COA reverses judgment on contract-rescission claim against lottery

The Indiana Court of Appeals will allow lottery scratch-off game players’ claim of contract rescission against the state’s lottery commission to proceed to trial, but the court affirmed summary judgment in favor of the commission on the other claims filed by the players in a class-action suit.

In Jeff Koehlinger, et al. v. State Lottery Commission of Indiana, No. 49A02-1003-CT-247, Jeff Koehlinger and other plaintiffs sued the State Lottery Commission of Indiana for contract rescission, false advertisement, negligence, negligent misrepresentation, unjust enrichment, restitution, and money had and received. They sued because of misrepresentations on the lottery’s website regarding the odds of winning when purchasing “Cash Blast” tickets. More than 2.5 million tickets had to be replaced before they went on sale because of a manufacturing defect; this caused the lottery’s computer system to overstate the number of unclaimed prizes on the website. After 14 months, lottery officials noticed the error and adjusted for the actual number of unclaimed prizes, which resulted in a 1,260 percent decrease in the number of unclaimed prizes.

Players were upset and wanted the lottery commission to make it right, although the commission never informed players how to initiate an administrative process nor provided information about it.

The trial court denied the class’s motion for summary judgment and granted summary judgment for the commission.

The appellate judges affirmed summary judgment in favor of the lottery commission that it has immunity under the Deceptive Consumer Sales Act, and on the quasi-contractual claims for unjust enrichment, money had and received, and restitution. They also affirmed not granting summary judgment for the commission on the basis that the class had failed to exhaust their administrative remedies.

The majority affirmed summary judgment on the negligence and negligent misrepresentation claims. Judge Patricia Riley dissented on this issue because the designated evidence supported a genuine issue of material fact. The commission had a duty to exercise reasonable care not to misinform its customers about the remaining prizes in the Cash Blast game, she wrote. It breached that duty when it didn’t accurately represent those numbers and it even admitted it was a mistake not to catch this reporting for 14 months.

Judge Riley also concurred in result with her colleagues on reversing summary judgment for the lottery commission on the contract-rescission claim and remanding for trial. Some class members had designated evidence that establishes they relied on the misinformation on the lottery’s website when deciding to buy the tickets. The majority also concluded it was reasonable to infer that many of those players suffered prejudice as a result of detrimental reliance.

“If a player can prove to the trial court that he or she relied on the Lottery’s misinformation to his or her detriment, that player will be entitled to rescission,” wrote Judge Cale Bradford.