February 25, 2021 Top Story

Government Contractor Is Not Immune from Fraud Claims

Government approval of work does not confer sovereign immunity on contractors

By Frances Codd Slusarz

A divided state supreme court held that a government’s sovereign immunity from suit did not extend to its contractor, and thus, did not insulate the defendant from fraud claims. The decision serves as a cautionary reminder to government contractors that not all actions taken pursuant to government contracts and approval will be immunized from litigation, ABA Litigation Section leaders say.

The defendant was a designer of scratch-off games for state lotteries.

The defendant was a designer of scratch-off games for state lotteries.

iStockphoto by Getty Images

Confusing Lottery Instructions Lead to Fraud Suits

In Nettles v. GTECH Corporation, the defendant, a designer of scratch-off games for state lotteries, proposed a game called “Fun 5’s” to the Texas Lottery Commission. The Fun 5’s ticket included a tic-tac-toe game. As initially proposed, if the ticket had three dollar-bill symbols in a row, the player would win the amount in the “PRIZE” box. A person could win five times that amount if the “multiplier box” contained a “5.” Only multiplier boxes on winning tickets would contain a “5.”

The commission required the dollar bill symbol to be changed to a “5,” and the “5” in the multiplier box changed to a money bag. The commission also told the defendant to put the money bag on losing tickets to prevent microscratching—scratching a tiny portion of a ticket to determine if it is a winner. The defendant made these changes but did not change the instructions, which read: “Reveal three ‘5’ symbols in any one row, column, or diagonal, win PRIZE in PRIZE box. Reveal a Money Bag ‘[money bag icon]’ symbol in the 5X Box, win 5 times that PRIZE.”

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