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GTECH May Blame Texas Lottery Commission for Fun 5’s Fail

GTECH Corporation, the operator of the Texas Lottery, has disclosed that it may designate the Texas Lottery Commission as a “Responsible Third Party” in the $504 million lawsuit filed against GTECH by nearly 1,000 lottery players in Austin, Texas.  The disclosure was contained at the end of GTECH’s recent Response to Request for Disclosures.

Background of the Fun 5’s lawsuit.

The lawsuit, pending in state district court in Travis County, alleges that GTECH used misleading and deceptive language on Fun 5’s scratch-off tickets printed by GTECH and sold in Texas. GTECH operated a nearly identical Fun 5’s game in several other states before proposing the game to the Texas Lottery Commission.  The language used by GTECH on the Fun 5’s tickets is the crux of the problem. Fun 5’s tickets printed by GTECH in Kansas, Indiana, and Nebraska contained a tic-tac-toe game designated as Game 3. In Texas, the same tic-tac-toe game was designated as Game 5. The instructions for the Fun 5’s tic-tac-toe game in those three states and in Texas are almost identical and provide as follows:

Kansas:  Get a “5” symbol in the BONUS box, win 5 times that Prize!

Indiana: Get a “5” symbol in the bonus box, win 5 times the prize shown.

Nebraska: Get a “5” symbol in the 5X box and win 5 times that PRIZE.

Texas: Reveal a Money Bag ”  ” symbol in the 5X BOX, win 5 times that PRIZE.

The suit alleges that in Kansas, Indiana, and Nebraska, 100% of the tickets with a “5” symbol were “winning” tickets and those players received 5 times the prize shown on the ticket.  In Texas, the original parameters of the game likewise provided that 100% of the tickets with a Money Bag symbol would be “winning” tickets.  Use of the same language in Texas as that used in the other states would have been accurate if 100% of the tickets with a Money Bag symbol were “winning” tickets as in the other states.  However, the suit alleges that GTECH and the Texas Lottery Commission decided to change the parameters of the game in Texas so that a “substantial percentage” of tickets with a Money Bag symbol would be designated as “non-winning” tickets. Despite the significant change in the parameters of the game, GTECH decided to leave the language on the tickets as is.  The suit alleges that GTECH misled at least 1,000 Texas Lottery players into justifiably believing they had “winning” tickets.

The Texas Lottery began selling Fun 5’s tickets on September 1, 2014.  Almost immediately phone calls began to pour into the Texas Lottery Commission from angry lottery players who believed they had “winning” tickets but were told otherwise when they attempted to cash their tickets.  Amazingly, despite these early warning signs that the Fun 5’s tickets were misleading, GTECH continued delivering the Fun 5’s tickets to retailers and the tickets continued to be sold to Texas consumers for at least seven weeks.  On October 21, 2014, the Texas Lottery issued a press release to announce that it was closing the Fun 5’s game early and would discontinue selling the tickets, citing “confusion” expressed by players and the Texas Lottery’s responsibility to create games that are “clear to understand for our players”.   A large number of the disappointed Fun 5’s players contacted their Texas legislators.  Others contacted the Travis County District Attorney. Still others contacted then Attorney General Gregg Abbott’s office asking for an investigation.  When they got no satisfaction from their elected officials, players with Money Bag symbols on their Fun 5’s tickets filed suit against GTECH.  Approximately 1,000 players have joined in the lawsuit and more are joining each week.  The total winnings being claimed by the disappointed players is at least $504 million.

 What is a Responsible Third Party?

In 1995, the Texas Legislature enacted Section 33.004 of the Texas Civil Practice and Remedies Code to permit a defendant in a tort-based lawsuit to file a motion with the court to designate a non-party to the lawsuit as a “Responsible Third Party”.  Lawyers often refer to this party as an “RTP”.  If a defendant is permitted to designate an RTP and if the defendant proves that the  RTP is partly responsible for the damages suffered by the plaintiffs, the jury is required to assess the percentage of responsibility of the RTP.  The percentage assessed against the RTP reduces the liability of the defendant and reduces the recovery of the plaintiffs unless they bring the RTP into the lawsuit.

What does GTECH gain and lose if it points the finger at the Lottery Commission?

Under the Civil Practice and Remedies Code, GTECH has until 60 days before trial to designate the Lottery Commission as an RTP.  Whether it will actually do so is not yet known.  What is known is that GTECH has much to gain and much to lose if it pulls the trigger.  If it designates the Lottery Commission as an RTP, GTECH will have the chance to reduce its liability, but only if it convinces the jury that the Commission was partly responsible for causing the players’ losses.  However, GTECH risks alienating both the  Lottery Commission and the Texas Legislature if it attempts to shift blame.  GTECH’s mere threat that it “may” designate the Commission as an RTP will require the players to take the sworn deposition testimony of the Commission’s staff and officials to determine whether the Commission was at fault.   The usually cozy relationship between the Commission and its contract operator may be damaged by GTECH’s finger pointing and attempts to place the blame on the Commission.  The Texas Legislature will not be thrilled either.  By designating the Commission as an RTP, GTECH will incentivize the players to seek approval from the Texas Legislature to bring the Lottery Commission into the lawsuit.  A group of  over 1,000 angry lottery players who believe they are owed $504 million makes for a very motivated and dangerous constituency group that may become angry at their elected officials if their needs are not met.  The Texas Lottery faced a near death penalty in the recent past when the Legislature nearly killed the lottery during  sunset proceedings.  By trying to lay blame on the Lottery Commission and its staff, GTECH may lose friends at both the Commission and in the Legislature and may inadvertently lend support to those Legislators who have been trying to kill the lottery.  GTECH also runs the risk of alienating other states that are shopping for a contract lottery operator.  One of the selling points used by GTECH to get lucrative government contracts in the past is that it has vast experience in running lotteries all over the world.  If GTECH gains a reputation for blaming state lottery officials for misleading scratch-off games, it may lose some of its advantage in competing for lottery contracts in other states.  Only GTECH knows whether it will actually pull the trigger and designate the Texas Lottery Commission as an RTP.  The coming months should prove interesting for GTECH, the disappointed lottery players, the Lottery Commission, and the Texas Legislature.

By Richard LaGarde


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