KOEHLINGER v. The State LOTTERY Comm'n of Ind.

• Decision Date: 07 September 2010
• Docket Number: No. 49A02-1003-CT-247.,49A02-1003-CT-247.
• Citation: 933 N.E.2d 534
• Parties: Jeff KOEHLINGER and Jeff Frazier, individually and as class representatives of all others similarly situated, Appellants/Plaintiffs, v. The STATE LOTTERY COMMISSION OF INDIANA, Appellee/Defendant.
• Court: Indiana Appellate Court

933 N.E.2d 534

Jeff KOEHLINGER and Jeff Frazier, individually and as class representatives of all others similarly situated, Appellants/Plaintiffs,

v.The STATE LOTTERY COMMISSION OF INDIANA, Appellee/Defendant.

No. 49A02-1003-CT-247.

Court of Appeals of Indiana.

Sept. 7, 2010.

Richard A. Waples, Jaunae M. Hanger, David R. Brimm, Waples & Hanger, Indianapolis, IN, Attorneys for Appellants.

Jon Laramore, James P. Hanlon, Matthew T. Albaugh, Baker & Daniels LLP, Indianapolis, IN, Attorneys for Appellee.

OPINION

BRADFORD, Judge.

Appellants/Plaintiffs Jeff Koehlinger and Jeff Frazier, as individuals and as class representatives of all others similarly situated (“Appellants”), appeal from the trial court's grant of summary judgment in favor of Appellee/Defendant the State Lottery Commission of Indiana (“the Lottery”). The Lottery contends that the trial court should have entered summary judgment in its favor on the ground that the Appellants did not exhaust their administrative remedies. Appellants contend that the trial court erred in concluding that the Lottery was entitled to summary judgment on their claims of contract rescission, false advertising, negligence, negligent misrepresentation, unjust enrichment, restitution, and money had and received. Concluding that the trial court erred in granting summary judgment in favor of the Lottery on Appellants' contract claim, we reverse and remand.

FACTS AND PROCEDURAL HISTORY

Most of the underlying facts of this case are not in dispute. The Lottery is authorized by the General Assembly to “enable the people of Indiana to benefit from significant additional money for capital improvements.” Ind.Code § 4-30-1-1 (2010). The Lottery offers and has offered various scratch-off games, including “Cash Blast,” which began in December of 2004. The Lottery posts information regarding scratch-off games on its website, including the number of prizes not yet claimed. Approximately 5 million Cash Blast tickets were available for purchase, at a price of $10 apiece. Prizes were available in amounts of $10, $20, $50, $100, $200, $500, $1000, $10,000, and $250,000, and, as stated on the tickets, the odds of purchasing a winning card of any denomination was one in 3.29. Cash Blast included ten winning tickets at the $250,000 level. Approximately $36,688,000 in prizes were available to be won in Cash Blast, for an aggregate return-to-player (“RTP”) of approximately 73.4 percent of the money spent on tickets. ¹

In early 2005, approximately 2.5 million Cash Blast tickets had to be replaced prior to sale due to a manufacturing defect. The Lottery's computer system that tracked the number of unclaimed prizes, however, treated the replacement tickets as additional tickets, resulting in, inter alia, an overstatement of slightly more than fifty percent of unclaimed prizes on the Lottery website at the time. ² For example, at the time of the error, the Lottery website indicated that thirteen $250,000 prizes were unclaimed when, in fact, there were only eight.

In the summer of 2006, the Lottery became aware of the error on its website after a player contacted it regarding where he could purchase Cash Blast tickets. The Lottery checked its inventory of Cash Blast tickets and discovered that ninety-eight percent of them had been sold. The Lottery's computer system, however, indicated that only sixty-five percent of Cash Blast tickets had been sold. Upon discovery of the error, the Lottery posted a message on its website explaining the error. Shortly thereafter, several Cash Blast players contacted the Lottery expressing displeasure that the number of prizes available had been overstated on the website. None of the Lottery's responses to these players indicated that any administrative process was available to address their concerns.

In particular, the Lottery's responses to players requesting that it “make this right” neither initiated administrative process nor provided information regarding the availability of such process. Plaintiff's Ex. 12 p. 5. The Lottery's responses to players dissatisfied with its explanation of the error neither initiated administrative process nor provided information regarding the availability of such process. The Lottery's responses to players requesting refunds or other compensation neither initiated administrative process nor provided information regarding the availability of such process. The Lottery's responses to players stating or implying that they would take the matter to court neither initiated administrative process nor provided information regarding the availability of such process.

