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United States Supreme Court Issues Opinion on Derivative Immunity

The U.S. Supreme Court issued an opinion yesterday on the issue of “derivative sovereign immunity”.  The opinion may impact the way Texas courts rule on that issue in the Fun 5’s case.

In Campbell-Ewald v. Gomez, the Supreme Court was asked whether a Navy contractor was immune from suit when it sent text messages to individuals who had not opted to receive them in violation of federal law and the Navy’s directive that the text messages should only be sent to those on the opt-in list. The Supreme Court made it clear that government contractors do not have absolute immunity.  As the Court noted: “[w]hen a contractor violates both federal law and the Government’s explicit instructions, as here alleged, no “derivative immunity” shields the contractor from suit by persons adversely affected by the violation.”  The Court went on to note that qualified immunity may be overcome if the defendant knew or should have known that his conduct violated a right ‘clearly established’ at the time of the episode in suit.”  The Court concluded that the Navy contractor was not entitled to immunity because there was no basis for Campbell-Ewald to argue that there was any doubt that the plaintiff had a clearly established  right to be free of unsolicited text messages or that its actions complied with the Navy’s instructions.  In the Fun 5’s case, the lottery players had a clear right to be free from deceptive or fraudulent representations.  GTECH cannot argue that it was unaware that it had a duty to be honest and fair with lottery players. Both Texas criminal and civil law prohibit the commission of fraud on consumers. Moreover, the Texas Lottery Commission made it clear in the Instant Ticket Contract with GTECH that GTECH was to provide final working papers that were “complete and free of errors”. Moreover, GTECH was required to conduct all of its operations “in adherence to the highest ethical standards.” To  the extent that the wording chosen by GTECH in the final working papers was misleading and deceptive, the working papers were not “free of errors” and GTECH did not comply with its contractual duty to conduct its operations in adherence to the highest ethical standards.

Although the Supreme Court’s opinion dealt with federal law, it is likely that it will be at least considered by the Texas trial and appellate courts when they rule on GTECH’s claim of derivative sovereign immunity in the Fun 5’s case.

By Richard LaGarde

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