Arbitrator rules in favor of Starbucks in gift card dispute

Beverage cups featuring the logo of Starbucks Coffee are seen in the new flagship store on 42nd Street August 5, 2003 in New York City.
Beverage cups featuring the logo of Starbucks Coffee are seen in the new flagship store on 42nd Street August 5, 2003 in New York City. Photo credit Stephen Chernin/Getty Images

LOS ANGELES (CNS) - Starbucks Corp. has prevailed in arbitration in opposition to a man's claim that the company wrongfully denied him a $1.70 cash redemption for the balance on his gift card at one of its West Hollywood
stores.

Arbitrator Ben Himmelstein of the American Arbitration Association
dismissed all of plaintiff Robert Paskey's claims in a May 20 ruling that
Starbucks is now asking to be confirmed by Los Angeles Superior Court Judge Yvette M. Palazuelos. No date has been set for or hearing on the affirmation of Himmelstein's ruling, which is not being opposed by Paskey.

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Paskey brought the suit in Los Angeles Superior Court in March 2020,
seeking compensatory and punitive damages as well as a court order that
Starbucks provide cash redemptions for gift cards having a balance of less than $10.

Paskey, 38, also sought class-action status for his suit. His court
papers stated that the number of Starbucks gift cards in circulation with
balances less than $10 is “quite large.''

However, Starbucks attorneys filed a motion to compel arbitration, saying Paskey agreed to resolve any disputes in that manner when he used the gift card.
Palazuelos held a hearing and heard arguments, took the case under submission and later granted Starbucks' motion while putting a stay on Paskey's case.

Paskey went to the location in the 8900 block of Santa Monica Boulevard on Dec. 26, 2019, and a clerk denied him his request for the $1.70 cash redemption on his gift card, telling him the sales software system did not
provide for cash redemptions on card balances of less than $10, the suit
stated.

Other Starbucks stores in California have the same practice and the
writing on the back of the company's cards states that gift cards are not
redeemable for cash ``unless otherwise required by law,'' the suit stated.

“But no relevant laws are identified informing consumers that gift
cards with balances of less than $10 are, in fact, redeemable for cash in
California,'' according to the plaintiff.

The Starbucks website states that cash redemptions for cards with less
than a $10 balance can be obtained online, but a request must be made and a
wait of seven to 10 days is required, according to the suit, which alleges the
policy is not posted in stores or on the back of gift cards so as to better
inform patrons.

In a sworn declaration, Paskey said the gift card was given to him as
a present by a third party, that he did not read the information on the back of
the card nor did he visit the Starbucks website.

“I was not aware of any arbitration agreement -- in connection with
my receipt and use of the gift card,'' Paskey said.

Consumers should not have to undertake “independent online research
projects'' to determine their rights regarding Starbucks gift cards, according
to his suit.

The online cash redemption policy was implemented by Starbucks in
September 2020, a month after the expiration of a 2009 injunction issued by a
Shasta County judge mandating that customers be permitted to obtain card cash balances of less than $10 in stores and that a notice of their rights be
conspicuously posted at the locations, the suit stated.

“It therefore appears that Starbucks will not comply with (the state
Civil Code) unless explicitly required to do so by court order ...,'' according
to the suit.

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