September 7, 2010
Today, the Indiana Court of Appeals held that a
post hoc administrative remedy does not need to be exhausted before a plaintiff may bring a legal action against a state agency in
Koehlinger v. The State Lottery Comm'n of Indiana, 933 N.E.2d 534 (Ind. Ct. App. 2010), Case No. 49A02-1003-CT-247.
less..
In this case, the Lottery issued a scratch-off game called "Cash Blast" and posted information about the number of prizes not yet claimed in that game on its website. In early 2005, approximately 2.5 million Cash Blast tickets had to be replaced prior to sale due to a manufacturing defect. The Lottery's computer system that tracked the number of unclaimed prizes treated the replacement tickets as additional tickets, resulting in,
inter alia, an overstatement of slightly more than fifty percent of unclaimed prizes on the Lottery website at the time. Eventually, the Lottery discovered the error in the summer of 2006 and posted a message on its website explaining the error. Shortly thereafter, several Cash Blast players contacted the Lottery expressing displeasure that the number of prizes available had been overstated on the website. None of the Lottery‟s responses to these players indicated that any administrative process was available to address their concerns, even after it was specifically asked about such a process. In January of 2007, the Lottery initiated a program whereby any person who held a Cash Blast ticket purchased while the erroneous information was posted on the website could redeem the ticket for a ten-dollar coupon for a scratch-off ticket of the person's choice.
The plaintiffs filed a class action against the Lottery based on these events. The trial court eventually granted class certification and granted the Lottery's motion for summary judgment. The plaintiffs appealed that decision.
On appeal, the Court addressed the Lottery's argument that the plaintiffs had not exhausted their administrative remedies.
The designated evidence contains myriad examples of persons attempting to contact the Lottery regarding the website error, and there is no indication that any of these contacts was successful in initiating any kind of administrative process. Simply put, it seems that the Lottery had no mechanism for addressing player concerns of this type at the time, leaving us in grave doubt as to the availability of an administrative remedy.
Moreover, we cannot agree that the Lottery's losing-ticket redemption program qualifies as an administrative remedy that needed to be exhausted for purposes of AOPA, as it did not exist when the Plaintiffs‟ claims became ripe. ... If we allowed agencies to fashion post hoc remedies, however, it is difficult to see where it would all end; all an agency would ever have to do to avoid litigation or final resolution of any dispute would be to devise yet another "remedy" to be exhausted. While we are strongly inclined, as a general rule, to allow the Lottery–or any other agency–the opportunity and autonomy to correct its own errors, that particular ship has sailed in this case.
The Court then went on to conclude that the trial court erred when granting summary judgment to the Lottery on the plaintiffs' contract rescission claim, but properly granted summary judgment on the plaintiffs' other claims.
The takeaway here is that the Court held that an administrative remedy must exist at the time the claim becomes ripe before a court will require that it be exhausted. The Court also seems to place the burden of proving the availability of such a remedy on the agency (although it does not expressly address this issue).
Lessons:
- When challenging an exhaustion of remedies argument, try to demonstrate that the agency did not respond to requests that an administrative process be started.
- An administrative remedy must exist at the time the claim becomes ripe before a court will require that it be exhausted.
- An agency may have the burden of demonstrating the availability of an administrative remedy.
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