Loyalty award owners as creditors in bankruptcy proceedings

[Intern9014]

This is a simple question: Are consumers who have loyalty points or awards in the line of creditors to receive something in bankruptcy proceedings?

 

[CSO286]

This is a simple question: Are consumers who have loyalty points or awards in the line of creditors to receive something in bankruptcy proceedings?

Ok, then you find a simple answer.


This forum is for US LAW ONLY.

 

[Intern9014]

Ok, then you find a simple answer.


This forum is for US LAW ONLY.

I am asking for US law in regards to when a business with a loyalty program goes bankrupt, does a customer with unredeemed loyalty awards have a claim in bankruptcy court? Are they in the line of creditors?

Is there case law, secondary sources, or statutes that discuss this?

 

[TheGeekess]

I am asking for US law in regards to when a business with a loyalty program goes bankrupt, does a customer with unredeemed loyalty awards have a claim in bankruptcy court? Are they in the line of creditors?

Is there case law, secondary sources, or statutes that discuss this?

We're not doing homework or research to satisfy your personal curiosity.

 

[Zigner]

Your loyalty program likely includes wording to the effect of "Loyalty points have no cash value."

Review your program details.

 

[Intern9014]

We're not doing homework or research to satisfy your personal curiosity.

I appreciate the honesty, but I sort of thought that was the point of a free legal advice forum. I was hoping someone who had experience on this subject would know something germane about the topic and would at least be able to provide a yes, no, or maybe with a short explanation as to why.

 

[CSO286]

I appreciate the honesty, but I sort of thought that was the point of a free legal advice forum. I was hoping someone who had experience on this subject would know something germane about the topic and would at least be able to provide a yes, no, or maybe with a short explanation as to why.

Did you read the TOS?

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[Intern9014]

Your loyalty program likely includes wording to the effect of "Loyalty points have no cash value."

Review your program details.

Interesting. So bankruptcy would not cover it? What if, for example, there was a movie theater that gave you one free movie ticket for every five movies a customer saw, and the customer saw fifty movies and never redeemed the award? He would have twenty-five free tickets. If the going rate for tickets were $7.50, would that individual be entitled to $187.50?

 

[Zigner]

Interesting. So bankruptcy would not cover it? What if, for example, there was a movie theater that gave you one free movie ticket for every five movies a customer saw, and the customer saw fifty movies and never redeemed the award? He would have twenty-five free tickets. If the going rate for tickets were $7.50, would that individual be entitled to $187.50?

We're not doing homework or research to satisfy your personal curiosity.

I think TheGeekess said it very well.

 

[Antigone*]

In the highly unlikely event that you could be considered a creditor, you'd be so far down at the bottom of the list that at the end of the day you'd only get heartburn.

There, now did that answer your question?

 

[Intern9014]

In the highly unlikely event that you could be considered a creditor, you'd be so far down at the bottom of the list that at the end of the day you'd only get heartburn.

There, now did that answer your question?

I appreciate the answer. What I am wondering is whether they can even be considered a creditor. However, you are right; it is unlikey.

 

[tranquility]

I appreciate the answer. What I am wondering is whether they can even be considered a creditor. However, you are right; it is unlikey.

I will give you a very good answer if you give me the reason why you are asking.

 

[Intern9014]

I will give you a very good answer if you give me the reason why you are asking.

Thank you.

The reason I am asking this question is that I am an intern researching whether loyalty programs can be considered unclaimed property that is escheated to the state. In most states, they cannot. (Some states explicitly state that they cannot through their unclaimed property statutes.) This is mainly because of the derivative rights doctrine. However, if bankruptcy courts were to consider loyalty award owners as creditors and determine that they should receive monetary value equivalent to the worth of their loyalty award, the state could hold that money in unclaimed property. This would be fine under the doctrine. Unfortunately, my research has lead to dead ends; thus, I am making inquiries to see if anyone has any experience or knowledge on the subject.

 

[tranquility]

Thank you.

The reason I am asking this question is that I am an intern researching whether loyalty programs can be considered unclaimed property that is escheated to the state. In most states, they cannot. (Some states explicitly state that they cannot through their unclaimed property statutes.) This is mainly because of the derivative rights doctrine. However, if bankruptcy courts were to consider loyalty award owners as creditors and determine that they should receive monetary value equivalent to the worth of their loyalty award, the state could hold that money in unclaimed property. This would be fine under the doctrine. Unfortunately, my research has lead to dead ends; thus, I am making inquiries to see if anyone has any experience or knowledge on the subject.

Ah, not homework. Well, most of the real cases have to do with frequent flyer miles and airline bankruptcy. The Supremes weighed in at American Airlines v. Wolens (93-1286), 513 U.S. 219 (1995). There, AA tried to change the old flyer miles to new ones with different terms and conditions in bankruptcy. (Obviously, to have a better business model on the miles.) The court said the rights were contractual and suing on them were not prohibited by the Airline Deregulation Act. However, if you look to the news of the time you find that because of the decision, many airlines (And, I suppose other companies as well.) changed their terms in the way Zigner mentioned earlier--making them an almost illusory "promise" not rising to a contract.

 

[Intern9014]

Ah, not homework. Well, most of the real cases have to do with frequent flyer miles and airline bankruptcy. The Supremes weighed in at American Airlines v. Wolens (93-1286), 513 U.S. 219 (1995). There, AA tried to change the old flyer miles to new ones with different terms and conditions in bankruptcy. (Obviously, to have a better business model on the miles.) The court said the rights were contractual and suing on them were not prohibited by the Airline Deregulation Act. However, if you look to the news of the time you find that because of the decision, many airlines (And, I suppose other companies as well.) changed their terms in the way Zigner mentioned earlier--making them an almost illusory "promise" not rising to a contract.

Thanks!

However, if I am not mistaken, airlines have different bankruptcy rules (guided by the FAA) than a retailer or other entities that offer loyalty programs. Thus, I think their frequent-flyer miles are protected, but I do not know whether, for instance, a customer who had unredeemed reward points in a grocery store could be considered in the line of creditors. I could be wrong though.

Also, that is a good point raised by you and Zigner about how companies changed their wording to avoid contract obligations. That alone could be the end of the issue.