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Bankruptcy erases buffet's gift cards
Barnhill's new owner will offer some refunds, but other customers learn a tough lesson.
By Jill Tillman, Times Staff Writer
Published March 6, 2008
NEW PORT RICHEY - Claude Howard liked to take his lady friend to Barnhill's Buffet every day for lunch. So when the restaurant sold discounted gift cards last December, the couple bought nearly $500 worth to support their daily ritual.
This worked just fine until one day last month. That was when Howard pulled out his card - only to learn the last $38 was worthless.
Turned out Barnhill's parent company had filed for bankruptcy in Tennessee on Dec. 3. On Feb. 1 it sold 16 of its 41 locations, including the one in New Port Richey, to an Arizona company that was not honoring the gift cards.
Howard didn't appreciate the news. He refused to budge from the register line until the manager reluctantly agreed to accept the remaining balance on the cards. But he saw other customers who didn't put up a fight.
"What if this had been my first date?" said Howard, 80. "What a horrible public relations move to not honor those cards."
Howard and an untold number of others are learning a tough lesson about the risks of gift cards.
Chapter 11 bankruptcy treats gift cards as a loan to a company, not as cash. What this means, according to consumer advocates: Be very careful about where you buy gift cards.
"Consumers need to buy gift cards with their eyes wide open," said Jack Gillis, a spokesman for the Consumer Federation of America.
The CEO of Star Buffet Management, the Scottsdale-based company that bought 16 Barnhill's restaurants on Feb. 1, told the Northeast Mississippi Daily Journal that his company bought only the operating assets and assumed no liabilities other than real estate. A gift card holder, he pointed out, is an unsecured creditor in bankruptcy court.
Barnhill's gift card holders are not alone. Sharper Image announced last month that it was suspending the acceptance of gift cards, at least temporarily, after it filed for bankruptcy protection.
C. Britt Beemer, chairman of America's Research Group, told the Associated Press "you will see a lot of frustration among customers. You basically stole (money) out of the customers' pocket. They will never forgive you."
Count Don Bailey, 84, of Hudson, as one person in a non-forgiving mood. He received a $50 Barnhill's gift card for Christmas. He wondered why the restaurant sold the card after it had already filed for bankruptcy protection. He wondered whether the new owner would step up.
"We won't be going back," he said. "I said if somebody buys a business, they should take over the debts of the previous owner. You'd think they'd want to keep a good reputation."
So what recourse do customers have?
After Mississippi customers complained to the newspaper, Star Buffet's CEO announced that he had instructed managers at the 16 new locations, including New Port Richey, to accept gift cards with $25 or less on them.
And this week, the Nashville-based bankruptcy lawyer who represents the former owner, Tennessee-based Barnhill's Buffet Inc., told the Pasco Times in an e-mail that customers who purchased cards of any value between Dec. 3 and Jan. 31 are entitled to refunds from his client.
Told about the latest options for customers, Howard said he's still upset with the way the issue was handled. He doesn't think he'll go back to Barnhill's.
"I think it was about the dumbest corporate decision I ever heard in my life," he said.
Information from an Associated Press report was used in this story. Jodie Tillman can be reached at email@example.com or (727) 869-6247.
If you have a card
Barnhill's Buffet gift card holders who bought their cards in a specific window of time - from Dec. 3, 2007 to Jan. 31 - are entitled to refunds, said Caldwell Hancock, bankruptcy lawyer for the former owner, Barnhill's Buffet Inc.