April 6, 2018

sweepstakes-lawsuit
Sweepstakes Lawsuit

Earlier this year, a federal district court in the State of Illinois certified a class action sweepstakes lawsuit in which an Illinois consumer alleged that HMI Industries, Inc., TD Bank, and A-1 Allergy Relief, Inc. violated the Illinois Prizes and Gifts Act, 815 ILCS 525/1, et seq. (“Prizes and Gifts Act”), Illinois Consumer Fraud and Abuse Act (“ICFA”), the Federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), and the Federal Truth in Lending Act. The case is captioned Rench, et al. v. TD Bank, N.A., et al. (3:13-cv-922-SMY-RJD) and is currently pending in the United States District Court for the Southern District of Illinois.

How did HMI Industries, Inc. allegedly violate the Prizes and Gifts Act?

Sweepstakes Prizes: No Conditions Should Apply

The Prizes and Gifts Act provides that a sweepstakes or contest sponsor may not represent to a person that he or she has won a prize unless: (1) the prize is without obligation; (2) the winner is notified within 15 days; and (3) the representation is not false, deceptive, or misleading. The Prizes and Gifts Act also requires that all promotional prize offerings contain a number of material terms, including a clear and conspicuous notice describing any restriction(s).

HMI Industries, Inc. (“HMI”) is engaged in the manufacture, marketing, and sale of vacuums and air filters to consumers throughout the United States. HMI’s products are sold exclusively through in-home demonstrations. HMI utilized scratch cards as part of its promotional marketing materials, which instructed consumers to “CALL IMMEDIATELY” in to the “Winners Hotline” to learn what prize they had won.

In the instant sweepstakes lawsuit, plaintiff Sabra Rench (“Rench”) alleged that she received a promotional sweepstakes scratch card in the mail from HMI. She scratched a winning card and immediately called the “Winners Hotline” to find out what prize she had won. However, Rench alleged that she was not told what prize she had won during the phone call, and, further, that she had to agree to an in-home sales demonstration in order to receive her prize. In addition, Rench alleged that the subject promotional scratch card failed to disclose material terms required by the Prizes and Gifts Act, such as identifying HMI as the contest sponsor and that the receipt of the prize was subject to restrictions.

Court Grants Class Certification in Sweepstakes Lawsuit

With respect to class certification under the Prizes and Gifts Act, the Court found that common issues existed as to “whether the representation on the scratch cards that a person had won a prize or unconditionally would be the winner of a prize without obligation was false, deceptive, and misleading.” In particular, the Court reasoned that the information contained on the scratch cards would determine liability in the case, i.e., whether the promotional scratch cards failed to disclose material facts. The Court also certified two additional classes under RICO and the ICFA.

Help Prevent a Sweepstakes Lawsuit

The laws relating to contests and sweepstakes were enacted to, among other ends, protect the public interest from deceptive promotional advertising. Before launching a contest or sweepstakes, it is recommended that you retain qualified legal counsel to help navigate the issues that may arise during the course of your promotion.

If you are interested in learning more about this topic or pursuing 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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