Tuesday, April 17, 2007

S.C. Court of Appeals reversed UTPA award of damages

In Collins Holding v. Defibaugh, the Court of Appeals considered an award of damages under the UTPA. At base, Defibaugh competed with Collins by placing machine games in bars and stores across the state. The Defibaughs’ machines utilized a technique known as “reflexive payout,” meaning the owner of the machine can control how much the machine pays back to players over the lifetime of the machine. The machine, unbeknownst to the player, makes adjustments to the game’s outcome to stay within the payback percentage.

Collins brought a UTPA claim and arguing that the reflexive payout scheme of the Defibaugh machines caused Collins to suffer lost profits. Over $100,000 in damages was awarded to Collins. The Court of Appeals reversed:

While Collins may have demonstrated some lost profits arising from the Defibaughs’ placement of their machines at the same locations as where Collins’ machines were placed, Collins did not show that the utilization of reflexive payout on those machines was the cause of any lost revenue. Collins’ director of operations, Jefferson Gibbons, testified that the primary reason the Defibaughs’ machines hurt Collins’ business was because the Defibaughs’ machines were easy to play. Gibbons also testified that the Defibaughs’ machines were faster and involved no thinking or skill. The UTPA only creates causes of action in those suffering a loss as a result of a deceptive act. See S.C. Code Ann. § 39-5-140(a) (emphasis added). While “morphing” may have affected the players of the games, that feature is not what caused Collins’ machines to earn less money than before the Defibaughs’ machines were placed at the same locations.

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