June 16, 2004

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Classifieds

Palo Alto Online

Not a Hollywood ending

by Jocelyn Dong

In business as in love, apparently, breaking up is hard to do.

In May, the 19-year-old Midtown Video store in the Midtown Shopping Center closed, the managers hastily bid their customers good-bye with a note posted on the door and phone calls to their most loyal shoppers.

This month, the saga turned sour when angry customers alleged the outfit took some of their money with it.

At issue are pre-paid coupons customers bought at one of the store's two semi-annual sales. Each coupon, bought at a discount, was a credit for future rentals or purchases. When the store closed, owners promised the coupons would be honored for the first week of the liquidation sale, which began May 27.

But after shoppers had redeemed a reported $10,000 worth the first day, owners of Midtown Video called off the deal. Now, long-time customers are mad.

"I feel it's really bad business ... because they've been a neighborhood entity," said K.C. Griffin, who had $75 on her account. "It's crappy."

Kirk Fry tried to buy videos on his pre-paid account the third day of the sale, but was turned away. The salesclerk, who worked for the liquidation company that bought Midtown Video's assets, pointed to a sign that informed customers the Midtown Video owners could not make good on the promise, "due to unfortunate circumstances."

It isn't the amount of money that bothers him, Fry said, it's that "people basically trusted them."

Jay Elliot, who represents the family that owned Midtown Video, said he didn't want to short anyone but pointed out the store was running out of money.

"We had to stop it," he said.

The business has not filed for bankruptcy, he said, and the owners are trying to avoid that costly possibility.

A clerk at the store last Friday said that creditors have been calling every week, demanding to be paid.

In fact, the coupons had been key to the store's flagging business, which Elliot said had dropped 80 percent in recent years.

The twice-yearly coupon sales kept the business afloat, essentially advancing the company funds, according to Laurie Garcia, the store manager.

"The coupon money would barely hold us through the next sale," Garcia said.

"I hope (customers) understand, if we wanted to scam them, we would have had a sale in December and closed in January," Garcia said.

Even if the store had the money to refund customers, it's difficult to figure out which customers are owed what, she said. The coupons that people bought were not physical pieces of paper, but credit that was recorded onto a computer database.

Customers believe the store has records of how much each person has on account. The clerk last week, who has worked for Midtown Video for three years, said a supervisor printed out the store's database last month. He opened his arms wide to indicate how long the list was of customers and the number of coupons they bought.

One person, he said, had 123 coupon credits on his account, worth roughly $440.

But Elliot and Garcia said the database was not reliable.

"Unfortunately, in the last several years, the accounting has been shabby," Elliot said.

Garcia said the store had at least 9,000 members in the database, and that some memberships had lapsed, rendering their coupons worthless. Also, she noted, the store's policy was that coupons were non-refundable, a fact written into store literature.

The finger-pointing has gone both ways. While customers grumble about the sudden closure, the owners rebut that if people had continued frequenting the shop, it might not have gone out of business in the first place.

People who have been complaining, Elliot said, hadn't been to the store in years.

Griffin just wished management had taken the time to explain the situation. "If they had done it differently, I could care less. It's just not the way that business should have done it."

She said she'd join a class-action lawsuit if one were filed.

An attorney with the Santa Clara County District Attorney's office said that customers' legal recourse depends on how the coupon policies were defined, documented and communicated.

Meanwhile, the Midtown Video salesclerk, who feels caught in the middle, has started keeping a list of customers who have come in to complain about being owed money.

He doesn't know what he'll do with the list, however.

Senior staff writer Jocelyn Dong can be reached at jdong@paweekly.com.

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