Summary
In Molina v. Games Mgt. Servs., 58 N.Y.2d 523, 462 N.Y.S.2d 615, 449 N.E.2d 395 (1983), plaintiff had a carbon copy showing she had purchased a ticket with the winning Lotto numbers.
Summary of this case from Fowles v. Kansas State LotteryOpinion
Argued March 22, 1983
Decided May 3, 1983
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, JOHN W. BURKE, J.
Andre L. Ferenzo for appellant. Howard M. Squadron, Neal M. Goldman and Eugenie C. Gavenchak for respondent.
Plaintiff claims she holds the $166,950 winning Lotto ticket for the week of September 6, 1980. She promptly presented it for payment but payment was refused because there was no record of the purchase at Lotto Central. She brought this action against the sales agent who sold her the ticket, J'S Coiffures, Inc., doing business as Donut Shoppe, and the independent contractor operating the Lotto game for the New York State Division of the Lottery, defendant Games Management Services. She seeks to recover the prize money and $1,000,000 punitive damages upon causes of action sounding in negligence, "intentional deprivation", contract, and bailment. Contending that many Lotto tickets have been misplaced or lost and that defendant contractor was guilty of negligence or gross negligence in losing the original or a record of her ticket, she sought extensive discovery and a trial to prove defendants' fault. After discovery was partially completed, defendant contractor moved for summary judgment. Special Term denied the motion and ordered further discovery. The Appellate Division reversed and dismissed the complaint ( 89 A.D.2d 69). It held that, notwithstanding the outstanding discovery order and the evidence plaintiff might develop from it, defendant contractor was not liable on plaintiff's claim, either in tort or contract. Defendant J'S Coiffures, Inc., has not moved for summary judgment; rather, it opposed the contractor's motion when made.
Plaintiff did not sue the State. She concedes she has no claim against it under the rules and regulations adopted by the Division of Lottery, but she contends that the contractor and the sales agent are not similarly insulated from liability for their own fault. We hold that they are, however. Under the division's rules and the terms of the contract of purchase printed on the ticket, plaintiff's ticket never became a "winning ticket" because it was never accepted (i.e., microfilmed) by defendant contractor (21 N.Y.CRR 2817.13). That the failure to deliver the ticket or microfilm it, as the rules required, may have resulted from defendant contractor's fault is irrelevant. The State and the contractor are both exempt from liability for fault in delivering the ticket for microfilming and plaintiff's only recourse is recovery of her wager (21 N.Y.CRR 2817.11).
Gambling contracts are unenforceable in New York State (General Obligations Law, § 5-401) and the lottery is authorized only because of specific constitutional and statutory provisions (see N Y Const, art I, § 9; Tax Law, § 1600 et seq.). Pursuant to these provisions, the Legislature has directed the State to conduct a lottery to raise funds for educational purposes (Tax Law, § 1601). Under the statutory scheme the Commissioner of Taxation and Finance is authorized to appoint a Director of the Division of the Lottery to administer the lottery and he, in turn, is delegated the authority to determine the type of lottery to be conducted, the number and size of the winning prizes and to promulgate rules and regulations governing its operation. The director is also charged with licensing sales agents and with developing an internal security plan for the lottery (Tax Law, § 1604). Lotto is one of the games established by the division.
Obviously, the success of any gambling operation, particularly one as broad based and as susceptible to counterfeiting and fraud as a lottery, depends upon the security of its operation and the reliability and speed with which prizes are paid. It was essential, therefore, that the State devise procedures that eliminated the possibility of fraud and protracted litigation over the validity of suspect tickets after each weekly drawing by disappointed players. Accordingly, after the statute was enacted the director solicited proposals from those interested in operating Lotto for the State. It accepted the proposal of defendant Games Management Services, a joint venture, whose partners include several affiliates of Vernon's Organizations Ltd., an operator of over 150 sports pools and lotteries with worldwide experience. The contractor's experience convinced it that the only reliable way to conduct an off-line game (i.e., one in which computer terminals are not used) was to require the microfilming of the original of each ticket sold. Accordingly, the division enacted rules and regulations detailing the procedures to be followed for each ticket sale and providing that unless such procedures are followed the tickets may not be recognized as winners (see, generally, 21 N.Y.CRR 2817.1 et seq.).
