Lottery Winner Can Sue|Over Withheld Winnings

(CN) - A $10,000 lottery winner has standing to sue New York City for intercepting half his winnings to reimburse the state for his participation in a state-funded public assistance program, the 2nd Circuit ruled.

When Walter Carver hit the jackpot, the state intercepted and redirected $5,000 of his $10,000 winnings to the city, for which Carver worked for minimum wage under a state-funded "workfare" program.

Under New York law, the state is entitled to up to half the lottery winnings of any welfare recipient who wins more than $600.

Carver filed a class action against the city and various officials, claiming they violated the Constitution's takings clause, along with state and federal minimum wage laws.

The district court ruled that Carver lacked standing, because the city was not directly responsible for his alleged injuries.

But a three-judge panel in Manhattan partially reinstated Carver's lawsuit, ruling 2-1 that the lower court prematurely dismissed the minimum-wage claims.

"Carver pertinently claims that the City defendants violated state and federal labor law by paying him minimum wage while requiring that he return some portion of those wages in the event he won the lottery," Chief Judge Dennis Jacobs wrote for the majority.

"On this theory, Carver was directly injured by the City's alleged failure to abide by state and federal labor law when compensating him for his work."

Although the majority reinstated the minimum-wage claims, it expressed "no opinion" on the merits of his claims.

Judge Ralph Winter dissented, saying Carver's beef is with the state, not the city.

"The City has done absolutely nothing to cause the loss to Carver of his lottery winnings," Winter wrote.

He also noted that Carver has sued New York in state court for the full $5,000, half of which was disbursed to the city after deducting state tax.

"The judicial, municipal, and private resources poured into Carver's attempt to recover $5,000 must be in excess of six figures," Winter added. "Now we have to face a remand to the district court followed perhaps by another appeal to this court."

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