On July 10, 2006, named plaintiff Koehlinger wrote the Lottery and requested “an appropriate response[,]” but the Lottery's response neither initiated administrative process nor provided information regarding the availability of such process. Plaintiff's Ex. 12 p. 37. On August 29, 2006, Koehlinger again wrote the Lottery, requesting a refund for 231 losing Cash Blast tickets. Koehlinger's communication included the following language:

Please consider this written communication an official request of complaint. If there is some sort of administrative remedy that you offer, please consider this a request for that remedy. If I need to complete some form other than this letter in order to invoke that procedure, please send me any such form.

Plaintiff's Ex. 12 p. 169. The Lottery's response the next day indicated that it would not compensate Koehlinger for any losing Cash Blast tickets and did not indicate that any additional administrative remedy was available.

In January of 2007, the Lottery initiated a program whereby any person who held a Cash Blast ticket purchased between May 18, 2005, and July 6, 2006, could redeem the ticket for a ten-dollar coupon for a scratch-off ticket of the person's choice. On March 29, 2007, however, the Lottery posted a notice on its website and sent letters to it retailers indicating that Cash Blast tickets and claim forms submitted for redemption would have to be postmarked no later than April 30, 2007, in order to be considered.

Meanwhile, on January 5, 2007, Plaintiffs filed suit against the Lottery, requesting certification of a class of those who had bought non-winning Cash Blast tickets between May 2005, and July 7, 2006. Plaintiffs raised claims of negligent misrepresentation, negligence, breach of contract, fraud, money had and received, restitution, unjust enrichment, and deceptive sales practices under Indiana's Deceptive Consumer Sales Act (“DCSA”). On April 2, 2007, the Lottery filed a motion to dismiss, which the trial court denied on February 1, 2008. On July 7, 2008, the trial court granted the Plaintiffs' motion for class certification. On September 16, 2008, this court denied the Lottery's request to accept jurisdiction of an interlocutory appeal of the trial court's certification of the class.

On August 28, 2009, the Plaintiffs filed a motion for summary judgment. On September 1, 2009, the Lottery filed a motion for summary judgment. On March 8, 2010, the trial court denied the Plaintiffs' motion for summary judgment and granted the Lottery's.

DISCUSSION AND DECISION

When reviewing the grant or denial of a summary judgment motion, we apply the same standard as the trial court. Merchs. Nat'l Bank v. Simrell's Sports Bar & Grill, Inc., 741 N.E.2d 383, 386 (Ind.Ct.App.2000). Summary judgment is appropriate only where the evidence shows there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Id.; Ind. Trial Rule 56(C). All facts and reasonable inferences drawn from those facts are construed in favor of the nonmoving party. Id. To prevail on a motion for summary judgment, a party must demonstrate that the undisputed material facts negate at least one element of the other party's claim. Id. Once the moving party has met this burden with a prima facie showing, the burden shifts to the nonmoving party to establish that a genuine issue does in fact exist. Id. The party appealing the summary judgment bears the burden of persuading us that the trial court erred. Id.

I. Whether the Trial Court Erred in Failing to Grant the Lottery Summary Judgment on the Basis that the Plaintiffs had Failed to Exhaust Their Administrative Remedies

Both sides acknowledge that the Lottery and claims against it are subject to the Administrative Orders and Procedures Act (“AOPA”). The Lottery contends that the Appellants did not exhaust the administrative remedies available to them while the Appellants argue that they should be excused from the exhaustion requirement because no adequate remedy existed at the time their claims became ripe.

There exists a strong bias in case law in favor of the requirement that administrative remedies be exhausted. The objective of such a requirement is to avoid collateral, dilatory action, ensure the efficient, uninterrupted progression of administrative proceedings and the effective application of judicial review, and provide an agency with an opportunity to correct its own errors and to compile a factual record as necessary for judicial review. Austin Lakes [ Joint Venture v. Avon Utilities, Inc.], 648 N.E.2d [641, 649 (Ind.1995).]

Be that as it may, we recognize that there are exceptions to the requirement of exhaustion of remedies at the agency level. For instance, a party is excepted from the exhaustion requirement when the remedy is inadequate or would be futile, or when some equitable consideration precludes application of the rule. Indiana State Building and Construction Trades Council v. Warsaw Community School Corp., 493 N.E.2d 800, 806 (Ind.Ct.App.1986). To prevail upon a claim of futility, “one must show that the administrative agency was powerless to effect a remedy or that it would have been impossible or fruitless and of no value under the circumstances.” Id. Furthermore, the requirement of exhaustion of administrative remedies “will be...