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May 8, 2002
For More Information, Contact:
Kristina Loquist at (916) 651-4011
SACRAMENTO – Assemblyman Joe Simitian (D-Palo Alto) announced today that a winner of his “There Oughta Be a Law Contest” was in Sacramento to testify on behalf of her entry which will protect consumers using gift certificates. Assembly Bill 2473, regarding gift certificates in bankruptcy, was unanimously approved by the Assembly Committee on Business and Professions on Tuesday, May 7th. This bill protects consumers by requiring businesses that have declared bankruptcy to honor gift certificates issued prior to the date of the bankruptcy filing.
“The idea for the bill came from Andrea Leiderman, a constituent, who participated in my ‘There Oughta Be a Law ’ contest,” said Simitian. “Andrea had the unfortunate experience of visiting a local merchant where she found that she could not use her gift certificate because the store had filed for bankruptcy.”
Currently, during a bankruptcy, individual companies may choose not to honor a gift certificate. The goal of Simitian’s bill is to require businesses that declare bankruptcy to continue to honor previously issued gift certificates. Because the value represented by the gift certificate is the property of the recipient, not the store (in legal parlance a “value held in trust” by the store on behalf of the recipient), the gift certificate should appropriately continue to be honored while a company works its way out of bankruptcy.
Bankruptcies are handled in federal court, and there is no requirement that the federal judge follow state law. However, a federal judge may, and often does, follow state law where it exists. This bill, thereby, provides federal courts with the opportunity to apply California law.
Leiderman, of Mountain View, who submitted the gift certificate bill idea to Simitian, was be on hand to testify at the Committee hearing. Leiderman said, “Joe’s contest was an opportunity for me to try to strengthen consumer protection in the State of California. This bill proves that an average citizen can influence the legislative process by putting forth good ideas. Joe’s ‘There Oughta Be a Law’ contest was a great idea. I think every Legislator should do this.”
Assembly Bill 2473 will next go to the Assembly Floor for a vote.