Evans, et al. v. Linden Research, et al. NATIONAL CLASS ACTION LAWSUIT - A Short Summary Analysis of the Complaint. Citations to Bragg v. Linden Lab (Second Life)

The Main Website for this information is found at VirtualLandDispute.com

A Class Action Virtual Land Dispute Complaint against Second Life (Linden Research and Philip Rosedale) claiming fraud and damages in excess of $5,000.000.00 was filed by Jason Archinacao in the matter of "Carl Evans, Donald Spencer, Valerie Spencer, Cindy Carter, individuals, on Behalf of themselves and for the Benefit of all with the Common or General Interests, Any Persons Injured, and All Others Similarly Situated v. Linden Research, Inc., and Philip Rosedale", April 15, 2010 in the Eastern District of Pennsylvania U.S. Federal District Court at Docket No.: 2-:10-cv-01679-ER. The case has initially been assigned to the same Federal Court Judge, Honorable Eduardo Robreno, that authored the published opinion in the Bragg v. Linden case.

The primary focus of the complaint appears to be on the rights of consumers and just how far can a virtual world business go in making public representations to its users to induce them to pay for property and participation where they are promised ownership of what they buy, agree to a terms of service agreement, and then the company unilaterally changes the material terms of the ownership and service agreement depriving access to the consumers' property unless the new terms are agreed by a click wrap TOS. The net result seeming to be that that the company acquires the added value invested by the consumer without up front letting the consumer know this could occur, eventually the consumer's economic loss and the company's economic advantage. Numerous other legal issues and rights of consumers versus the rights of the creators of the virtual world platform are also raised and will most likely be discussed by legal scholars as the case progresses and for years after it concludes.

The Complaint is briefly summarized here pointing out some interesting passages.

Relying heavily on the precedent established in the published opinion of Bragg v. Linden Labs (which was not appealed by Linden), the Complaint begins by identifying the class plaintiffs as individuals who owned land at a time the second life website and the company's representatives promised that a participant owns the land that they buy. (A class is simply a group of individuals that share the same common elements or bundle of rights that were violated at a particular point in time or by a particular action by another for which the law provides a remedy.) The Complaint does not know the entire size of the class that existed at the time Second Life promised its paying customers that they owned what they bought, but anticipates it is quite large and as the case proceeds, Linden will be required to assist these three individuals in identifying all of those other users regardless of whether they remain participants, land owners at this time, or not because if they were damaged, they are entitled to some legal relief. Further on, the specific conduct imposed on the class plaintiffs is described as

". . . that they would receive and retain all right, title, interest, copyright and intellectual property rights to the land, objects and virtual property, Plaintiffs purchased and/or created in Second Life, Defendants intended to and did in fact deceptively induce Plaintiffs to invest thousands in U.S. Dollars via the wires and mails crossing state lines.

Indeed, over the course of their participation in the game, Plaintiffs acquired a significant amount of virtual property from Defendants, or others in-game. Further, Plaintiffs acquired a number of virtual items from independent third parties.

Plaintiffs trusted and believed that the money they deposited with Linden, as well as the money they invested in the virtual property, could not and would not be stolen or otherwise converted by the Defendants. Further, Plaintiffs trusted and believed that Linden’s representations that Plaintiffs would retain all of their intellectual property rights were true and that Defendants would not interfere in the use and/or exercise of those rights.

Defendant Linden, despite the representations of ownership, took the virtual land, items and money in the accounts of Plaintiffs without compensation. Further, Defendant Linden “froze” Plaintiffs’ accounts preventing them from accessing the account to use, cancel or modify it or enjoy or use the virtual items, land or real world money contained therein.

In essence, Linden prevented Plaintiffs from accessing any of their items, land or goods to which they had all rights, title and interest. Interestingly, to resolve whether this primary class was damaged and the degree of compensable harm, the court will have to finally resolve the rights of the creators and owners of the avatars that are used to manipulate, create, own, and sell their land and property inside the virtual world."

The Complaint then describes in great detail and with specific citations, the many representations that were made to the public about the ownership of land and how that change in company direction essentially saved the company from the brinks of extinction, the growth of Second Life, and how it acquired well publicly known investors such as by coat-tailing on the same business model, you own what you buy, unlike any other virtual world at the time.

"Defendants associated themselves with Lawrence Lessig, the respected legal scholar, the March, 2006 press release announced that Linden had obtained $11mm in new financing from Globespan Capital Partners, with participation from Jeff Bezos, the founder of Amazon.com.   Linden also noted that other investors, including Mitch Kapor, the founder of Lotus Development Corp., was also involved in their business as an investor.  It is unkown whether Defendants have disclosed to Lessig, Bezos or Kapor that the representations that they make to consumers about land ownership in Second Life ..."

Further on, allegations describe Second Life's "Liquidity Event", generally defined as that point in time when Second Life decided to change its business model such that it would eventually devalue all land to zero in an attempt to grow the number of servers providing the services on a "leased" basis. The gist of the liquidity event seeming to be that users were duped out of their money via the promise of ownership because the company didn't have sufficient resources and reserves to grow on its own and by allowing anyone to "connect" their own server and "create" their own land, the initial participants land would eventually devalue to zero and by default the company would own all that others had paid for and built. The latest TOS now terms land acquisition as a lease and/or license, including allowing any user to photo or video copy the creations of another (under certain "nonsensical" limitations), which seems to have been interpreted by long-term users as removing any vested interest those users were originally promised in their own creations.

