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Minnesota Souvenir Milkcaps, LLC v. State

October 12, 2004

MINNESOTA SOUVENIR MILKCAPS, LLC, ET AL., APPELLANTS,
v.
STATE OF MINNESOTA, ET AL., RESPONDENTS, ALLIED CHARITIES OF MINNESOTA, INTERVENOR.



Ramsey County District Court File No. C5-03-9579.

Considered and decided by Toussaint, Chief Judge, Presiding; Anderson, Judge; and Halbrooks, Judge.

SYLLABUS BY THE COURT

In order for a "promotion" to qualify as an "in-package chance promotion" and thus avoid characterization as a lottery, there must be a legitimate, valuable product included in the package associated with the promotion.

The opinion of the court was delivered by: G. Barry Anderson, Judge

Affirmed

OPINION

Appellants distributed and marketed "milkcaps" with a promotional scratch game. Respondents notified appellants that the promotional game violated Minnesota law prohibiting lotteries. Appellants voluntarily ceased distribution of the milkcaps and brought an action seeking a declaratory judgment that their promotional game was not a lottery. The district court concluded that the promotional game was a lottery. We affirm.

FACTS

Appellant Wisconsin Souvenir Milkcaps, Inc. (Wisconsin Souvenir) is a Wisconsin corporation that sells milkcaps (also referred to as "pogs"). The milkcaps are marketed in Wisconsin using a promotional game. Wisconsin Souvenir also sells special "collector packets" without the game piece used in the promotional game. In July 2003, Wisconsin Souvenir entered into an agreement with Minnesota Souvenir Milkcaps LLC (Minnesota Souvenir) whereby Minnesota Souvenir would market and distribute a product and game in Minnesota that was virtually identical with the Wisconsin game.

Appellants identify the product as a "milkcap," and it is described as a "removable perforated circle" on a piece of cardboard with "a picture laminated on it." Milkcaps were originally designed for and used to sell milk bottles in the 1940s and 1950s. Vintage milkcaps are thicker than the milkcaps at issue and use printed, rather than laminated, pictures.

Included with the "milkcap" is a scratch game with prizes up to $250. Aside from some cosmetic differences, the only difference between the Minnesota and Wisconsin games is that the Wisconsin game is a pull-tab, rather than a scratch, game.

Each "milkcap" with its associated game piece costs the customer one dollar. Wisconsin Souvenir has produced approximately 3,000,000 milkcaps for use in Minnesota at a production cost of approximately $90,000. Retail outlets purchase a box of milkcaps for $400, and each outlet is responsible for paying $2,480 in prizes.

There is evidence in the record that Wisconsin Souvenir's president and sole shareholder purchased three milkcaps that he produced in 1990, early on in Wisconsin Souvenir's existence, for fifty cents each. One of appellants' witnesses testified that she was aware of milkcaps selling for between $1.50 and $5, but the witness did not differentiate between vintage milkcaps and the replicas at issue here. Respondents' expert witness testified that the milkcaps at issue here are valueless. Respondents' witness also testified that the most he has ever spent on a milkcap was $85 for a very rare milkcap but that he had also recently bought and sold large quantities of more common milkcaps for ten cents apiece and four cents apiece.

In denying appellants' request for declaratory judgment, the district court stated that the milkcaps are not sold as part of a package because a package includes "a legitimate product with an ascertainable value" and ...


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