To play Lotto a player buys a ticket printed in triplicate, marks it with the numbers he or she desires to play, in this case six numbers for a $1 wager, and then has the sales agent validate the ticket by machine. After validation, the sales agent returns one copy to the player and keeps the original and one copy. The agent delivers the original with all other original tickets sold that week to the contractor to be taken to Lotto Central, defendant's headquarters in White Plains. There, the contractor microfilms and dates each ticket to establish proof that the ticket was actually sold, marked and validated before the weekly drawing.
Under the rules of the division and under the terms of sale printed on the ticket, no ticket can be a winner unless it has been microfilmed at Lotto Central before the drawing (see, generally, 21 N.Y.CRR 2817.9 [n]; 2817.13 [a] [4], [c]; 2817.18). Specifically, rule 2817.13 (a) provides: "To be a valid ticket * * * all the following requirements must be met: * * * (4) The top part of the ticket submitted through a Lotto sales agent must be received by Lotto Central and be microfilmed before the drawing for a particular weekly game." Similarly, among the terms of sale imprinted on each ticket, original and copies, in bold-face type and red ink, is the statement that: "LOTTO TICKETS NOT VALID UNTIL MICROFILMED AT LOTTO CENTRAL, in accordance with LOTTO rules." The player is bound by both the regulations and the terms of sale printed on the ticket.
Plaintiff has submitted affidavits, including those from an employee of the sales agent, to prove that she purchased and marked her ticket and that it was validated by the sales agent. She hypothesizes that that ticket was not received and microfilmed at Lotto Central because the contractor's courier must have lost it. Whether he did so or not is irrelevant for the rules provide that neither the State Lottery nor the contractor is liable for lost or stolen lottery tickets (21 N.Y.CRR 2817.10 [b]). Moreover, the fact that defendant sales agent admits it received a fee for the ticket or that it validated the ticket is not sufficient, for neither is acceptable proof that the ticket was received by Lotto Central (21 N.Y.CRR 2817.13 [c], [d]). Finally, the rules provide that the risk of loss rests on the player, not the State or the contractor (21 N.Y.CRR 2817.15), and that in the event of a dispute between the State and/or the contractor and a player claiming a winning ticket, the sole and exclusive remedy of the player shall be a determination by the director and the State Lottery that the player is entitled to a refund of the fee paid (21 N.Y.CRR 2817.11). Similarly, the terms of sale printed on the ticket provide: "Players acknowledge that LOTTO Sales Agents are acting on behalf of the players in validating the LOTTO tickets and returning them to the Contractor [defendant Games Management Services] acting for and on behalf of the State Lottery. The liability of the Contractor, the State, and the lotto Sales Agents is limited to a refund of the amount wagered if a ticket is not accepted by the Contractor on behalf of the State, regardless of whether said liability arises through neglect, omission, failure or otherwise on the part of an Agent or the Contractor" (emphasis added).
21 N.Y.CRR 2817.15 (d) provides: "Neither the contractor nor the State Lottery shall be liable to any player for any neglect, omission or failure on the part of any Lotto sales agent to forward a ticket to Lotto Central in accordance with this Part or to properly validate the same. The only acceptable proof of entry for a ticket is that the ticket's image appears on microfilm for the particular weekly game."
These rules were formulated and enacted after defendant contractor had been consulted and with its aid and advice. They expressly and necessarily exempt both the State and the contractor from liability on disputed ticket claims, for danger to the stability and success of the game is just as great if either of them becomes bogged down in ticket disputes with disappointed players.
