Nettles v. Gtech Corp.
| Decision Date | 21 July 2017 |
| Docket Number | No. 05-15-01559-CV,05-15-01559-CV |
| Citation | 581 S.W.3d 234 |
| Parties | Dawn NETTLES, Appellant v. GTECH CORPORATION, Appellee |
| Court | Texas Court of Appeals |
Manfred Sternberg Jr., Manfred Sternberg & Assoc. PC, Mary Ellis LaGarde, Richard L. LaGarde, LaGarde Law Firm, P.C., Peter M. Kelly, Kelly, Durham & Pittard, LLP, Houston, TX, Thad D. Spalding, Kelly, Durham & Pittard, LLP, Dallas, TX, for Appellant.
Kenneth E. Broughton Jr., Francisco Rivero, Arturo Munoz, Michael Bernick, Reed Smith LLP, Kent G. Rutter, Haynes and Boone, LLP, Houston, TX, Nina Cortell, Haynes and Boone, LLP, Dallas, TX, Ryan Mindell, Office of the Attorney General - Financial Litigation, Tax & Charitable Trusts, Austin, TX, for Appellee.
Before Justices Lang -Miers, Myers, and Richter1
Opinion by Justice Richter Appellant Dawn Nettles sued appellee GTECH Corporation, a private contractor, for fraud in the sale of a Texas Lottery scratch-off ticket called "Fun 5's." The trial court granted GTECH's plea to the jurisdiction and dismissed Nettles's suit. In this appeal, we consider whether derivative sovereign immunity bars Nettles's claims against GTECH. We conclude that it does, and affirm the trial court's order granting GTECH's plea.
Nettles purchased tickets in the Texas Lottery's "Fun 5's" scratch-off game. The tickets included a tic-tac-toe game containing a three-by-three grid of symbols, a "prize box," and a box labeled "5X," known as a "multiplier." Nettles contends that the instructions on the tickets misled her to believe that she would win five times the amount in the tickets' prize box, when in fact her tickets were "non-winning."
Nettles alleges the instructions described two ways to win five times the amount in the prize box, by either (1) matching three symbols in a row, column, or diagonal in the grid, or (2) finding a "money bag" symbol in the multiplier box. The tickets, however, were non-winning unless both of these conditions were met. On some of the tickets Nettles purchased, one or the other of the conditions was met, but not both. When she learned that her tickets were non-winning, Nettles sued GTECH for an amount in excess of $4,000,000 that she alleges she should have won.
The Texas Lottery is owned and operated by the Texas Lottery Commission ("TLC"), a state agency. The TLC and its executive director "have broad authority and shall exercise strict control and close supervision over all lottery games conducted in this state to promote and ensure integrity, security, honesty, and fairness in the operation and administration of the lottery." TEX. GOV'T CODE ANN. § 466.014(a) (West Supp. 2016). By statute, the executive director of the TLC "shall prescribe the form of tickets." TEX. GOV'T CODE ANN. § 466.251(a) (West 2012).
GTECH2 is the United States subsidiary of an Italian gaming company which operates lotteries, sports betting, and commercial bookmaking throughout the world. On December 14, 2010, TLC and GTECH executed a "Contract for Lottery Operations and Services" (the "Operations Contract") that gives GTECH the exclusive right to operate the Texas Lottery through 2020. According to the Operations Contract, GTECH is an independent contractor and not an employee or agent of the TLC. In the "warranties" section, the Operations Contract provides:
GTECH warrants and agrees that its tickets, games, goods and services shall in all respects conform to, and function in accordance with, Texas Lottery-approved specifications and designs.
Section 3.33.1 of the Operations Contract provides in relevant part, "GTECH shall indemnify, defend and hold the Texas Lottery, its commission members, [and] the State of Texas ... harmless from and against any and all claims ... arising out of a Claim for or on account of the Works, or other goods, services, or deliverables provided as the result of this Contract...." Section 3.34 of the Operations Contract addresses requirements for bonds and insurance. Among other coverages, GTECH must maintain general liability insurance and errors and omissions insurance.
In her operative petition, Nettles cites to a "Request for Proposals for Instant Ticket Manufacturing and Services" available on the TLC's website, alleging that "GTECH is obligated, under Section 7.8 of the Instant Ticket RFP to provide working papers for each instant game and is further obligated to provide executed working papers that ‘must be complete and free from any errors.’ " Joseph Lapinski, an account development manager for GTECH, also testified that GTECH submits "draft working papers" to the TLC containing specifications for proposed scratch-off tickets, including the design, artwork, prize structures, and rules of the game. Lapinski also testified that the TLC then notifies GTECH of any desired changes to the working papers.
