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The United States District Court for New Jersey has issued a ruling in the closely watched lawsuit challenging New Jersey's recently enacted law requiring gift card issuers to escheat gift cards sold in that state.

On November 13, 2010, the court enjoined enforcement of Section 5c of the law and related guidances from the New Jersey Treasurer, Section 5, which created a presumption that gift cards sold in New Jersey are owned by New Jersey residents and are, therefore, subject to escheat, if the issuer does not have records of the owner's state of residence and has not incorporated in a state that escheats gift cards.

The court found that such provisions violated existing Supreme Court precedents establishing rules of priority for determining which states have the right to escheat gift cards.

Section 5c also required issuers to collect zip code information from purchasers’ gift cards in New Jersey. The court's ruling enjoining the enforcement of Section 5c also appears to cover this requirement. The plaintiffs in the case are apparently interpreting the ruling as enjoining the zip code collection requirement.

The court further ruled that the law could not be retroactively applied to require the escheat of gift cards that were issued before July 1, 2010, the effective date of the New Jersey law, if those gift cards can only be redeemed for merchandise or services.

Read our earlier article about the gift card law.

For more information about this ruling and the gift card law, please contact:

Scott Pink