Wal-Mart Bills Xerox for Huge Shopping Spree

DALLAS (CN) - Wal-Mart sued Xerox over a 10-hour long outage of electronic food stamp systems in 16 states that sparked shopping sprees that left shelves in several stores bare.

The world's biggest retailer sued Austin-based Xerox State and Local Solutions in Dallas County Court on Friday.

Wal-Mart claims that on one of its busiest days of the year - Oct. 12, 2013 - Xerox failed to warn that it was planning maintenance that caused the lengthy outage. It claims Xerox failed to use a backup system to process the Electronic Benefit Transfer transactions and gave Wal-Mart "false information proximately causing" $4 million in damages.

Xerox is the EBT program vendor independently hired by each of the 16 states, responsible for transferring federal money to retailers for purchases made under the federal Supplemental Nutrition Assistance Program.

"Xerox's actions and omissions prevented Wal-Mart from electronically verifying thousands of EBT transactions for its customers in over 1,400 Wal-Mart stores and Sam's Club locations," the 22-page complaint states. "Rather than turn these customers away, Wal-Mart allowed recipients using the EBT system to purchase their groceries using their EBT cards without instant verification. Wal-Mart used the longstanding and permitted 'store and forward' method of holding the unverified EBT transactions in a queue for processing by Xerox following the restoration of its system."

With the system blacked out, EBT cardholders could buy unlimited goods before Xerox's systems were restored, Wal-Mart says.

Police were called to maintain order at several Louisiana stores as cardholders went on frantic shopping sprees, according to media reports.

Several videos on YouTube and social media show bare shelves and dozens of shopping carts piled high with purchases abandoned after EBT systems were restored.

More than 420,000 transactions worth $16.1 million were stored during the outage, Wal-Mart says. It says Xerox processed and reimbursed it for "many" of the transactions, but has refused to process around 55,000 of them.

"These transactions went unprocessed because Xerox represented that its system was available to process the store and forward transactions at a time when its system actually had not been restored," the complaint states. "When Wal-Mart submitted the transactions for verification, it received generic and erroneous declines that precluded Wal-Mart from resubmitting the transactions for processing electronically."

During previous outages, Xerox processed the "store and forward" transactions as though they were occurring in real time "as soon as Xerox's system was restored," Wal-Mart says. Xerox did not immediately respond to a request for comment Monday evening.

Wal-Mart seeks actual damages for breach of contract and negligence. It is represented by Jim E. Cowles with Cowles Thompson in Dallas.

Follow @davejourno

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit