Walmart can end Capital One credit card partnership early, US judge rules

By Thomson Reuters Mar 26, 2024 | 2:05 PM

By Jonathan Stempel

NEW YORK (Reuters) – A federal judge ruled on Tuesday that Walmart can end its credit card partnership with Capital One early because the bank failed to provide the required level of customer service.

U.S. District Judge Katherine Polk Failla in Manhattan said the terms of a 2018 agreement making Capital One the exclusive issuer of Walmart-branded credit cards in the United States “clearly dictate” that Capital One’s “repeated customer service failures” entitled Walmart to end their relationship.

Capital One, based in McLean, Virginia, said it disagreed with the decision and was evaluating its right to appeal.

Walmart, based in Bentonville, Arkansas, said it was pleased with the decision.

The world’s largest retailer had accused Capital One of being too slow to post many transactions to cardholders’ accounts, and failing to promptly replace many lost cards.

The problems were uncovered in late 2022 and early 2023.

Walmart said it could end the partnership if Capital One failed to meet any of 13 “critical” customer service standards at least five times in a 12-month period.

Capital One said the retailer could invoke that right only if it failed any single critical standard at least five times.

In a heavily redacted decision that reads like a grammar lesson, including the meanings of “a” and “an” and the adverbial phrase “five or more times,” Failla said the agreement’s “plain and unambiguous” terms favored Walmart’s view.

She said Capital One’s interpretation would leave Walmart powerless even if the bank failed all 13 customer service standards four times a year – 52 failures in all -for 10 years, a position Walmart called “patently absurd.”

Failla directed both companies to advise by April 19 how to resolve their remaining claims and counterclaims.

The lawsuit began in April 2023. Capital One agreed last month to buy credit card rival Discover Financial Services in an all-stock transaction valued at $35.3 billion.

The case is Walmart Inc et al v Capital One NA, U.S. District Court, Southern District of New York, No. 23-02942.

(Reporting by Jonathan Stempel in New York; Editing by Tomasz Janowski)