Gift Card Issue - California

[swjl587]

I'm hoping someone can help. About two years ago, I bought my wife a $95 gift card to a local beauty salon as a Valentine's Day gift so she could get a massage, facial, or whatever. About two months after I bought it, the owners of the spa sold the business to another group of owners. The new owners refused to honor the card and told me that I needed to contact the previous owners to get a refund. They said they would not honor it because they only purchased the assets of the company, not the liabilities. I sent letters to the previous owners at a P.O. box that the new owners gave me but it is no longer valid.

Since I couldn't find the old owners, I requested a refund from the new owners and was told that the only thing they would do is allow me to use the gift card as a "discount" card toward the purchase of additional products or services from them. This means that in order to fully redeem the $95 dollar card, I would have to spend an additional $380 at this spa. My dealings with the new owners has been horrible. They are rude, arrogant, unhelpful people and I won't give them a cent of my money.

I have researched the California law covering gift cards but it appears to be silent on issues like this. The current owners continue to operate the spa at the same location, using the same name, same phone number, etc., as the previous owners. They are even issuing gift cards using the same card stock as the previous owners. From my perspective, as a consumer, this is the same company from which I bought the card.

I filed a complaint with the Better Business Bureau which did not help. My only other recourse seems to be to file suit in small claims court. With this in mind, I have two questions:

- Can anyone provide an informed opinion about whether or not I would win a small claims action?
- Other than small claims, are there any other options I can pursue to recover the money?

Responses appreciated.

 

[tranquility]

The absolute limit of your damages is $95. How much effort do you want to expend for that money?

 

[BL]

And seriously , it could have been used instead of sitting around for two years .

Try a complaint with the Office of Attorney General , but if they offer her services , would She really want to go after all that's transpired ?

 

[swjl587]

To "tranquility" - I realize it's only $95. I've asked myself the same question. At this point, it's more about principal. The people have been very, very rude and arrogant about the whole thing. If I believed I had a good chance of recovering, I would pursue the new owners in small claims. Hence, the reason for my original question.

To "BL" - Gift cards such as this one never expire under California law. Therefore, it doesn't matter if she waits two years or ten years. Also, she didn't wait for two years. She waited for about nine months. I've been working to get the money back since that time. Regarding accepting services, no, after what we've dealt with from the new owners, she would not be interested. As I mentioned, they offered to apply the original gift card toward 20% "discounts" on services which would require us to pay a additional $380 out of pocket to fully "redeem" the $95. This will never be acceptable to me.

Going back to my original questions, if anyone else can provide thoughts on the following I would appreciate it.

- Does anyone have an informed opinion about whether or not I would win a small claims action?
- Other than small claims, are there any other options I can pursue to recover the money?

 

[tranquility]

Even in small claims you would need to file against both the owner and the person (entity) you bought the card from. Between filing, service and, perhaps, finding out the location of the later, it will cost you more to file than you could win. You could get appropriate costs against the party the court finds liable. If you get a professional service company, you will be out about $150 up front of which $100 will be compensable against the liable party as costs. If you get friends to serve, you will be out around $50 which will be compensable as costs.

I think you have a contract with someone. One of those two parties breached. With the up front money, wait and hours and hours of time you will probably win. However, most cards in CA have an amount deducted for each month not used after it's been dormant for a period of time. Therefore, the amount you can recover will be less than the amount left on the card. This is so stores don't have a huge liabilty sitting on the books forever.

I think the legal system is not appropriate for your principal. Better is a letter to the editor, or spend the same amount of time you would spend preparing your case with a big sandwich sign explaining exactly what happened (no embellishing, only the *provable* truth) walking back and forth in front of the business during a busy time of theirs. It will hurt them a lot more and court resources won't be used up. They will call the cops who will tell them it is a civil matter and I bet the store will try to deal with you then.

 

[Zigner]

FURTHERMORE:

You don't have a case. The "new" company did NOT buy the liabilities (ie: your gift card). Your only chance is to pursue the prior company, and/or the owner of the prior company, which is now out of business.

 

[ErinGoBragh]

And just to add this tidbit, because I think a lot of people don't understand throughly understand gift cards:

A gift card is a loan. I buy a $100 gift card, I loan the company the money. The company goes out of business, I have lost out on that loan.. happened over Christmas to a bunch of people who got cards to the Sharper Image and some other businesses.

This is why sometimes cash is really the better option.

