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Singer Asset Finance Co. v. State

May 14, 1998


Argued April 20, 1998

On appeal from the State Lottery Commission, Department of the Treasury.

Before Judges Landau, Collester and Bilder.

The opinion of the court was delivered by: Landau, J.A.D.

This is an appeal taken by Singer Asset Finance Company, L.L.C. (Singer) under R. 2:2-3(a)(2) to review the validity of amendments to the "Pick-6 Lotto" game rules adopted by the New Jersey State Lottery Commission (Commission) under the authority of N.J.S.A. 5:9-7a, on March 14, 1997.

As amended, the challenged game rules provide that the purchaser of a Pick-6 ticket must select, at the time of sale, the method of prize payment. Two choices are provided: (1) an annuity installment option of one initial cash payment and nineteen subsequent yearly installments; or (2) a check in the amount of the estimated present value of the installment option *fn1 . The selection of method of prize payment made at the time of sale is binding and final. The amended Pick-6 rules also contain a provision stating that voluntary assignment of a prize is "unlawful."

Singer is in the business of buying lottery prize payment streams from prizewinners in a number of states. It is undisputed that, notwithstanding N.J.S.A. 5:9-13 *fn2 , New Jersey has been one of those states since December 1993. N.J.S.A. 5:9-13 generally prohibits assignment of the right of any person to a State lottery prize, save for payments to the estate of a deceased prize winner, and except "pursuant to an appropriate judicial order."

In In Re Petition of Singer, *fn3 a separate opinion rendered today, we have endorsed and expanded upon McCabe v. Director of New Jersey Lottery Commission, 143 N.J. Super. 443, 448 (Ch. Div. 1976), in which Judge Kimmelman held that "a court order sanctioning an assignment of winnings must be circumscribed not only by circumstances of absolute necessity but must not undermine the legislative intent inherent in the State Lottery Law." We held in In Re Petition of Singer that the legislative intent of N.J.S.A. 5:9-13 was to prohibit routine assignments of lottery prize winnings, notwithstanding that an informal practice appears to have developed in at least one vicinage not to follow McCabe but regularly to issue orders approving such assignments despite opposition by the Attorney General.

Our opinion in In Re Petition of Singer may largely render moot Singer's interest in opposing the amended Pick-6 rule. We consider, nonetheless, Singer's several challenges which may be summarized: (1) the lump sum option provided by the amended game rule is arbitrarily inconsistent with a prior Commission argument (adopted as a factor in the McCabe opinion) that the State has a parens patriae interest to insulate unsophisticated mega-prize winners from their own human frailties as well as from possible predators, by extending payment over a long period of time; (2) the amended Pick-6 Lotto game rule was adopted without compliance with the New Jersey Administrative Procedure Act (N.J.S.A. 52:14B-1 to -15)(APA) as required by N.J.S.A. 5:9-13.8; and, (3) even assuming that the Pick-6 rule was adopted and amended under authority of N.J.S.A. 5:9-7a and b (which relieve lottery game rules and regulations of the nature set forth therein from the requirement of the APA), New Jersey case law independently requires a degree of process to affected parties which was not afforded to Singer.

We find each of the arguments unpersuasive.

The legislative purpose of a 1981 amendment *fn4 to N.J.S.A. 5:9- 7, which excluded lottery game rules from being considered administrative rules under the APA, was described in the introductory statement to the enacting bill:

This bill amends the "State Lottery Law" to exclude rules governing lottery games from the jurisdiction of the "Administrative Procedure Act." The change would apply only to rules governing lottery games. Other rules of the Lottery Commission would still be subject to the "Administrative Procedure Act."

As amended, N.J.S.A. 5:9-7a provides, in pertinent part:

Notwithstanding the provisions of any other law to the contrary, no rule or regulation establishing a lottery game shall be considered an "administrative rule" or "rule" pursuant to P.L. 1968, c. 410 (C. 52:14B-1 et seq.).

The record before us shows that game rules for Pick-6 Lotto were not previously amended under the APA, but under the exemption provided by N.J.S.A. 5:9-7 for the rules establishing a lottery game. Thus, the Pick-6 rules existing prior to the March 1997 amendments were adopted without utilizing APA procedures, just as were the challenged amendments. Pick-6 rules did not, and do not, appear in the New Jersey Administrative Code. The Commission's interpretation of N.J.S.A. 5:9-7 is entitled to prevail unless plainly unreasonable. Merin v. Maglaki, 126 N.J. 430, 436-37 (1992). We note that N.J.A.C. 17:20-7.3, which treats with time of prize awards, specifically defers to individual game rules in ...

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