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February 05, 2013


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Bette Dell

I've also been considering the development of the relationship between Schultz and Django. I would chime in and agree with you. To me, there's definitely a friendship there, past any 'business'-related partnership. Furthermore, yes, I think they can be likened to a father/son duo as well because I simply find it endearing, not to mention credible: Schultz admits he feels responsible for Django, he guides him and arms him with means of self-protection, and stands by him, defends him every step of the way.

This link sums up everything pretty well:

And yes, please elaborate on your interpretation of their father/son relationship. I can't get enough of any of that kind of evidence.

Matthew Bruckner

As a facial matter, the bankruptcy code would treat the owners of such stored value cards as unsecured claimants. As a practical matter, many companies that intend to reorganize seek permission to allow cardholders to redeem their cards at full face value (or as close as these things come to allowing you to get the full amount off of them). In short, it is my understanding that bankrupt companies honor these cards at 100 cents on the dollar, despite having no legal obligation to do so.

Marc Roark

Matthew -- Regarding the practical aspects, we have seen at least one prominent bankruptcy decision in which consumers were proposed to use the full cash face value of the card, but only if they spent double the amount of the card (hardly full value). In re Sharper Image Corp., No. 08-10322 (Bankr. D. Del. Mar. 3, 2008). Only after backlash by the National Association of Attorneys General did Sharper Image withdraw its already approved plan. So I'm not sure that its necessarily true that Bankrupt companies generally treat fairly with consumers, outside of some collective, external pressure, be it from state Attorney Generals or legislation.

Matthew Bruckner

Hi Marc,

I suppose my point was that gift card holders are holders of unsecured claims. Requiring them to file proofs of claim and accept a pro rata distribution is fair within the bankruptcy context. And yet, I would expect that reorganizing companies act different than liquidating companies.

For companies that are reorganizing (or hope to), rather than liquidating, i would be surprised if they all didn't seek approval to honor gift cards at full face value. Otherwise, they would alienate customers.

Liquidating companies present a different picture. It isn't clear to me why they would honor these cards. Nevertheless, didn't Borders continue to accept gift cards while it liquidated? See In re Borders Group, Inc., 2011 WL 3022401, at *35 Bkrtcy.S.D.N.Y.,2011. (

Marc Roark

Matthew -- I don't disagree that gift card holders are unsecured creditors. In fact one question in the paper is whether we should create a legal fiction of a secured creditor (the unsecured aggregate creditor) to provide a basis of leverage - akin to the class action plaintiff who has no leverage to litigate a small matter, but collectively has greater force. I agree that there is a market force ethic at work for companies seeking to reorganize and different companies will honor the cards differently under those scenarios. But, and I am just venturing a guess on the Borders point, the gift cards were honored for stock they owned as assets for the company. My guess is (and this is purely a guess) that much of Border's inventory was returned to publishing companies who held a greater security interest. I recall walking around Borders and finding the inventory to be rather low compared to its prior state.

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