In an easily read and understood opinion, Judge Robreno DENIED Defendants Linden Labs (Second Life) and Philip Rosedale's request that the Complaint be dismissed, but did agree that the case should be moved to the consumer friendly state of California in San Francisco. The Opinion and the Order are available at the attached links.
A beginning with no end in site... plaintiffs filed their opposition to Second Life's request that the Court dismiss and/or transfer the action to California.
The entire filing is available here in zip format. Virtual Land Dispute (includes the opposition and affidavits).
"As Yogi Berra once famously said: 'It’s déjà vu all over again.' Once again, Defendants Linden Research, Inc. (“Linden”) and Philip Rosedale (“Rosedale”) are back before this Court requesting that claims stemming from its misrepresentations about virtual property ownership rights in the virtual world Second Life ...."
Plaintiffs have accurately pointed out by reference to Linden's opposition and affidavits, that in fact, Plaintiff Evans agreed 72 times to a Terms of Service Agreement that the Court had declared unconscionable and void. Curiously, Linden seems to have missed this critical fact when it filed its opposition in the first place and claimed that Evans accepted the TOS at least 72 times and therefore his claim cannot stand but must be dismissed because the TOS precluded it. Similarly, Plaintiffs pointed out that Linden's forum selection clause requiring litigation to take place in California is equally unconscionable as the original arbitration clause and should be stricken as was the clause in Marc Bragg's case and for nearly the same reasons as it is equally unfair even in its most recent prepackaged form (now as of March / April, 2010).
The forum selection clause apparently requires a second life user to travel to California to enforce his / her furry's rights if the matter is over $10,000 without regard for the costs of doing so, and if under $10,000, as is Mr. Evans the Locksmith's claim, then to arbitrate and if he loses, then be subject to a $1000 fine regardless that the original claim may be only $100, or even $1.00? When did Linden become entitled to levy a fine under the U.S. law?
The opposition relies heavily on the Bragg v. Linden, et al opinion authored by Judge Robreno. While Defendant Second Life takes the position that Judge Robreno should allow the California courts to resolve these novel legal issues of virtual property rights, Mr. Archinaco for Plaintiffs points out that Judge Robreno should be considered competent to do so in Pennsyvlania since after all, Judge Robreno, Mr. Archinaco notes, is probably the only Judge in the country to have written an opinion on virtual property rights.
Summarily, Plaintiffs retrace prior history and logic clarifying the elements of unconscionability, clarify some confusion that surrounded the numerous TOS, dates they were issued, and the common terms that pervade them all and that should be considered void, and present to the Court the discretion granted by the law to decide whether to retain this case, or ship it to California into Linden's "backyard".
As part of the opposition, Plaintiffs attach an amended complaint to cure a technical deficiency in affidavits Defendants identified.
Despite having been an attorney for a number of years and been involved in and litigated many cases, I never cease to marvel at the economic incentives that drive the tremendous amount of economic waste that has permeated our legal system.
Linden Labs filed a Motion to Dismiss (click to download) the class action complaint in the Evans, et al v. Linden Labs, et al., virtual land dispute currently pending in the Eastern District of Pennsylvania. Before looking at the substance of the motion itself, it is overly common and I believe an abused procedural tool to exercise the right to file a motion to dismiss as a routine legal tactic. I cannot recall a case where one was not filed and it seems to have become, but was not intended to be, a standard responses just in case the judge might decide to terminate the matter at a very early procedural stage, i.e., before the parties' claims can be fully heard. Without getting totally into the boring technicalities, the standard of review a judge applies to a review of such motions in deciding whether to grant and terminate the case, or deny / dismiss it and allow the case to proceed, as consumers (as opposed to the judge), we should read such a motion in light of the obvious economic and professional incentives that might motivate such a filing.
The first motivation is somewhat obvious, legal fees. These motions generally require a great deal of time and consequent legal expense i.e., fee income to the attorneys that file them if those attorneys are working on an hourly basis. Arguably, if granted, that up front investment is tremendous leverage, because compared to the cost of an entire lawsuit through to jury verdict, the cost of such a motion is minimal, but if the case is not terminated, or not likely to terminate as a result of the motion, then the cost is one component that increases the entire cost of the lawsuit, the time and cost burden on our legal system, and serves only to justify the position that only the wealthy can truly afford their day(s) in court and a slice of justice. Remembering that the american civil legal system is just as much a resource / wealth shifting mechanism as it is a venue to vent / define our rights, a more thorough economic analysis may result in other conclusions.
