Judge Rules $211 Million Worth of Borders Gift Cards Mean Nothing

Roughly $210.5 million of Borders gift cards remain unredeemed since the bookstore giant went into bankruptcy in 2011 – and now a New York judge has ruled against customers’ appeals to reclaim the value, pointing out that a class action approval, which would open claims up to the entire membership, would effectively destroy the estate and its final distributions. This follows a ruling last August that putative class action would be denied.

There is as much as $210.5 million in unredeemed gift card balances.

The appeal dismissal came from U.S. District Judge Andrew L. Carter, who noted that “an intellectually honest analysis of the consequences flowing from opening the door to a class of gift card holders demonstrates the situation is not as simplistic as appellants suggest. There is as much as $210.5 million in unredeemed gift card balances. While the parties agree it is highly unlikely that even half of this amount would be claimed through the proposed class, the financial consultant to the trust estimates roughly $50 million would satisfy the claims.”

While the news may be disappointing and even surprising to customers who remain out-of-pocket for gift cards bought in good faith that they would be redeemable, effectively as cash, the denial of class action status does make sense. $211 million worth of claims, while most likely theoretical compared to the amount that would be filed, is an impractical and essentially crippling debt to lay upon the Borders estate.

Estimates show that after current admin costs and priority claims, less than $90 million will be left for Borders to pay unsecured creditors.

Interestingly, the motion to certify a class of gift card holders was filed several months after the general bar date for filing claims had passed – an oversight that the plaintiffs argue is due to the fact that, as gift card holders whose information was known to the company, they are already known creditors. Last August’s ruling from U.S. Bankruptcy Judge Martin Glenn denied untimely class action status to recover the amounts still on Borders cards, pointing out that time had already passed for claims to be filed before the bar date, and that an advertisement in the New York Times was acceptable forewarning.

A single advertisement may not seem like much to go on – but Judge Glenn’s ruling sticks. When plaintiffs’ lawyers argued in April that Borders had failed to make reasonable attempts to contact the 17 million card holders, they failed to convince the judge.

Now, the gift cards look to be left as they are, worth nothing and with no redeemable future. It’s a sad outcome for Borders and its past customers, but the money is simply no longer available to back up the cards. With this, the last major dispute, the Borders bankruptcy case may soon come to an end.