In California, it is against the law for gift certificates to have expiration dates. Furthermore, they cannot even lose value due to inactivity, as is stipulated in the fine print of many gift cards.
Enter Southwest Airlines, who recently decided to set an expiration date on all in-flight alcohol vouchers, including those that may be decades old with no expiration date on them. Southwest already started putting expiration dates on newly-issued drink coupons a couple of years ago, but thousands of older ones are floating around.
But hold that thought, because the court decision I’ll outline below is not about drink chits.
California resident Mitch Tanen purchased a $100 Southwest travel certificate (it was not specified, but this was probably one of the Southwest gift cards you see in grocery and drug stores) in 2005 and tried to redeem it 14 months later, two months past its stated expiration date. Southwest refused to honor the certificate and Tanen sued, claiming the decision violated California law.
A California trial court sided with Southwest and a California appellate court, in a decision released today, affirmed the lower court decision. The court held a California law limiting "gift certificate" expiration dates does not apply to Southwest because the federal Airline Deregulation Act pre-empts state laws that purport to regulate airline "prices, routes, or services."
If you want to read about the precise legal rationale that underpinned the court’s ruling, you can read the entire case, available (free registration required) by clicking on the link above. To summarize, though, the court held that federal law trumped state law in this case, so Southwest could enforce an expiration date on their gift cards. To reach this conclusion, the court determined that gift cards are included in "prices, routes, or service" and thereby fall under federal law, which allows for expiration dates.
Getting back to the drink chit controversy, today’s ruling may make it less likely that any potential litigants will find success in challenging WN’s decision to let drink chits expire, but not impossible. I’ll elaborate below.
While I would prefer to see Southwest (and all companies) refrain from setting an expiration date on their gift cards and drink chits, I understand why it makes business sense to set expiration dates. My concern with the older drink chits, though, is that no expiration date was ever set. It is one thing to allow a certificate to expire that has a clearly demarcated expiration date on it. It is quite another thing to unilaterally impose an expiration date on drink chits, many of which were purchased by customers who legitimately believed they would not expire.
This was a key aspect in today’s court ruling: that Tanen had notice that the gift card expired one year from the date of activation. Unless the Southwest drink chits stated in the terms in conditions (and I do not believe that they did) that the airline reserved the authority to modify terms of the coupons, even with Southwest’s victory today it would not surprise me if a plaintiff prevailed over Southwest in a class action lawsuit over drink chits.
Any lawsuit will have to wait until August 31, 2011, the date non-dated drink vouchers will expire on Southwest. Until a customer is denied the use of a voucher, this matter will not be ripe for adjudication.
I have spent close to 3 million dollars with southwest rapid rewards over the past few years and part of my loyalty was the drink coupons. I have around 150 of them left with no expiration date on them. I have used the ones that had a expiration date on them and was told by southwest employees that my old ones will never expire. So I go on a flight last week to California and hand them a non expired coupon and to my surprise I am told this is expired. We talk about it and she explained that southwest has told everyone that this was going to happen. So I explained that I get southwest letters and e mails all year long an never once have I seen any information that southwest was dishonoring its promotional coupons. So not to argue any more I handed her my southwest visa and paid $5.00 a beer. This is as much as you would pay for a beer at a nice restraint. This was not a fun experience and I am not happy with southwest. I worked hard to earn the flights and drink coupons southwest promised me. I was never informed you were going to void all non dated coupons. This is a business decision south west has made and I don’t agree with it so I am going to take my business somewhere that will appreciate it. Good luck on the class action lawsuit southwest should not be able to change the rules whenever they want. Southwest should be forced to stand behind the promotions they put on. southwest knows exactly how many coupons are out there because they are numbered don’t use the excuse that there are to many out there you put them there in the first place. Shame on you southwest
Craig
I agree entirely with what Craig said in his comment about SWAs decision to no longer honor our drink coupons. I feel that in California from my understanding of the law, that SWA can not end or no longer honor drink coupons that do not have an expiration date. We have phoned SWA and emailed to voice our opinion at their Customer Relations Dept. 214-932-0333. We encourage all SWA Rapid Rewards members to do the same. Shameful business dealings by SWA. We never received any notice or emails from our 6 Rapid Rewards accounts.
I agree to a point. First, Southwest did advise there would be an expiration. Most of us did not read it. When I questioned them in an email they apologized and within a few days I had replacements, no charge.
As to the other carriers, here are three examples of why although SW is not perfect, they have some things going for them.
A couple of years ago when the weather hit the fan in Chicago I was unable to get to New York on American because changing from a flight involving a change in Chicago to a nonstop to New York was a change in itinerary and would involve a substantial fee. I had to wait until the next day, missing one of the reasons for going to New York in the first place.
About six months ago when traveling east on SW I went to the wrong airport. There was not enough time to get to the correct airport, but SW, without charging me, booked me on a later flight to my destination, without charge.
Last month while traveling on a freebie I decided the night before to change my itinerary. No problem, no charge.
I agree the airline is not perfect, and I agree I do not like certain changes, such as the recent change to the rewards program vis-a-vis how trips are earned. Unfortunately, however, on balance, on the shorter trips I believe they are ahead of the curve, at least, so far. From a business standpoint I can understand wanting to change the drink coupon policy. If nothing else, having all those unused coupons out there can be an accounting nightmare and can also play havoc with certain IRS schedules.
Yes, I miss Herb, but war is hell sometimes.
Like many loyal SWA flyers, I found out about this phantom expiration on the ‘non-expiring’ drink coupons on a SWA flight about a month ago. Personally, I think it is the most short-sighted, loyal-passenger unfriendly decision that Southwest has ever made. Is any savings really worth all the disgruntlement among their most loyal flyers?! I’m hearing more and more negative comments about this and also starting to see it on many social sites…so its not going to just go away, as I’m sure SWA would like it to. Whatever you do, hang on to any of the old coupons you have as I’ll bet they will back-pedal soon due to all the bad feelings they are causing with their poor judgement. Why would they give a ‘thank you gift’ and then just take it away?!… Makes no sound business sense.
BTW…here’s a guy in IL that has just initiated a lawsuit on this: http://bit.ly/s0kVJ4
Eugene appears to be lucky. Southwest has never responded to any emails I’ve sent. Any other ways to get the drink coupons replaced short of winning a lawsuit?