If there’s one thing I’ve learned marketers hate, it’s having to “clearly and conspicuously” make the required disclosures for a promotion in their collateral materials, which include posting the Official Rules. I can explain that there are provisions in the Official Rules required by law, that the Official Rules represent the contract between them and the entrant, and that the Official Rules are protective for them if (and let’s always hope not!) some aspect of the promotion is challenged either by an entrant, a winner, a class-action lawyer (ack!), or a regulator (double ack!), and I get all of the responses in return: “Nothing is going to happen.” “We’re not going to need these rules.” “No one reads the rules.” “The disclosures are eating up our character count. We don’t have any room for the actual marketing copy.” “Can’t we just post them on a website (not said: but not disclose where they are)?”
I get it, I do. In a post I wrote last week, I said that consumers rarely read the Official Rules unless you give them a reason to do so. While often true, that’s not a reason not to have them and to make sure you clearly disclose them, which Root v. Robinson, No. 5:20-cv-00239-M, 2021 U.S. Dist. LEXIS 5550 (E.D.N.C. June 23, 2021), demonstrates better than I can.
Here are the basics:
In 2019, Tony Robinson organized a conference in Las Vegas to teach others how to be successful at real estate called “The 100K Club Conference 2019.” Robinson used a sweepstakes to get people to purchase tickets. Those who purchased a ticket to attend the conference in-person or via pay-per-view were entered for a chance to win $100,000 cash. The FAQ section of the conference website which advertised the sweepstakes stated:
How Can I Win $100,000? Buy a ticket of any level and attend live or online through our pay-per-view option. Is there a catch? No, one lucky person will walk away with $100,000. In order to win you must purchase a ticket in person or pay-per-view. Winner will be drawn randomly from ticket buyers. That is it!
There was also a “100K Drawing Disclaimer” that read:
“Only one lucky person (in person or pay-per-view) will walk away with $100,000. In order to win you must purchase a ticket in person or pay-per-view. Winner will be drawn randomly from ticket buyers, complimentary tickets do not apply.”
Those of you who are experienced at running sweepstakes will have undoubtedly picked up one or more of the issues here. The elephant in the room that I won’t be talking about in this post is whether this sweepstakes was, in fact, an illegal lottery. No, the purpose of this post is to talk about the parade of horribles that happened after the winner was selected.
At the conference, Gaege Root, the selected winner, was presented with a giant fake check for $100,000. He did not “walk away” with $100,000 in cash. What he walked away with was an Affidavit of Eligibility and Release form (“Affidavit”) he was required to execute and return prior to the prize actually being awarded. Based on the complaint, the Affidavit included all of the standard provisions: blanks for Root’s personal information, a representation that Root had complied with the Official Rules and understood the prize would be paid out according to a specified payment schedule, a publicity grant, and a release of liability. What doesn’t appear to have been provided with the Affidavit was a copy of the Official Rules or the prize payment schedule it referenced.
After Root returned the Affidavit, he expected to receive a check for $100,000. What he actually received was a check for $30,000. When Root demanded the remaining $70,000, Robinson apparently refused to pay it. Root then sued in federal court alleging: (1) breach of contract; (2) fraud; (3) unfair and deceptive trade practices; and (4) constructive trust, and sought punitive damages.
Robinson argued that the Official Rules, as the controlling terms between the parties, contained a requirement that disputes be submitted to arbitration; therefore, the court should dismiss the case because the terms of the Official Rules, agreed to through the Affidavit, precluded Root’s lawsuit. Root attested that he never saw any Official Rules prior to the litigation and he never agreed to arbitrate or release Robinson from any claims.
The court ordered the parties to undertake limited discovery to determine “(1) when, where, and how [Root] purchased a ticket; and (2) whether [Root] was aware of, saw, or agreed to the Official Rules before the Conference took place.” Robinson testified that the Official Rules were made available through an 100kconference.com and an “app” available to conference participants; however, when a current version of the website was submitted into evidence, Robinson was unable to point to where the Official Rules were made available and claimed the site had been “doctored.” The court held that Robinson introduced “no evidence that the Official Rules were ever made available to anyone, anywhere, at any time.” Robinson’s motion to dismiss was denied.
The obvious takeaway here is that this could have been avoided if the Official Rules had been clearly disclosed as part of the marketing of the sweepstakes. The Official Rules (I assume) would have stated that the winner would be required to sign the Affidavit and it would have set out how the prize would be awarded, including the initial payment of $30,000. (Note though that even the Official Rules couldn’t have negated Robinson’s representation in the marketing copy that the winner would “walk away” with $100,000. It’s difficult to disclaim a false statement.) Finally, given the horrendous fact pattern here, if Robinson had simply paid Root the $70,000 after he complained, legal action might have been avoided. The reputational harm and legal costs associated with fighting this complaint must have far exceeded the $70,000 initially demanded by Root.