Circuit City Stores - Criticism and Controversy

Criticism and Controversy

In 2005, Circuit City agreed to pay $173,220 in settlement and investigation reimbursement costs due to a false advertising claim in a 2004 New Jersey court case. The court found that important information pertaining to sale items was purposely obscured within the advertisement, thus potentially deceiving customers.

The same year, Harris and Kaufman, Attorneys at Law, successfully represented a class action suit of Circuit City employees caught in an unfair arbitration agreement. The court's ruling in Gonlugar v. Circuit City Stores, Inc., found the store's arbitration agreement to be "tainted with illegality." The arbitration agreement was found to be so one-sided that it was unconscionable. Harris and Kaufman maintained the arbitration agreement bound only the employee to arbitration, required the employee to pay fees to Circuit City for initiating the arbitration (Circuit City paid no such fee), imposed a shortened statute of limitations on the employee (not on Circuit City), and prohibited class actions.

During the week of August 31, 2007, the California Supreme Court ruled that the Circuit City arbitration agreement, which all 46,000 employees were required to sign, violated the state's labor laws and that Circuit City employees may sue the store for labor law violations despite having signed it. The document requires employees to waive their right to sue their employer and establishes a cap for damages regarding any wrongdoing on the part of corporate or management, which violates California's well-established law on arbitration agreements.

Circuit City's City Advantage Plan was also challenged in a United States District Court in Massachusetts. The plaintiffs' claim concerned Circuit City's cancellation of its warranty plan without full disclosure of the plan at the time of sale. The plaintiffs cited breach of contract, unjust enrichment, and violation of the Massachusetts Consumer Protection Act. Circuit City requested the matter be dismissed. The court, however, upheld the plaintiffs' claim that the monies paid for the protection plan be reimbursed and credit be issued for non-working goods returned.

Liquidators handling the sale of remaining Circuit City inventory have also become the target of consumer complaints, not only for often-uncompetitive pricing of items but also for an "all sales final" policy which allows the sale of defective or damaged merchandise at former Circuit City locations with no recourse afforded to the consumer.