The Covid-19 pandemic has caused a significant uptick in online shopping, but analysts are still projecting strong retail sales for the year-end push. It’s high season for gift cards for those friends and family members who already have everything.
It’s also the time of year when retailers cannot lose sight of important consumer protection laws regulating gift cards. There are two areas where consumers and prosecutors are still bringing actions based on gift card related statutes: mandatory cash redemption statutes, and Title III of the Americans with Disabilities Act (ADA).
With adequate precautions and training, retailers can navigate through the season avoiding lawsuits in early 2021.
Cash Redemption Provisions
Many states require retailers to provide cash redemption when requested by a consumer if the gift card’s value is under a certain sum. For example, California Civil Code Section 1749.5(b) requires cash redemption if a patron requests cash back for a gift certificate with a balance under $10.
Several states have adopted analogous provisions including: Colorado (under $5), Connecticut (under $3), Maine (under $5), Massachusetts (under $5), New Jersey (under $5), Puerto Rico (under $5), Rhode Island (under $1), Vermont (under $1), and Washington (under $5).
Often, plaintiffs or their agents time their redemption requests so that it is made after the cashier has completed the transaction. For example, in most states, if a customer purchases a $18 dollhouse with a $20 gift card, the customer may request (and the cashier must then provide) the remaining $2 in cash. Failure to issue cash refunds in these instances could lead to an action by a district attorney’s office or even a class action.
During the pandemic, Fortune 500 companies continue to be sued in situations in which cashiers did not provide cash redemptions for gift cards with balances of less than a fixed sum. Plaintiffs in such actions typically seek class settlements based on the total balance of outstanding gift cards under the statute’s monetary threshold. For many companies, the cumulative value of outstanding cards is often in the six or seven figures.
These actions emphasize the importance of ensuring that staff—particularly cashiers and location managers—understand cash redemption provisions in various states of operation. For example, all employees should know that a consumer is entitled to cash redemption even if the consumer fails to first purchase an item.
In many states, a consumer can walk into a store with a $1 gift card and lawfully demand $1 in cash. Professionally led training sessions will benefit companies seeking to refresh their employees’ grasp on these statutes. Additionally, training manuals should be revised to ensure companies have adequate refund procedures in place.
Recent Attempts to Expand ADA Laws into Gift Cards
In addition, plaintiffs have recently attempted to apply Title III of the ADA to gift cards. To date, these efforts have been unsuccessful. In late 2019, several plaintiffs filed ADA complaints against retailers in New York under Title III, alleging that the failure to offer Braille gift cards violated the law.
In these actions, the plaintiffs allegedly called defendants asking whether the defendant sold gift cards with Braille. If the defendant answered no, the consumer filed a boilerplate complaint. Yet, to have standing under Title III, a plaintiff must show a plausible intention or desire to return to the place but for the barriers to access.
In one such action, Dominguez v. Banana Republic, the plaintiff provided no facts to suggest that he would be patronizing the defendant’s store in the future where he would need to use a Braille gift card. In April, the Southern District of New York held that plaintiff had no standing to assert the ADA claims.
Additionally, the Dominguez court held that Title III only requires nondiscriminatory enjoyment of those good and services that are normally provide. So, for example, a bookstore would not be required to sell books in both Braille and standard print.
Following Dominguez, several other courts in the Southern District of New York dismissed nearly identical gift card claims under the ADA. In Mendez v. Edelman Shoe, the same court wrote, “Finally, because the Court concludes that gift cards are goods, Edelman Shoe cannot be required to offer accessible gift cards that include Braille.”
Despite the debilitating effects of the pandemic, the plaintiff’s bar will continue bringing gift-card related actions to “champion the rights” of consumers. As retailers continue to operate during these challenging times, we recommend adequate training on gift card laws on a state-by-state basis. Costly litigation is the last thing retailers can afford in these times.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Joshua Briones is a managing member of Mintz’s Los Angeles office and has served as lead defense counsel on over 500 alleged nationwide class actions in state and federal courts across the country.
Matthew Novian is an associate with Mintz in the Los Angeles office and focuses his practice on complex commercial litigation, including consumer protection matters, and copyright disputes.