Presenting a live 90 ‐ minute webinar with interactive Q&A In ‐ House Counsel Challenges With Offering Gift Cards and Coupons via E ‐ Commerce and Social Media d d d l d Navigating State and Federal Gift Card Laws, Escheat Duties, and When a Coupon Might Be Deemed a Gift Card WEDNES DAY, MAY 15, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Edward B. Chansky, Shareholder, Greenberg Traurig , Las Vegas Robert J. Herrington, Co-Chair, National Products Liability and Mass Torts Practice, Greenberg Traurig , Los Angeles Y Y en Trac, Counsel, Gap , San Francisco en Trac, Counsel, Gap , San Francisco Maria L. Zanfini, Litigation Counsel, American Express , New Y ork The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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IN ‐ HOUSE COUNSEL CHALLENGES WITH OFFERING GIFT CARDS AND COUPONS VIA E ‐ COMMERCE AND SOCIAL MEDIA NAVIGATING STATE AND FEDERAL GIFT CARD LAWS, ESCHEAT DUTIES, AND WHEN A COUPON MIGHT BE DEEMED A GIFT CARD MAY 15, 2013 Edward B. Chansky, Shareholder Greenberg Traurig, Las Vegas Robert J. Herrington, Co ‐ Chair, National Products Liability and Mass Torts Practice Greenberg Traurig, Los Angeles Yen Trac, Counsel Gap, San Francisco Maria L. Zanfini, Litigation Counsel , g American Express, New York Company
Three Fact Patterns 1. Joe’s Pizza Online “ Daily Deal” coupon: $10 for large pizza, normally $20 2. Aggregator Preloaded cards for $X good at any participating merchant 3. Premium Preloaded card issued as benefit in points/ rewards program 6
Three Issues 1. Front-end Terms of offer, including expiration date 2. Back-end Escheat 3 3. Litigation Litigation Risks and Strategy Risks and Strategy 7
Facts to Focus on • What did the consumer pay? • What did the sponsor say? • Wording of state & federal laws • Intent/ Purpose of Statutes Intent/ Purpose of Statutes • Gray Areas • Best Practices 8
Joe’s Pizza – Daily Deal 9
Multi ‐ Merchant Program 10
Points/Rewards Program 11
What are the primary forms and sources of regulation of gift cards and gift certificates? • Federal CARD Act • State laws • Restrictions and/ or prohibitions on expiration dates and dormancy fees • Cash-redemption option for remaining balances below $5 or $10 12
What's covered and what's not? What s covered and what s not? • Card/ certificate with cash-equivalent balance the consumer pays for? Generally yes. • Reward item given as premium/ gift/ prize without payment? Generally no. • Other kinds of pre-paid plans or subscriptions for services? S ometimes unclear. • Does the form/ format matter? (paper vs. electronic) • Does the wording matter? (what if you don't call it a "gift card") • What about a discount coupon? • What about a voucher for a product/ service rather than a credit for a cash-equivalent balance? 13
What is escheatment? • Under the doctrine of escheat, the state is entitled to take custody of property that has remained unclaimed or abandoned by its owner. • E Every state and t erritory of the US has unclaimed property laws. t t d t it f th US h l i d t l • Generally, the laws require a business to report and remit outstanding liabilities that have gone unclaimed by an employee, vendor or supplier, liabilities that have gone unclaimed by an employee, vendor or supplier, customer (the “ owner” ) for the period of time specified in the state’s unclaimed property laws (the “ statutory dormancy period” ). 14
How does escheatment apply to gift cards pp y g and daily deals? • Gift Cards - Y ou receive a $100 Bloomingdales gift card. (1) Y ou take it to Bloomingdales and purchase $150 worth of merchandise and pay the extra $50 out of pocket and everyone’s happy; $ p y ppy; (2) you forget about it completely or lose it; (3) you take it to Bloomingdales and purchase a blender that after sales tax costs $97.49. Y (3) k i Bl i d l d h bl d h f l $97 49 Y our gift card now has a balance of $2.51. Y ou put the gift card in your wallet, but probably are not going to pay much attention to it because what can you buy for $2.51? Chances are, you completely forget about the $2.51 because it is so insignificant. • Daily Deals - Y ou bought the daily deal for Joe’s pizza (paying $10 bucks for a $20 pizza), but to never get to Joe’s to redeem it. 15
Escheat and Gift Cards • States have reached different conclusions on the issue of whether unused gift cards are abandoned property that escheats to the state. Minority Approach : • Exclusion of GCs from abandoned property laws • Exemption for specifically defined types of Gift Cards • No expiration or escheat model Majority Approach: Majority Approach: • Unused Gift Cards are abandoned property that will escheat to the state, but there are many variables including such things dormancy period (which runs from 2 to 7 years). 16
Escheat and Daily Deals • Who is the holder of the unclaimed funds? • Who is the issuer? • What Value? • Face Value Or Purchase Price? 17
Which state’s law governs? • Y ou buy your niece or nephew a gift card in NY and send it to you nephew who is at UCLA in California. • Which state’s escheat law governs? Whi h t t ’ h t l ? 18
Priority Rules • The primary rule: the escheat law of the state of the owner’s last known address, based on the records of the holder, will apply. • The secondary rule: In situations where the holder has no address information for the • The secondary rule: In situations where the holder has no address information for the owner, the Court adopted a secondary rule (referred to as the “ back-up rule” ) that provides for escheat to the state of incorporation of the holder of the property. • In addition, the secondary rule applies not only when the rightful owner’s address is unknown, but also when the owner’s identity is unknown. 19
New Jersey, Not the Garden State for Gift Cards In 2010, New Jersey amended gift card law: (1) prohibited dormancy fees; (2) provided for an abandonment period of only two years; (3) required store value card issuers to collect the purchaser’s name and address and to maintain at minimum, the purchaser’s zip code; (4) presumed NJ to be the purchaser’s location if the gift card was sold in NJ and (4) presumed NJ to be the purchaser’s location if the gift card was sold in NJ, and the issuer did not have the name and address of the purchaser. 20
NJ Enjoined From Creating Transactional Priority Rule In January 2012, the Third Circuit affirmed the lower court’s decision and held: (1) the retroactive application of the provision in the law requiring escheatment of outstanding SVCs issued prior t o enactment of the law is unconstit utional; f t t di SVC i d i t t t f th l i tit ti l (2) the place of purchase presumption is invalid; and (3) the transactional priority rule is unconstitutional. 21
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