 

[swjl587]

ErynSMA – I understand your point about gift cards completely and this is the main reason why I hate them. I don’t like giving free loans to people. Only problem is, my wife loves them which is why I bought it for her to begin with.

In any event, I also agree with “tranquility” that there is a contract and, in this case, a breach. However, I disagree with the notion that small claims is not the place to try to recover based on “principle.” I think small claims is exactly where a case such as this belongs.

My concern is, as “Zigner” said, that the original contract is with the previous owners. Would a judge look at this situation and, since California is a very consumer oriented state, say that the new owners should honor the card? As I mentioned, even though it’s now owned by other people, they continue to operate under the exact same name, with the exact same signage, with the same employees, at the same location. They have tried very hard to maintain the same look and feel of the business and everything about it looks the same. As I also mentioned, they even continued issuing gift cards on the same plastic card stock as the previous owners.

From the perspective of a consumer, this is the same company. I have heard of similar situations where judges will look at something like this and, in the interest of what is fair to the consumer, say that the new company should honor the contract. I know from talking to the Better Business Bureau that this company has had several complaints filed against them since they bought it so it’s not just me that they are treating poorly. This may be another point in my favor. I will likely have to decide for myself whether or not I’m willing to roll the dice and file a claim.

Last point: Based on the type of card this is and when it was purchased, by law it’s value can’t be reduced by “service charges” or “inactivity fees.”

 

[Zigner]

Would a judge look at this situation and, since California is a very consumer oriented state, say that the new owners should honor the card?

WOULD a judge look at the situation as you are thinking? No way to tell (it's not my week to keep the FA Crystal Ball).

However, you don't have a contract with THIS BUSINESS. So I'm really not sure there is anything to enforce.
Take it to court and see what happens...won't cost you much except time. Personally, I'd value my time at FAR MORE than $95...but to each his own, I s'pose.

 

[xylene]

They said they would not honor it because they only purchased the assets of the company, not the liabilities.

People say a lot of things.

I think that statement is load of BS.

 

[VeronicaLodge]

it depends on how the business transaction to buy/sell the company actually went down. was it an asset purchase where they bought the assets and not the liabilities? if so, the judge cant really look at it any other way. was it a stock purchase? then yes, the new owner would probably have to honor and a judge would see it that way as well.

 

[swjl587]

it depends on how the business transaction to buy/sell the company actually went down.

I’m not sure of exactly how the sale of the company was structured. What I do know is that the entities involved were two separate California registered corporations. So, it could have been a stock purchase, maybe not. However, the current owners told me that they only purchased the assets, not the liabilities.

Going back for just a second to the idea of “fairness,” in a previous post “ErynSMA” mentioned Sharper Image. Let’s say someone comes along and buys Sharper Image with the intent of continuing to operate the same stores under the same names, but they tell the people holding the old gift cards, “Sorry, we only purchased the assets of the previous owners, not the liabilities.” What would happen next, of course, is a class action suit by the holders of the cards. I may be wrong but I have to believe that a judge would try to find a way to make those people whole.

 

[Zigner]

What would happen next, of course, is a class action suit by the holders of the cards. I may be wrong but I have to believe that a judge would try to find a way to make those people whole.

You ARE wrong. You are going on feelings of "fairness", not legality.

 

[VeronicaLodge]

People say a lot of things.

I think that statement is load of BS.

its absolutely not BS if it was an asset purchase not a stock purchase and it happens all the time in bankruptcies. someone or company comes in and buys specific assets or all assets of a bankrupt company and leaves all the liabilities or unnecessary assets in the bankruptcy.

 

[VeronicaLodge]

I’m not sure of exactly how the sale of the company was structured. What I do know is that the entities involved were two separate California registered corporations. So, it could have been a stock purchase, maybe not. However, the current owners told me that they only purchased the assets, not the liabilities.

Going back for just a second to the idea of “fairness,” in a previous post “ErynSMA” mentioned Sharper Image. Let’s say someone comes along and buys Sharper Image with the intent of continuing to operate the same stores under the same names, but they tell the people holding the old gift cards, “Sorry, we only purchased the assets of the previous owners, not the liabilities.” What would happen next, of course, is a class action suit by the holders of the cards. I may be wrong but I have to believe that a judge would try to find a way to make those people whole.

again, it depends on how they bought it, not what they say or what a judge might think is fair, if the literally only bought assets they will NOT BE HELD LIABLE FOR THE LIABILITIES. this is basic business law.