I'm not so sure that you're sister has a case against the department store. 1) they never charged her with anything. The "demand" letter that she recieved is a CIVIL demand. No legal charges were pressed against her or you would've recieved something from the city or county. 2) they never aprehended her and detained her, so she can't sue for unlawfully detaining her.
Now i'm not saying don't get a lawer you should deffinately look into it, but don't get your hopes up that you'll come out with a settlement. Also I am not a legal expert. I do work in LP though, and i can tell you that they did not follow correct procedures.
It is possible that she could sue them for something, but I don't see what it would be. Also you don't have to worry about getting this taken off her record, it was never on her record. Most department stores handle most shoplifting casses civily, that is they don't involve law enforcement or the court, so nothign goes on your record as long as you pay the civil demand. If they had pressed criminal charges you would know by now becuase she would've been aprehended by the LP and the police would've been called at the time this happened, then she would've recieved a citation or been arrested. Also it is very likely that the department store does not have a camera system, esepcially if it is a relatively old store. It is harder than people think to set up a camera system and have it recording or being monitored at all times unless the camera system is put into the buildings original design. So it is very likely that they do not have a camera system and they just simply have LP agents walking the floor.


