CHICAGO (CN) — A class of Walmart shoppers asked Seventh Circuit on Wednesday to save their fraud case against the world's largest retail chain.
The class, represented by an Ohioan who visited a Walmart in the northwest Chicagoland suburbs, claims the chain lists different prices for items on its shelves than what it actually charges customers in the checkout lane.
"What does plaintiff allege? That Walmart, the largest retailer in the world, has a widespread pervasive company-wide practice of posting lower prices on its shelves than it charges at checkout," Stanley Bernstein, one of the class' attorneys, argued before a three-judge federal appellate panel Wednesday.
This price discrepancy, the class argues, is a violation of Illinois' Consumer Fraud and Deceptive Practices Act and Uniform Deceptive Trade Practices Act.
The case began in August 2022 when the Ohioan shopper, Yoram Kahn, bought snacks from a Walmart in Niles, Illinois, and noticed that his receipt showed marked-up prices for the goods compared to the prices listed at the display racks.
He paid $2.28 for a jar of salsa, for example, that was advertised on the store shelf as only costing $2.00. Similarly, he paid $1.88 for a Kit-Kat bar that was listed at $1.64.
Though not exactly bank-breaking discrepancies, the increased costs represented 9% - 15% markups.
In a federal class action Kahn filed a week later, he argued this was a characteristic of Walmart stores nationwide, and cited instances of state authorities in California and North Carolina issuing five- to seven-figure fines against Walmart over similar checkout price discrepancies.
He added that, for such a rich company, even fines in the million-dollar range were insufficient deterrents.
"Store-specific fines in the thousands of dollars, and even a statewide $2 million fine — if and when Walmart is caught, and if and when state agencies elect to investigate — are not an effective deterrent to this $500-billion corporation. Walmart continues its false, misleading, unfair and deceptive pricing practices unabated," Kahn argued.
It was an argument Bernstein echoed before the Seventh Circuit on Wednesday, pointing out the financial incentives for Walmart even to modestly over-charge customers.
"If only 2% of Walmart's products are overpriced... and if they're only overpriced by 5%, which is a very, very modest, modest overprice... the math works out with a company that does $400 billion of sales per year to be a windfall to Walmart of $400 million per year, taken from consumers and given to Walmart just on overpricing," Bernstein said.
The attorney also pointed to an amicus brief from the National Retail Federation, The Food Industry Association and Illinois Retail Merchants Association, which claims that "regulatory schemes developed by government experts consider a store compliant if 98% of items are labeled accurately on the shelf."
"This is the plan. This was in the amicus brief," Bernstein argued. "They've confessed!"
It was an argument that, among others, a lower federal court didn't buy.
U.S. District Judge Sara Ellis, a Barack Obama appointee, dismissed Kahn's case last March on the grounds that Kahn was given a receipt that displayed his overpayments. Kahn could contest the price discrepancy using the receipt, Ellis reasoned, meaning Walmart had not carried out any intentionally deceptive practice as defined by the relevant state statutes.
"Kahn could, and indeed did, use [his] receipt to compare the prices Walmart charged him with the advertised shelf pricing. This comparison revealed the discrepancy and dispelled any potential deception," Ellis wrote in her dismissal order, which Kahn appealed a month later.
Daniel Blouin, Walmart's attorney, clung to Ellis' logic. He claimed in Walmart's appellee brief filing that "neither the law nor industry standard require perfection," and on Wednesday he deemed Kahn and other customers' overcharges "honest mistakes."
"That's the underlying point that they're trying to make throughout this entire lawsuit, is even in a simple situation where an honest mistake is made, my client should be held liable," Blouin said.
The attorney further accused Kahn of "shopping for a lawsuit," pointing out that the same day Kahn bought overpriced snacks from the Niles, Illinois, Walmart in August 2022, he also went to a Target down the street to buy overpriced Ritz crackers.
Kahn also filed a near-identical class action against Target the same day he filed suit against Walmart, only to voluntarily dismiss the Target suit after it was transferred to Minnesota federal court in 2023.
"He was seeking discrepancies here. He was seeking mistakes," said Blouin, with U.S. Circuit Judge Diane Sykes, a George W. Bush appointee, seeming to agree.
"He was a tester," Sykes said.
The other two judges on the appellate panel, the Barack Obama-appointed U.S. Circuit Judge David Hamilton and Joe Biden appointee U.S. Circuit Judge John Lee, seemed more skeptical of Blouin's points. Lee clarified that, at least at the moment, Kahn and his putative class weren't looking to hold Walmart liable for anything per se; they were arguing their allegations were sufficient to overturn the district court's dismissal order.
"Those are two very different things," Lee said.
Hamilton was even more pointed in his criticism, expressing skepticism that simply offering customers a receipt "washes away all potential for deception." He doubted the average Walmart customer would audit their receipts for discrepancies as closely as Kahn did.
"Retailers invest an awful lot of money into researching actual consumer behavior... and every cashier I've been around, I'm surrounded by impulse items," Hamilton said. "Candy, gum, magazines, distractions, the latest celebrity divorce and so on, everything to distract me from paying attention to whether scanned prices match what I saw and might remember."
Even so, Blouin held to the stance that Kahn's over-charged items were innocent human error by Walmart employees, not a deliberate scheme to defraud consumers.
"There is no factual support for any reasonable inference that this is anything other than a mistake," Blouin argued.
The trio of appellate judges took the case under advisement, but did not say when they would issue a ruling.
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