SEATTLE (Legal Newsline) -- A class action lawsuit was filed Oct. 24 in U.S. District Court of for the Western District of Washington against MGM Resorts International and Costco Wholesale Corporation, alleging a breach of contract on purchasable gift cards.

Plaintiff David Hanson argues the MGM gift cards he and many others purchased do not fulfill their terms and consumers were harmed by this situation. The class members of the suit expected the cards to be available for use at other places of business, the suit says, but the cards are only available for use at MGM Resorts International. 

MGM issued the cards, and Costco sold them.

In this case, Costco appears to be filling the role of a gift card “distributor” or “re-seller,” in which all they are responsible for is selling the gift card to the individual user, and then passing the gift card dollar amount to the gift card issuer (MGM) so that the gift card funds are stored with the issuer, Erin Fonte, of the Dykema law firm in Austin, Texas, told Legal Newsline. 

Fonte expects Costco to fight the suit, as it was the "re-seller" of the MGM gift cards.

"Typically a 'distributor' or 're-seller' of a gift card has no control over the administration of the gift card program itself, including the terms and conditions – all of that is controlled by the merchant that issues the gift card," she said.

If Costco does get looped into the case, "that will have a ripple affect throughout the industry as distributors and re-sellers have not typically been held to violate the law when the underlying gift card product they distribute or resell [and over which they have no control] violates the law," Fonte said.

"That is a shift or expansion of potential liability that closed-loop distributors and re-sellers may not be prepared to accept."

Because the case is a class action, it could lead questions for MGM if it will change its terms and conditions stated on the gift cards.

Fonte said, "MGM will also need to make sure that its gift card terms and conditions comply with the federal CARD Act of 2009 with regard to required disclosures, and that MGM is charging inactivity fees according to a process and in the amount that is allowed under applicable state law.

"The plaintiff’s complaint alleged violations of both federal and state law, so MGM will need to make sure its gift card terms and conditions comply with both."

This suit could effect MGM gift card sales.

"Anytime there is an allegation of unfair and deceptive practices by a company against consumers, there is the chance that the negative press will adversely affect the company’s reputation and ultimately have a negative effect on sales and patronage of that company," Fonte said. 

"In addition, if the class is certified and the class action moves forward and is not settled, MGM Resorts International, as a publicly traded company, will have to disclose some details about the lawsuit and attendant risks in its Securities and Exchange Commission filings."

Hanson seeks monetary funds for his court costs and interest. MGM declined to comment. 

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U.S. District Court for the Western District of Washington
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