Motion for late claim relief in putative class action for misleading advertising by the Division of the Lottery was denied.
|Claimant(s):||R. WRIGHT, individually and for all others similarly situated|
|Claimant short name:||WRIGHT|
|Footnote (claimant name) :|
|Defendant(s):||THE STATE OF NEW YORK|
|Footnote (defendant name) :|
|Judge:||FRANCIS T. COLLINS|
|Claimant's attorney:||Balestriere Fariello f/k/a Balestriere Lanza PLLC
By: Craig Stuart Lanza, Esquire
|Defendant's attorney:||Honorable Andrew M. Cuomo, Attorney General
By: Joan Matalavage, Esquire
Assistant Attorney General
|Third-party defendant's attorney:|
|Signature date:||February 11, 2010|
|See also (multicaptioned case)|
Movant, R. Wright, seeks late claim relief on behalf of himself and putative class members asserting the State allegedly misrepresented the odds of winning the Take Five lottery game.
The proposed claim alleges causes of action for fraudulent inducement, deceptive acts or practices under General Business Law § 349, false advertising under General Business Law § 350, unjust enrichment and breach of contract. All of the causes of action are based on the contention that the State through the Division of the Lottery (the "Division") lured the movant and others to purchase tickets in the Take Five game through misrepresenting that the odds of winning the Take Five lottery were 1 in 9. The proposed claim alleges, as pertinent here, the following facts:
"16. Consumers participate in the Take Five game by heading to any NY Lottery licensed retailer and purchasing a Take Five playcard. Consumers then select five different numbers between one and thirty-nine and receive a receipt from the retailer confirming their selections. Lottery purchasers then tune in to their televisions at 11:21 p.m. each night, when NY Lottery conducts the drawings and announces the winning numbers.
17. If all five of your numbers match the numbers drawn, which has odds of 1-in-575,757, the expected prize amount is an average of $57,575.70. If four of your numbers match, which has odds of 1-in-3,386.81, the expected prize amount is an average of $508.02. If three of your numbers match, which has odds of 1-in-102.63, the expected prize amount is an average of $25.66. If you match two numbers, which has odds of 1-in-9.62, you receive a Quick Pick Free Play. If you match one or zero numbers, you receive nothing.
18. As contrasted with an actual cash prize, a Quick Pick Free Play simply gives you another chance to win an actual cash prize (or yet another Quick Pick Free Play), except that consumers cannot pick their own numbers.
19. The tagline of this advertising campaign is "A Little Bit of Luck," which features a diminutive man known simply as "A Little Bit of Luck."
20. This impish character represents that, with Take Five, "All you need is a little bit of luck" because "the odds of winning Take Five are one-in-nine," and "there's [sic] a hundred thousand winners every day."
21. These advertisements litter the television and appear on radio, online, and in print, whether in newspapers, magazines, or posters found across all across state, on billboards, public buses, public telephones, and many other across New York."
Movant, R. Wright, alleges he was enticed by the advertisements touting a 1-in-9 chance of winning and that, in reliance on these misrepresentations, he purchased Take Five tickets regularly from January 2008 through at least March 2008. The relief demanded by the movant includes, inter alia, both compensatory and punitive damages, equitable relief in the form of a permanent injunction enjoining the State from engaging in deceptive advertising practices and attorney's fees.
The action was first commenced in the United States District Court for the Southern District of New York in May 2008. That action was discontinued without prejudice to recommencing an action in State Court upon the agreement of the parties that the action would not be recommenced in or removed to Federal Court (see movant's Exhibit B). A State Court action was thereafter commenced in the Supreme Court, New York County, on September 5, 2008. Defense counsel sought and obtained several extensions of time to answer the complaint and advised movant's counsel of her belief that the action was brought in an improper venue (movant's Exhibits D and E). The State thereafter moved by order to show cause to extend its time to serve its answer or pre-answer motion to dismiss and move for a change of venue. In a separate motion, the State then moved for a change of venue to Schenectady County where the Division maintains its principal office and the majority of witnesses were located. The motions were granted by Decision and Order filed February 2, 2009, and the venue was changed to Schenectady County (movant's Exhibit F). The State then moved to dismiss the claim for lack of jurisdiction, arguing that actions against the State may only be brought in the Court of Claims. That motion was granted by Decision and Order dated July 8, 2009, which was served together with a notice of entry dated August 5, 2009 (movant's Exhibit G). The instant motion for late claim relief was thereafter filed on October 19, 2009.
Subdivision 6 of section 10 of the Court of Claims Act permits this Court, if the applicable statute of limitations set forth in article 2 of the CPLR has not expired, to allow the filing of a late claim upon consideration of the following factors: "whether the delay in filing the claim was excusable; whether the state had notice of the essential facts constituting the claim; whether the state had an opportunity to investigate the circumstances underlying the claim; whether the claim appears to be meritorious; whether the failure to file or serve upon the attorney general a timely claim or to serve upon the attorney general a notice of intention resulted in substantial prejudice to the state; and whether the claimant has any other available remedy."
