The WCLC defended itself by stating that customers should always read the disclaimer on the back of the ticket.  The disclaimer reads: “some prizes on this ticket may already have been claimed”.  Customers can also check the WCLC website, updated weekly, to see what major prizes are available.

Shortly after the CBC report, the Merchant Law Group LLP filed a Statement of Claim against the WCLC and lottery commissions in Alberta, Manitoba, Saskatchewan, and the Northwest Territories.  The Statement of Claim was filed on behalf of all persons who, since the commencement of the Class Period, “purchased or acquired one or more Scratch n’ Win Tickets from a game order for which all tickets containing the top prize had already been sold.”  The Merchant Law Group LLP has since filed Statements of Claim against all of the major provincial lottery corporations. 

The Scratch n’ Win Statement of Claim

The plaintiffs claim:

a)general damages for breach of contract in an amount to be determined at trial;

b)an order for rescission of the contracts between the plaintiff and the defendant and the return of all monies paid;

c)an injunction enjoining the defendant from selling Instant Lottery Game Tickets from game orders in which the top prize can no longer be won;

d)an order requiring the defendant to disgorge and repay all monies acquired as a result of the improper sale of such tickets

Breach of Contract

The plaintiffs’ position is that each scratch ticket purchased represents an individual contract with the respective lottery corporation.  The lottery corporation is required to deliver a ticket with a chance of winning the top prize in exchange for the purchase price.

The ticket-contract purchased was defective because although the plaintiffs paid for the chance to win the top prize, the lottery corporation breached its obligation by not delivering a chance to win the top prize.

Rescission of Contract

According to the plaintiffs, the lottery corporation promised a chance to win the top prize at the time of purchase, and the lottery corporation knowingly breached the contract.  The breach of the contract amounted to a failure of consideration. The failure of consideration, which is predicated on evidence of deception and misrepresentation, is a recognized ground for rescission of the contract between the plaintiffs and defendants.  If the contract is rescinded, the plaintiffs would be entitled to a refund on money they spent to purchase the scratch tickets.

Injunctive Relief

Hundreds of thousands of Scratch n’ Win tickets have been sold in Canada where the top prizes were no longer available.  Since the lottery corporations are continuing this practice, the plaintiffs requested an order enjoining the defendant from selling lottery tickets advertising a top prize after that prize could no longer be won.

Case Law

The Scratch n’ Win lawsuit is the first of its kind in Canada. In the United States, however, three recent cases have ruled on the legality of selling lottery tickets after the top prize has been awarded. (3)  

An unpublished decision from the Washington Court of Appeal addresses the arguments that are advanced in the Canadian Scratch n’ Win Statements of Claim.   Similar to the current Canadian action, the plaintiff in the Washington case argued that the scratch tickets created a contract that was breached when tickets were sold after the top prize was won.

The Court of Appeal gave two reasons as to why the plaintiff’s argument was not persuasive.  First, the plaintiff was aware that people bought scratch tickets before, after, and at the same time as the plaintiff.  As a result, the plaintiff should have known that any of these people could have won one of the top prizes.

Second, the court observed that a breach of contract was not found because of the legal principle that a contract may assign risk.  Since the overall odds of winning a prize in a scratch ticket game are stated on the back of the game, the plaintiff knows that most tickets do not win, and therefore assumes the risk when he or she purchases the ticket.

Scratch 22 or Caveat Emptor?

Lottery corporations argue they should not be held responsible for failing to inform the customer, because the customer has access to a disclaimer on the back of the ticket. In the Scratch n’ Win Statements of Claim, the plaintiffs claim that since the tickets were in a glass display, the plaintiffs were unable to access the back of the ticket until after the ticket was purchased.  Therefore, the only way for the plaintiffs to access the disclaimer was to purchase the ticket.

Assuming, however, the plaintiffs were unable to view the ticket prior to purchase, once one scratch ticket was bought, they would be able to examine the ticket and read the disclaimer and odds. It could therefore be argued that the principle of caveat emptor applies after the initial purchase, and the actual damage to each member of the class would be for a nominal amount (their first scratch ticket). Will a court certify a class action where each member of the class is entitled to an average of three dollars?

In the United States case of Boland et al. v. Simon Marketing, Inc., and McDonald’s Corporation (Boland), the court was faced with a similar challenge with respect to the size of the class and nominal amount of damages suffered by each member of the class. 

Simon Marketing Inc. was responsible for operating and running McDonalds’ contest style promotions.  Employees at Simon Marketing had manipulated numerous McDonald’s contests: removing the winning game pieces from the public domain and ensuring the winning game pieces went to friends.  Customers purchased McDonald’s products thinking they had a chance to win the top prize, yet the top prize was not available to be won.

The class the plaintiff attempted to have certified was “all customers of the McDonald’s who paid money for McDonald’s food products in order to receive a client contest game piece for client contest promotions”. 

McDonald’s agreed to a settlement where they would: a) run a contest giveaway totalling $15 million in prizes; b) assume financial responsibility for reasonable costs related to the notice of the class action settlement and the implementation of the prize giveaway and c) pay the Plaintiffs’ reasonable costs and attorney’s fees up to $3 million.  

Looking ahead

It will take years before courts in Canada determine whether lottery corporations should be permitted to sell scratch tickets after the top prize has been won.  Meanwhile, the lottery corporations are taking action to prevent future litigation. Information on the remaining top prizes are prominently displayed on the websites of each of the major provincial lottery corporations. Andrew Swan, the provincial minister in charge of lotteries, has pledged systemic review of scratch ticket practices.

As of September 2009, neither the plaintiffs nor the defendants had taken additional steps to advance the claim. The lottery corporations have yet to file a statement of defense.

By Jack Tadman is currently pursuing his LLM at Osgoode Hall.  

^1- Deedee Correll, Settle for Lottery Leftovers? Not a chance, L.A. Times, Aug. 10, 2008.
2 - A major prize is a prize over $1000.
3 - For an excellent summary and analysis of the decided cases in the United States, see Darren Prum’s “Lottery Tickets Sold After the Feature Prize is Claimed: Will the Courts Force the Practice to be Stopped?” 13 Gaming L. Rev. 286-297 (2009).