Honorable John W. Darrah, United States District Judge 

for the Northern District of Illinois, is sitting by designation.

In the

United States Court of Appeals

For the Seventh Circuit

No. 09-3667

TOM GEORGE, CHRIS VITRON, LORI CHAPKO and

EDWARD SNEAD, on behalf of themselves and

all others similarly situated,

Plaintiffs-Appellants,

v.

NATIONAL COLLEGIATE ATHLETIC ASSOCIATION,

Defendant-Appellee.

Appeal from the United States District Court

 for the Southern District of Indiana, Indianapolis Division.

No. 08-CV-1684–William T. Lawrence, Judge.

ARGUED MARCH 29, 2010—DECIDED JULY 16, 2010

Before CUDAHY and KANNE, Circuit Judges, and

DARRAH, District Judge.

DARRAH, District Judge. Plaintiffs brought this proposed

nationwide class action against the National Collegiate
2 No. 09-3667

Athletic Association (“NCAA”) and Ticketmaster,

alleging that both defendants operated illegal lotteries

to sell and distribute tickets for certain Division I championship tournaments. The NCAA moved to dismiss Plaintiffs’ Second Amended Complaint. The district court

dismissed all claims with prejudice, and this appeal

followed.

BACKGROUND

The named plaintiffs are residents of Arizona, Oregon,

and New York. Each applied for tickets to NCAA men’s

basketball games through NCAA-owned websites, and

each of them forfeited service fees when they were not

selected as winners in the process. Plaintiffs claim the

NCAA’s ticket-distribution system, which the NCAA

has operated since at least 1994, is an illegal lottery and

a means of increasing revenues at Plaintiffs’ expense.

Plaintiffs believe the number of potential class members

to be in the hundreds of thousands.

The ticket-distribution system has been used for inter alia

the NCAA’s Division I men’s and women’s basketball

and hockey championship tournaments. In their Second

Amended Complaint, Plaintiffs specifically describe the

application of the NCAA’s system for distributing

tickets to the 2009 Men’s Basketball Tournament. For

the final games of that tournament, during which the

top four teams (the “Final Four”) compete for the Championship title, Plaintiffs explain the process as follows:

Each person who applied for tickets to Final Four games

submitted a single application with up to ten entries.
No. 09-3667 3

Each entry was a chance to win, at the most, two tickets

and required a payment of a six-dollar “non-refundable

handling fee.” An applicant could win only once. Nonetheless, each applicant was required to submit the full

face value of the tickets for each entry submitted. Accordingly, in order to maximize the chances for winning

a single pair of $150 tickets, an applicant would have to

submit $3,060 (the face value of ten pairs of tickets plus a

six-dollar handling fee for each of ten entries). If the

applicant were to win, he would receive a pair of tickets

via overnight mail and, eventually, a $2,700 refund (the

total ticket price for the remaining nine entries). The $60

in handling fees would be forfeited to the NCAA. If

the applicant were to lose, he would receive a $3,000

refund (his entire up-front investment minus the

handling fees).

Plaintiffs allege that these retained “service” or “handling” fees, as well as the NCAA’s use of the applicants’

money, constitute consideration for a chance to win the

right to purchase “highly prized” tickets for priority

seating at venues that “are much too small to meet ticket

demand” and that the NCAA’s ticket-distribution

system constitutes an unlawful lottery. (Second Am.

Compl. ¶¶ 46-47.)

Plaintiffs allege that “the number of applicants greatly

exceeds the number of tickets on virtually every occasion,”

that the NCAA falsely advertises the availability of

certain seats and “manipulate[s]” the purportedly random drawings “to accommodate business needs,” and that

the resale market value of the tickets is high due to their
4 No. 09-3667

With the exception of Count III, all counts were later dis- 1

missed against Ticketmaster pursuant to a settlement agreement. Because Count IV was asserted against Ticketmaster

only, it is not at issue.

