“Fun Five” plaintiffs survive sovereign immunity challenge in lotto case

It should not take a lawyer to interpret a lotto ticket. You scratch them while munching on corn nuts and pumping gas. It can’t be that hard right? Three in a row? Matching symbols? You win!

Not so fast!

In what will undoubtedly be a case that keeps on giving, the Third Court of Appeals released its opinion today in GTECH Corpr. v. James Steele, et al,. Although, sovereign immunity was the only issue on the table, this case is one to keep an eye on.

The case concerns a Texas lotto ticket “scratch-off” known as “Fun 5’s” (pictured above). The ticket featured–as you would imagine–five different games by which hopeful scratchers could win prizes. One of these games was tic-tac-toe. Hopeful Texans could win a prize by revealing three “5” symbols in any one row of the grid, horizontally, vertically, or diagonally. That is, they won a prize by winning the game of tic-tac-toe.

In the event the user won, the amount of the prize was revealed in the “PRIZE” box directly below the grid, ranging from $5 to $100,000.  Directly next to the “PRIZE” box was a “5x BOX.” If a “moneybag” icon appeared in the “5x BOX” the prize amount would be increased five-fold, elevating the range to between $25-$500,000.

Now here’s the issue. As a security feature, moneybags were present even in those tickets in which the user had not won the tic-tac-toe game. The court explained this, noting:

Although the moneybag icon was a prize multiplier having effect only on tickets that won in tic-tac-toe, Game 5 was configured so that the moneybag multiplier would appear not only on a subset of the winning tickets, but also on roughly 25 percent of non- winning tickets, a security measure deemed advisable by the Texas Lottery Commission (TLC) to prevent advance discovery of winning tickets merely by “microscratching” the 5x BOX to find moneybag icons.

After sales began, scratchers who revealed the moneybag icon on “non-winning” tickets asserted that they were actually winners. Despite losing tic-tac-toe, they argued that they were still entitled to 5X the prize shown. As support for their interpretation, these individuals pointed to the instructions on the ticket, which provided:

Reveal three “5” symbols in any one row, column, or diagonal, win PRIZE in PRIZE box. Reveal a Money Bag “[icon]” symbol in the 5X BOX, win 5 times that PRIZE.

Accordingly, they argue, if you reveal a moneybag, you are entitled to 5X the amount shown in the PRIZE box, regardless of whether you were successful at Game 5’s tic-tac-toe. These “winners” had their elation crushed when they actually attempted to collect their prizes. I imagine upon receiving these claims the Texas Lotto’s reaction was something like this.

Famous lawyer, author, and spectacular Christmas party host Mark Lanier collected hundreds of these hopeful scratchers and filed suit (as a note, there is a separate, but related case in Dallas County, Texas). The Defendant, GTECH Corporation, contracted with the Texas Lottery Commission to develop, print, and distribute these tickets.

Unsurprisingly, in light of recent cases coming out of Texas courts, GTECH filed a plea to the jurisdiction asserting that the Plaintiffs’ claims were barred by sovereign immunity derived from the Texas Lotto Commission’s immunity. The trial court denied GTECh’s plea and GTECh appealed.

The Third Court of Appeals affirmed in part and reversed in part in a 61-page opinion. In short,  the court held that where Plaintiffs’ causes of action were predicated on GTECH’s failure or refusal to follow the Texas Lotto Commission revisions to Game 5, the claims could go forward. However, with respect to other claims in which GTECH acted in conformity with the Texas Lotto Commission’s directions, the court held that the claims were barred by sovereign immunity.

The court explained:

The district court did not err in denying GTECH’s plea to the jurisdiction with respect to the Steele Plaintiffs’ fraud causes of action to the extent they are predicated on GTECH’s failure or refusal, following TLC’s change in the Game 5 parameters to have moneybag icons appear on non-winning tickets, to raise with TLC the now-complained-of asserted discrepancy between the Game 5 instructions and actual parameters.

However, in its other components, the Steele Plaintiffs’ suit implicates sovereign immunity by substantively seeking to control the actions and decisions of TLC within its delegated authority

The court’s analysis was in-depth and extensive. This article only grazes the surface of the issues implicated in the case, which are worth exploring further.

I can’t wait for this case to work its way back up . This one, on the merits, smacks of the classic first-year contracts case, involving a Pepsi commercial and a military grade fighter jet. If you remember that one, despite featuring a military grade harrier jet (driven by a teen to school) and listing it as available for 7 million points, nobody really believed you could purchase a military grade jet by drinking Pepsi.

Similarly here, it seems highly improbable that anyone could really believe that by losing the game tic-tac-toe, they could nonetheless be entitled to receive five times the amount of the prize had they actually one. It defies common sense.

But, hope springs eternal for those who scratch.

Tyler Talbert practices law in Waco, McClennan County, Texas, with the firm Scanes & Routh. He focuses on appeals and appellate law and has practiced before numerous Courts of Appeal. Before becoming an attorney, he graduated from Case Western Reserve University School of Law and Baylor University. 

Waco, McClennan, Appeal, Law,  Appellate, Appeals, Court of Appeals, Tyler Talbert, Scanes & Routh, Lawyer, Attorney, Baylor, Case Western Reserve University, Supreme Court of Texas