in fines for overcharging consumers due to price scanning errors in February 2022.”
Although Kahn lives in Ohio, the purchases informing his complaint happened at a Niles Walmart in August 2022 where he said he paid a total of $1.89 more than was advertised on a total purchase of $27.69 before taxes. The panel noted that is a small amount even to one plaintiff, but potentially significant given the size of Walmart’s operations.
“We reject Walmart’s arguments that courts should overlook the realities of attempts to influence consumer behavior,” Hamilton wrote. “This case concerns the nation’s largest retailer, which allegedly stands to profit by hundreds of millions each year from shelf pricing discrepancies. It is reasonable to assume that Walmart can afford to and does hire leading consumer researchers and experts.”
With a backdrop of reasonable consumers subject to influence by things like store design and advertising, the panel continued, it found Kahn plausibly alleged Walmart engaged in a deceptive or unfair practice and did so intending customers would rely on that deception.
“It is neither ‘unreasonable’ nor ‘fanciful’ for consumers to believe Walmart will sell them its merchandise at the prices advertised on its shelves,” Hamilton wrote. “If shelf prices are not accurate, they are likely to mislead reasonable consumers.”
The panel then explained Ellis was wrong to determine the purchase receipt dispelled allegations of deception and further said Kahn’s allegations of “bait-and-switch” tactics could survive dismissal even if the price discrepancy is discovered before a customer completes a transaction.
Beyond the fact the customer cannot see prices on a receipt until after a purchase, Hamilton wrote, the receipt doesn’t include any information about prices posted on store shelves. That puts the onus on shoppers to remember or document everything to compare to their receipt and then seek recourse.
“Who does that?” Hamilton wrote. “For obvious reasons, many reasonable consumers will not undertake such audits. Some consumers lack smartphones to photograph the shelf prices as they shop, requiring them to write down or remember dozens of distinct shelf prices. Others lack the time to retrace their steps through the store, comparing their receipts against all the shelf prices.
"Even if shoppers somehow retain records of each shelf price, at checkout, many are trying to corral young children, others are skimming the tabloid headlines displayed to entice them, and still others are lending a hand to the baggers or pulling out their wallets. Shoppers can easily miss the split-second display of a price or two at checkout. Even if consumers do notice a price discrepancy on a point-of-sale display or on a receipt, they must then raise the issue to the store’s attention to resolve it. It is reasonable to infer that many consumers in that situation would be concerned about holding up the six shoppers in line behind them, reluctant to trouble a busy store manager over a few pennies per item, or unable to spare the time to track that manager down.”
The panel further said courts have routinely allowed deception lawsuits alleging companies didn’t disclose the full price of goods or services to proceed further into litigation and said Kahn’s pleading also adequately alleged an unfair practice under the Illinois Consumer Fraud and Deceptive Business Practices Act. The panel noted the claim “is not necessarily premised on intentional deception,” but contends the existence of inaccurate prices creates an oppressive, injurious situation.
Although the effect on individual consumers may be small, the panel acknowledged, “Kahn alleges that Walmart profits on the order of hundreds of millions of dollars from the aggregation of these small overcharges.” While allowing for the possibility of error in a retail network with hundreds of thousands of products, the panel also noted Kahn’s allegations of historic corporate behavior underscoring the argument the company is aware of but uncommitted to fixing the problem.
Finally, the panel said Kahn’s pursuit of an injunction under the Uniform Deceptive Trade Practices Act fails because he didn’t adequately plead the likelihood of a future legal injury absent judicial intervention. However, it did reverse Judge Ellis’ decision limiting Kahn’s ability to amend this portion of the complaint and also reversed dismissal of the class claims.
Kahn is represented by Bernstein Liebhard, of New York, which is advertising the litigation and seeking potential class members.
“We are pleased with the opinion and look forward to vindicating the rights of Walmart customers," Stanley Bernstein said in a written statement.
Walmart’s communication office issued a statement on the ruling, writing: “We’ll always work to provide our customers everyday low prices they can count on. We are confident in the evidence and look forward to arguing our case.”