The first issue for determination upon a late claim motion is whether the application is timely. Subdivision 6 of Section 10 requires that a motion to file a late claim be made "before an action asserting a like claim against a citizen of the state would be barred under the provisions of article two of the civil practice law and rules." Movant's causes of action for fraud, unjust enrichment and breach of contract are governed by a six-year statute of limitations (CPLR 213  and ). Movant's application for late claim relief with respect to his common law causes of action for fraud, unjust enrichment and breach of contract is therefore timely. The statutory causes of action under General Business Law § 349 and § 350 are governed by a three-year statute of limitations (CPLR 214 ; Gaidon v Guardian Life Ins. Co. of Am., 96 NY2d 201 ). The motion is also timely as to the causes of action brought under General Business Law § 349 and § 350.
Turning to the statutory factors, this Court has broad discretion in deciding a motion to permit the late filing of a claim (Ledet v State of New York, 207 AD2d 965). The statutory factors are not exhaustive nor is any one factor controlling (Matter of Gavigan v State of New York, 176 AD2d 1117 ). The most important factor is whether the potential claim has merit, as it would be a futile exercise to permit litigation of a clearly baseless lawsuit (Matter of Martinez v State of New York, 62 AD3d 1225 ; Savino v State of New York, 199 AD2d 254 ).
The excuse advanced by movant's counsel for the failure to timely serve and file the claim is that an action was first commenced in Federal Court and that the Federal Court action was discontinued, without prejudice, and recommenced in the Supreme Court by agreement of the parties. Contrary to this assertion, however, the email correspondence annexed as movant's Exhibit B reflects an agreement between the parties to recommence the action in State Court, which of course would include the Court of Claims. Nevertheless, it appears that the State played a role in delaying the inevitable dismissal of the action in the Supreme Court through its multiple requests for extensions of time to serve its answer or pre-answer motion to dismiss and then by moving for a change of venue prior to moving for dismissal based upon lack of subject matter jurisdiction. Under these circumstances, the Court finds the excuse for the delay in serving and filing the claim to be reasonable.
The intertwined issues of notice, opportunity to investigate and prejudice to the State will be considered together. The State clearly had notice of the facts of the proposed claim through the service of a class action complaint filed in the Federal Court action and the subsequent commencement of an action in the Supreme Court. Though the nominal plaintiff in the Federal Court action was different, the allegations were substantially the same. Under these circumstances the State had both notice and an opportunity to investigate the essential allegations of the claim and will suffer no prejudice in the event late claim relief is granted. As the State makes no contrary argument, these factors weigh in favor of the movant.
With respect to the required showing of merit, the claim is sufficiently established if the movant demonstrates that the proposed claim is not patently groundless, frivolous, or legally defective and there is reasonable cause to believe that a valid cause of action exists (Matter of Santana v New York State Thruway Auth., 92 Misc 2d 1 ; Fowx v State of New York, 12 Misc 3d 1184[A] ). Late claim relief is properly denied where "it is evident that 'it would be futile to permit a defective claim to be filed even if the other factors in Court of Claims Act § 10 (6) supported the granting of the claimant's motion' " (Matter of Martinez v State of New York, 62 AD3d at 1226, quoting Savino v State of New York, 199 AD2d at 255). Here, movant's allegation that he was enticed to purchase lottery tickets by the State's misrepresentation of the odds of winning is belied by the plain language of the rules and regulations governing the Take Five lottery game. While the Court rejects the State's argument that it is not liable for any act which is completely sovereign in nature, such as the State-run lottery in issue (see affirmation of William J. Murray, pp. 2-3)(1)
, the applicable rules and regulations clearly set forth the prizes for winning tickets in the Take Five lottery and the odds of winning as to each. As a free play in a future draw was specified as the fourth place prize, and the odds of winning were accurately advertised and clearly conveyed in the rules governing the game, no basis for recovery exists (see 21 NYCRR § 2834.2 and § 2834.10). In reaching this conclusion, a brief historical perspective of the rules and regulations is necessary.
In 1966 Article I, § 9 of the NY Constitution was amended to permit as an exception to the general prohibition against gambling "lotteries operated by the state and the sale of lottery tickets in connection therewith." The Legislature thereafter adopted enabling legislation, which is now found in Tax Law § 1600 et seq. and known as the "New York state lottery for education law" (see Tax Law § 1600). As part of this legislation, Tax Law § 1604 granted the Division broad authority to promulgate rules and regulations governing the establishment and operation of the lottery (see 21 NYCRR 2800, et seq.). It is well settled that lottery players are bound by the administrative rules and regulations governing the lottery and that these rules and regulations must be strictly construed (Molina v Games Mgt. Servs., 58 NY2d 523, 529 ). These precepts evolved from a recognition of the fact that a State-run lottery is an exception to the general laws against gambling and that such rules serve the salutary purpose of preventing fraud and the dissipation of funds by excessive litigation (Id. at 529). Against this background, the Court will now turn to the rules and regulations applicable to this case.
