• Gift Card Suit against McDonald’s Moves Forward
  • November 12, 2009
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • A California federal court has rejected a motion by McDonald's Corporation to dismiss a class action lawsuit alleging that the fast fooder refused to exchange a $5 gift card for cash in violation of California statutory and common law.

    California Civil Code section 1749.5(b)(2) provides that "any gift certificate with a cash value of less than ten dollars ($10) is redeemable in cash for its cash value." Plaintiff purports to represent a class of individuals who sought and failed to redeem McDonald's gift cards for cash.

    McDonald's challenged the plaintiff's standing to bring a claim under the UCL, arguing he did not suffer the required injury in fact. It also sought dismissal of the plaintiff’s unfair enrichment claim, arguing that he did not lose money or property. Because plaintiff could still exchange the card for five dollars' worth of McDonald's merchandise, he had suffered no injury and no loss of money or property, McDonald’s argued.

    The court rejected both arguments, finding the plaintiff’s allegation that he was denied money to which he has a right under law was sufficient to establish standing.

    On the back of the gift cards, it states that "[t]he value on this card may not be redeemed for cash . . . unless required by law." The court dismissed a separate claim brought under California’s false advertising law alleging that the language failed to apprise consumers of their right to request cash and deceived consumers into not requesting cash because, the court found, the plaintiff did not allege reliance on the language.

    Why it matters: This case highlights one of the difficulties of complying with myriad state laws governing gift cards. According to the complaint, text on the back of the gift card itself takes into account any law requiring that the card be redeemable for cash. Yet the case is proceeding against McDonald’s on the alleged action of an employee (among the company’s many thousands of employees) who refused to redeem the gift card for cash.