Plaintiffs also cite California prohibitions against private 2

lotteries. Plaintiffs’ appeal, however, is based on Indiana

law only.

scarcity. (Second Am. Compl. ¶¶ 25, 47, 49.) Plaintiffs

further allege that the “service fees” and “handling fees”

charged by the NCAA bear “no relationship to the costs

of running the lottery and grossly exceed[] any costs

associated with the lottery.” (Second Am. Compl. ¶ 41.)

According to Plaintiffs, the NCAA reaps huge profits

by holding and using the money received from applicants (approximately $100 million in 2008).

Plaintiffs’ Second Amended Complaint asserts six

claims, five of which remained at the time the NCAA

filed its motion to dismiss. Count I seeks a declaratory 1

judgment that the NCAA’s ticket-allocation process

constitutes illegal gambling in violation of Indiana

law; Count II is a claim for unjust enrichment; Count III 2

alleges a civil conspiracy between the NCAA and

Ticketmaster; Count V is for monies had and received;

and Count VI claims the NCAA violated the Indiana

Deceptive Consumer Sales Act (“DCSA”), codified at

Ind. Code § 24-5-0.5-1 et seq.

The district court dismissed the entire Second Amended

Complaint with prejudice on the NCAA’s Motion to

Dismiss pursuant to Federal Rules of Civil Procedure

12(b)(6) and 9(b).
No. 09-3667 5

LEGAL STANDARD

A district court’s grant of a motion to dismiss under

Federal Rule of Civil Procedure 12(b)(6) is reviewed de

novo. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th

Cir. 2008). All well-pleaded facts are accepted as true,

and all reasonable inferences are drawn in the plaintiff’s favor. Id. The allegations in the complaint “must

plausibly suggest that the plaintiff has a right to relief,

raising that possibility above a ‘speculative level’; if they

do not, the plaintiff pleads itself out of court.” Equal

Employment Opportunity Comm’n v. Concentra Health

Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (citing Bell

Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1965, 1973 n.14

(2007)).

ANALYSIS

Lottery

Indiana law defines a lottery as “a scheme for the

distribution of prizes by lot or chance.” Lesher v. Baltimore

Football Club, 496 N.E.2d 785, 789 (Ind. Ct. App. 1986)

(Lesher), vacated in part on other grounds, 512 N.E.2d 156

(Ind. 1987), (quoting Kaszuba v. Zientara, 495 N.E.2d 761,

763 (Ind. App. Ct. 1986); Tinder v. Music Operating, Inc., 142

N.E.2d 610, 614 (Ind. 1957) (Tinder)). These cases identify

three elements necessary to establish a lottery: (1) a prize,

(2) an element of chance, and (3) consideration for the

chance to win a prize. The NCAA does not dispute this.

The NCAA argues that its distribution process only

grants an opportunity to purchase tickets at full price,
6 No. 09-3667

which the NCAA contends is not a prize. This argument misconstrues the nature of the ticket-distribution

process as pled by Plaintiffs.

As detailed above, Final Four games, in particular,

required a significant up-front investment—as much as

$3,060. Included in this cost were “non-refundable handling fees.” Unsuccessful applicants were refunded a

portion of their up-front investment at some later point

in time, but all handling fees were retained by the NCAA.

In dismissing Plaintiffs’ Second Amended Complaint,

the district court cited Lesher, a case from the Indiana

court of appeals, which held that a distribution scheme

for season tickets to Indianapolis Colts games did not

constitute an unlawful lottery. 512 N.E.2d at 789-90.

In Lesher, all applicants submitted the face value of the

tickets sought plus a handling fee. Id. at 787-88. Winners

were selected at random. Id. Losers received a full

refund of the ticket price and the handling fee. Id. at 787-88.

Defining a prize as “something of more value than

the amount invested,” the Lesher court held that the

applicants merely “invested the price of the tickets

and received in exchange either the tickets or the

entire amount invested,” such that “those receiving

tickets got nothing of greater value than those who received refunds.” Id. at 789-90. Because the court found

that no prize had been awarded, it held that the

scheme was not a lottery. Id. at 790.

