Christian Schreiber, of the Mill Valley law firm Chavez & Gertler, is one of the attorneys representing Chen. In court papers, he calls the demand letters a "fraudulent business practice" because they are "likely to deceive members of the public as to their legal rights and obligations."
Schreiber told ABC News that these demand letters are specious. He claims Home Depot in the past four years has brought not a single lawsuit under California's anti-shoplifting law, which allows merchants to recover the cost of stolen items. Nor in that same time, he said, had Palmer, Reifler sued a single Home Depot customer accused of shoplifting.
Home Depot and the law firm, he said, were playing a numbers game: They don't need to go to the trouble and expense of suing. They just need to scare enough people, whether guilty or innocent, into settling their claims. About 20 percent of people who get the threatening letters, he said, settle and pay the demanded fees. That practice, he said, nets the law firm, which provides the same service for other retail clients, millions of dollars. The firm remits about 75 percent of what it collects to clients, such as Home Depot, and keeps the rest, he says.
Since clients pay the law firm nothing, the money from demand letters amounts to gravy, said Schreiber.
According to the National Association for Shoplifting Prevention (NASP), more than $13 billion worth of goods are stolen from retailers every year--more than $35 million per day. More than 10 million people have been caught shoplifting in the past five years, says NASP.
In response to a request for comment from ABC News, a spokesman for Home Depot said that although the retailer had not yet had time to review the complaint, "We do disagree that the general practice of [making] civil demands is unlawful."
Palmer, Reifler, asked for comment by ABC, did not respond. The law firm is not named as a party to the class action.
Natt Reifler, one of Palmer, Reifler's principals, was deposed in 2007 for an unrelated lawsuit. Asked how much money Palmer, Reifler collects on behalf of its clients, he replied, "under $10 million a year." The firm's typical contingency fee, he said, was between 18 percent and 30 percent. Asked to name the firm's biggest clients (as of January 2007), he responded, "The top five would probably include Walmart, Kmart, J.C. Penny, Walgreens, possibly. It's hard to say who the fifth would be."