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Home / News / Business / Arbitrator rules in favor of Starbucks in gift card dispute

Arbitrator rules in favor of Starbucks in gift card dispute

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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.

Paskey brought the suit to Los Angeles Superior Court in March 2020, seeking compensatory and punitive damages as well as a court order that Starbucks provides 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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