Evans et al vs. Linden Lab – L$43 million settlement

secondlifeIn April 2010, and following Tateru Nino’s lead, I reported on a class action lawsuit brought against Linden Lab by plaintiffs Carl Evans, Donald Spencer, Valerie Spencer and Cindy Carter  on behalf of Second Life users, citing misrepresentation and fraud on property ownership, misrepresentation and fraud.

The action was brought by the plaintiffs after having their accounts terminated and their assets (land, content, Linden dollars) seized. What made the case particularly interesting at the time was that the plaintiffs had retained Jason Archinaco as their legal representative. Archinaco was himself no newcomer to the legal complexities of virtual worlds – he had represented Marc Bragg in a similar lawsuit brought against Linden Lab in 2007 which resulted in an eventual settlement between the two parties.

Judge Eduardo Robreno
Judge Eduardo Robreno

Nor did the similarities end there: the Evans et al case was initially set to be heard by Judge Eduardo Robreno, who presided over the Bragg case.

Given this, it is no surprise that the papers filed by Archinaco on behalf of his clients pursued a similar line of argument as had been put to Robreno in 2007, when  – and despite the confidential nature of the final settlement – Robreno appeared somewhat sympathetic towards the plaintiff at that time. Indeed, in a further twist, it was Robreno’s published holding on the matter of Bragg vs. Linden Lab which may have resulted in alterations to the SL Terms of Service which may in turn have contributed to the case involving Evans et al.

Even without this, Archinaco had a strong case to put before the court. Despite ToS changes, etc., Archinarco argued that the Lab continued to systematically represent that virtual items and land were owned by users and that the Linden Dollar constituted a valid currency. At the same time he outlined the Lab’s moves to withdraw such representations and present virtual goods and the Linden Dollar as ‘limited licenses’ and “tokens”, thus presenting Linden Lab as the owner of all as effectively altering users’ title “without consideration, the consumer’s knowledge or consent” through ToS, which Robreno himself had previously held as a Contract of Adhension.

The papers filed by Archinaco set out two potential class actions:

  • The Main Class, comprising: US residents “who are or were owners, possessors, purchasers, creators or sellers of virtual land or any other items of virtual property or items as participants [of Second Life] at any point between November 14, 2003 and the date of class certification”
  • A subclass of plaintiffs who found their Second Life assets “deliberately and intentionally converted, taken, ‘frozen’, or otherwise rendered unusable by Linden Lab” (SubClass A).

The case ran on through 2010, with the Lab moving for the case to be dismissed in July of that year, citing grounds which – and while I stress I’m certainly not a lawyer, I didn’t think at the time would carry much weight. After that, the case tended to fade from public thought – although it clearly continued with further papers being subsequently filed by both parties, including Amended Complaints on behalf of the plaintiffs, which included the names of further SL users who had seen their accounts suspended.

Judge Donna M. Ryu
Judge Donna M. Ryu

Move ahead to 2012, when Magistrate Judge Donna M. Ryu, of the United States District Court, N.D. California, published holdings on the case, which granted Subclass A of the motion, which was defined by the court as:

All persons whose assets, including virtual items, virtual land, and/or currency in lindens and/or U.S. dollars, have been deliberately and intentionally converted by Defendant Linden’s suspension or closure of their Second Life accounts.

The Main Class of the action, which involved claims of violation of a number of Californian Laws, was denied.

It now appears that a settlement in the matter has been reached between Linden Lab and some 57,000 plaintiffs who met the criteria of subclass A before the matter came to court. This has apparently resulted in an agreement for a payout of some $172,000 by the Lab – which is to made in Linden Dollars (and so presumably to active SL accounts), amounting to approximately L$43,000,000.

Given settlement has been reached, and as Peter S. Vogel of Gardere Wynne Sewell LLP notes, we will “need to watch for other lawsuits to see how virtual property ownership will ultimately established.”

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With thanks to Aimee Weber, NWN

11 thoughts on “Evans et al vs. Linden Lab – L$43 million settlement

  1. There’s one caveat here: does this mean that someone who gets kicked out of SL for violating the ToS (for instance, harassment, disclosure of RL information, RL threats etc) has a hope of successfully suing?

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    1. Usual caveat: IANAL.

      I would doubt it; the ToS is pretty unambiguous on matters of harrassment, etc. One of the issues concerning this situation was that of ambiguity, which even existed within the ToS itself.

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  2. What’s even more interesting is that, if LL closed down SL tomorrow, every single resident would be a member of “subclass A” and would, arguably, be entitled to compensation for the virtual currency, land, virtual goods, and actual $USD in their accounts. Which would pretty much invalidate LL’s TOS declaration that they could cease offering the Second Life service at any time with no notice and no impact to them. In other words, they are stuck with us.

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    1. I’m not sure this is necessarily true.

      For one thing, no legal precedent has been set – the judge granted the plaintiffs clearance to pursue one part of their claim against LL (subclass A), but plaintiffs opted to settle rather than continue on to court.

      It could be justifiably argued that had matters come before a jury (and the plaintiffs were demanding a jury trial), then the jury may have found against the plaintiffs as much as they might have found against LL.

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  3. I am not sure to understand what the implications of all this are. Is there any chance that LL can now legally change their TOS so that we are no longer owners of the stuff we build?

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    1. I think it fair to say that LL can theoretically do anything they like with the ToS – and potentially be challenged as a result. – and that hasn’t changed per se.

      If one thing comes out of this situation (if it hasn’t already), is that it will encourage LL to remove any remaining ambiguity in wording around concepts such as “virtual property” once and for all from the ToS (if any such ambiguity still exists – I confess I haven’t read the ToS from top-to-toe since the last couple of updates).

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  4. it’s eeenteresting for sure. i don’t think there is a settled legal definition OF virtual property yet. the little bits of the case i can glean from above all hang on basic principles of contract law. i’m not sure any one of us, let alone courts outside are able to define what virtual property is. but it might not matter. so far we have no trouble attaching real world value to it, exchanging it for lindens and so on.
    i also wonder if LL is putting extra peeps on the phone lines to handle the refund for inventory or restart & rollback losses they might be about to receive 🙂

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