The Complaint directly alleges: "The sad reality is that Defendants are simply planning a return to their original business model, i.e., that consumers truly own nothing, through deceit."

"Defendant Linden has quietly gone about doing so by removing, one by one, the representations of ownership on its website yet providing no compensation to those that it induced under the false promises of ownership.  Despite the quiet removal of such representations over time, Defendants’ prior representations continue to proliferate and cause consumers to believe that when they purchase land in Second Life, they own it.  For example, to this day, the publicly monitored and edited Wikipedia entry for Second Life continues to state that consumers can “own” land in Second Life." 

Of course, whether this can be proven will be one point of debate, but these plaintiffs appear to believe they have some proof:

"Kapor has acknowledged specifically that such decisions will cause a devaluation of the money invested by consumers and has stated that Defendant Linden needs to engage in a “managed transition” and it would be “insanely stupid to do it any other way.”  Kapor has also stated that there will be “plenty of advance notice.”"

The allegations then spell out the Lindex exchange trading lindens to U.S. dollars and back and forth, the "fine print" of the Terms of Service and unilateral changes made by Second Life after customers have invested based on a different discrete set of expectations. This issue, whether any company can unilaterally change and then bind a consumer by the company's terms of service agreement after the consumer has already become an invested participant, is one of the currently biggest consumer related issues pervading our economy and our personal lives. Changes in this type of practice have already begun to surface in the changes recently imposed on credit card companies and the governments march towards instituting consumer protection mechanisms in every aspect of our lives: health care, credit cards, college tuition, etc.

CLASS ACTION ALLEGATIONS - NATIONAL CLASS ACTION LAWSUIT

I would think that information will soon surface on how to contact these plaintiffs and their attorney if you seek additional information, have a differing point of view, or want to join the class if you found yourself in a similar situation with Second Life.

Then the class action allegations begin; first, recognizing a main class being essentially all property owners of land, virtual personal property, and U.S. dollars, between a certain date and the date the court certifies the class, and a second class, individuals that had property or U.S. dollars and whose accounts were frozen and their property and money not returned or released.

Questions common to all class members, i.e., what did these consumers experience or lose as a result of Linden's conduct, are listed in the Complaint as:

 The nature and scope of Defendants’ wrongful practices;

Whether Defendants falsely and uniformly asserted that Plaintiffs and Main Class members were owners of virtual land, when they were not;

Whether Defendants wrongfully deprived Plaintiffs and Main Class members of ownership, access to, use and/or possession of their virtual property;

Whether Defendants wrongfully deprived Plaintiffs and Main Class members of intellectual property rights, such as copyrights;

Whether Defendants’ actions and representations breached the terms of the TOS agreements with Second Life users;

Whether the TOS agreements (as they were presented to new users and as they were unilaterally revised and imposed upon existing users), were contracts of adhesion and/or were unconscionable;

Whether Defendants’ actions breached their implied covenant of good faith and fair dealing with Second Life users;

Whether Defendants engaged in and continue to engage in fraud and/or fraud in the inducement;

Whether the Defendants have been and continue to be unjustly enriched;

Whether the Court can award declaratory and injunctive relief; and

The proper amount of damages.

Whether Defendants falsely asserted that the class members owned the virtual land, when they truly did not;

Whether Defendants represented that class members owned virtual land;

Whether Defendants representations about the ownership of virtual land and items was a violation of California Civil Code Sections 1770(a)(5), (7), (9), (14) and/or (16);

Whether Defendants are subject to liability for violating the Consumer Legal Remedies Act (“CLRA”), Civ. Code §§ 1750-1784;

Whether Defendants have violated the Unfair Competition Law, Bus. & Prof. Code §§ 17200-17209;

Whether Defendants have violated the False Advertising Law (“FAL”), Bus. & Prof. Code §§ 17500-17536;

Whether the subclass is entitled to an award of compensatory damages pursuant to Civil Code section 1780(a)(1);

Whether the subclass is entitled to an award of statutory damages pursuant to Civil Code section 1780(a)(1);

Whether the subclass is entitled to an award of restitution pursuant to Civil Code section 1780(a)(3);

Whether the subclass is entitled to an award of punitive damages pursuant to Civil Code section 1780(a)(4);

Whether the Defendants have been unjustly enriched as a result of the unlawful, fraudulent, and unfair conduct alleged in this Complaint, such that it would be inequitable for Defendants to retain the benefits conferred upon them by Plaintiffs and the proposed class;

Whether the class is entitled to an award of restitution pursuant to Business & Professions Code section 17203; and

Whether the Defendant violated California Civil Code §1812.600, et. seq.

Among the questions of law and fact common to Subclass A are:

Whether Defendants lawfully confiscated virtual and real-world property owned by Second Life users;

Whether Defendants lawfully terminated access to users’ virtual and real world property;

The value of the property Defendants confiscated from individual Second Life users; and

The proper amount of damages related to the confiscation of virtual and real-world property owned by Second Life users."

On behalf of all class members, the plaintiffs seek to have their rights defined and numerous damages and relief including restitution, that they be returned what they paid; also, that they receive their property back and their rights once defined, then restored, any out of pocket losses, punitive damages as appropriate, and attorney fees.

Further analysis and updates will be coming once the lengthy descriptive complaint is digested and as filings with the Court become available.