Wall Street Journal: Owners of unused gift cards target Borders in bankruptcy court
Two consumers who got stuck with $125 in unused Borders gift cards after the Ann Arbor-based bookstore chain completed the liquidation of its stores in September are trying to organize a class action suit against Borders' bankruptcy estate, according to the Wall Street Journal.
Borders honored gift cards until the virtual end of its liquidation sales in September, but the gift cards are now worthless.
Attorneys for two consumers who filed papers with the U.S. Bankruptcy Court's Southern District of Manhattan are targeting Borders, saying the bookstore chain didn't give proper notice that the gift cards would be worthless after its liquidation. They want to compile a group of angry owners of unused gift cards to gain more heft.
During the final month it was in business, Borders recorded $156.2 million in "other revenue" — which, according to a bankruptcy filing, included the "write-on of all unredeemed gift cards issued prior to" the company's Chapter 11 bankruptcy filing in February.
Many retailers don't treat gift card sales as revenue until they're spent — but in this case, all of Borders' stores are closed and competitor Barnes & Noble, which acquired Borders' intellectual property, isn't accepting Borders gift cards.
In effect, Borders gift cards are now useless, allowing the consultants who now run Borders' bankruptcy estate to record unused gift cards as revenue.
It's unclear whether the lawsuit has much of a chance: The company received approval in December to legally dissolve its estate.