Breach of Contract Claim in Cash App Fraud Case 'Makes Little Sense': Walmart

Walmart “sympathizes” with Risa Potters and other fraud victims, but her claims that the retailer should have done more to protect her from a third-party fraudster “are meritless and should be dismissed,” said its memorandum of points and authorities Friday (docket 1:22-cv-0337) in U.S. District Court for Central California in Los Angeles in support of its motion to dismiss Potters' December fraud class action (see 2312110039).

Potters seeks to hold Walmart liable after an anonymous fraudster allegedly scammed her into depositing money into his Cash App account at a Walmart store. Though she doesn’t allege Walmart has a connection to the scam, or that Walmart induced her to part with her money, the plaintiff claims the retailer “is responsible because Walmart followed her instructions and processed her Cash App deposits as she requested,” it said.

Walmart maintains it has implemented “a robust anti-fraud program to help customers avoid the ever-evolving schemes perpetrated by fraudsters,” said the memorandum.

Potters brings breach of contract claims, saying Walmart failed to advise her about potential fraud and “failing to prevent her deposits," said the memorandum. But she “does not adequately plead the existence of a contract, let alone link her claim to any specific contract provision,” it said. She also doesn’t explain how Walmart “frustrated any contract provision in breach of the implied covenant.” Her theory that she contracted with Walmart for the provision of Cash App deposit services, and that Walmart “frustrated that contract” by processing her deposits as she requested “makes little sense,” the defendant said.

The plaintiff’s claim of negligence fails under the economic loss rule, which bars negligence claims resting on purely economic injuries, said the memorandum. Under “well-settled negligence principles,” Walmart didn’t owe Potters a duty to protect her from third-party criminal conduct, it said.

Potters’ statutory claims under the California Consumers Legal Remedies Act and Unfair Competition Law, fail too, because she’s not a consumer under the CLRA since she didn’t buy a tangible good or service from Walmart, the memorandum said. The CLRA claim is based on an assertion that Cash App deposits are an “illegal” financial product, it said. Her UCL claim fails to plausibly show that Walmart’s conduct -- processing Cash App deposits as requested by customers -- violates an established public policy “or is immoral or substantially injurious such that the conduct could be deemed ‘unlawful' or 'unfair,'” it said. The plaintiff also has no Article III standing to seek injunctive relief, it said.

Potters was victimized by a caller who identified himself as a police officer, said the December lawsuit. The fraudster told her a subpoena had been sent to a previous address requiring her to appear in court regarding treatment of one of her chiropractic patients. The caller said because she had not appeared, the judge had issued a $10,000 bond against her, the complaint said. The caller directed Potter to make several deposits into Cash App accounts using barcodes purportedly associated with a bond account that belonged to a court. Potters didn’t know, and Walmart didn't inform her, they were Cash App barcodes, it said.

The caller directed Potters to Walmart stores in Southern California, “where Walmart facilitated the transfers without question,” said the complaint. Walmart didn’t raise any red flags when Potters, who had never used its services, first attempted to deposit $10,000 into a Cash App barcode. Walmart also didn't inform her that a Cash App paper money deposit isn't intended for money transfers, the complaint said. Instead, Walmart allowed her to transfer $4,000 in less than 24 hours, said the complaint.