October 14, 2021 – Arbitration Uncertainty Sends Walmart Gift Card Class Action to Trial
To be decided at trial is whether an enforceable arbitration agreement exists between gift card buyers and Walmart. In a nine-page opinion, the appeals court relayed that although the district court, in denying Walmart’s motion to arbitrate the dispute, found that there was no need to hold a trial on “the question of arbitrability,” there still exist too many questions with regard to whether gift card buyers lawfully assented to the arbitration clause found on Walmart’s website. The court wrote that the way forward in these types of scenarios is made clear by the Federal Arbitration Act.
“If it does, the Federal Arbitration Act tells us what to do next: remand for a trial on that issue,” the filing reads.
Although neither the plaintiffs nor Walmart felt a trial was necessary, the appeals court made clear that whether there existed “mutual assent” to the retailer’s online arbitration policy was still under dispute. Mainly, the contention at issue was whether any of the plaintiffs actually used or accessed Walmart’s website, i.e., the location of the retailer’s arbitration clause, the filing relays.
The Eight Circuit found that without more facts on when, or if, any plaintiffs may have accessed the specific parts of Walmart.com that contain the company’s arbitration clause, the court was “left to guess” as to whether the dispute could legally be arbitrated.
“Among the yet-unanswerable questions are the exact location and prominence of the terms-of-use hyperlink, how many clicks it would have taken for the user to discover the arbitration provision, and whether the website changed during the relevant period,” the court wrote, adding that answers to these kinds of questions are essential to determining whether the lawsuit belongs in arbitration or litigation.
The appeals court added that “[s]imilar questions exist about the gift cards themselves,” namely that the back side of each card directs buyers to “Walmart.com for complete terms.” The court wrote that although this directive could, in theory, have put the plaintiffs on notice with regard to an arbitration clause, “the record is lacking in specifics, including the size and placement of the notation on the back, which are relevant to determining whether the plaintiffs would have been on notice to inquire further.”
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Walmart has drawn the ire of nearly 30 plaintiffs who allege in a proposed class action lawsuit that the mega retailer has failed to take adequate and reasonable measures to ensure scammers do not tamper with gift cards.
“The problem with the Walmart Gift Cards is rampant and widespread and Walmart is well-aware of the problem,” the plaintiffs allege, “yet Walmart continues to sell insecure Gift Cards.”
The 206-page lawsuit out of Arkansas alleges defendants Walmart, Walmart Stores of Arkansas and Walmart Stores East have known for some time that thousands of gift cards sold to consumers nationwide have been tampered with, resulting in proposed class members being unable to use funds loaded onto the store-brand cards. According to the suit, which outlines alleged consumer protection law violations for all 50 states, Walmart has also known that scammers who enter its locations could physically remove the security tape from gift cards, log a card’s PIN and then use that PIN to steal money eventually loaded onto the gift card by a customer. All told, consumers have lost millions due to both Walmart’s failure to ensure gift cards are not tampered with and its apparent failure to disclose the possibility that gift cards could be tampered with, according to the lawsuit, which estimates that it’s “likely thousands of customers have been harmed.”
“Walmart knew or should have known that one method the third parties were using to learn the secret eight digits involved the third parties taking possession of the cards, removing the security tape covering the PIN numbers on the Gift Cards, recording the eight digits and replacing the tamper evident tape with a commercially available equivalent substantially similar, but not identical, to the original tamper evident tape or other such means,” the lawsuit reads.
Despite its knowledge of the issue of gift card tampering, Walmart, the case argues, “has done nothing” to remedy the problem. In certain circumstances, Walmart, the lawsuit says, will send a consumer an email containing a password to activate a gift card. This option, however, was not afforded to the plaintiffs nor proposed class members, many of whom were denied access to the money on gift cards because they were deactivated and not replaced by Walmart, the case states.
With regard to Walmart’s apparent awareness of the unlawful tampering of its gift cards, the complaint points out that the retailer has “received enough customer complaints” that it should have known consumers were being denied access to the money loaded onto gift cards.
The lawsuit proposes to cover a class of consumers across the United States who bought a compromised Walmart gift card from a Walmart retail location and who either had funds loaded onto a gift card used by a third party due to tampering or had a card or cards deactivated by Walmart prior to first use that Walmart refused to replace, reactivate or refund.