Retailer Found Guilty In Gift Card Case

On September 21, 2018, a Delaware jury found guilty of failing to report and remit nearly $3M in unredeemed gift card balances that should have been reported to the State of Delaware as unclaimed property.
The verdict is the latest in a series of on-going cases that has already resulted in the payment to Delaware of over $25 million in unpaid gift cards and penalties from other retail card issuers who settled before trial.

Under Delaware law, gift card issuers are required to turn over unredeemed gift card balances to the state after a period of 5 years.  However, this and other lawsuits has exposed a common practice in the gift card industry, where significant numbers of cards go unredeemed and issuers keep these balances.

In the Overstock case (The State of Delaware ex. rel. William Sean French v., Inc. [Superior Court of Delaware C.A. No. N13C-06-289 PRW CCLD]), the defendant declared that it had transferred unredeemed gift card balances to an Ohio-based business, CardFact Ltd (now known as Card Compliant).  As Ohio does not require the escheatment of unused gift card balances, this transfer allowed CardFact and Overstock to keep these balances.

The jurors in the case rejected Overstock’s claim that the unused gift card balances were transferred to CardFact and held that the balances should have been reported and remitted to Delaware after five years.  

The case was brought under Delaware’s whistleblower statute, and consequently, Overstock could be liable for treble damages plus statutory fines and attorneys’ fees.  Total damages will be determined by presiding Superior Court Judge Paul R. Wallace.  The trial covered unpaid card balances from 2004 to 2007.

Stuart Grant, one of the plaintiff’s attorneys stated, “We are not surprised that the jurors had no trouble seeing through the scam that Overstock tried to pull.  This case was simple and straight-forward. Overstock had a legal obligation to report and turn over almost $3 million dollars from unused gift cards to the State. The Company knew the law and instead of following it, they intentionally tried to evade their obligation.  We are pleased that the jury saw through the CardFact scheme and held Overstock accountable.” 

A spokesman for the company late Friday said, “Overstock disagrees with the verdict and plans to explore all options for appeal.”

Like other types of unclaimed property, proper policies, procedures, organization and documentation for unredeemed gift card balances need to be in place to help ensure your company is correctly reporting these amounts.  Before deciding to participate in any “transfer scheme”, it is important that a company involve outside experts versed in unclaimed property law and practice to ensure that all statutes are followed. 

If you have any questions regarding gift cards or any other unclaimed property matters, contact us at or 844.357.1099    

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