I wanted to follow up on my post from a while back about the class action suit filed against Linden Research, the maker of Second Life, regarding its land ownership policies. Earlier this month, the plaintiffs filed their amended complaint in response to Linden’s Motion to Dismiss. (You can find links to the documents here.) I promised to explain in greater detail about what’s going on in this case and it certainly does make for interesting reading.
To briefly summarize the original complaint: the plaintiffs, who are seeking class action certification, argue that Linden deceived players and potential players by advertising and extensively marketing that Second Life offered residents the opportunity to buy land in the virtual world and that those purchases would convey full title to the land, as would a land purchase in the real world. This turns out not to be the case, Linden stated in the 2007 Bragg proceedings that players only acquire a license to access server resources, not full ownership. The complaint also argues that the players’ in-game assets were improperly confiscated when the players were expelled from the game. It cites numerous examples where Rosdale, the former (and now current) CEO of Linden Research, Philip Rosedale, described how ownership was similar to owning real land or items. Whether these were grossly out of context remains to be seen. But the complaint does seem to paint a rather compelling case for the plaintiffs. On the other hand…
Linden responded to the complaint on almost entirely procedural grounds. It argues that the venue chosen by the plaintiffs, U.S. District Court, Eastern District of Pennsylvania, is improper because there is a forum selection clause in the Second Life TOS mandating claims be brought in San Francisco, California. They also argue that, of the four named class members, only one lives in Pennsylvania, which is considerably disproportionate, as Linden and all of its employees and resources are located in California.
The plaintiffs undoubtedly chose Pennsylvania in the hopes of capitalizing on the 2007 Bragg v. Linden Research case as precedent to negate the provision in the Terms of Service agreement that requires arbitration of disputes with the company. Linden countered, however, with fact that it substantially amended its TOS after the Bragg case. It foresaw just the sort of tactics that the plaintiffs used and moved to nullify the argument. Whether the court will view the changes, which allow parties with in-game assets under $10,000 to use a lower-cost arbitration process, as substantially more party-neutral remains to be seen, but there’s probably little chance that the court will just roll over and let the action through without a stronger showing by the plaintiffs. This is further complicated by an apparently requirement in the TOS that parties who bring claims against Linden are responsible for attorneys fees up to $1,000 per plaintiff. I will be curious to see how this particular piece gets analyzed by the court, as it seems to make the optional arbitration a lot less optional, at least under the traditional American rule, which is that each party pays for its own attorney fees except in certain circumstances specified by statute. Does the addition of such a clause make a standard form contract like the TOS legally unconscionable? We’ll have to wait and find out.
Linden then asks that, if the court finds the forum selection clause invalid, the case be transferred to California, as the majority of the operative events underlying the claims took place in California. This is in addition to the argument that all of the company’s employees and documents are located in California. They made a point earlier in their response that there is only one named plaintiff in the class who lives in Pennsylvania–the others live in Florida and Wisconsin–and there are a host of public and private interest factors that favor moving the case to California. The most important of their reasons, I think, is the fact that the case will, unlike Bragg, be interpreting California law rather than just applying it. There are four California statues the plaintiffs seek to use against Linden, one of which (California Civil Code § 1812.600 relating to fraud in auctions) is apparently relatively untested in court. Correct me if I’m wrong about this, but to my knowledge, there’s nothing wrong with a federal court sitting in diversity jurisdiction (for cases where no plaintiff resides in the same state as any defendant) interpreting laws for other states if the case appears before them. It just sounds persuasive if you want to get your case moved back home. There’s also a procedural requirement for one of the other California statutes (Cal. Civil Code § 1750-84), which requires a particular form of notice to be filed upon the defendants prior to filing of a claim for damages. If the plaintiffs did not comply with that notice requirement, their claim under that provision could be dismissed with prejudice.
One last thing I want to mention. Linden described, at some length in the response, some of the vitriol-filled chat messages and emails sent by one of the class members to Linden and other Second Life residents. They paint the only plaintiff who resides in Pennsylvania as a profane and distasteful character who repeatedly and defiantly violates the world’s TOS. While I was surprised that some people really do talk like that, I do have to admit that it is excellent trial strategy. If you can paint your opponent’s lead class member is an intolerable lout who breaks the rules for fun, it makes it a lot more difficult to sympathize with their case. Yet, in some ways, that behavior is irrelevant, as most of the class is made up of people who were kicked out of Second Life for some reason or another (at Linden’s sole discretion) and thus lost access to their assets.
If I was asked to judge this case based on these pleadings and determine whether or not to grant Linden’s request for dismissal under Rule 12(b)(6), I think I would be hard-pressed to grant their motion. Not only do they not really make any arguments against the substantive points raised by the plaintiffs, but if we assume that the plaintiffs’ fact allegations are correct (the standard for summary judgment) court, the case should go to trial. In any case, I am hopeful that it will, because, even if Linden prevails, it will be great to finally have some law on the books, instead of having to continually guess what courts might do with the property issue.