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September 2020

Class Action Team Secures Dismissal for National Retail Client Exposing Fraudulent Tactics

An inter-office team consisting of San Francisco partner Fletcher Alford and Chicago associate Christina Flores achieved a big win for a new firm client – a national office supply retailer – using creative lawyering to expose the case as part of a fraudulent scheme and winning a dismissal without undergoing any discovery. 

The class action complaint alleged that the named plaintiff purchased a gift card for herself, and that the retailer declined to “cash-out” the card when the balance dropped below $10 – allegedly in violation of California law. 

The allegations in this case struck the client as suspect, given that it has a written policy that requires clerks to cash out gift cards that have a balance of $10 or less.  It also seemed odd that the plaintiff, or anyone else for that matter, would purchase a gift card for her own use. 

The plaintiffs’ attorneys – a firm specializing in prosecuting gift card class actions just like this one – indicated that they had clear proof of multiple instances in which the retailer allegedly violated the law by refusing to cash-out low balance cards.  They explained that their first interaction with the plaintiff was when she approached them after being denied a cash-out and that before filing suit, they conducted “pre-suit investigations,” allegedly revealing that this was not an isolated incident.  The “pre-suit investigations” were performed at the height of the COVID-19 pandemic and when the shelter-in-place orders were in effect. 

The plaintiff’s counsel lobbied hard for an early, class-wide settlement on terms substantially identical to those on which they had previously settled multiple cases alleging similar violations of California law.  The plaintiff’s counsel further indicated that the proposed settlement would result in very little payout to the putative class because it would require class members to submit a claim to receive a $10 gift card.  The real money, of course, would go to class counsel.

It is true that most of these gift card cases settle at a very early stage – as there are few if any defense options. 

But the Gordon & Rees team was not ready to throw in the towel that easily.  Following a hunch, and using creative lawyering, Alford and Flores obtained the number of the gift card allegedly purchased by the plaintiff and worked with the client to gather all available data regarding that transaction – including, in particular, security camera video footage showing the plaintiff’s attorney himself purchasing the gift card at issue. 

Several days later, when the plaintiff’s counsel again reached out to urge an early (and, they hoped, lucrative) settlement, the firm's team revealed the results of its investigation and informed the plaintiffs’ counsel that no settlement would be forthcoming, given that this was a set-up lawsuit.  Although the plaintiff’s counsel adamantly denied purchasing the card that formed the basis for the suit, they were at a loss to explain the security video footage showing exactly that. 

Soon thereafter, the plaintiff’s counsel dismissed the case with prejudice.  Both the presiding judge and the state bar have been notified of counsel’s fraudulent scheme.  Hopefully this will deter them from victimizing other California retailers. 

The client is thrilled with the result, and has already sent the firm another case.

Fletcher C. Alford
Christina M. Flores Furman