Nettles v. Gtech Corp.
| Decision Date | 12 June 2020 |
| Docket Number | No. 18-0159,No. 17-1010,17-1010 |
| Citation | 606 S.W.3d 726 |
| Parties | Dawn NETTLES, Petitioner, v. GTECH CORPORATION, Respondent GTECH Corporation, Petitioner, v. James Steele, et al., Respondents |
| Court | Texas Supreme Court |
Thad D. Spalding, Dallas, Dana Brooke Levy, Mary Ellis Lagarde, Richard L. Lagarde, Manfred Sternberg Jr., Houston, for Petitioner.
Warren Kenneth Paxton, Austin, Kyle D. Hawkins, Jason R. LaFond, Jeffrey C. Mateer, Austin, as Amicus Curiae.
Arturo Munoz, Michael H. Bernick, Houston, Jason N. Jordan, Dallas, Michael A. Hatchell, Nina Cortell, Dallas, Kenneth E. Broughton, Kent G. Rutter, Houston, Christopher Knight, for Respondent GTECH Corporation.
Ryan S. Mindell, for Respondent Texas Lottery Commission.
In this case, we consider whether derivative sovereign immunity bars claims against GTECH Corporation, a private contractor. GTECH provided instant ticket manufacturing and services to the Texas Lottery Commission. Several plaintiffs filed two separate suits against GTECH, alleging that the instructions on a scratch-off lottery ticket were misleading, causing them to believe they had winning tickets when they did not. GTECH filed pleas to the jurisdiction, asserting it was entitled to the same immunity held by the Lottery Commission. One of the trial courts granted GTECH's plea to the jurisdiction, but the other court denied the plea. On appeal, the Dallas Court of Appeals affirmed the trial court's grant of the plea to the jurisdiction. The Austin Court of Appeals affirmed in part and reversed in part the trial court's denial of the plea.
As to the plaintiffs' fraud claims, we hold that GTECH would not qualify for derivative sovereign immunity even if we recognized that doctrine because the Lottery Commission did not control GTECH's choices in writing the game instructions. We affirm the Austin Court of Appeals' judgment holding that GTECH is not entitled to immunity from the plaintiffs' fraud claims, and we reverse the portion of the Dallas Court of Appeals' judgment holding otherwise. GTECH is entitled to immunity, however, from the plaintiffs' allegations of aiding and abetting the Commission's fraud and of conspiracy with the Commission. Because the plaintiffs necessarily must override the substance of the Commission's underlying decisions in order to impose derivative liability on GTECH, these allegations implicate the purposes of sovereign immunity. We therefore affirm the Dallas Court of Appeals' judgment in part as to these allegations.
The Lottery Commission contracted with GTECH for instant ticket manufacturing and services. In performing its obligations under the contract, GTECH proposed the FUN 5's scratch-off game, which it had operated in other states. The Commission selected the game, and GTECH submitted working papers with images of the ticket, detailed specifications, and game parameters. In the working papers, the scratch-off ticket included five different games, including a tic-tac-toe game. A player would win the tic-tac-toe game if a ticket had three dollar-bill symbols in a single row, column, or diagonal line and would win the amount in a "PRIZE" box. The game also included a 5X multiplier box, which allowed a player to win five times the PRIZE amount if the box contained a 5 symbol. The working papers specified that a 5 symbol would only appear in the 5X box on eligible winning tickets. The proposed instructions for the tic-tac-toe game provided:
The Lottery Commission responded to GTECH's working papers with changes to the game. For the tic-tac-toe game, the Commission requested that the dollar-bill icon be changed to a 5 symbol and that the multiplier 5 symbol in the 5X box be changed to a money-bag symbol. The Commission also notified GTECH that the money-bag symbol needed to appear on some non-winning as well as winning tickets in order to prevent microscratching—using a small, sharp object to reveal a microscopic portion of a ticket to determine whether it is a winner.
