A federal judge in Manhattan has ruled that Bob’s Discount Furniture will not have to defend itself in court against allegations that it offers “misleading” warranties.
Lead plaintiffs Renal Glover and Claudia Musella brought a putative class action lawsuit against Bob’s and insurance plan provider Guardian Protection Products, Inc. in December 2020 in New York alleging breach of contract and related non-contract claims such as negligent misrepresentation, fraud and unjust enrichment.
The claims arise out of the plaintiffs’ purchase of furniture and of a protection plan for that furniture, known as the “Goof Proof” warranty. The Goof Proof warranty is sold to customers to protect against accidental damage by liquids, food or beverage stains, pen markings, cosmetics, and rips, tears, cuts and punctures.
As part of its ruling, the New York court said Bob’s Discount Furniture can compel arbitration of the claims, meaning it can force the plaintiffs to submit the dispute to arbitration.
While the defendants’ motions to dismiss Glover’s claims are granted, Glover will be allowed to file a third amended complaint within 30 days of the order dated Aug. 12.
Bob’s Discount Furniture did not immediately respond to Sourcing Journal’s request for comment.
The New York plaintiffs alleged in their case that the discount nature of the furniture creates extra incentive to purchase the warranty, “because consumers know intuitively that lower priced furniture may not be as sturdy or resistant to accidental stains or tears as higher-priced furniture.” Therefore, it makes sense to spend extra on a warranty to cover these potential issues, the complaint states.
However, Bob’s Discount Furniture was accused of being “in the business of collecting premiums and rejecting claims” submitted for the warranty.
The plaintiffs further allege that Bob’s receives undisclosed incentives or kickbacks from Guardian Insurance for every warranty it sells to consumers, particularly that sales personnel receive bonuses and can be penalized based on the number of warranties they sell. They also say that Guardian representatives receive incentives for the number of claims they deny during various time periods.
Glover and Musella also said the warranties were misleading because “the furniture is poorly made,” and accused Bob’s of “easily and unfairly” attributing any accidental stain or rip to a product defect, when there might be cause for overlap between what caused the damage. They also claim that the retailer repeatedly denies events where a young child causes stains or other damages since they are not accidental, “but expected, and the type of events which should trigger coverage under the warranty.”
The defendants also say the company has not reasonably defined what types of stains, rips, etc., are “excessive” and the application of this criteria results in valid claims getting denied.
Additionally, they purport that the warranty costs more than it would if it were disclosed that customers would have no chance of having their claims approved.
But upon making its arbitration ruling, the New York court indicated that Glover did not adequately allege that the defendants breached the contract.
“The receipt links to the full terms of the plan, but Glover has not identified which specific term in the plan entitles her to compensation for her complaint,” the court memorandum said. “Moreover, because Glover alleges only that her sofa ‘accidentally broke,’ Glover has failed to allege specifically that the damage to her sofa fell within the ‘wide variety of accidents’ covered by the plan.”
The court memorandum also indicated that Glover failed to adequately spell out the agreement between her and Guardian, since she never had any interaction with the company.
A similar, separate class action complaint in April 2022 was levied exclusively against Bob’s by Robert Potthoff in Illinois.
Potthoff’s case highlights more specifics related to the purchase itself, claiming that the retailer sold a couch with a recliner that was not up to the quality initially represented. He said he bought the chair for $1,999 in March 2020 along with a Goof Proof warranty for $299, which he says is advertised as being able to “protect your investment from a wide variety of accidents for five years.”
Within two years of purchase, the recliner broke as he was getting out of it. Yet despite purchasing Goof Proof, Potthoff alleged that Bob’s declined to honor his warranty claim.
Potthoff argues the damage to the recliner was not anything that was caused by its “intended use” but rather because the product was poorly manufactured.
“The springs, which cause the chair to recline and return to its upright position, were defectively designed with bends too close to their edges, causing them to prematurely fail after less than two years,” the class action lawsuit stated.
In the New York case, Musella is bound to arbitration by a provision on her receipt, Judge John G. Koeltl of the U.S. District Court for the Southern District of New York ruled Aug. 12.
While Musella argued that she did not enter an agreement to arbitrate because she didn’t sign the receipt, the judge declared a party may be bound to an agreement as long as “it is evident that the parties intended to be bound by the contract.”
This includes actions like acceptance or retention of the goods purchased, or “intentionally accepting benefits under the contract, by remaining silent or acquiescing in the contract” after having the chance to avoid it.
Both lawsuits aren’t uncommon in the retail world. Last month, a Missouri consumer filed suit against Bass Pro Shops claiming the fishing, hunting and outdoor retailer misrepresented a lifetime warranty for one of its wool socks.