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New York Appellate Court Holds that Federal Law Does Not Preempt
State Contract and Consumer Protection Laws in Gift Card Suit
May 1, 2012
E-Commerce
News provided by BuckleySandler LLP for
informational purposes only, and should not be construed as legal advice
on any subject matter.
May 1,
2012
On April 17, 2012, the Appellate Division of the
New York Supreme Court held that federal laws and regulations do not
preempt state contract and consumer protection laws, reversing an earlier
trial court decision dismissing a lawsuit concerning gift card expiration
dates and renewal fees. Sharabani v. Simon Property Group, Inc., No.
2010-07552, 2012 WL 1320067 (N.Y. App. Div. Apr. 17, 2012).
The plaintiff filed an action based on New York state law to recover damages
arising out of a gift card that required a “reactivation fee”
for use after its expiration date. The defendant, a federally chartered
thrift that managed the gift card program, and
its co-defendant moved to dismiss the lawsuit on various grounds,
including that all of the plaintiff’s state law claims were
preempted by federal law. The court held that although Office of Thrift
Supervision (OTS) regulations permitted
the issuance of gift cards with administrative fees, the OTS has
explicitly stated that its regulations do not preempt state contract law,
commercial law, tort law, or criminal law to the extent those laws are
consistent with the OTS’s intent to
occupy the field of federal savings associations’ deposit-related
regulations. Based on this regulatory guidance, the court determined that
only the claim based on New
York’s abandoned property law was
preempted by federal law because the OTS has specific regulations
regarding abandoned accounts. The court affirmed dismissal of the
abandoned property claim and remanded the remaining claims based on state
contract and consumer protection laws to the trial court for evaluation
under the remaining prongs of the defendants’ motion to dismiss.
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