Last year, we discussed a class action lawsuit against Groupon alleging that the company’s deals violate California and federal gift card laws. The plaintiffs argued that Groupon’s deals constitute gift cards, and that the expiration on the deals violate federal and state laws that restrict expiration dates. Although Groupon denies they violated any law, the company recently reached a proposed settlement of several consolidated lawsuits in California.

Under the proposed settlement, class members who purchased Groupon vouchers between November 2008 and December 1, 2011 will be able to redeem expired vouchers, and if they are unable to do so, obtain a refund from an $8.5 million settlement fund. If a merchant refuses to redeem a settlement voucher, the class member will be entitled to receive a refund of the purchase price plus 20% of the promotional value.

Groupon also agreed to make changes to how it structures and advertises its deals. For example, Groupon agreed to clearly and conspicuously that any expiration dates apply only to the promotional value of the deal, and that the purchase price portion of the deal does not expire until the voucher is redeemed or refunded. And they agreed to limit the number of its annual Daily Deals that expire less than 30 days from the date of issuance.

Gift cards and deal vouchers may be subject to a patchwork of laws that are spread out across all states and the federal level, and it’s not always easy to figure out which laws apply or how to comply with them. Plaintiff’s lawyers are taking advantage of this confusion and filing lawsuits against these types of deals. Accordingly, companies should take a close look at any offers that combine pre-payment with an expiration date in order to evaluate their risk of being a target of these types of suits.

Groupon Reaches Settlement in Gift Card Lawsuits