AUSTIN - On Friday, the Texas Supreme Court affirmed in part and reversed in part a take-nothing judgment in a breach of contract lawsuit between Wal-Mart Stores and Xerox State & Local Solutions.
Justices were tasked to decide whether a federal regulation protecting food stamp consumers and state governments in charge of the Supplemental Nutrition Assistance Program from lawsuits by retailers also gives technology contractors complete immunity from all state-law causes of action brought by retailers.
On May 27, the high court granted Walmart’s petition for review, which sought to reverse an appellate court’s decision to affirm two summary judgment wins in favor of Xerox.
The case involves a dispute between Walmart and Xerox, a company that contracts with many states to distribute SNAP benefits to lower-income citizens.
According to Walmart’s petition, on Oct. 12, 2013, Xerox’s Electronic Benefit Transfer (EBT) system failed and remained down for ten hours. Retailers all over the country, including Walmart, were unable to process SNAP transactions automatically and had to decide whether to stop selling food or to conduct the transactions using back-up systems.
Walmart argued the decision rejecting its suit to recover lost revenue was in error.
Xerox’s contended the appellate court correctly held that Walmart performed store-and-forward transactions at its own choice and liability.
According to the Supreme Court’s opinion, the central issue on appeal is whether the EBT contractor is insulated from liability under a federal regulation authorizing retailers to store and forward EBT transactions “at the retailer’s own choice and liability.”
“We hold that this regulation does not insulate third-party EBT contractors from liability to retailers,” the opinion states. “The court of appeals’ contrary conclusion led to the erroneous affirmance of summary judgment on some of the retailers’ losses and rendered the court’s analysis faulty as to the retailers’ tort claims.
“Accordingly, we reverse summary judgment as to the tort claims and remand those claims to the court of appeals to consider the EBT contractor’s alternative grounds for affirmance but affirm summary judgment on the breach-of-contract claims because the retailers have failed to produce evidence of their status as third-party beneficiaries.”
Case No. 20-0980