The RadioShack bankruptcy case has already drawn the attention of both state and federal regulators for potential privacy violations, and now the company faces a new issue: $43 million worth of unused gift cards.
Texas Attorney General Ken Paxton launched an adversary proceeding in the bankruptcy case seeking a declaratory judgment that any unused gift cards should receive priority up to $2,775 per card under Bankruptcy Code Section 507(a)(7). RadioShack gift cards did not expire and the face of the cards did not disclose an expiration date, the AG told the court.
“Consumers who purchased gift cards from [RadioShack] prepetition presumably did so with the expectation that [RadioShack] would apply some or all of the face value of the gift card toward a later, ultimate purchase,” Paxton argued in his complaint.
Although consumers have the option of filing a proof of claim in the RadioShack bankruptcy case to recover the amount of any gift cards, the AG said the debtor has not made any efforts to provide consumers with notice of its filing or any other deadlines.
Based on preliminary discovery, Paxton estimated that $43 million worth of gift cards remain unredeemed. Should gift card funds remain after all of the consumer claims are paid, “such funds should be turned over to the appropriate state for unclaimed property,” the AG suggested.
Paxton also disputed RadioShack’s contention that it did not know the identity of the holders of unredeemed gift cards. “Texas respectfully contends that such an assertion must be viewed with some skepticism in light of the fact that the Defendants maintain extensive data regarding their customers’ purchases,” according to the complaint. “The Defendants likely know the names, mailing addresses, and e-mail addresses of at least some of the purchasers if not the holders.”
The reference to “extensive data” likely alludes to Paxton’s previous skirmish with RadioShack over the company’s efforts to sell its customer information as an asset in the bankruptcy proceeding. In March, joined by dozens of other state attorneys general and backed by the Federal Trade Commission, he filed a motion to halt the sale, citing violations of state consumer protection laws with regard to the transfer of the names, addresses, and phone numbers of 117 million customers.
Facing the objections, RadioShack agreed to destroy the personally identifiable information at issue.
To read the complaint in Texas v. RadioShack Corp., click here.
Why it matters: The RadioShack bankruptcy case continues to provide important lessons for companies. After presenting an example of the intersection of privacy policies and bankruptcy, the case now presents a second hot topic: unredeemed gift cards.