December 22, 2015

sweepstakes-lawsuitWe’re going into overtime. Last Wednesday, prize promotion and risk management company SCA Promotions, Inc. (“SCA”) gave notice that it intends to appeal a Dallas federal court’s judgment to the Fifth Circuit in connection with a botched billion-dollar 2014 March Madness sweepstakes and SCA’s ensuing sweepstakes lawsuit against Yahoo! Inc. (“Yahoo”).

Is this Round 2 for Yahoo and SCA?

Agreement Gone Wrong Leads to Sweepstakes Lawsuit

Yahoo wanted to offer a March Madness sweepstakes in 2014 where any participant who could correctly predict the winner of all 63 games in the NCAA Men’s Basketball Tournament would win a $1 billion prize. Yahoo planned to pay an $11 million fee to SCA, who agreed to pay out the full $1 billion prize in the event of a winner, with certain other conditions. Yahoo made an initial scheduled payment of $1.1 million to SCA soon after signing the contract.

In January 2014, when Quicken Loans publicly announced that it was teaming up with Warren Buffet and Berkshire Hathaway to sponsor a very similar “Billion Dollar Bracket Challenge,” Yahoo changed its plans and worked out a deal with Quicken to become a co-sponsor of its promotion – and without SCA. That same month, SCA initiated a sweepstakes lawsuit against Yahoo, alleging breach of contract and claiming that Yahoo owed SCA nearly $10 million.

As we reported earlier this month, the district court ultimately granted Yahoo’s motion for summary judgment and dismissed the sweepstakes lawsuit, ruling that Yahoo is actually entitled to a refund of $550,000 from SCA. Last Wednesday, undoubtedly dissatisfied with the ruling, SCA filed its notice of appeal with the district court.

Sweepstakes Lawsuits: Best to Be Avoided

Although Yahoo prevailed at the federal district court level, the wheels of litigation continue to spin, and the fate of Yahoo’s contractual obligations to SCA will once again be determined by a court of law. For sponsors of sweepstakes and promotional contests hoping to avoid sweepstakes lawsuits of their own, it makes good business and legal sense to speak with an experienced marketing attorney before launching a promotion or signing any related agreements.

If you are interested in learning more about this topic, pursuing a sweepstakes-related venture, or if you have been served with legal process in connection with your marketing practices, 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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Related Blog Posts:

Yahoo Prevails in Sweepstakes Fulfillment Contract Dispute

Yahoo Brings Fraud Counterclaims in March Madness Sweepstakes Lawsuit

Sweepstakes Marketing: Don’t Be the Odd Man Out

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