Should the owners of unused Borders gift cards be compensated? Trustee says no
Borders Group Inc. trustee Curtis R. Smith doesn’t think the owners of unused Borders gift cards have much of a case in bankruptcy court.
A bankruptcy judge is expected to hear a case next month from two consumers who got stuck with $125 in unused gift cards to the former Ann Arbor-based bookstore chain — which closed its stores last year as part of its Chapter 11 bankruptcy liquidation.
Two consumers want to file late claims for their unused Borders gift cards.
AnnArbor.com files
The individuals say they should be allowed to file late claims for reimbursement because Borders did nothing to inform them of the claims deadline, the Wall Street Journal reported this week. They have requested the court approve their lawsuit as a class action suit to gain more heft.
During the final month it was in business, Borders recorded $156.2 million in "other revenue" — which, according to a bankruptcy filing, included the "write-on of all unredeemed gift cards issued prior to" the company's Chapter 11 bankruptcy filing in February.
Borders honored gift cards until the virtual end of its liquidation sales in September, but with Borders’ stores closed, the cards are now worthless. Competitor Barnes & Noble, which acquired Borders’ intellectual property, isn’t accepting the gift cards.
Attorneys for the two consumers who filed papers with the U.S. Bankruptcy Court's Southern District of Manhattan are targeting Borders, saying the bookstore chain didn't give proper notice that the gift cards would be worthless after its liquidation.
In court papers filed last week, Borders trustee Smith — who distributes cash to Borders creditors — said the company did its part to notify its creditors, including gift-card holders, of the deadline to file a claim.
“The gift card holders had multiple opportunities to act and mitigate any loss by either redeeming their gift cards or timely filing proofs of claim,” he said in the court papers. “Instead, they squandered these opportunities and did nothing.”
He also noted that it was “widely publicized” in news articles that people should use their gift cards before the company completed its liquidation.
He said letting the consumers join the line of creditors waiting for payment could lead to “potentially tens or hundreds of thousands of gift card claims” to be filed despite missing the claim deadline.
Read the Wall Street Journal report.
Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or email her at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.
Comments
Tru2Blu76
Sat, Jun 2, 2012 : 12:55 a.m.
Weighing in 3 weeks after a heart attack, I can only observe that people seem a lot more careless with their money than they used to be. I don't entirely blame "people" because we've all been lured into the world of "virtual money" where plastic cards and electronics have replaced our hands-on experience with actual currency for the most part. Gift cards are a great example, pick them from a rack by the register, get your credit card scanned and walk away with another plastic card which is backed (in theory) by a little slip of receipt paper which will fade away in a week if not protected. Recipients never see the money either - not like the $20 bill in an envelope which used to serve the same purpose. Small wonder some people feel cheated even though the "rules" are well known. My next "gift card" will be a cashiers check (in whatever amount) the recipient can spend as they wish on (hopefully) something real.
K Thompson
Fri, Jun 1, 2012 : 1:40 a.m.
Yeah. Yeah, publicized, I know.
K Thompson
Fri, Jun 1, 2012 : 1:39 a.m.
"widely pubicized"? Where? I don't think so. In a world without printted news, there is no "widely publicized" because there is no central location for such "publicized" info. I do have an unused gift card but question the "widely publicized" aspect. How hard did they try to contact the purchasers or receivers of said gift cards? All gift cards, Money down a rathole, let it be a lesson. Avoid gift cards. A joke, a ripoff. You think you are being generous but if the receiver doesn't cash it/use it, YOU are the chump.
bobslowson
Fri, Jun 1, 2012 : 1:58 p.m.
Ummm...with this little invention called the "internet"...I'm pretty sure Borders demise was widely publicized before they actually went under....
GoNavy
Thu, May 31, 2012 : 11:40 p.m.
I have some Confederate dollars. Any takers?
hail2thevict0r
Thu, May 31, 2012 : 11:48 p.m.
Ironical, those would probably be worth a lot more than a regular US dollar right now because of their historical value.