The limited power of the court in cases such as this is familiar law and it remains only for us to pass upon the reasonableness of these rules. The Legislature may establish administrative agencies to accomplish its purposes and such agencies may be given the power to adopt rules and regulations to advance the purposes for which they were created. The regulations so adopted, if reasonable, have the force and effect of law ( Matter of Bernstein v Toia, 43 N.Y.2d 437, 448; Ostrer v Schenck, 41 N.Y.2d 782, 786). The court may not disturb them unless they are "so lacking in reason for [their] promulgation that [they are] essentially arbitrary" ( Matter of Marburg v Cole, 286 N.Y. 202, 212). Because authorized gambling contracts are an exception to the general laws, administrative rules regulating such activities are to be strictly construed (see Matter of Caplan v New York State Dept. of Taxation Fin., Div. of Lottery, 32 N.Y.2d 134; Mc Bride v New York City Off-Track Betting Corp., 66 A.D.2d 770).
Manifestly, these rules were reasonably enacted to prevent fraud, dissipation of funds by excessive and protracted litigation, and to insure prompt payment of prizes. Plaintiff concedes as much. Her contention that defendant contractor is not protected by them is belied by the express language of the various rules which mandate the strict procedures to be followed before the player may be adjudged to possess a winning ticket. Whether the State or an independent contractor is the operator of the game, the player must first prove her entitlement to the prize by proving the ticket was accepted, i.e., microfilmed by the contractor.
Finally, we would note that the terms on the tickets exempting the State and the contractor from liability are clear and unequivocal and consistent with the rules and regulations of the game. They should be enforced (see Ciofalo v Vic Tanney Gyms, 10 N.Y.2d 294; and cf. Gross v Sweet, 49 N.Y.2d 102). Insofar as plaintiff has attempted to charge defendant with gross negligence, her opposing papers fail to raise a question of fact on that issue.
Accordingly, the order of the Appellate Division should be affirmed.
Chief Judge COOKE and Judges JASEN, WACHTLER and FUCHSBERG concur with Judge SIMONS; Judge MEYER dissents and votes to reverse in a separate opinion in which Judge JONES concurs.
Order affirmed, with costs.
The majority opinion would be correct were the action against the State. It is not. The defendant is the contractor, which can exempt itself from liability for its own negligence or breach of contract only if that intention "is expressed in unmistakable language" ( Gross v Sweet, 49 N.Y.2d 102, 107). Nor is that rule of strict construction against the contractor converted into one of strict construction for the contractor, as the majority suggests, simply because gambling is involved; there is no gambling between plaintiff and the contractor, only between plaintiff and the State.
Here the contract language is far from unmistakable. The terms of sale only limit the contractor's liability "to a refund of the amount wagered if a ticket is not accepted by the Contractor on behalf of the State" (emphasis supplied), not otherwise. Nothing in the rules supports the majority's equation of "accepted" with "microfilmed," which, of course, could only take place after acceptance. Defendant can absolve itself from liability on its motion for summary judgment, therefore, only by showing that plaintiff's ticket was not accepted by it. Its moving papers, however, do not deny acceptance of plaintiff's ticket. They state only: "Neither could the original of that ticket [the ticket in issue] be found at GMS."
Section 2817.15 (d) of the rules (21 N.Y.CRR 2817.15 [d]), quoted in the majority's footnote 1, is of no help to defendant, Games Management, for it is not sued for failure of a Lotto sales agent to forward plaintiff's ticket, but for negligence on its own part.
That the lottery is susceptible to player fraud is but one side of the equation; it is equally susceptible to skimming, after acceptance by the contractor, by the contractor's employees, a possibility not foreclosed by the moving papers and to prevent which GMS owed players the duty to exercise reasonable care.
Nor bearing in mind that defendant's motion for summary judgment cut off before completion the discovery to which plaintiff was entitled should she be put out of court because her answering papers on this motion do not present prima facie evidence of gross negligence.
It may well be that after full discovery plaintiff will not be able to sustain her action against a motion for summary judgment or on trial. But I cannot concur in a decision which speaks almost entirely to the obligations of the State, a nonparty, and ignores the limitation of the exculpatory provision which defendant contractor, as the majority notes, was itself instrumental in preparing. I, therefore, respectfully dissent and vote to reverse the order appealed from and to reinstate Special Term's order.