Kyle v. Georgia Lottery Corp.

• Decision Date: 21 November 2011
• Docket Number: No. S10G1808.,S10G1808.
• Citation: 11 FCDR 3612,290 Ga. 87,718 S.E.2d 801
• Parties: KYLE et al. v. GEORGIA LOTTERY CORPORATION et al.
• Court: Georgia Supreme Court

11 FCDR 3612

290 Ga. 87

718 S.E.2d 801

KYLE et al.

v.GEORGIA LOTTERY CORPORATION et al.

No. S10G1808.

Supreme Court of Georgia.

Nov. 21, 2011.

Merolla & Gold, Angelo T. Merolla, for appellants.

Samuel S. Olens, Atty. Gen., R.O. Lerer, Deputy Atty. Gen., William W. Banks, Jr., Shereen M. Walls, Sr. Asst. Attys. Gen., Troutman Sanders, Bradley J. Harrison, for appellee.

MELTON, Justice.

Appellants George Kyle and Frank Mankovitch (collectively Kyle) sued appellees Georgia Lottery Corporation (GLC) and Scientific Games International (SGI) asserting trademark infringement, deceptive trade practices, and breach of contract stemming from GLC's “Money Bags” lottery games of 2005 and 2007. The trial court granted GLC's motion to dismiss for lack of subject matter jurisdiction based on sovereign immunity, and alternatively granted motions for summary judgment brought by both GLC and SGI with respect to the claim of trademark infringement. Kyle appealed to the Court of Appeals, which affirmed the trial court's ruling in its entirety. Kyle v. Ga. Lottery Corp., 304 Ga.App. 635, 698 S.E.2d 12 (2010). This Court granted certiorari and posed the following questions: (1) Did the Court of Appeals err in finding that the Georgia Lottery Corporation was entitled to assert sovereign immunity as a bar to a suit raising claims arising outside the Georgia Tort Claims Act? and (2)Did the Court of Appeals err in finding that OCGA § 10–1–440 requires the bona fide use of a trademark to make out a claim concerning the trademark's infringement? For the reasons that follow, we affirm.

GLC was created by the General Assembly in 1992 under the authority of the Georgia Lottery for Education Act, OCGA § 50–27–1 et seq., for the purpose of marketing and selling lottery tickets to benefit state educational purposes. Pursuant to that authority, GLC began a “MONEY BAGS” lottery game in Georgia in October 1994, selling approximately 20 million tickets until it concluded the game in 1996. SGI is the company that printed and provided the lottery tickets to GLC.

In 1995 an entity created by Kyle was issued a registration for the mark “MONEYBAG$” by the Georgia Secretary of State on a game which consisted of a marked velvet pouch containing numbered tiles to assist in randomly selecting numbers for lotto games. The registration was renewed for an additional ten-year period in April 2005. Between 1995 and 2005, Kyle sold less than 50 such games.

In late 1999 GLC planned to run the MONEY BAGS lottery again and in a routine trademark search, SGI learned of Kyle's trademark registration for the MONEYBAG $ mark. SGI contacted Kyle to obtain his consent for the use of the MONEYBAG $ logo for GLC lottery tickets. As a result, consent letters were signed by Kyle and SGI in 2000 and 2002, authorizing the latter's use of the MONEYBAG $ trademark to print 14 million tickets with sales to commence in 2000 and 2002, respectively. As a result, SGI sent clearance letters to GLC opining that GLC could use the “MONEY BAGS” name in games undertaken in those years without any danger of confusion with another mark.

In 2005 and again 2007, GLC ran its MONEYBAG$ games and in those instances, SGI printed scratch-off instant lottery tickets without obtaining permission from Kyle. In 2006 appellant Frank Mankovitch obtained exclusive distribution rights to Kyle's game but failed to market the game successfully; consequently, the game was not offered for sale in the marketplace from 2005 through 2007. Nonetheless, Kyle and Mankovitch sued GLC and SGI on a variety of legal theories, including infringement of the MONEYBAG$ trademark, and sought to recover all gross profits GLC derived from the sale of its MONEYBAG $ lottery tickets during the years 2005 to 2007 (approximately $5 million).

Sovereign Immunity

1. Because sovereign immunity applies to state instrumentalities, GLC is entitled to assert sovereign immunity as a defense in this case. See Miller v. Ga. Ports Auth., 266 Ga. 586, 470 S.E.2d 426 (1996); Youngblood v. Gwinnett Rockdale Newton Community Svc. Bd., 273 Ga. 715, 545 S.E.2d 875 (2001). In Miller, supra, we determined that the Georgia Ports Authority was a state agency entitled to the defense of sovereign immunity. To make this determination, we first examined a 1991 amendment to our state constitution, which provides:

(a) The General Assembly may waive the state's sovereign immunity from suit by enacting a State Tort Claims Act, in which the General Assembly may provide by law for procedures for the making, handling, and disposition of actions or claims against the state and its departments, agencies, officers, and employees, upon such terms and subject to such conditions and limitations as the General Assembly may provide. ...