The second biggest motivation I've noticed for the use of these motions, which is really a subpart of the first motivation, is to cause delay / harass or impose additional burdens on a smaller party up front in the litigation in an effort to intimidate or deter further concentrated efforts because the costs become too great.
A less obvious motivation is for the lawyer to protect him / herself against later malpractice suits from a client who later, after having spent many thousands in litigation might otherwise claim against his attorney that he / she should have filed a motion to dismiss early on and saved his client the extraordinary costs that were ultimately endured. Consumers often chant that lawyers make all our lives more difficult, and while maybe partially true, lawyers must have clients to proceed into court and so we as clients should share some of the accountability for the position in which we find ourselves. It is interesting that the majority of us feel that we do not want others, especially the government, deciding our choices for us, i.e, we want to self-govern to the fullest extent possible. Then, when numerous ridiculous matters are filed in court by lawyers representing clients who have decided that they want to pursue the american dream, protect and enforce their rights, or have those rights better defined for themselves and others, we collectively blame the lawyers / legal profession for pursuing that which forms a profound fundamental component of our democratic society.
Regardless of motivation, however, any attorney may file such a motion provided they believe the position has legal and factual merit without regard to the chance of success and this point is important to our way of life. As a society our majority policy seems to be that we would prefer that the legal system's resources be stretched to the point of breaking rather than the courts intimidating lawyers into reducing their number of motion and the consequent chilling effect such deterrence could have on our civil and constitutional rights.. but I digress....
Linden and Rosedale's Motion to Dismiss first requests the matter be dismissed, for reasons discussed below, but if not dismissed, they ask the Court in Pennsylvania to transfer the matter to California. Motions are often postured with the ultimate request, a gift of sorts if granted, but knowing that to be unlikely, make an alternative request believed to be more probable. Burden on defendants to litigate in a state different that where its business is located is usually a legitimate request and must be balanced with the burden imposed on the plaintiffs, the court, and the interests of justice.
Clearly, for Linden to litigate in California would save them some time and expense since all their records are presumably located there as are their offices and personnel that might have to participate in depositions and court proceedings; however, from articles about the company, the servers and virtual items / land are located in other states around the country so retrieval and access to evidence for litigation in this digital age is not burdensome for them, one would think, especially for such a large company like Linden, to participate in any court in the country... especially as they sell their services and provide the same information that would be collected for use in such a lawsuit, to all their users in every state in the union as part of their individual user / avatar accounts on a persistent and concurrent basis. Clearly, as well, the named plaintiffs appear from the Complaint to have little by comparison to Linden in the way of resources and it would be far more difficult to require them to participate in depositions and court proceedings in California than it would in Pennsyvlania, or along the eastern seaboard. It seems a bit unfair, if you accept the plaintiffs' claims as true (which the judge must do for purposes of deciding a motion to dismiss), to ask the plaintiffs whose resources, land and virtual items, and money were taken, to require them to incur a greater burden and go to California to get back what Linden said was their's because it makes it easier for Linden to defend itself, again, when Linden had no problem selling those items and services to the plaintiffs on the east coast.
Linden has put forth their Terms of Service agreement as the basis for moving the case to California, but of course, the TOS they put forward seems to be the most current. This issue of the TOS and its enforceability will always seems to me, be a point of obstruction for Linden's future growth. Critical factual and legal issues must be resolved before the transfer issue can be decided. For example, are the plaintiffs who were terminated before the current TOS was instituted required to comply with the current version to assert their state rights? If not terminated during the old versions of the TOS, then are they automatically bound by the new TOS even though they had no opportunity to negotiate its terms when it was unilaterally changed by Linden after those plaintiffs had invested their time and money in reliance on the terms of the old TOS and the only option was to walk away from the property they were told they owned? Is the TOS enforceable under California law, and if only parts are, which parts of which versions and to whom do the enforceable parts apply? Is there a shortcut resolution to all of this convolution that Linden's public promises and later unilateral modifications to the terms of the TOS appear to create?
Linden contends it is reasonable to require a complainant to go to California to pursue a claim despite that most claims might average less than $50 perhaps? and the cost to do so would be in the thousands. Participation in a binding arbitration over the phone as an alternative, though less expensive, doesn't really seem reasonable since it's an "option" that is really not an option given the cost to travel to California. Couple the above with the fact that since Linden requires the arbitration to be binding means users give up their very important appeal rights. Lastly, Linden also states if you lose, you could have to pay them $1,000 for counsel fees or some such thing, all of which rings unreasonably and fundamentally unfair. California courts look at these situations and leave to the judge whether the "option" or methodology dictated by the company is reasonable or fundamentally fair, and leading courts in California seem to agree it is not.
