Stolen Profits: Civil Shoplifting Demands and the Misuse of Neb. Rev. Stat. Section 25-21,194

• Publication year: 2021

95 Nebraska L. Rev. 28. Stolen Profits: Civil Shoplifting Demands and the Misuse of Neb. Rev. Stat. Section 25-21,194

Stolen Profits: Civil Shoplifting Demands and the Misuse of Neb. Rev. Stat. §25-21,194

Ryan Sullivan, Daniel Gutman and Chris Schmidt(fn*)

TABLE OF CONTENTS

I. Introduction .......................................... 29

II. Background ........................................... 32
A. Civil Shoplifting Statutes Generally ............... 32
1. General Authority and Amount Recoverable . . . . 33
2. Civil Demand Letters .......................... 35
3. Collection of Damages and Penalties Under Civil Shoplifting Statutes ........................... 36
B. An Overview of Nebraska's Civil Shoplifting Statute ........................................... 38
1. The Origins of Nebraska's Civil Shoplifting Statute ........................................ 39
2. The Statute as Amended ....................... 40
3. Limits on Pre-Litigation Demands Under Neb. Rev. Stat. §25-21,194......................... 41
a. General Loss-Prevention Costs ............. 44
b. Anticipated Litigation Expenses ............ 46

III. Advising the Client ................................... 48
A. Pay the Demand .................................. 49
B. Ignore the Demand ................................ 49
1. Defending a Claim ............................. 52
2. Liability for Attorney's Fees ................... 53
3. Impact on Credit Rating ....................... 54
C. Affirmative Legal Challenges ...................... 55
1. Federal Challenges ............................ 56
a. Fair Debt Collections Practices Act ......... 56

1

b. Racketeering Influenced and Corrupt Organization Act ........................... 59
2. Nebraska Consumer Protection Act ............ 61
a. Standing to Sue Under the NCPA .......... 62
b. Unfair or Deceptive Business Practice ...... 66
c. Trade or Commerce ........................ 68
d. Affecting Public Interest ................... 71
3. Declaratory Judgment ......................... 72

IV. A Call to Action ....................................... 77
A. Legislative Repeal ................................. 77
B. Legislative Amendment ........................... 81
C. Education and Enforcement ....................... 85

V. Conclusion ............................................ 86

I. INTRODUCTION

Imagine a prospective client-we'll call her Samantha Smith- walks into your office and needs your help. She was caught shoplifting Zicam and vitamin C tablets from the local Walmart. Her six-year-old daughter had the flu, and without health insurance, Samantha could not afford prescription medication. A security guard saw the act, confronted her, and led her back to a small room in the rear of the store. The local police arrived after a few minutes and issued her a citation. According to Samantha, she fully cooperated, confessed on the spot, and personally observed the recovered items- valued at approximately $20-being placed back on the shelf as she left the store.

Surprisingly, however, Samantha did not come to you to discuss her criminal case-all charges were dismissed upon her successful completion of a criminal diversion program.(fn1) Instead, Samantha

2

wants your advice on a letter she received from an attorney representing Wal-Mart Stores. The letter references the shoplifting incident and demands payment of $200 "in accordance with Nebraska Rev. Stat. §25-21,194."(fn2) The letter further demands the amount be paid within thirty days, implying further action would be taken upon failure to do so. Confusion sets in. The charges were dismissed and the stolen items were returned to the store's shelf without damage. On what grounds does Samantha owe the retailer $200? This must be a scam, you conclude.

Unfortunately, it's not a scam-at least not one explicitly prohibited by law. Millions of these "civil demand" letters are sent by Wal-Mart and other retailers every year to individuals accused of shoplifting.(fn3) The concept is known as civil recovery(fn4) and is authorized by state civil shoplifting statutes.(fn5) Retailers often partner with collection firms to capitalize on their statutory right of recovery.(fn6) Laws authorizing civil recovery vary greatly from state to state, but in most instances allow for a remedy significantly greater than the value of the item stolen.(fn7)

The Nebraska statute cited by Wal-Mart in its demand letter to Samantha allows for recovery of property damage, cost of suit, and even attorney's fees incurred in bringing an action.(fn8) While Ne-

