March 4, 2011, 12:32 PM

Groupon faces the threat of a class action lawsuit

The case challenges the legality of vouchers’ expiration dates.

Zak Stambor

Managing Editor

Lead Photo

A consumer this week filed a lawsuit against daily deal site Groupon that challenges the legality of the expiration dates of the vouchers sold by the company. Eli Johnson filed the suit in such a way that it could be certified as a class action, which could potentially open it up to all of Groupon’s 60 million subscribers.

Johnson bases his claims on his purchase of a $55 Groupon deal to play a game of Whirleyball (a combination of bumper cars, polo and jai alai) with friends. But the voucher expired in February, six months after purchase and before Johnson was able use it. Johnson is seeking unspecified financial damages in the suit filed in the U.S. District Court for the Northern District of Illinois, which is located in Groupon’s home base of Chicago.

The vouchers Groupon sells offer a discount for goods or services. And every voucher that Groupon sells has an expiration date, which the suit claims “are unconscionably short—often just a few months.”

The crux of the case rests on whether those vouchers are effectively gift certificates. That’s because there are several federal and state consumer protection laws that restrict, or in some cases prohibit, expiration dates on gift certificates. For instance, the federal Credit Card Accountability, Responsibility, and Disclosure Act requires gift certificates to hold their value for at least five years.

In addition to challenging Groupon’s expiration dates, the suit claims that the daily deal site imposes other “deceptive and unfair” conditions, including limiting use of a voucher to a single transaction and barring redemption of the unused portion of a voucher for the cash value.

Groupon “essentially places unfair restrictions on the manner in which consumers can redeem the gift certificates for the products and services offered, even though consumers have already paid in full for such products and services,” the suit claims.

Other lawsuits have made similar claims against daily-deal sites. LivingSocial faces a similar challenge in a suit filed last month in the U.S. District Court in Seattle. And Groupon itself is facing a similar lawsuit in the Southern District of California.

Both Groupon and LivingSocial’s web sites say that local and federal laws may supersede the expiration dates and other restrictions on the vouchers.

Groupon’s policy says, “You should be allowed to redeem the cash value (or purchase price) of your voucher up until the greater of: (1) the Voucher’s expiration date; or (2) the minimum length of time allowed by applicable law for a Voucher to expire.”

A Groupon spokeswoman says the company does not comment on pending litigation. LivingSocial could not be reached for immediate comment.

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