You may have purchased a coupon from restaurant.com, where restaurants offer discounts. You can spend, for example, $25 and get a $50 coupon for use at a specific restaurant. The increasingly popular site Groupon.com expands that to other kinds of businesses. Each day it offers a new deal–if enough people sign up, the deal is on, thereby guaranteeing the offering business a certain number of interested consumers. So what’s this new lawsuit all about?

In the case filed on Tuesday, the lead plaintiff purchased three $40 Groupon certificates offering $80 worth of flowers from Chicago-based Grow Flower Shop. He was told he’d have to pay a $20 delivery charge for each. The certificate also says the offer is only good through July 2010. The Plaintiffs say this violates a state law which prohibits companies from selling gift certificates that expire in fewer than five years. The actual law in question was amended in 2008 to add the language prohibiting an expiration date shorter than 5 years. Not a bad theory.

But Groupon’s take is: well, the expiration is for the discount but the business will honor the face value of the certificate indefinitely. Thus, only the discount expires but you can use the certificate for what you paid for it. But the Plaintiff’s attorneys say it doesn’t actually say that and there’s no guarantee of that. Indeed, I don’t see where it says that.

So I took a look at Groupon’s web site about refunds. It says:
“Returns are handled on a case-by-case basis. Within the limits of reason, we’ll do what it takes to make you happy. Unless there is something wrong with the purchase, we are generally unable to offer refunds after one week from the purchase date.” No help there.

Also in 2009 the law prohibited a “post-purchase fee.” It says:
“The face value of a gift certificate…may not be reduced in value and the holder of a gift certificate…may not be penalized in any way for non-use or untimely redemption of the gift certificate.” This sounds like it’s intended to be as broad as possible.

Groupon’s site also says:
“If I don’t use the full value of the Groupon in one visit, can I use the remainder later? No. Unless otherwise stated you do not receive store credit or cash back for whatever you don’t use. Bring a friend – share a little!”

groupon familyIn this, like any case, a big question is does the law even apply to these Groupon discount certificates in the first place? In other words, are they somehow different than regular “gift certificates” so as to fall outside this law? Well, the actual language of the Act says “Gift certificate” means “a record evidencing a promise, made for consideration, by the seller or issuer of the record that goods or services will be provided to the holder of the record for the value shown in the record…” That just means you’re entitled to whatever value is shown on the certificate.

What’s more, it appears that the law considered “discount certificates” and specifically excluded them from the law BUT ONLY those issued in connection with fund raising for nonprofits or charities:

“Gift certificates that are sold below face value at a volume discount to employers or to nonprofit and charitable organizations for fundraising purposes if the expiration date on those gift certificates is not more than 30 days after the date of sale.”

For what it’s worth, it also excludes “food products:” (“Gift certificates that are issued for a food product.”) Whatever that means. Restaurant food? Supermarket Food?

What do you think? Does this law apply to discount certificates? Will the Defendant’s defenses hold water? In my brief search I couldn’t find any court opinions interpreting this language. A lot of interesting legal questions. Is it unfair to Groupon? Unfair to consumers? Or just what the law says, and rules is rules? You can see the text of the law here.