3

braska's law appears fairly straightforward in providing Wal-Mart the right to recover actual damage sustained, it is unclear on what basis Wal-Mart derived this suspiciously round amount of $200-particularly where the retailer incurred no actual damage. Does the law entitle a Nebraska merchant to account for a portion of its overall expenses related to loss prevention? Can the demand letter seek anticipated litigation costs and attorney's fees? Can a retailer demand an amount greater than it may be entitled to under the statute? This Article concludes the answer is "no" to all of the above, and that retailers' practice of demanding arbitrary amounts from Nebraskans under section 25-21,194 is improper, unfair, and deceitful.(fn9)

Civil shoplifting demand letters put individuals like Samantha at a crossroads: pay it out of fear of the threatened or implied consequences, ignore it and hope it simply goes away, or take affirmative action to challenge the retailer's demand. This is a particularly daunting decision for most recipients given the criminal-civil overlap and the intimidating nature of the letter itself. The demand, after all, is printed on "official" attorney letterhead,(fn10) and asserts the amount demanded is "in accordance" with state statute. In this way, the letter implies payment of the amount stated is required as a matter of law.(fn11)

Assuming a recipient is in a position to fight the claim, on what grounds and through what mechanisms can the demand be challenged? And, considering retailers' misuse of the statute, is legislative action needed? This Article addresses these questions by exploring the origins and nature of civil shoplifting statutes generally, and the legislative history and intent of Nebraska's provision specifically. This Article is intended to serve as a practical blueprint for advising a client who has received a civil demand letter of this nature. To this end, the Article highlights the limitations on recoverable damages

4

under Nebraska's civil shoplifting statute and discusses potential legal claims which could be brought against those who abuse or otherwise misapply the statutory cause of action.

Part II provides essential background information on civil recovery, with section II.A discussing the general nature and utilization of civil shoplifting statutes in other jurisdictions and section II.B analyzing Nebraska's civil shoplifting statute and the limitations on recoverable damages under Nebraska law. Part III offers analysis and appraisal of the three options available to letter recipients: ignore it, pay it, or challenge it. This Article concludes that while a state-based consumer claim or a federal extortion-based claim may have merit, most recipients would be wise to simply ignore the demand and use the limitations discussed herein to defend the suit if filed. Lastly, Part IV highlights retailers' frequent misuse of Nebraska's civil shoplifting statute and the inadequacy of the legal remedies available for citizens caught in its web, and thus calls for lawmakers to repeal, amend, or otherwise make sufficiently clear the proper scope and application of the statute.

II. BACKGROUND

A. Civil Shoplifting Statutes Generally

In 2014 alone, shoplifting and other incidents of fraud cost the retail industry nearly $44 billion.(fn12) To combat the problem, states impose harsh penalties for acts involving theft. In Florida, for example, shoplifting $10 worth of merchandise can result in sixty days in jail and up to $500 in court fines and fees.(fn13) Similarly, in Nebraska, shoplifting a candy bar can lead to six months imprisonment, $1,000 in fines, or both.(fn14) In addition to these extreme criminal penalties, all fifty states have adopted civil shoplifting statutes, which provide retailers a special civil cause of action against individuals who shoplift from their stores.(fn15) These statutes, which operate independently of

5

and in addition to the respective state's criminal sanctions,(fn16) have the stated intent of transferring the costs associated with stolen goods and theft-prevention measures from the retailer to the shoplifter.(fn17) In this way, the laws operate as cost-shifting statutes, at least in theory, making the shoplifter responsible for loss-prevention costs, as opposed to the merchant (or the merchant's paying customers).

1. General Authority and Amount Recoverable

The amount of damages recoverable under each state's civil shoplifting statute varies considerably. Of particular significance with these state-by-state distinctions is whether and how much the retailer is able to recover in additional civil penalties-those amounts above the actual damages(fn18) -associated with a particular act of theft. In Louisiana, for example, merchants can recover "the retail value of the merchandise taken . . . plus damages of not less than fifty dollars nor more than five hundred dollars."(fn19) These additional civil penalties

6

are purportedly designed to help offset the general cost of employing security personnel and maintaining other theft-prevention services.(fn20) Most states also allow for the recovery of court costs and attorney'sfees.(fn21)

In all but one state, convicted shoplifters are subject to two monetary...