Attorneys: Consumer IEEPA Refund Class Actions Might Not Be Viable, B2B Suits on Rise

However, some businesses down the supply chain are suing their upstream suppliers for refunds, which could cause a cascading effect. Attorneys said this may be a more successful route for lawsuits, depending on whether contracts between companies addressed tariffs, or the event of tariff refunds.

Eric Berman of Steptoe, who specializes in consumer protection, said there aren’t specific factors that make companies more susceptible to being sued than others.

“You're damned if you seek a refund, because then the plaintiffs will say, well, you're about to get this, and you've got to pass it through to us,” he said. “You're damned if you don't file a refund, because why aren't you? You should be.”

“You're damned if you make a public statement about your intentions, because maybe that shines some attention on you,” Berman continued. “You're damned if you don't make a statement, because you should be promising to do something for us.”

Emily Tate of Frankfurt Kurnit, who specializes in commercial disputes, and Ron Kendler, a trade lawyer at Steptoe, said consumer-facing companies have largely borne the brunt of the class action suits.

“Consumer goods companies such as apparel retailers, electronics companies, and big box retailers have been the main targets,” Tate said.

Matthew Seligman, a professor at Stanford Law School, said the weakest category of class action lawsuits are ones based solely on companies raising their prices without making public statements that tied price increases to IEEPA tariffs. He said those cases typically rely on claims of unjust enrichment, that it is unfair for companies to retain refunds if they increased their prices to offset tariff costs.

"There's not a lot of precedent supporting that theory,” and consumers don’t have a legal right to a lower price “if it turns out that the seller's costs were lower than anticipated,” Seligman said.

Berman said that it will be difficult for consumers to prove that price increases were the result of IEEPA tariffs, because other factors, such as inflation, may have impacted prices.

And tariffs also differed depending on country of origin and product type, which might make determining how companies raised prices in response to tariffs complicated, Kendler added.

“Was it based on the country of origin, or was it kind of put all into one big pot and then averaged out?” he said. “That's going to vary, potentially product by product, company by company, ultimately possibly consumer by consumer.”

Seligman said a stronger category of class action lawsuits are the ones where there was “an explicit line-item charge” for the tariffs.

“I don't think they're rock solid, but I think they're stronger, because you can really clearly identify that the tariff was being passed on,” Seligman said.

Seligman said he still doubts whether this legal theory is “viable.”

“I think what the importers are going to say is, ‘yes, [we] put it on the line item for consumer communication reasons, because we wanted to explain why we were raising prices, but that doesn't change the underlying legal fact that the consumer doesn't have a legal right to get [refunds] if it turns out our costs were lower than we anticipated,’” Seligman said.

The existence of public statements would help determine how much of a refund consumers would be owed if they were to prevail, but it doesn’t change “the question of whether there's a legal right to the refund in the first place,” he said.

And it will be difficult to prove that the companies who made public statements about raising their prices in response to IEEPA tariffs deceived consumers, as the class actions being brought under consumer protection laws allege, Berman said.

“I think it is going to be challenging for a consumer protection or deception theory to work here when the plaintiff admits in its complaint that the retailer disclosed what it was going to do,” he said. “If you are disclosing this publicly, then I really think it's challenging to be held liable for deception.”

Matthew Goodin, a class action litigator, used the example of how plaintiffs in a case against Costco alleged that the chief financial officer said on an earnings call that price increases were always a last resort, and they would try to source products domestically to avoid tariffs, but they ultimately raised prices.

“I think the motion [to dismiss] there makes a very compelling argument, that there's just nothing about that statement that says we won't pass the cost of these tariffs along in some form or another.”

However, there’s a public relations aspect to the cases, he said. For example, Costco prides itself on offering low prices, and it may feel a “squeeze” for public relations reasons, and litigation can impact how consumers see their brand.

“I can see a consumer being put off if the price of some product that they buy went up significantly because of tariffs and then the company gets a $5 billion refund from the government, and they get to keep that,” he said.

Goodin said there can be proactive remediation by companies when they get sued, where, in this case, they could theoretically decide to give refunds back to the consumers unrelated to the lawsuit. However, it doesn’t make the lawsuit go away.

“The plaintiffs can typically proceed with their lawsuit, get some kind of remedy, they could get a declaratory judgment or a breach of contract determination, and still collect damages,” he said.

Berman said companies that have publicly stated that they intend to give refunds to consumers as soon as the companies receive refunds for IEEPA tariffs might reduce the risk of being sued, but it’s “not necessarily a get out of jail free card.” He said consumers might still file suits to seek a “legally binding commitment” that companies will give refunds to consumers.

