Federal Court Dismisses Sweepstakes Law Class Action

April 12, 2019 

Sweepstakes Law Class Action

Last month, a federal court in New York dismissed a putative class action lawsuit brought by thirteen named plaintiffs (collectively, “Plaintiffs”) against a national sweepstakes operator (“Defendant”). In this sweepstakes lawsuit, the Plaintiffs alleged that Defendant violated the federal CAN-SPAM Act, the Deceptive Mail Prevention and Enforcement Act (“DMPEA”), and New York General Business Law (“GBL”) Sections 349 and 369-e. Because plaintiffs were granted leave to amend, the sweepstakes law class action remains pending in the Eastern District of New York.

How were Plaintiffs allegedly misled into entering sweepstakes drawings? 

Plaintiffs’ Allegations 

Plaintiffs are various individual residents from states outside of New York. Plaintiffs claim that Defendant entices users via email to enter sweepstakes drawings for a prize. After entering a drawing, Plaintiffs maintain that “the consumer is presented with a screen that prevents the consumer from completing their entry form until they purchase a product.” Plaintiffs claimed that they were misled by Defendant’s advertisements into purchasing products that they did not need in an attempt to increase their chances of winning prizes in Defendant’s sweepstakes drawings. Plaintiffs claim that some of these misleading advertisements included emails stating: “We’ve reserved an EXCLUSIVE Cash Prize Just To Thank Past Orderers, Like You!” and “$ 100,000 Contest Is ONLY Open To Valued Customers like you!” In addition, Plaintiffs claim that Defendant informs consumers that they won a sweepstakes contest for as much as $10,000, but then when Plaintiffs responded to these commercial email messages, Defendant claims that it was a mistake. Plaintiffs claim that Defendant uses this “tactic” to encourage consumers to continue to enter sweepstakes drawings.

The Defendant is a nationally recognized sweepstakes and marketing brand. Defendant operates sweepstakes contests via marketing campaigns over the Internet, television, email, and direct mail. Defendant moved to dismiss based on grounds of standing and failure to state a claim.

The Court’s Sweepstakes Law Ruling

The court dismissed the claims arising under the CAN-SPAM Act and GBL Section 369-e (which prohibits the use of misleading advertising in the sale of consumer products in connection with the opportunity to receive gifts/prizes in contests) because neither statute provides for a private right of action. In addition, the court found that the Plaintiffs did not allege that they had requested to be excluded from the subject sweepstakes promotions. As such, the court dismissed the DMPEA claim, which provides for a private right of action only where an individual receives one or more mailings after requesting no further contact from the subject sweepstakes operator.

That left Plaintiffs’ remaining claim under GBL Section 349, which provides for a cause of action for consumers who are materially misled and suffer an injury as a result of allegedly misleading/deceptive acts or practices. The court dismissed the GBL Section 349 claim on the basis that the Plaintiffs must allege more than receipt of misleading advertisements—they must allege how those specific advertisements misled them and how they were injured. 

Avoiding a Sweepstakes Lawsuit 

This sweepstakes lawsuit represents an example of some of the issues, laws, and regulations that must be considered during the marketing phase of any sweepstakes promotion. Given the potential regulatory and litigation exposure that sweepstakes operators face, it is imperative to retain qualified legal counsel to ensure that sweepstakes laws and related issues are addressed in the planning stage of any sweepstakes marketing campaign.

If you are interested in learning more about this sweepstakes lawsuit or setting up a sweepstakes-related venture, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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