California Lottery Ticket Supplier Gambles--and Loses

A high-stakes gamble by the firm making millions of California lottery tickets backfired Thursday when a Georgia judge ruled that the company must use an Atlanta plant and not the brand-new facility it secretly began building in Gilroy before the lottery was even approved by voters.

Fulton County Superior Court Judge Osgood Williams ordered that 700 million tickets for California’s soon-to-be-launched instant “scratch-out” game be manufactured at Dittler Bros. Inc. of Atlanta rather than at the recently completed, $6-million facility built by ticket supplier, Scientific Games Inc. of Norcross, Ga.

Shrouded in secrecy and using assumed names, Scientific Games began construction on the Gilroy ticket-printing plant in September, 1984, two months before the lottery initiative passed.

Scientific Games also is the firm that wrote California’s lottery initiative and contributed $2.2 million of the $2.4 million spent to finance the measure.

Thursday’s court ruling means that Scientific Games may never be able to produce lottery tickets in its new Santa Clara Valley plant, reported to be the highest-volume lottery ticket factory in the nation.

In a lawsuit, Scientific Games had argued that the Atlanta plant owned by Dittler Bros.--Scientific Games’ sole printing subcontractor--has too limited a capacity to print 700 million tickets by California’s deadline and that delays could mar the lottery’s scheduled fall start-up.

According to officials at both companies, the judge gave Dittler 75 days--the entire time California is allowing for production of tickets--to produce 700 million tickets for two games.

The legal battle between Scientific Games and Dittler began with the new plant.

Dittler sued, fearing that its exclusive contract to supply all of Scientific Games’ tickets was crumbling. Scientific Games countersued, saying it would use the plant only if Dittler failed to meet the huge demand in California.

Scientific Games legal counsel Robert Mote said he wants the courts to clear up questions about whether his company could produce and store tickets in Gilroy “as insurance” against the $250 million in penalties it could face if Dittler is late with tickets.

Mote said the company would risk the cost of producing backup tickets that might never be used because “we’ve never failed an obligation.”

Dittler board Chairman Gilbert Bachman said that he is “confident that we will be able to fulfill our obligation on time.”