Mollie Sitkowski, partner at Faegre Drinker, said these lawsuits may be “semi-successful” in getting settlements, and consumers may get a gift card out of the effort. She also said most of the big companies are in reconciliation, so they haven’t been able to file in CBP's Consolidated Administration and Processing of Entries (CAPE) system for most of their refunds. However, the cost of litigating is expensive.

Seligman said the strongest class action cases would likely be in the business-to-business context, where a sales contract “explicitly says something about tariff cost.” He said these will be the “rarest” cases, and he hasn’t seen any cases in this category yet.

“The advantage, legally speaking, for the plaintiffs in this third category of cases is that you're no longer dealing with unjust enrichment, which is sort of this free-floating legal cause of action,” Seligman said. “Instead, you're saying, ‘Hey, I have a contractual right for you to pay me,’ and that's a much stronger legal basis.”

Matthew Morrissey of Faegre Drinker said he's seen business-to-business claims, where companies further down the supply chain go to the importers of record and ask for refunds, in a June 12 Faegre Drinker webinar.

"Companies that are a little bit farther down the supply chain are going up the chain and stating that they paid increased pricing due to pass-throughs of IEEPA tariffs, and that they are in fact entitled to a refund of these sums," he said, adding he's seen letter-writing campaigns, "nasty" emails and phone calls between businesses.

Morrissey's only seen one or two complaints that affirmatively allege claims against another business, but he said he expects there will be a significant volume of business-to-business claims filed in the future. They've been filed on the basis of unjust enrichment and tortious interference with business expectancy.

"We hope that there is not a similar explosion of litigation on the B-to-B front, and we know just from our experience working on these issues that a lot of companies are trying to work it out without litigation," he said.

Morrissey said he expects to see a cascading effect where companies are trying to bring other companies higher up in the chain into the suit as well.

In consumer suits, Seligman said companies might argue against class certification by claiming that there aren’t common issues because different consumers purchased different products, but he said he doesn’t think this argument is strong. He said the plaintiffs in a class action could bring in an economist to analyze how the price was impacted by the tariffs.

“So, I don't actually think that class certification is going to be the biggest hurdle, although it will be a hurdle,” Seligman said.

“Issues like the superiority of a class action and anything that makes the named plaintiff not typical of the class can present hurdles for the plaintiffs as well,” Katie Burghardt Kramer, a partner at DTO Law, said.

Berman said some companies may have terms and conditions that require lawsuits to be handled through arbitration.

“A lot of these consumer companies … have mandatory arbitration clauses that say that in the event of a dispute about anything, you have to take that dispute to private binding arbitration,” Berman said. “If you're a plaintiff that has to go through arbitration and has waived their right to proceed on a class basis, then you're not an adequate class representative for the millions of other consumers that you’re trying to represent here.”

“How each putative class member purchased the product and from whom may create discrepancies among them based on the various terms they agreed to,” Tate said.

Instead, Seligman said the biggest hurdle will be the motions to dismiss from the companies that will likely argue that there isn’t a legal right to refunds before the suits get to the class certification stage.

Morrissey said that in the past few months he's seen a new iteration of these claims, where plaintiffs are filing because companies have failed to file for IEEPA refunds. Consumers of Amazon products filed a lawsuit against the company in May, claiming it deceived customers by allegedly declining to seek refunds (see 2605180041).

"We're seeing a few complaints that companies breach duties owed to consumers by not going to the government, getting their money back and then passing it on down the chain to consumers," he said.

Seligman said he has a “hard time seeing” class action suits alleging that companies are required to seek refunds “being successful.”

“Where's the legal right there?” Seligman said. “The only thing that kind of makes sense is, if the consumer has a legal right to a pass-through refund, then maybe they have a legal right for Amazon to pursue that refund. But that's again assuming that there's a right to the pass-through refund in the first place, which, absent special circumstances, is going to be really difficult to prove just on the basis of price increases.”

Kendler said proving that a company has or hasn’t sought refunds is complicated by CAPE not being public record.

Sitkowski said companies who sold their refund rights to avoid bankruptcy are looking to find reports and proof to show that they’re only getting a portion of their full refunds back (see 2604130052). She said she doesn’t know what happens in those lawsuits, and whether people would try to sue the private equity firms that bought the refund rights.

“It's just, it is a mess, probably unlike any we've seen for a long time,” she said.

Berman said the class action lawsuits likely will take years to resolve.

“If these cases do not get dismissed, I would expect not months, but years of discovery and fights,” Berman said. “Even simple cases get dragged out these days, let alone cases like this.”

Berman said there is a high likelihood that the class actions will be appealed, and it might be an issue that reaches the Supreme Court.

“I think that there is enough at stake here, and certainly these are well-resourced defendants, that I would not be surprised if any or all of them didn't appeal,” Berman said. “This is a significant question involving administrative trade policy. I could see the Supreme Court taking an interest in it.”