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POPOVICH v. MCDONALD'S CORP.

January 14, 2002

NICK POPOVICH, PLAINTIFF,
V.
MCDONALD'S CORPORATION, SIMON MARKETING, INC., AND JEROME P. JACOBSON, DEFENDANTS.



The opinion of the court was delivered by: Kennelly, District Judge.

MEMORANDUM OPINION AND ORDER

Plaintiff Nick Popovich, a frequent customer of McDonald's restaurants, has sued McDonald's Corporation and Simon Marketing, Inc., as well as Jerome Jacobson, Simon's director of security, for wrongs allegedly committed in connection with promotional games conducted by McDonald's since 1988. McDonald's and Simon have moved the Court to compel arbitration of the dispute and to stay judicial proceedings pending the outcome of arbitration. Popovich has moved for a finding that a suit filed by McDonald's against Simon, pending before another judge of this Court, is related to this case and should be transferred to this Court's docket. For the reasons stated below, the Court denies defendants' motions to compel arbitration and grants Popovich's motion for a finding of relatedness.

Facts

Popovich alleges that since 1988, McDonald's has contracted with Simon to conduct its national advertising and run its promotional games, including the recent game "Who Wants to Be a Millionaire." Each game offers participants the chance to win low-value, mid-value, and high-value prizes. The high-value prizes include motor vehicles and/or cash awards of up to $1 million. The games are played by obtaining game pieces that are distributed at McDonald's restaurants, in newspapers, and by direct mail. Customers can win by collecting specific pieces or groups of pieces, or by obtaining an "instant winner" game piece.

According to the amended complaint, Simon acted as McDonald's agent to distribute game pieces. Simon in turn entrusted Jacobson with the responsibility of ensuring the games' integrity and with disseminating the high-value winning pieces. Jacobson, plaintiff alleges, devised a scheme to convert the high-value winning pieces and sell them to associates who falsely represented themselves to be legitimate winners or recruited others to do so. As a result, Popovich and other McDonald's customers had no real opportunity to win the high-level prizes.

Popovich alleges that McDonald's first learned of Jacobson's activities in August 2000, when the Federal Bureau of Investigation advised the company that it was investigating the conduct of the games. Plaintiff alleges that despite this knowledge, McDonald's continued to permit Simon and Jacobson to promote the games, encouraging customers to buy its products in order to win prizes, while knowing full well that it was impossible (or virtually so) for them to win the high-level prizes.

In August 2001, the government announced the indictment of Jacobson and other participants in the scheme, and McDonald's announced that it was suspending the then-current "Pick Your Prize Monopoly Game," which had begun in July 2001. The two $1 million prizes that had been offered to game participants had been diverted by Jacobson.

Popovich filed this lawsuit on August 24, 2001, naming only McDonald's as a defendant, and seeking certification of a class of plaintiffs. On August 31, he moved the Court for a preliminary injunction preventing McDonald's from suspending or terminating the Pick Your Prize game. McDonald's contested the motion, which the Court denied on September 17, 2001.

In early October 2001, in response to the filing of similar lawsuits against McDonald's in various districts (including some cases that were filed in state court and removed by McDonald's to federal court), McDonald's filed with the Judicial Panel for Multidistrict Litigation a motion pursuant to 28 U.S.C. § 1407 to transfer and consolidate for pretrial proceedings all pending federal actions. On October 19, McDonald's filed its motion to compel arbitration in the present case. On October 26, Popovich filed an amended complaint, naming Simon and Jacobson as additional defendants, and making claims for breach of contract, unjust enrichment, consumer fraud, and (against Jacobson only) violation of the Racketeer Influenced and Corrupt Organizations Act. Simon followed with its own motion to compel arbitration.

As noted earlier, Popovich's claims concern McDonald's games from 1988 through 2001. In his amended complaint, he seeks certification of a class of plaintiffs and requests an award of compensatory and punitive damages to the plaintiff class, as well as an injunction requiring McDonald's to "complete" the Pick Your Prize game by awarding to legitimate participants all high-level and other prizes that have not been properly awarded.

Each of the McDonald's games had official rules which were available in McDonald's restaurants and elsewhere. The rules for each of the eight games sponsored by McDonald's since 1999 have included a provision stating that

[e]xcept where prohibited by law, as a condition of participating in this Game, participant agrees that (1) any and all disputes and causes of action arising out of or connected with this Game, or any prizes awarded, shall be resolved individually, without resort to any form of class action, and exclusively by final and binding arbitration under the rules of the American Arbitration Associates and held at the AAA regional office nearest the participant; (2) the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings as such arbitration; and (3) judgment upon such arbitration award may be entered in any court having jurisdiction. Under no circumstances will participant be permitted to obtain awards for, and participant hereby waives all rights to claim punitive, incidental, or consequential damages, or any other damages, including attorney's fees, other than participant's actual out-of-pocket expenses (i.e., costs associated with entering this Game), and participant further waives all rights to have damages multiplied or increased.

In their motions to compel arbitration and stay judicial proceedings, defendants McDonald's and Simon rely on ...


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