Halter
Thu, May 31, 2012 : 11:28 p.m.
This is just another story of New Yorkers out for a buck. In this case, the trustee is right. No case here.
Diane
Thu, May 31, 2012 : 10:54 p.m.
Absolutely
sellers
Thu, May 31, 2012 : 8:40 p.m.
What about stock in borders that was worth farm more than $125. How come they don't get money. It is like others said, in order of size.
GoNavy
Thu, May 31, 2012 : 11:41 p.m.
Bankruptcy wipes out the equity which backs the value of stock.
xmo
Thu, May 31, 2012 : 8:18 p.m.
What about the Bond Holders in the auto bail outs? They were told it was greedy to want to be paid by the president. It sounds like we have some more Greedy people here!
UncleMao
Thu, May 31, 2012 : 8:09 p.m.
I still have a $100 gift card to Mervyn's lying around somewhere. I demand recompense!
f4phantomII
Fri, Jun 1, 2012 : 4:31 p.m.
Use it at Woolworth's.
Diane
Thu, May 31, 2012 : 10:55 p.m.
Why didn't you use it?
lynel
Thu, May 31, 2012 : 8:23 p.m.
It's time to throw that one away.
Dcam
Thu, May 31, 2012 : 7:23 p.m.
Gift cards are sold with the full knowledge that a large percent will never be redeemed, clear profit for the seller. It's about as close to systemic fraud as a legitimate business can get and remain a lawful transaction.
Dcam
Thu, May 31, 2012 : 8:08 p.m.
"Not all gift cards are redeemed. The card may be lost; there may be time decay (expiration and fees) or complex rules of redemption; the recipient may not be interested in the store that accepts the card or be under the false assumption that not using it will save money for the giver. It has been estimated that perhaps 10% of cards are not redeemed, amounting to a gain for retailers of about $8 billion in the US in 2006."
Kilgore Trout
Thu, May 31, 2012 : 7:18 p.m.
There's no need in writing an comment chastising the two consumers who got stuck with gift cards, if they weren't reading the paper then, they're not reading one now.
tomnspats
Fri, Jun 1, 2012 : 1:28 a.m.
a refreshing and wise comment
hail2thevict0r
Thu, May 31, 2012 : 7:17 p.m.
Any gift card owner has a claim to debt like any other person borders is a debtor to. However, the claims are usually paid out to the highest debt holders first and then work their way down the list until Borders runs out of the money gained by liquidating. Meaning someone who borders owes only $125 is probably going to be out of luck; especially since "Borders honored gift cards until the virtual end of its liquidation sales in September".
hail2thevict0r
Thu, May 31, 2012 : 7:21 p.m.
Also, I knew a few people who worked at Circuit City when Circuit City went out of business and all of the people who had special ordered TV's, computers and things of that nature were essentially hosed. They just became debtors and likely never got their money back. You must be really careful when dealing with businesses that are either about to go out of business or are currently in the bankruptcy process.
A2comments
Thu, May 31, 2012 : 7:14 p.m.
Borders took gift cards during the liquidation, not all stores do. Everyone knew they were going under before they even filed for bankruptcy. Then, when they filed, everyone knew and had plenty of time to use their cards. If they didn't use them, that's unfortunate. We used our last one months before bankruptcy - buying a book for $37 that Amazon sold for $19.
Diane
Thu, May 31, 2012 : 10:58 p.m.
Always check with Amazon first, no matter what you buy.
brimble
Thu, May 31, 2012 : 7:13 p.m.
This is sorta like asking Buick to honor a coupon for a discount on a new Saturn, or Applebees to take a certificate from Houlihan's. Surely this case is driven by the attorneys filing suit, not the consumers' genuine sense of having been wronged?
jns131
Thu, May 31, 2012 : 9:43 p.m.
I totally agree. A lot of card holders sat on the fence and are now trying to take advantage of this. I really hope they get left holding nothing but a bag of hot air. Sorry folks but you should have used it when you had the chance.