Here, Plaintiffs allege they were required to invest the

additional “service fee” or “handling fee” of six to ten
No. 09-3667 7

dollars per ticket or entry, which bears no relation to

the NCAA’s actual cost in administering the ticket-distribution process and was not refunded. Win or lose, the

service fee was forfeited by all entrants and retained by

the NCAA. Thus, Plaintiffs have alleged the existence

of consideration not present in Lesher, where the

handling fee was refunded to those who did not secure

tickets.

Plaintiffs have also alleged the existence of a prize not

present in Lesher. They specifically allege that the

scarcity of the tickets makes those tickets far more

valuable than the cost of purchase. Although the plaintiffs in Lesher attempted to make a similar argument,

that case was decided on a motion for summary judgment, and the court determined that the plaintiffs

had not presented evidence necessary to establish that

fair-market value was higher than face value. See id. at 789

(“Because they did not come forward with evidence

disputing the fact of value and because the court had

evidence as to the market value of the tickets, Lesher

and Dillon’s argument on appeal regarding the value of

scarce commodities is of no benefit to them now.”). This

case, by contrast, was dismissed on a motion challenging the sufficiency of the complaint. To defeat that

motion, Plaintiffs need only have alleged that the

fair-market value of the tickets exceeded their face

value such that those tickets constitute something of

more value than the amount invested. Plaintiffs have

done so.

The NCAA also argues that Plaintiffs have not alleged

an element of chance. In Indiana, the “chance” element
8 No. 09-3667

is met if “the winning of a prize is dependent primarily

on, if not solely, upon chance [rather than skill].” Tinder,

142 N.E.2d at 615. For an event in which the demand

for tickets exceeds the supply and the right to purchase

tickets is allocated at random, the element of chance is

plain. Applicants for NCAA tickets do not obtain their

reward through any exercise of skill or judgment. Nonetheless, the NCAA argues that its ticket-distribution

scheme lacks any element of chance because a random

drawing occurs only if the demand for tickets to a given

event exceeds the supply. Therefore, an element of

chance is not necessarily present. But Plaintiffs specifically allege that tickets are highly prized and that the

venues hosting the events are “much too small to meet

ticket demand.” (Second Am. Compl. ¶ 47.) The fact

that all applicants may win tickets for some events

does not obviate Plaintiffs’ claims that they paid money

to enter drawings for valuable tickets where the

demand for tickets did exceed the supply.

Thus, Plaintiffs have alleged all elements of a lottery:

they paid a per-ticket or per-entry fee (consideration)

to enter a random drawing (chance) in hopes of obtaining

scarce, valuable tickets (a prize).

The NCAA also argues that even if its ticket-distribution process is a lottery, it is not unlawful because it

fits within an exception to Indiana’s statutory definition

of “gambling.” Under Indiana law, it is unlawful for a

person to knowingly or intentionally engage in gambling,

Ind. Code § 35-45-5-2(a), which is defined as “risking

money or other property for gain, contingent in whole
No. 09-3667 9

or in part upon lot, chance, or the operation of a

gambling device; but it does not include participating

in: . . . bona fide business transactions that are valid

under the law of contracts,” Ind. Code § 35-45-5-1(d).

Clearly, the exception in the statute was intended to

exclude such activities as regulated investing from the

definition of gambling. See, e.g., Auten v. State, 542

N.E.2d 215, 222 (Ind. Ct. App. 1989) (stating that

activities of a brokerage firm’s purchasing stocks on

margin would fall under the bona-fide-business-transaction exception under Indiana law); Christopher T.

Pickens, Note, Of Bookies and Brokers: Are Sports Futures

Gambling or Investing, and Does It Even Matter?, 14 Geo.