(e) Except as specifically provided in this Paragraph, sovereign immunity extends to the state and all of its departments and agencies. The sovereign immunity of the state and its departments and agencies can only be waived by an Act of the General Assembly which specifically provides that sovereign immunity is thereby waived and the extent of such waiver.Ga. Const. Art. I, Sec. II, Par. IX.

Next, we considered what the 1991 amendment meant by the term “agencies.” We noted: “The dictionary defines the word ‘agency’ as a ‘department or other administrative unit of the government.’ ” Miller, supra, 266 Ga. 586, 470 S.E.2d 426 (citing Webster's Third New International Dictionary 40). We then concluded that, “[a]s the state administrative unit responsible for the state docks, the Georgia Ports Authority is a state agency entitled to sovereign immunity.” Id. We went further to explain:

This interpretation comports with the General Assembly's intent in passing the 1991 amendment and the Georgia Tort Claims Act.¹ The 1991 amendment was passed to extend sovereign immunity to all state departments and agencies, regardless of insurance, and to substitute the insurance waiver provision in previous constitutions with a tort claims waiver. Acting under the authority of the 1991 amendment, the legislature enacted the Georgia Tort Claims Act to eliminate the unfairness caused by a strict application of the traditional sovereign immunity doctrine while, at the same time, limiting the state treasury's exposure to tort liability. Thus, when viewed in light of the Georgia Tort Claims Act, the purpose of the 1991 constitutional amendment was to redefine the terms of the state's waiver of its sovereign immunity in two ways: (1) it replaced the insurance waiver with the tort claims waiver; and (2) it limited the tort claims waiver to state government entities.

Unlike the constitutional amendment, however, the tort claims act leaves no ambiguity concerning the meaning of the word “state.” Under the bill as originally introduced and as passed by both houses of the General Assembly, the “State” was defined to mean all state governmental entities, regardless of their nomenclature. “State” means the State of Georgia and any of its offices, agencies, authorities, departments, commissions, boards, divisions, instrumentalities, and institutions, but does not include counties, municipalities, school districts, other units of local government, hospital authorities, or housing and other local authorities. By its express terms, the act clarifies that the “State” includes state authorities and instrumentalities, but not local governmental entities, for purposes of waiving sovereign immunity. Our earlier cases distinguishing between instrumentalities of the state and state agencies are not dispositive since both instrumentalities and agencies are included in the act's definition of the state.(Footnote omitted; emphasis supplied.) Id. at 588, 470 S.E.2d 426.

In Youngblood, supra, 273 Ga. at 716(1), 545 S.E.2d 875, we considered whether community service boards are State agencies or departments for purposes of sovereign immunity. To make this determination, we affirmed the analysis that we had set forth in Miller. We held:

Although we have not previously addressed this issue with regard to community service boards, we are guided by our opinion in Miller [, supra], in which we interpreted both Article I, Section II, Paragraph IX and the Georgia Tort Claims Act, OCGA § 50–21–20 et seq., to extend sovereign immunity to the State of Georgia, its offices, agencies, authorities, departments, commissions, boards, divisions, instrumentalities, and institutions. See OCGA § 50–21–22(5), (6). Looking to the legislation creating the Georgia Ports Authority and the public purposes for which it was created, we held in Miller that the Georgia Ports Authority is a State agency entitled to raise the defense of sovereign immunity. Miller, supra at 589 .

Applying the Miller analysis, a review of the law creating and defining community service boards clearly establishes that such boards are departments or agencies of the State charged with the public purpose of providing mental health care and services to the disabled citizens of this State.... Considering the public purpose for which community service boards were created, we find that the [(Gwinnett Rockdale Newton Community Service Board)] GRNCSB is a “state department or agency” entitled to raise the defense of sovereign immunity under Article I, Section II, Paragraph IX of the Georgia Constitution.

(Footnote omitted.) Youngblood, supra, 273 Ga. at 716(1), 545 S.E.2d 875.

Under this construct, GLC must be classified as an instrumentality of the State to which sovereign immunity applies. A review of the law creating GLC establishes that it is an instrumentality of the state, OCGA § 50–27–4, and that its main purpose is to generate net proceeds to be “used to support improvements and enhancements for educational purposes and programs and that such net proceeds shall be used to supplement, not supplant, existing resources for educational purposes and programs.” OCGA § 50–27–2(1). Furthermore, GLC “shall be governed by...