• Marlboro Wins Gift Certificate Lawsuit
  • July 15, 2009
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • In a key win for the promotion industry, the U.S. Court of Appeals for the Ninth Circuit has ruled that California’s gift certificate law does not cover on-pack proofs of purchase as part of a Marlboro Miles loyalty program by brand owner Philip Morris.

    The June 2, 2009, decision in Reynolds v. Philip Morris USA Inc. arose from a complaint claiming that Marlboro Miles were “gift certificates” regulated by California law, and that Philip Morris’s termination of the program violated California law, which dictates that gift certificates distributed under a loyalty program may expire only if the expiration date is printed on the gift certificate. No such expiration date was printed on Marlboro Miles.

    In its motion to dismiss, Philip Morris argued that Marlboro Miles were not gift certificates, but proofs of purchase that are commonly used in connection with consumer loyalty programs. On June 5, 2007, the district court denied Philip Morris’s motion, finding that Marlboro Miles were gift certificates as defined by California law. The Ninth Circuit has now reversed the lower court, finding that the Marlboro Miles were proofs of purchase, “just like a cereal box top,” and not a “gift certificate,” as the term would ordinarily be understood.

    Why it matters: If the lower court’s decision had stood, it could have severely restricted the ability of marketers to offer loyalty programs where points are obtained through product purchases. To preclude having to accept such points forever, promoters would have had to print an expiration date on each proof of purchase in capital letters in 10-point font. With the Ninth Circuit’s ruling, companies may continue to offer point certificates in connection with a loyalty program, without having to worry that they will bump up against California’s gift certificate law.