For example, in a Paypal case: "The record in this case shows that PayPal serves millions of
customers across the United States and that the amount of the average
transaction through PayPal is $55.00. Although
PayPal cites to
unpublished or out-of-state authority holding that such facts do not warrant a
finding of unconscionability, PayPal cites no California
authority holding that it is reasonable for individual consumers from throughout
the country to travel to one locale to arbitrate claims involving such minimal
sums. Limiting venue to PayPal's backyard appears to
be yet one more means by which the arbitration clause serves to shield PayPal from liability
instead of providing a neutral forum in which to arbitrate disputes.See, e.g., Bolter, 87 Cal.App.4th at 909,104 Cal.Rptr.2d 888 (finding that enforcement of forum
selection clause providing that claims are arbitrated exclusively in Utah would
be cost prohibitive in light of fact that the potential claimants located around
the country would be required to retain counsel familiar with Utah law)".
And in an Earthlink case: "The California Court of Appeals for the Second Appellate District found that the
forum selection clause in defendant EarthLink, Inc.’s (“EarthLink”) membership
contract, which would have required consumers (in this case, putative class
plaintiff California residents), to travel 2,000 miles to Georgia in order to
recover claims of $40 to $50, is unenforceable because it is unreasonable as a
matter of law. Additionally, the Court held that the contract’s class action
waiver was procedurally unconscionable because it took the form of an adhesion
contract with no opportunity to opt out, and also substantively unconscionable,
because, if the allegations were found to be true, EarthLink would have been
cheating numerous customers out of small sums of money."
The Motion then immediately goes into a tirade of alleged statements by Mr. Evans, a plaintiff. containing a lot of explicatives. Besides the bold nature of the prose quoted without any redaction or apology to the Court for repeating only the basest of comments purportedly by Mr. Evans, Linden does not tell us how these statements have any impact on the legal issues raised by the motion. They appear to presented for the purpose of shocking the court. It is even more interesting to realize that all conversations in this "private virtual world" are in fact not private, but appear to be reviewed by Linden employees. Now, we all know that any computer system can be designed so that such language / words can be automatically redacted by the system without exposing any other users, so one must ask, why didn't Linden do so if such language is inconsistent with their company or business ethics? And if they did not, and they know that Mr. Evans was fraudulently creating numerous accounts under different names, why didn't they ban his computer's mac address so that no log ins from that particular computer, or any computer identified as associated with him was precluded from logging in. This begs the question then that if they did not prevent him from participating, why accuse him now of bad language via use of an avatar to the court when they chose not to cut off his human participation permanently prior to the lawsuit being filed.
Here are some of the quotes. One has to wonder whether the axiom that any news, even bad news, is good for business because it generates curiosity and in this case that could translate to new users signing up to see what all the noise is about?
"... you fucking whore your mother and father should burn in hell you rat cunt if I could get near you I wold spit in your skank mouth and shove a bat up your filth ass you little cry baby bith [sic]" at page 13 of the Motion to Dismiss. No explanation or history of what may have provoked this alleged outburst is provided by Linden.
"... good morning you rat cunt i started this account just to fucking rip your head off you worthless piece of shit you supposed to mentor not men whore you ratted on my man i wish i could get may handn around your thoart [sic]" Same lack of additional history or context, unfortunately.
..... more to come as I get through the pleading and its exhibits.
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
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
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
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.
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
Whether Defendants wrongfully deprived Plaintiffs and
Main Class members of ownership, access to, use and/or possession of their
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
Whether the Court can award declaratory and injunctive
The proper amount of damages.
falsely asserted that the class members owned the virtual land, when they truly
represented that class members owned virtual land;
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;
have violated the Unfair Competition Law, Bus. & Prof. Code §§ 17200-17209;
have violated the False Advertising Law (“FAL”), Bus. & Prof. Code §§
subclass is entitled to an award of compensatory damages pursuant to Civil Code
subclass is entitled to an award of statutory damages pursuant to Civil Code
subclass is entitled to an award of restitution pursuant to Civil Code section
subclass is entitled to an award of punitive damages pursuant to Civil Code
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
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.
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.