Breaking News: Federal Court Enjoins Parts of NJ Gift Card Law

by admin

A few weeks ago, we reported on the NJ Retail Merchants Association’s lawsuit against New Jersey in response to that state’s new unclaimed property laws relating to gift cards.  As we covered earlier, the NJRMA challenged various provisions of the NJ legislation (the “Bill,” discussed here) including the provisions presuming NJ reportability for cards sold in NJ locations or in NJ zip codes (the “Location Presumption”) and the requirement that issuers turn over the full face value of cards inactive for 2 years (the “Face Value Requirement”).  The NJRMA also challenged the retroactivity of the bill (i.e., the law’s application to cards that were issued years before the bill was enacted). 

Similar lawsuits were filed against the state by the New Jersey Food Council and American Express Prepaid Management as to the gift card provisions.  Lawsuits have also been filed by American Express (challenging new laws relating to travelers’ checks) and Memo Money Order Company (challenging the shortened dormancy period for money orders).  These plaintiffs all sought a preliminary injunction — that is, an order preventing NJ from enforcing the Bill — until the court can issue a final ruling.  The State opposed these requests, and asked the court to dismiss the case.

On November 12, the federal district court issued an opinion and order in connection with the plaintiffs’ request for a preliminary injunction.  The court has enjoined the state from enforcing the Location Presumption, and from applying the Face Value Requirement to cards issued prior to the effective date of the Bill.  The court declined, however, to stop the state from enforcing the new 2 year dormancy period for stored value cards, or from shortening the dormancy period for travelers’ checks.  This does not represent a final ruling on any of these issues.  Instead, it is a preliminary determination that prevents NJ from enforcing the Location Presumption or the Face Value Requirement (retroactively) until a final decision is made.

We will continue to follow the case.