In March 2013, GTECH made a presentation to the TLC, providing examples of scratch-off games that had been successful in other states. The TLC selected the Fun 5's game as one of the scratch-off games it intended to purchase from GTECH for use during fiscal year 2014. Although the Fun 5's game ticket included five different games, only Game 5 is at issue here.
Penny Whyte, GTECH's customer service representative, prepared the initial draft of the working papers for the Fun 5's game. Whyte testified that before the draft was sent to the TLC, GTECH undertook an internal review of the artwork, instructions, and parameters for the game. Lapinski testified that initial draft working papers were based on the game that GTECH had operated in other states. He explained that the instructions for the game in the initial draft working papers were based on a game used in Nebraska. The instructions for Game 5 provided:
Reveal three Dollar Bill [graphic of symbol] symbols in any one row, column, or diagonal line, win PRIZE in PRIZE box. Reveal a "5" symbol in the 5X BOX, win 5 times that PRIZE.
Gary Grief, the Executive Director of the TLC, testified that because GTECH has "experience in the industry," the TLC "do[es] rely on them, at least as a starting point, when we're looking at language that goes on tickets." He agreed that he expected GTECH to exercise reasonable care to propose language that is not misleading.
Lapinski testified that after the working papers were submitted to the TLC, the TLC requested changes to Game 5. First, the TLC requested that the "5" symbol be changed to a "Money Bag" symbol. Second, the TLC requested that the "Dollar Bill" symbol be changed to a "5" symbol. Third, the TLC requested that GTECH change the parameters of Game 5. In an email marked "High Importance" from Jessica Burrola, an Instant Product Specialist for the TLC, to Laura Thurston, a client services representative of GTECH, the TLC instructed:
Game #5: Game parameters #33 and #34 (see below) mention the money bag symbol as only appearing on winning tickets. This would make it an easy target for micro-scratching since only the rest of game 5 would not have to be micro-scratched to know that it is a winner. We would prefer to have the money bag symbol appear on non-winning tickets, too.
Walter Gaddy, a Regional Sales Manager for GTECH, explained in an affidavit that:
The TLC ordered this change as a security measure against "micro-scratching." Micro-scratching consists of someone using a small sharp object to unveil a microscopic portion of the play area of the scratch ticket to discern whether a ticket is a winner or a non-winner in a way that is largely undetectable. If the Money Bag symbol only appeared on winning tickets, this might make the game an easy target for micro-scratching since only the rest of Game 5 would not have to be micro-scratched to know that it is a winner.
Gaddy also testified that "[u]pon the instructions of the TLC, GTECH incorporated the TLC's changes to the game's parameters and programmed its computers so that 25% of the tickets that had not won the tic-tac-toe game would reveal a Money Bag Play symbol in the 5X box."
GTECH then prepared a set of final working papers for the TLC's approval. In accordance with the TLC's instructions, a "money bag" symbol appeared on approximately 25% of the non-winning tickets, and the rules for Game 5 read:
Reveal three "5" symbols in any one row, column or diagonal, win PRIZE in PRIZE box. Reveal a Money Bag "[graphic of symbol]" in the 5X BOX, win 5 times that prize.
In her operative petition, Nettles alleges that on May 16, 2014, TLC Executive Director Grief "executed the final working papers and approved the Fun 5's game as proposed by GTECH." Nettles's operative pleading also acknowledges that the parameters of the game were changed "[a]t the request of the TLC."
Nettles elicited testimony from both GTECH and TLC witnesses that she relies on to support her allegations that it was GTECH's responsibility to (1) check the parameters of the game in the working papers, (2) conduct a comprehensive review of the game's instructions to make sure that the change in parameters requested by the TLC did not require a change in the language of the game's instructions, (3) compare the language on the tickets to make sure it was not misleading or deceptive, and (4) make sure the final executed working papers were free of errors. She alleges that GTECH's customer service representative and software department had the knowledge and expertise necessary to ensure that the language was clear, unambiguous, and not misleading, and that the TLC expected GTECH to exercise reasonable care in doing so. And she contends that Thurston and Whyte, both of GTECH, were the decision-makers "that GTECH would not change the wording of the instructions to make them less misleading or deceptive."
Nettles also alleges in her operative petition that GTECH and the TLC began to receive complaints about the Fun 5's tickets from retailers and players almost...
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Nettles v. Gtech Corp.
...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 an......
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Nettles v. Gtech Corp.
...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 a......