Commonwealth v. Stewart-Johnson

941 N.E.2d 656, 78 Mass. App. Ct. 592, 2011 Mass. App. LEXIS 40
CourtMassachusetts Appeals Court
DecidedJanuary 12, 2011
DocketNo. 09-P-1820
StatusPublished
Cited by1 cases

This text of 941 N.E.2d 656 (Commonwealth v. Stewart-Johnson) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commonwealth v. Stewart-Johnson, 941 N.E.2d 656, 78 Mass. App. Ct. 592, 2011 Mass. App. LEXIS 40 (Mass. Ct. App. 2011).

Opinion

Milkey, J.

According to the evidence presented at trial, the defendants participated in and encouraged others to join a classic “pyramid scheme.” A Superior Court jury convicted them of violating G. L. c. 271, § 7 (setting up or promoting a lottery). On appeal, the defendants argue that their motions for required findings of not guilty should have been granted for two distinct [593]*593reasons. First, they argue that the scheme at issue was not a “lottery” subject to the statute. Second, they argue that their role in the scheme did not rise to the level of “promoting” it. They also argue error in the jury instructions. We affirm.

Background. Applying the familiar standard set forth in Commonwealth v. Latimore, 378 Mass. 671, 676-678 (1979), we conclude that the jury could have found the following facts.2 During 2006, a money-making venture circulated through the Cape Verdean community in the Dorchester section of Boston. This venture was sometimes referred to as the “table game,” because the participants were said to be sitting at imaginary “tables.” There were fifteen players at each “table,” with the players divided into four levels denominated as courses of a meal. There were eight players in the “appetizer” course, four at “soup and salad,” two at “entree,” and one at “dessert.” New participants joined at the “appetizer” level. In order to join, each player had to pay an entrance fee of between $1,000 and $5,000 (depending on the table).3 That money was paid to the person who was enjoying dessert. This would conclude the round, and the person who had completed his meal would retire fully sated. The remaining players would be split into two new tables, with each player advancing to the next course at the new [594]*594table. Each of the four “soup and salad” players at each new table was then to recruit two new appetizer participants to complete the table. The tables would replicate in this fashion, with players looking to advance through the four courses to the payoff at the end. Assuming all went according to plan, the person who had finished the meal would leave the table with eight times what he or she had initially paid to join the game.

The defendants each participated in the pyramid scheme and actively recruited others to join. Their soliciting of others took many forms, including personal conversations, electronic mail messages, and conference calls.

Discussion. 1. Whether the table game is a “lottery.” As noted, the defendants argue that — as matter of law — the table game is not a “lottery” within the meaning of G. L. c. 271, § 7.4 That term has been the subject of a good deal of case law. As the Supreme Judicial Court has long recognized, “lottery” encompasses a large variety of activities, which include three elements: “(1) the payment of a price for (2) the possibility of winning a prize, depending upon (3) hazard or chance.” Commonwealth v. Lake, 317 Mass. 264, 267 (1944), citing Commonwealth v. Wall, 295 Mass. 70, 72 (1936), and Commonwealth v. Plissner, 295 Mass. 457, 463 (1936).5 There is no question that the first two elements are satisfied here: players paid a [595]*595“price” (the entry fee) for the possibility of winning a “prize” (the payoff they obtained if and when they reached the dessert course). The debate is over the third element. The defendants argue that whether one “wins” the game cannot fairly be said to depend on “hazard or chance.” They point out that players were required to recruit others to join, and they suggest that winning depended largely on the “skill” of the players in completing that task. On this basis, they argue that, as matter of law, the game could not be considered a “lottery.” See Commonwealth v. Lake, 317 Mass. at 267 (holding that “a game is . . . considered a lottery if the element of chance predominates and not a lottery if the element of skill predominates”).

We reject the defendants’ argument. As in other classic pyramid schemes, players in the table game stood to turn the expected profit so long as participation in the game kept growing. However, as is self-evident from the mathematics on which such schemes are based, it is inevitable that at some point the pool of potential participants would become saturated. At that point, there would no longer be the supply of new players necessary to feed the ever-growing appetite of the system. As a result, the large group of participants who had not yet completed their dessert would remain unsated and lose the funds they had paid to join. As the United States Supreme Court recognized over a century ago, pyramid schemes “must ultimately and inevitably result in failure.” Public Clearing House v. Coyne, 194 U.S. 497, 515 (1904).

Given that pyramid schemes necessarily follow an ill-fated trajectory, whether someone succeeds or fails by joining one effectively turns on the happenstance of precisely where along that trajectory he joins. Even to the extent that a given player in [596]*596the game in question here might marginally have been able to improve the chances of winning by employing “skill” in recruiting others, we believe that success or failure remained largely outside a player’s control and was therefore predominantly determined by “chance.”

The large majority of other courts that have examined similar statutes have come to the same conclusion. For example, in determining that a pyramid scheme fell within the language of a Federal statute that prohibited a “lottery or scheme for the distribution of money ... by lot, chance, or drawing,” the United States Supreme Court concluded that “the amount of such return [achieved by members of the scheme who successfully recruited others] depends so largely, and indeed almost wholly, upon conditions which the member is unable to control, that we think it fulfills all the conditions of a distribution of money by chance.” Public Clearing House v. Coyne, 194 U.S. at 512-513.6 See Lashbrook v. State, 550 N.E.2d 772, 775-776 (Ind. Ct. App. 1990); Solon v. Meuer, 141 Misc. 2d 993 (N.Y. Civ. Ct. 1987); Roberts v. Communications Inv. Club of Woon-socket, 431 A.2d 1206, 1207-1208, 1211-1212 (R.I. 1981); Burnom v. State, 55 S.W.3d 752, 754 (Tex. App. 2001); State v. Dahlk, 111 Wis. 2d 287, 294 & n.1, 296-300 (Ct. App. 1983).7 Those jurisdictions that have come to the opposite conclusion have done so based on specific statutory wording or interpretative principles not applicable here.8

To be sure, the fact that money invested in an enterprise may [597]*597be subject to risk, with the potential return largely dependent on the actions of others, does not by itself render the enterprise an illegal lottery.

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Bluebook (online)
941 N.E.2d 656, 78 Mass. App. Ct. 592, 2011 Mass. App. LEXIS 40, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commonwealth-v-stewart-johnson-massappct-2011.