Second Life Class Action Update: Virtual Land Suit Still Awaiting Ruling on Dismissal Motion

Happy New Year everyone!  I thought I’d start off 2011 with an update of what’s going on in the virtual land class action case I last told you about in August.  For those of you who are just catching up, it’s a lawsuit arguing that Linden Research (aka Linden Labs) unilaterally changed its Terms of Service agreement for Second Life to strip users of their ownership rights in virtual land they purchased.  I won’t go into all of the arguments that have been made, which I discussed in earlier posts, but I will give you a summary of the latest arguments that have been made by both sides, starting with Linden’s motion to dismiss the matter.

Linden’s position is that the matter does not belong in court at all but if it does, it should be litigated in California.  In their brief filed on September 30, 2010, Linden moves the court to dismiss the matter under Rule 12(b)(6) or to transfer the matter pursuant to 28 U.S.C. § 1404(a).  Let’s start with why they think the matter should be thrown out of court altogether.  All of the plaintiffs agreed to arbitrate any dispute with Linden when they clicked “I Agree” after being presented with the Terms of Service agreement.  Linden argues that all of the named plaintiffs actually created multiple accounts (in violation of the TOS) and thus agreed to arbitrate many times over.  The lead plaintiff has created over 100 accounts since first joining Second Life, according to Linden.  Almost all of those accounts have records showing that the user clicked the “I agree” button when presented with new Terms of Service contracts subsequent to September 2007.  Septemeber 2007 is important because that is when Linden updated its Terms of Service in response to the lawsuit brought by Marc Bragg in Bragg v. Linden Lab.  More on that later.  In the alternative, Linden contends, if the arbitration clause is unenforceable, the matter should be litigated in California not Pennsylvania.  The terms of service’s choice of forum clause should still be effective regardless of the other clauses.  Linden’s case relies on a very straight-forward interpretation of their contract and the fact that the plaintiffs seemed unwilling to follow the rules Linden laid out when they created their accounts.

The plaintiffs responded to the motion on October 11, 2010 with some clever legal maneuvering.  Ignore all the subsequent accounts, they argue, only the pre-September 18, 2007 accounts matter.  Those accounts had virtual land and Linden$ that they lost when they were unilaterally closed/suspended by Linden.  If, however, Linden’s advertising messages and statements from company executives were to be believed, the plaintiffs contend that they actually owned that land and currency and thus had a right to some form of compensation when the accounts were closed.  They appear to concede that the subsequent TOS agreements may have changed their wording sufficient to ward off any claims to full property rights.  That doesn’t mean that the new agreements get to reach back to replace the agreements established in the old accounts.  They liken it to if you bought something from a store 2 years ago, and then buy something today.  The merchant doesn’t get to use your current purchase to amend your rights to the old purchase, so why should Linden get to do that here?  Of course, all this depends on the court agreeing with its earlier decision in Bragg and tossing out the arbitration and forum selection clauses.

I, for one, don’t know what Linden’s policy was back in 2007-2009, but it is my understanding that they now give users a warning when new terms of service are coming (not that I’ve ever gotten an email, however) so that they can choose to wind up their accounts if they don’t like the new terms.  I think this should be mandatory for all modifications to a EULA or TOS.  I know the case law seems to support unilateral modification with no notice and no additional consideration, but why should you have to choose between a policy you don’t like or giving up your purchases and account forever?  It’s one of the main reasons I won’t buy anything in Second Life or any other virtual world.  I want to be able to walk away.

Getting back to the arguments, however, I’m not sure which side I support in this.  This is still in the procedural phase, we haven’t yet seen any real substantive arguments.  In that respect, I am compelled to support the plaintiffs just because I want to see a court weigh some real issues.Subsequent to those filings, Linden filed a motion for leave to respond to the plaintiffs’ opposition and the plaintiffs filed a counter-motion.  These were filed on October 13 and 15, respectively.  The court has not yet issued any response.

There could still be some interesting opinions in a dismissal, if it comes to that, such as whether a subsequent TOS can modify contracts previously agreed to that were not active when a new agreement was reached.   We still won’t get as much guidance from that as I would like, just as we didn’t get a whole lot from the Bragg decision before the parties settled out of court.  In any event, I’m watching the matter much more closely now and will be sure to post updates much sooner after they arrive.

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About Justin Kwong

An attorney in the Twin Cities and adjunct professor at William Mitchell College of Law where I teach a seminar on the law of virtual worlds.
This entry was posted in Contracts and Agreements, Litigation, Virtual Currency, Virtual Items / Virtual Goods, Virtual Land, Virtual Stuff..., Virtual Worlds and tagged , , , , , , , , , , , . Bookmark the permalink.

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