GTECH implemented the requested changes. Although GTECH had designed the multiplier symbol for use only on tickets containing a winning tic-tac-toe game, the symbol also appeared on some non-winning tickets as the Commission had instructed. GTECH did not change the instructions on the tickets for the tic-tac-toe game other than to reflect the new symbols. The final instructions read:
The Lottery Commission began selling the Fun 5's scratch-off game on September 2, 2014. Lottery players began calling the Lottery Commission about the game immediately, saying that they thought the money-bag symbol on their tickets meant an automatic win of five times the amount in the prize box. Callers complained that the game instructions were misleading, leading them to believe incorrectly that they had winning tickets even though they had not also won the tic-tac-toe game. Legislators also contacted the Lottery Commission regarding constituent complaints that the instructions were misleading. Based on these complaints, the Lottery Commission shut down the game on October 21.
Several people who had purchased non-winning Fun 5's tickets that included a money-bag symbol sued GTECH, claiming it misled them into believing they would win if their tickets revealed a money-bag symbol. James Steele and more than 1,200 other named plaintiffs (collectively, Steele) filed one suit against GTECH in Travis County. These plaintiffs brought claims for fraud, fraud by nondisclosure, aiding and abetting the Lottery Commission's fraud, tortious interference with the plaintiffs' contracts with the Texas Lottery, and conspiracy with the Lottery Commission. Dawn Nettles filed suit against GTECH in Dallas County.1 She similarly asserted claims for common-law fraud, fraud by nondisclosure, aiding and abetting the Lottery Commission's fraud, and conspiracy with the Lottery Commission.
GTECH filed pleas to the jurisdiction in both counties. GTECH asserted that derivative sovereign immunity barred all the claims against it because the suits were premised on alleged conduct directed and controlled by the Lottery Commission, an entity with sovereign immunity. The Dallas County trial court granted GTECH's plea to the jurisdiction and dismissed the case, but the Travis County trial court denied GTECH's plea.
Nettles appealed the dismissal of her suit to the Dallas Court of Appeals. The Dallas Court affirmed, concluding that Nettles's claims were barred by immunity because GTECH met its burden of proving it acted as the Lottery Commission and did not exercise independent discretion in making the changes to the lottery tickets that were the basis of Nettles's claims. 581 S.W.3d 234, 244 (Tex. App.—Dallas 2017).
GTECH appealed the denial of its plea in the Steele case to the Austin Court of Appeals. The Austin Court affirmed in part and reversed and rendered in part. As for Steele's claims of aiding and abetting fraud, tortious interference, and conspiracy, the court held they implicated sovereign immunity because the complaints substantively challenged underlying Lottery Commission decisions and directives. 549 S.W.3d 768, 796 (Tex. App.—Austin 2018). But the court held the plea had been properly denied as to the fraud claims, which related to actions taken by GTECH within its independent discretion. Id. at 802–03. The court explained that if "the relevant contracts would leave the government contractor discretion to comply with the asserted tort duty and avoid the conduct alleged to be wrongful," as the contract did here, "there is no derivative immunity." Id. at 803.
Both GTECH and Nettles filed petitions for review in this Court, which we granted. The parties disagree regarding what GTECH must prove to be entitled to the Commission's immunity and whether it met that legal standard as to each of the claims against it.
Sovereign immunity is the "well-established doctrine ‘that no state can be sued in her own courts without her consent, and then only in the manner indicated by that consent.’ " Brown & Gay Eng'g, Inc. v. Olivares , 461 S.W.3d 117, 121 (Tex. 2015) (quoting Tooke v. City of Mexia , 197 S.W.3d 325, 331 (Tex. 2006) ). Sovereign immunity is a common-law doctrine. Id. at 122. It is the responsibility of the judiciary to decide when our State and its political subdivisions have immunity and to define its boundaries, and the responsibility of the Legislature to determine whether to waive immunity and to what extent. Id.
Immunity from suit implicates a court's subject-matter jurisdiction and is properly asserted in a plea to the jurisdiction. Hous. Belt & Terminal Ry. v. City of Houston , 487 S.W.3d 154, 160 (Tex. 2016). Because subject-matter jurisdiction is a question of law, we review de novo a trial court's ruling on a plea to the jurisdiction. See Brown & Gay , 461 S.W.3d at 120.
We have not had many opportunities to address whether a Texas government agency's immunity from suit might extend to its private contractors, and if so under what circumstances. See Rosenberg Dev. Corp. v. Imperial Performing Arts, Inc. , 571 S.W.3d 738, 751 (Tex. 2019). Federal courts, and some Texas...
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