Home Depot accused of shaking down shoplifters - KYTX CBS 19 Tyler Longview News Weather Sports

Home Depot accused of shaking down shoplifters

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Courtesy ABC News

Home Depot has intimidated thousands of customers accused of shoplifting into collectively paying millions of dollars to have such accusations dropped, even though the company has no intention of suing, a class-action suit alleges.

The suit claims that the big box retailer is using California's Civil Shopping Law as "a profit center" by arbitrarily seeking "damages" from accused customers.

According to the complaint, filed in Alameda, Calif., Superior Court, Jimin Chen and a friend went shopping at a Home Depot in San Leandro on June 6. Before loading lumber onto a cart, each man put on a pair of $3.99 work gloves, to protect their hands.

Before Chen's $1,445.90 purchase was rung up, says the complaint, he removed his gloves and left them on top of the merchandise in his cart, where they were plainly visible. The checkout personnel, however, failed to scan the gloves.

Immediately after Chen paid, and before he had left the store, he was accosted from behind, according to the complaint, by a Home Depot security guard, who told him he had failed to pay for the two pairs of gloves. Chen and his friend were taken into custody by Home Depot security for about 30 minutes, during which time Chen, because of stress and lack of air in the holding room, suffered an asthma attack.

"As panic set in due to plaintiff's asthma attack," says the complaint, "Home Depot's security guard placed plaintiff, who weighs about 115 pounds, in handcuffs."

Watch: How Much Does Shoplifting Cost You?

The suit alleges that the two accused shoplifters were told they would be allowed to leave only if they submitted personal identifying information and signed a document agreeing to stay out of the store for 90 days. They complied. Upon their release from Home Depot detention, said the complaint, they were given a one-page document titled "Notice of Intent to Exercise the Rights and Potential Remedies of Home Depot."

They were not arrested, and the police were never called, according to the complaint.

Nevertheless, according to the complaint, the notice warned them that "You may face both criminal charges and a civil claim related to this incident." It also stated, "You will soon receive further information from the Home Depot's attorneys, (law offices of Palmer, Reifler and Associates) regarding demand for the civil penalty." Failure to respond promptly, it warned, might subject them to further liability.

On or around June 10, according to the complaint, Chen received a letter from the law firm demanding that he pay $350 within the next 20 days or else risk being sued by Home Depot for theft of merchandise. This "first demand letter," stated the lawsuit, "is a standard form letter that has been and continues to be sent to hundreds, if not thousands, of individuals accused by Home Depot of shoplifting from its stores in California."

When Chen did not respond, the suit alleges that he received a "second demand letter" dated July 5 telling him he now had to pay $625. It repeated the threats contained in the first letter, which included that he might be sued by Home Depot, and, that if he lost, Home Depot would seek "damages, attorney's fees and court costs up to the maximum amounts allowed by law, which could possibly exceed the amount demanded above." If Chen opted to pay by credit card, a "convenience fee" of $14.50 would apply.

Christian Schreiber, of the Mill Valley law firm Chavez & Gertler, is one of the attorneys representing Chen. In court papers, he calls the demand letters a "fraudulent business practice" because they are "likely to deceive members of the public as to their legal rights and obligations."

Schreiber told ABC News that these demand letters are specious. He claims Home Depot in the past four years has brought not a single lawsuit under California's anti-shoplifting law, which allows merchants to recover the cost of stolen items. Nor in that same time, he said, had Palmer, Reifler sued a single Home Depot customer accused of shoplifting.

Why not?

Home Depot and the law firm, he said, were playing a numbers game: They don't need to go to the trouble and expense of suing. They just need to scare enough people, whether guilty or innocent, into settling their claims. About 20 percent of people who get the threatening letters, he said, settle and pay the demanded fees. That practice, he said, nets the law firm, which provides the same service for other retail clients, millions of dollars. The firm remits about 75 percent of what it collects to clients, such as Home Depot, and keeps the rest, he says.

Since clients pay the law firm nothing, the money from demand letters amounts to gravy, said Schreiber.

According to the National Association for Shoplifting Prevention (NASP), more than $13 billion worth of goods are stolen from retailers every year--more than $35 million per day. More than 10 million people have been caught shoplifting in the past five years, says NASP.

In response to a request for comment from ABC News, a spokesman for Home Depot said that although the retailer had not yet had time to review the complaint, "We do disagree that the general practice of [making] civil demands is unlawful."

Palmer, Reifler, asked for comment by ABC, did not respond. The law firm is not named as a party to the class action.

Natt Reifler, one of Palmer, Reifler's principals, was deposed in 2007 for an unrelated lawsuit. Asked how much money Palmer, Reifler collects on behalf of its clients, he replied, "under $10 million a year." The firm's typical contingency fee, he said, was between 18 percent and 30 percent. Asked to name the firm's biggest clients (as of January 2007), he responded, "The top five would probably include Walmart, Kmart, J.C. Penny, Walgreens, possibly. It's hard to say who the fifth would be."

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