The May Department Stores Company
by
Rod Harmon
Attorney at Law
rodharmon@abusivechargebacks.com
425.402.7800
wholesaler, against The May Department Stores Company. SDG claimed
$440,000 in damages for chargebacks which were unauthorized and
unjustifiable. We claimed that May Co. breached its contracts for the sale of
goods by failing to pay all of the purchase price. May claimed, of course, that the chargebacks it deducted were either agreed to by SDG or were justifiable as damages for SDG's alleged nonconformity to the terms and conditions of the purchase contracts. We settled the suit days before trial for an amount the May Company insisted I not disclose.
Putting the chargeback dispute into court turned the tables on May Co. because we reversed the burden of proof. Instead of SDG having to prove that it had complied with its contracts, May Co. had to prove by a preponderance of the evidence that SDG had failed to comply. The law that governs the sale of goods is very clear on this point. When the buyer accepts the goods, the buyer also assumes the burden of proving that the seller breached the contract by delivering nonconforming goods. It took May Co. a while to recognize that it was not making the rules anymore.
We were also able to take advantage of two provisions of the law governing the sale of goods.
One provision requires that, after goods are accepted, the buyer must give the seller notice of breach within a reasonable time or be barred from any remedy. I was able to use this provision to great effect because May Co. failed so often to provide any notice of breach and, even when it did so, it failed to provide the notice within a reasonable time.
The second provision we took advantage of gave some definition to the meaning of "reasonable time." That provision says that the seller has the right to inspect the goods to verify the buyer's claim that they are nonconforming. If the buyer fails to provide a meaningful opportunity for inspection, the buyer loses his remedies, including the right to deduct the chargeback. This only makes common sense. How else is the seller to know that the claimed breach actually occurred? And even if there was a breach, how else is the seller to gather evidence so as to claim indemnity against his supplier?
These provisions were particularly useful when it came time to argue about
chargebacks for alleged shortages, carton label deficiencies, UPC deficiencies, and hanger nonconformities. SDG never received a chargeback notice in time to inspect and verify these alleged nonconformities. The goods were on the display racks before May's accounting department even generated a chargeback notice. SDG never received notice of breach before May eliminated any evidence of the breach (if there was any). SDG could not exercise its right to inspect, and therefore May Co. lost its right to deduct.
Finally, SDG had a number of large chargebacks that May Co. claimed were
agreed to. The problem for May Co. was that its buyers usually failed to document their agreements for markdowns and ran afoul of the statute of frauds, which requires certain agreements to be in writing in order to be enforceable.
I was able to marshal all of these arguments on behalf of SDG because we were in court. May Co. was not a law unto itself there.
Attorney at Law
rodharmon@abusive chargebacks.com
(425) 402-7800