Mason L. Rev. 227, 248 (2006) (discussing Wyoming’s

nearly identical exclusion of “bona fide business transactions which are valid under the law of contracts” as a

legislative effort to exclude investing activities from the

statutory definition of “gambling”) (quoting Wyo. Stat.

Ann. § 6-7-101(a)(iii)(B)-(C)).

Moreover, another statutory provision makes it

unlawful to conduct a lottery without regard for the

definition of “gambling” provided in section 35-45-5-1. See

Ind. Code § 35-45-5-3(a)(4) (“A person who knowingly or

intentionally . . . conducts lotteries . . . commits professional gambling, a Class D felony. . . .”); Lashbrook v. State,

550 N.E.2d 772, 776-77 (Ind. Ct. App. 1990) (affirming

conviction for professional gambling under section

35-45-5-3(a)(4) based on an “airplane investment program” held to be an illegal lottery). Indiana proscribes

all lotteries except those run by the State, where profits
10 No. 09-3667

go to benefit Indiana residents. See L.E. Servs., Inc. v.

State Lottery Comm’n, 646 N.E.2d 334, 339-40 (Ind. Ct. App.

1995) (“With the exception of lotteries conducted by

the State Lottery Commission, lotteries are considered

illegal gambling in Indiana.”). Because Plaintiffs have

sufficiently pled that the NCAA conducted a lottery,

the bona-fide-business-transaction exception to the statutory definition of gambling is of no effect.

In Pari Delicto

Under the equitable doctrine of in pari delicto, “where

the wrong of both parties is equal, the position of the

defendant is the stronger.” Knauer v. Jonathan Roberts

Fin. Group, Inc., 348 F.3d 230, 236 (7th Cir. 2003) (quoting

Theye v. Bates, 337 N.E.2d 837, 844 (Ind. Ct. App. 1975)

(Theye)). It literally means “of equal fault.” Theye, 337

N.E.2d at 844 (quoting Perma Life Mufflers, Inc. v. Int’l

Parts Corp., 392 U.S. 134, 135 (1968)). Thus, “where both

parties are in delicto . . . it does not always follow that they

stand in pari delicto, for there may be, and often are, very

different degrees in their guilt.” Stewart v. Wright, 147

F. 321, 329 (8th Cir. 1906) (quoting 1 Story, Eq. Jur. § 300)

(italics added).

Relying on the application of that doctrine in Lesher, the

district court dismissed most of the counts in Plaintiffs’

Second Amended Complaint based on its conclusion

that Plaintiffs were equally at fault for their participation in the NCAA’s scheme.

But the language in Lesher relied upon by the district

court was dicta, which, in turn, relied on Swain v. Bussell,
No. 09-3667 11

10 Ind. 438 (1858) (Swain). In Swain, the Indiana

Supreme Court held that the defendant’s scheme for

the distribution of real estate through a random

drawing was an unlawful lottery prohibited by Indiana

statute and constitution but that the plaintiff was not

entitled to relief because he was aware of the scheme’s

unlawful nature and had actually arranged with the

defendant to violate the law. Id. at 443.

Here, the Second Amended Complaint does not state

or imply a mutual arrangement to violate the law. Nor

does it reflect that Plaintiffs knew or had reason to

suspect they were agreeing to participate in an illegal

lottery at the time they sought to purchase tickets. When

all reasonable inferences are drawn in Plaintiffs’ favor,

Swain does not support dismissal at the pleadings stage.

Indiana law makes it unlawful to conduct lotteries

or otherwise gamble knowingly. Ind. Code §§ 35-45-5-2,

35-45-5-3(a)(4). As alleged, the NCAA’s act of knowingly

conducting an unlawful lottery demonstrates a greater

degree of fault than Plaintiffs’ act of unwittingly

entering that lottery. As such, the district court erred

in holding that the doctrine of in pari delicto bars

Plaintiffs from seeking relief from the court.