The payment of prizes for the Take Five lottery is set forth in 21 NYCRR § 2834.2 (a). There are four categories of prizes - first through fourth. Any two winning numbers qualifies for a fourth place prize (21 NYCRR § 2834.9). The fourth place prize is set forth in § 2834.2 (a) (4) as follows:
"No prize money will be allocated from the winning pool to the fourth prize category. The fourth prize shall be a free play in a future drawing of the Take Five game to be awarded to each game panel which qualifies for a fourth prize."
The chances of winning the Take Five lottery are set forth in 21 NYCRR § 2834.10 for each prize category. The chances of winning a fourth prize are 1 in 9.6, according to the regulation, and the overall chances of winning a prize for a $1 bet are 1 in 8.77 (id.). The regulations provide that "[i]n purchasing a ticket, the customer agrees to comply with and abide by all laws, rules and regulations . . ." (21 NYCRR § 2804.10 [n]) and knowledge of their restrictions is presumed (Craft v Capital Dist. Regional Off Track Betting Corp., 107 AD2d 952 ).
Movant's assertion that the odds of winning the Take Five lottery were misrepresented is premised entirely on the contention that the fourth place prize - a free play - is not a "win" because it is not a cash prize and the most likely outcome of the free play is a loss (see proposed claim, ¶¶ 28 - 31). In view of the fact that the fourth place "prize" is defined by the controlling regulation to be a free play in a future drawing (21 NYCRR § 2834.2 [a] ) and the odds of winning a fourth place prize as well as the overall odds of winning were clearly set forth in the regulation, the Court concludes that the State cannot be liable on theories of either fraudulent inducement, breach of contract or unjust enrichment.
To prevail on a claim for fraudulent inducement a movant must establish "the misrepresentation of a material fact, which was known by the defendant to be false and intended to be relied on when made, and that there was justifiable reliance and resulting injury" (Ventur Group, LLC v Finnerty, 68 AD3d 638, 639  [internal quotation marks and citation omitted]). Here, movant can fulfill none of these requirements. The applicable rules and regulations clearly define the fourth place prize in the Take Five lottery as a free play in a future drawing. Moreover, the inclusion of a free play as a "prize" in the lottery comports with the holding of the Court of Appeals in Dalton v Pataki (5 NY3d 243 ), which interpreted the term lottery to include the tender of consideration to purchase tickets and receipt of "a prize in the form of compensation or chances to play additional games" (5 NY3d at 264-265). Thus, the regulation's inclusion of a free play as a prize in the Take Five lottery is entirely consistent with the Court of Appeals' definition of a prize. Consequently, there was no misrepresentation of a material fact as the odds of winning a prize, which include a free play in a future drawing, were accurately represented and fully disclosed in the rules and regulations. Nor can the movant fulfill the requirement of justifiable reliance in light of the fact that knowledge of the applicable rules and regulations is presumed (Craft v Capital Dist. Regional Off Track Betting Corp., 107 AD2d at 954; see also DeAngelis v Timberpeg E., Inc., 51 AD3d 1175 ). Inasmuch as the fourth place prize and the odds of winning it were accurately represented in accordance with the applicable rules and regulations, the cause of action for fraudulent inducement is meritless as a matter of law (see Craft v Capital Dist. Regional Off Track Betting Corp., supra).
Movant's causes of action for breach of contract and unjust enrichment are meritless for the same reasons. When movant purchased a ticket for the Take Five lottery the overall odds of winning were 1 in 8.77 and the odds of winning a fourth prize was 1 in 9.6 (21 NYCRR § 2834.10). The representation that movant had a 1 in 9 chance of winning was therefore accurate and may not form the basis for claims sounding in either breach of contract or unjust enrichment (see also Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382  [existence of contract governing a particular subject matter generally precludes recovery on a theory of unjust enrichment]).
To the extent the claim is premised upon violations of General Business Law § 349 and § 350, the proposed claim fails to state a potentially viable cause of action. Tax Law § 1608 provides the following:
"No other law providing any penalty or disability for the sale of lottery tickets or any acts done in connection with a lottery shall apply to the sale of tickets or acts performed pursuant to this article. "
As movant concedes in his reply brief (at p. 5), this statute precludes causes of action under either General Business Law § 349 or § 350.
As to the final factor to be considered, it appears no alternative remedy exists.
As the proposed claim is defective as a matter of law, the Court finds that it would be futile to grant leave to file a late claim. Accordingly, movant's motion for late claim relief is denied.
February 11, 2010
Saratoga Springs, New York
FRANCIS T. COLLINS
Judge of the Court of Claims
The Court considered the following papers:
1. The State's argument in this regard was based primarily on Williams v State of New York, 90 AD2d 861 , which was implicitly overruled in Ford Motor Credit Co. v State of New York, 133 AD2d 980 ; see also McLean v City of New York, 12 NY3d 194 ).