We wanted to alert you to a NJ District Court's recent ruling on a request for preliminary injunction filed in American Express Travel Related Services Company, Inc. v Sidamon-Eristoff, et al., (and the related actions filed by the New Jersey Retail Merchants Association, New Jersey Food Counsel and American Express Prepaid Card Management Corporation) in connection with NJ's recent adoption of a burdensome unclaimed property laws that took effect on November 15, 2010 and will impact, among other things, stored value cards. We have included highlights from the opinion below and included a link to the Court's opinion and order. We believe that aspects of this decision are likely to be appealed.
On November 13, 2010, Judge Freda Wolfson granted in part and denied in part the plaintiffs' requests for a preliminary injunction. The highlights are as follows:
- In connection with traveler's checks, the Court found that a likelihood of success on the Substantive Due Process claim, Contract Clause claim, or Takings Clause claim had not been established;
- In connection with stored value cards and the two year abandonment period in Chapter 25, ¶ 5c, the Court disagreed that the NJ law was preempted because it conflicted with the new federal gift card's five year expiration date limit, finding that there was no implied conflict because the NJ law affords consumers with greater protection than the federal law.
- After concluding that the stored value card plaintiffs had demonstrated a likelihood of success on their preemption claim under the Supreme Court's Texas line of cases dealing with escheat priorities, the Court enjoined the State of New Jersey from enforcing the place-of-purchase presumption found in Chapter 25, ¶ 5c;
- Recognizing that by operation of Chapter 25, the issuers would be "required to transfer the entire face value of the gift card to the state for custody upon abandonment even though gift cards are not redeemable for cash," which would substantially impair their right to earn and retain their profit, the Court further enjoined the State of New Jersey from enforcing Chapter 25 retroactively against issuers of stored value cards with existing stored value card contracts that obligate the issuers to redeem the cards solely for merchandise or services.