Quick Tip: Addressing DICK’S Sporting Goods' “Shrink” Problem on the Bar Exam

Dick’s Sporting Goods stock fell more than 20% yesterday morning after the sporting goods retailer said “shrink” is cutting into its profits.

“We thought we had adequately reserved for [shrink],” Dick's CFO Navdeep Gupta said on the company's earnings call yesterday. “However, the number of incidents and the organized retail crime impact came in significantly higher than we anticipated, and that impacted our Q2 results."

“Shrink” is the retail industry’s term for loss of inventory, which can result from shoplifting, internal theft, administrative error, vendor fraud, damage, and cashier error.

Addressing “shrink” is a common first-year torts topic, which makes it a potential testable area on the bar exam.

One can imagine a law school or bar exam scenario where a merchant, like Dick’s, sees a customer shoplift an item from its shelves. What can do the merchant do in this instance?

The merchant can take advantage of the shopkeeper’s privilege. Under the shopkeeper’s privilege—sometimes called the merchant’s privilege—a shopkeeper may detain a suspected shoplifter for a reasonable period of time if, given the circumstances, there exists a reasonable ground to do so.

According to the Restatement (Second) of Torts § 120A (“Temporary Detention for Investigation”):

One who reasonably believes that another has tortiously taken a chattel upon his premises, or has failed to make due cash payment for a chattel purchased or services rendered there, is privileged, without arresting the other, to detain him on the premises for the time necessary for a reasonable investigation of the facts. [emphasis added]

Many states have adopted statutes similar to the Restatement. For example, Ohio Revised Code Section 2935.041(A) provides that:

A merchant, or an employee or agent of a merchant, who has probable cause to believe that items offered for sale by a mercantile establishment have been unlawfully taken by a person, may, for the purposes set forth in division (C) of this section, detain the person in a reasonable manner for a reasonable length of time within the mercantile establishment or its immediate vicinity. [emphasis added]

Florida Section 812.015(3)(a) states that:

A law enforcement officer, a merchant, a farmer, or a transit agency’s employee or agent, who has probable cause to believe that a retail theft, farm theft, a transit fare evasion, or trespass, or unlawful use or attempted use of any antishoplifting or inventory control device countermeasure, has been committed by a person and, in the case of retail or farm theft, that the property can be recovered by taking the offender into custody may, for the purpose of attempting to effect such recovery or for prosecution, take the offender into custody and detain the offender in a reasonable manner for a reasonable length of time. In the case of a farmer, taking into custody shall be effectuated only on property owned or leased by the farmer. In the event the merchant, merchant’s employee, farmer, or a transit agency’s employee or agent takes the person into custody, a law enforcement officer shall be called to the scene immediately after the person has been taken into custody.

Of course, what's “reasonable” is highly subject to interpretation. As a result, the shopkeeper’s privilege can sometimes make a good law school or bar exam fact pattern (especially on essays) because it requires students and examinees to incorporate and discuss lots of facts in their answers.

As long as the merchant complies with the requirements of the shopkeeper’s privilege, the merchant is immune from civil or criminal liability for false imprisonment, false arrest, and unlawful detention.