Gift Card Suit Not Barred by Receipt of Card from Employer

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

The fact that a gift card holder received the card as a gift from her employer did not bar the holder from pursuing claims for damages and injunctive relief on the ground that small-print disclosures of “dormancy fees” on gift cards violated the New York deceptive acts and practices law, a New York appellate court has ruled.

The holder also could pursue claims for breach of contract and unjust enrichment. Claims brought under the New York gift card statute were rejected for lack of authorization of a private right of action.

Disclosure of Dormancy Fee

In a class action complaint, the card holder alleged that the type size used by card issuer Simon Property Group was impermissibly small, that Simon failed to clearly and conspicuously disclose the terms of the dormancy fee, and that this conduct, combined with deceptive marketing, damaged the holder. Allegations of a card issuer's unilateral imposition of illegal and/or unwarranted fees upon its customers had been held to state a valid claim of consumer fraud. Dismissal of the holder's deceptive practices claim was reversed.

Consumer Transaction

The card holder relied on a New York civil practice rule, N.Y. CPLR Sec. 4544, which provided that a consumer contract in which the print is not clear and legible or is less than 8 points in size (5 points for upper case) may not be received into evidence on behalf of the party who printed or prepared the contract.

Even though the holder received the card from her employer, the ultimate intended use of the card was for the recipient to purchase consumer goods with it for personal, family, or household purposes, the court determined. As a result, contrary to Simon's contention, the contract at issue involved a “consumer transaction” subject to CPLR Sec. 4544. Simon's other contentions regarding applicability of Sec. 4544 had already been rejected in Lonner v. Simon Property Group, Inc., CCH Advertising Law Guide ¶63,156.

Gift Card Statute

There was no private right of action for violations of the New York gift certificate statute, the court held. The statute (General Business Law Sec. 396-i, CCH Advertising Law Guide ¶33,215) did not expressly provide a private right of action and authorized only the Attorney General to commence an action for a violation of its provisions. Other sections of the General Business Law, such as Sec. 349 governing unfair and deceptive practices, did expressly provide for a private right of action (Sec. 349(h), CCH Advertising Law Guide ¶33,210). This suggested that recognition of an implied private right of action would be inconsistent with the legislative scheme.

Injunctive Relief

The card holder could pursue a claim for injunctive relief to bar Simon from collecting dormancy fees that allegedly were inadequately disclosed. Simon contended that, pursuant to a consent order with the New York attorney general, the fee structure for all of Simon's New York cards issued on or after October 18, 2004, complied with the applicable statutory provisions. However, the consent order did not apply to cards sold prior to October 18, 2004, including the holder's card. Dismissal of the claim for injunctive relief was reversed.

The November 25 decision in Goldman v. Simon Property Group, is reported at CCH Advertising Law Guide ¶63,195.

Gift Certificate Smart Chart

A new Smart Chart™ gives subscribers to the Advertising Law Guide on the CCH Internet Research NetWork quick access to detailed information on the types of certificates and cards that are subject to—and exempt from—statutes in more than 35 states. 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™.