Gift Card Purchaser’s Deception Suit Not Barred by Gift Certificate Law

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

The New York gift certificates statute did not bar a gift card purchaser's suit asserting deceptive practices and common law violations by Shell Oil and other card sellers for imposing “dormancy fees” against card balances, a New York appellate court has ruled.

The cards were subject to dormancy fees of $1.75 per month if not used for more than 12 months. The purchaser’s card balances allegedly were reduced to zero by the dormancy fees.

The purchaser brought a class action complaint seeking to recover damages based on the allegedly deceptive marketing of the cards and the alleged failure to disclose the dormancy fees.

Disclosure Requirements

The New York gift certificates statute (CCH Advertising Law Guide ¶33,215) regulates gift cards, as well as other types of gift certificates. The statute requires, among other things, that gift card terms and conditions be “clearly and conspicuously stated thereon” including whether any fees are assessed against the card balance.

The purchaser did not expressly plead a cause of action under the gift certificate statute. Instead, the purchaser asserted claims based on the generally applicable New York deceptive acts and practices law, the implied covenant of good faith and fair dealing, and unjust enrichment.

Deceptive Acts and Practices

A cause of action under New York's generally applicable deceptive acts and practices statute (CCH Advertising Law Guide ¶33,210) may be maintained whether or not the practices at issue are subject to any other New York law, according to the court. In addition, nothing in the gift certificates statute required a conclusion that the legislature intended to abrogate any common law remedy arising from allegedly deceptive or improper practices concerning gift certificates or cards.

The gift certificate statute's exclusivity provision—which was cited by the card sellers—preempted only local legislation concerning gift certificates or cards that was inconsistent with or more restrictive than the state statute, the court determined. Nor were the remedies granted to the state attorney general under the gift certificate statute made exclusive.

Because the suit was not preempted by the gift certificate statute, a lower court’s dismissal of the complaint was reversed. The case was sent back to the lower court for further proceedings.

The October 21 decision in Llanos v. Shell Oil Co. will be reported at CCH Advertising Law Guide ¶63,154.

More About Gift Certificate and Gift Card Laws

Subscribers to the CCH Advertising Law Guide on CCH Internet Research NetWork have access to more detailed coverage gift certificate and gift card laws in New York and more than 35 other states. A newly added Smart Chart™ gives users quick access to the types of certificates and cards that are subject to—and exempt from—the laws. Coverage of fee restrictions, expiration date restrictions, and disclosure requirements is provided, along with links to the law texts.

Information on 500 advertising-related state laws in ten categories with links to the texts is available in the Advertising Law Guide State Laws Quick Reference Smart Charts.™