Wednesday, October 15, 2008

Gift Card Purchaser Brings Consumer Fraud, Truth-in-Notice Suit

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

A gift card purchaser has filed a class action complaint asserting that Foot Locker, Inc. violated New Jersey law by selling gift cards providing for the charge of a “dormancy fee” after 12 consecutive months of non-use. The purchaser claims that Foot Locker violated the gift certificate statute contained within the New Jersey Consumer Fraud Act and the state’s Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA).

The purchaser seeks actual damages, statutory damages, and injunctive relief on behalf of a putative class of consumers who purchased Foot Locker gift cards in New Jersey on or after April 4, 2008.

Foot Locker has removed the case from state court to the federal district court in Trenton (docket no. 3:08-cv-05003-AET-TJB). Invoking federal jurisdiction under the Class Action Fairness Act, Foot Locker alleges that the amount in controversy exceeds $5,000,000. In a declaration to the court, the company’s gift cards manager has stated, based on a review of business records, that since April 4, 2006, Foot Locker has sold more than 50,000 gift cards in New Jersey.

Gift Certificate Statute

The New Jersey gift certificate statute provides that no dormancy fee may be charged against a gift card within 24 months immediately following the date of sale or following the most recent activity or transaction in which the card was used.

The statute also imposes disclosure requirements. These include a notice of any expiration date or dormancy fee printed in at least 10-point font, on the gift card, sales receipt, or package, along with a telephone number which the consumer may call, for information concerning any expiration date or dormancy fee.

The purchaser alleges that Foot Locker violated the statutory dormancy fee limitation by selling a $25 gift card stating that a service fee of $1.50 would be deducted from the remaining card balance after 12 consecutive months of non-use. The purchaser further alleges that Footlocker’s disclosure of the dormancy fee was printed in a smaller than the required 10-point type size and that Footlocker failed to meet the consumer information telephone number disclosure requirement.

Truth-in-Notice Statute

TCCWNA prohibits a seller from entering into a written consumer contract or giving a written consumer notice containing a provision that violates a clearly established legal right of a consumer under state or federal law. The statute also provides that no consumer contract or notice may state that any of its provisions are void or unenforceable without specifying which provisions are void or unenforceable in New Jersey.

The purchaser claims that each of Foot Locker’s violations of the gift card statute are violations of TCCWNA. In addition, the purchaser maintains that a disclaimer stating “No variance . . . allowed except where legally required” violated the statute.

TCCWNA provides that a violator is liable to the aggrieved consumer for a civil penalty of not less than $100, actual damages, or both, at the election of the consumer, together with reasonable attorney’s fees and court costs.

Detailed information and links to the texts of gift certificate and gift card statutes in more than 35 states can be accessed by subscribers to the Internet version of the CCH Advertising Law Guide through the interactive Advertising Law Guide Gift Certificate Topics Smart Chart. Information on 500 state laws in ten categories with links to the texts is available in the Advertising Law Guide State Laws Quick Reference Smart Charts.

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