American Express sues Pirch for $33M over disputed transactions

American Express and Worldpay, a credit and debit card processor, have each sued Pirch, alleging the luxury appliance retailer owes them almost $50 million in transaction disputes and chargebacks initiated by Pirch’s aggrieved customers.

On Wednesday, the company’s leaders emailed staff, announcing Pirch was permanently shutting down and has processed final paychecks. The San Diego County-based Pirch has several locations in Southern California, including Costa Mesa, Mission Viejo, Glendale, Rancho Mirage and San Diego.

The company halted operations in late March, leaving customers with unfulfilled orders, landlords with unpaid rent, vendors unpaid merchandise and other business stakeholders with money owed, according to court filings.

Along with millions allegedly owed, the company’s sudden closure leaves a trail of questions: Why did Pirch close, why is it not honoring financial obligations and why has it remained opaque in the face of mounting inquiries?

Also see: Pirch files layoff notice after abruptly closing stores and ghosting customers

Pirch executives have not replied to requests for comment.

Amex demands money and answers

Amex and card processor Worldpay are joining the list of stakeholders lining up to get paid by Pirch.

Since March, multiple lawsuits including the one filed by Amex in federal court on April 12, claim Pirch is withholding key information that would enable merchants and customers to recover losses.

Amex, in its complaint, says that “over 1,800 customer disputes have been filed for over $33 million in the aggregate on customer purchases with Pirch that were processed by Amex, which Amex may be forced to pay out-of-pocket because of Pirch’s failure, malfeasance and/or refusal to perform its obligations under the Card Acceptance Agreement.”

“Pirch is inexplicably withholding transaction data and information that it is contractually obligated to provide to Amex,” the complaint states.

Amex also says the lack of transparency regarding records and transactions makes it impossible for the credit card company to follow consumer protection law regarding timely processing of chargebacks, as well as to the merit of disputed charges.

Moreover, Amex alluded to “signs” of “financial fraud,” writing: “There also are signs that Pirch may have engaged in some kind of financial fraud that is ripe for inquiry and investigation, and may be careening towards an inevitable bankruptcy. Indeed, apart from its obligations to Amex, Pirch apparently owes millions of dollars to various other creditors, including various landlords and a supplier who recently sued the retailer for over $4 million in unpaid inventory. Such facts typically do not emerge in this context without the possibility of significant financial and/or accounting fraud,” the suit states.

Several other details from the suit:

• Amex has already processed $5 million in chargebacks from Pirch customers, and it is now facing an additional $33 million in disputes.
• If 1,800 Pirch customers disputed $33 million, that would put the average disputed transaction through that merchant at around $18,300.
• Amex says it is losing about $1.6 million per day.

One former Pirch sales associate, who spoke on condition of anonymity because he fears for his future employment, estimated that American Express may account for 50 percent of the company’s sales volume in terms of dollar value — with the rest being charged to other credit merchants and payment by check, wire transfer and cash.

Card processor sues for $10 million

Credit transaction processing merchant Worldpay also sued Pirch, claiming the company owes it more than $10.4 million in chargebacks that it has covered out-of-pocket.

“Worldpay has effectively been left ‘holding the bag’ for well over $10 million in reversed charges initiated by Pirch’s customers for which Pirch previously received the sales transaction proceeds,” the complaint states.

Worldpay started processing debit and credit card payments for Pirch in 2015, according to the complaint, filed in an Ohio county court.

The suit states that Pirch’s customers, “motivated by the lack of explanation, updates, or any transparency provided by Pirch” after it closed its stores, “began disputing the charges on their cards and obtaining chargebacks from the issuers of those cards in exceptionally large numbers.”

Like others suing Pirch, Worldpay claims that “Pirch has refused to give Worldpay any information” about inventory, orders and its ability to fulfill outstanding orders.

“The only response Worldpay has received is an e-mail dated March 26, 2024 in which Pirch’s chief financial officer, Mekall Kaltenbach, said she had ‘nothing to communicate’ and failed to address any of Worldpay’s questions or expressed concerns,” the suit states.

Ex-Pirch workers file complaints with state

On Wednesday, the company told its employees it was permanently shutting down and ordered them to return equipment.

“We want to thank you for your efforts over the past few months, which have been a challenge. The Board and management team explored a variety of options to chart a path forward for PIRCH, and we are disappointed to let you know that we are ceasing operations, and today will be our last day,” wrote Jan Sangl, Pirch’s chief human resources officer, in an email.

“Our final payroll has been processed, via direct deposit,” Sangl’s email states.

A screenshot was provided to the Union-Tribune by a former Pirch employee.

Three Pirch executives were copied: Chief Executive Officer Steve Smith, Chief Financial Officer Mekall Kaltenbach and Chief Operating Officer Will Dillard.

Until March, Pirch was a purveyor of luxury appliances, with about half a dozen stores throughout Southern California — and plans for a new location in Santa Monica. But on March 20, the company announced it was pausing operations. Language around the closure suggested it was temporary, though other signs pointed to a permanent halt.

Some former Pirch employees are disputing the date of their last paychecks and the conclusion of their benefits. They are alleging that Pirch did not follow the law when it laid off 40 workers earlier this month.

Liza Rogers, who worked in Pirch’s service and warranty department for 4 1/2 years, said she filed a complaint with the state on April 3 alleging the company violated employment law by not giving any notice before layoffs.

Another worker, who spoke on condition of anonymity out of concerns about future employment prospects and possible retaliation, filed a complaint that same day.

That second complaint states, in part, that employees “received instructions to cease all work-related activities and to utilize our accrued Paid Time Off (PTO) as a substitute for regular wages indefinitely.

“In the interim, there has been a systematic reduction in workforce across various departments without any transparent communication or foresight into the company’s strategic direction. This sequence of actions has led us to believe that these measures constitute a violation of the Worker Adjustment and Retraining Notification (WARN) Act, particularly in failing to furnish a mandatory 60-day notice period for closures or significant layoffs, alongside the provision of corresponding wages and benefits.”

The company filed WARN Act notices on April 4.

Customers in San Diego and Orange counties have also called for criminal investigations. A representative from the Orange County District Attorney’s Office said Thursday its office has received three complaints about Pirch.

The Union-Tribune is looking to interview current or former employees of Pirch. If you’d be willing to talk with a reporter, email roxana.popescu@sduniontribune.com.

Staff writer Lori Weisberg contributed to this report.

This story originally appeared in San Diego Union-Tribune.