Remaining Counts

After determining that Plaintiffs were barred from

challenging the NCAA’s alleged lottery by the doctrine

of in pari delicto, the district court listed a number

of deficiencies in Plaintiffs’ DCSA claims. Plaintiffs’ re-
12 No. 09-3667

maining counts were not addressed. Without elaboration, the entire action was dismissed with prejudice.

All of Plaintiffs’ claims, however, incorporate—and, to

some extent, rely on—all of the preceding allegations,

including the lottery claim. As discussed above, Plaintiffs

have sufficiently alleged that the NCAA operated an

unlawful lottery. Accordingly, the district court’s order

of dismissal must be reversed as to all counts remaining

in Plaintiffs’ Second Amended Complaint.

CONCLUSION

For the reasons stated above, the judgment of the

district court is REVERSED, and the case is REMANDED for

further proceedings consistent with this opinion.

CUDAHY, Circuit Judge, dissenting. I respectfully dissent

from the conclusion of the majority that the mode of

distribution of certain sought-after tickets for sports

events, as pleaded, is technically an illegal “lottery.”

This case is indistinguishable in relevant respects from

Lesher v. Baltimore Football Club, 496 N.E.2d 785 (Ind. Ct.

App. 1986), vacated in part on other grounds, 512 N.E.2d

156 (Ind. 1987). The principal ground for distinction

asserted by the majority is that in Lesher the application
No. 09-3667 13

fees of the losing applicants were returned while in

the present case they are not. This may be a basis for

finding an overcharge here, but it is hardly grounds

for elevating the present procedure to the status of an

illegal “lottery.”

Lesher relied primarily on a finding of in pari delicto

to invalidate that lawsuit and this is an equally valid

ground for dismissing this one. With respect to an almost

identical scheme in Lesher, the Indiana Court of Appeals

stated:

[P]laintiffs claim the ticket allocation plan constituted

a constitutionally proscribed lottery, yet they participated in the plan, knowing that a “blind lottery” was

possible. Even if we were to conclude that the plan

did constitute a constitutionally proscribed lottery,

we would note the words of our Supreme Court in

Swain v. Bussell, 10 Ind. 438, 442 (1858): “If the plaintiff,

with the facts before him, saw proper to become

a participant in such an illegal and prohibited transaction . . . he is not in condition to ask . . . the aid of

a court.”

Lesher, 496 N.E.2d at 790 n.1. In predicting how the

Indiana Supreme Court would decide a state-law issue,

we can obviously look to the Indiana Court of Appeals

as persuasive authority. See, e.g., AAR Aircraft & Engine

Group, Inc. v. Edwards, 272 F.3d 468, 470 (7th Cir. 2001)

(observing that, where the state supreme court has not

spoken, “the decisions of the state’s intermediate

appellate courts are authoritative unless we have a compelling reason to doubt that they have stated the law

correctly”). I see no reason why Lesher should not be
14 No. 09-3667

treated as authoritative in this instance and I find the

purported distinction regarding the return of fees

to be without significance to the question whether

the plaintiffs participated in the ticket-distribution

mechanism, “knowing that a ‘blind lottery’ was possible.”

Lesher, 496 N.E.2d at 790 n.1. Although the cited statement by the Indiana Court of Appeals was technically

dicta, I find the logic persuasive as applied to the present

case.

The efforts by the majority to rely on the relative culpability of the defendant compared with that of the plaintiffs or between a motion for summary judgment and a

motion to dismiss are also without significance.

In addition, the argument that the tickets awarded,

because of their scarcity, are more valuable than the

price originally charged for them is misleading. Face

value is in fact the value realized by the issuer. After

allocation, they acquire, as a result of the very process

of allocation, a resale value, not necessarily to be

realized, and for that reason irrelevant.

There are other reasons for excluding this process

of ticket distribution from being classified as an illegal

“lottery.” One of these is the statutory exemption for

“bona fide transactions that are valid under the law of

contracts.” Ind. Code § 35-45-5-1(d). This is a very openended exemption that is easily applicable to this device—incidental to allocating scarce tickets for popular

sports events.

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