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Hernandez v. IGE CaptionLast month, Hernandez v. IGE defendant IGE filed a motion (.pdf, via Justia) to stay the case in favor of arbitration, or dismiss it in favor of jurisdiction in California. Hernandez recently responded, arguing the Florida court should keep the case (.pdf, via Justia).

Brief recap: Plaintiff (on behalf of essentially all World of Warcraft players) is suing virtual property dealer IGE as as “third party beneficiary” of the Terms of Use that IGE had to agree to in order to use World of Warcraft. Plaintiff’s argument is that by devaluing gold, spamming chat, camping spawns, and generally disrupting gameplay, IGE has broken its agreement with Blizzard and injured all other World of Warcraft players — the “intended beneficiaries” of that agreement. It is a novel application of the “third party beneficiary” doctrine, but it is plausible, and could pave the way for similar claims in other virtual worlds and games.

Here, the argument is over whether the clause requiring arbitration should apply to this kind of third-party beneficiary action. Because this case involves a relatively unconventional use of the third party beneficiary doctrine, there is no case law directly on point. As a result, the parties are arguing somewhat differently than they would in a typical argument over an arbitration clause.

IGE argues that in traditional third party beneficiary proceedings, all the terms of the contract apply, and that should be true here too. Hernandez argues that the impact of the application of this clause in this situation would be to deny any possibility of a class-based claim against another player, because class-based arbitrations are prohibited by the clause. He also argues his claims aren’t the sort covered by the agreement, and that at least one claim — where he is seeking an injunction stopping IGE’s gold farming — is expressly exempted from the arbitration clause.

It would be a significant setback for the lawsuit if the court stays proceedings.

As always when reviewing excerpts from court filings on VB, keep in mind that a brief is an advocacy document, and thus intentionally slanted in favor of the party that files it (here, Hernandez). Here are a few key excerpts:

Notwithstanding the irony and inequity of IGE US’ position that Plaintiffs are bound by the EULA and TOA but it is not, IGE US’ Motion should be denied for the following reasons:

(1) The claims included within Plaintiffs’ Amended Class Action Complaint are expressly excluded from the arbitration clause contained in the EULA and TOU;

(2) IGE US has not conceded or properly established the validity of the arbitration clause included within the EULA and TOU;

(3) Plaintiffs’ Statutory Consumer and computer fraud claims must be decided by this Court to afford Plaintiffs the meaningful relief these statutes provide;

(4) Plaintiffs’ class claims are not arbitrable because Plaintiffs’ agreement with Blizzard Entertainment cannot be construed as a waiver of Plaintiffs’ right to prosecute class action claims against an entity, like IGE US, who violates the terms of the EULA or TOU;

(5) Plaintiffs’ forum selection clause with Blizzard does not apply to Plaintiffs’ dispute with IGE US.

Each of Plaintiff’s nine claims arises from an allegation of IGE US’ unauthorized use of World of Warcraft®. Thus, regardless of whether IGE US has standing to otherwise assert a right to invoke the arbitration clauses contained in Blizzard’s TOU and EULA, those contracts, on their face, do not allow for arbitration of Plaintiffs’ claims. “An arbitration clause, no matter how broadly construed, can extend only so far as the series of obligations set forth in the underlying agreement.” Parfi Holding AB v. Mirror Image Internet, Inc., 817 A.2d 149, 156 (Del. 2002) (Regardless of any policy favoring arbitration, arbitration is “a mechanism of dispute resolution created by contract,” and “does not trump basic principles of contract interpretation.”); see also SBC Interactive, Inc. v. Corp. Media Partners, 714 A.2d 758, 761 (Del. 1998) (“A court will not compel a party to arbitrate… absent a clear expression of such an intent”).

Defendants’ Motion must also be denied because Plaintiffs seek injunctive relief as their primary remedy for the ongoing, irreparable harm they continue to suffer as a result of IGE US’ unauthorized use of World of Warcraft®. The informal negotiation and binding arbitration clauses in the EULA and TOU expressly exclude such claims. See EULA ¶ 14d [at Exhibit “A” to Amended Complaint].

Defendants seek to bolster their argument by falsely characterizing Plaintiffs’ prayer for injunctive relief as “ancillary.” IGE US Brief at 16.6 In fact, because Plaintiffs believe IGE US is still actively engaged in real money trade of World of Warcraft® gold, and because most members of the Class continue to subscribe to World of Warcraft®, effective injunctive relief – in the form of an order preventing IGE US from continuing to interfere with and diminish Plaintiffs’ use and enjoyment of World of Warcraft® – looms large as the most important and central issue in this action.

The Court of Appeals for the Eleventh Circuit has held that when the validity of a consumer agreement is in question, such as in the instant Hernandez case as it pertains to IGE US, the district court is required to determine the validity of the contract prior to submitting the case to arbitration.

As with the Plaintiffs’ claims for injunctive relief (which claims are expressly excluded from the arbitration provisions of the EULA and TOU agreements IGE US seeks to enforce), Plaintiffs’ claims for classwide relief under Rules 23(b)(2) (for declaratory and injunctive relief) and Rule 23(b)(3) (for damages) are not governed by any arbitration agreement with IGE US. That the Plaintiffs agreed to have their remedies against Blizzard restricted does not enure to the benefit of IGE US. Plaintiffs have never agreed to surrender rights proceed on a classwide basis against World of Warcraft® Subscribers who blatantly violate the EULA and TOU.

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5 Responses to “Hernandez v. IGE Class Action Litigation Update: Response to Motion to Dismiss Filed”

  1. on 26 Nov 2007 at 2:56 pmcyn vandeverre

    What are “camping spawns” in WoW?

  2. on 26 Nov 2007 at 3:01 pmBenjamin Duranske

    Players (and gold farmers) “camp” spawns by staying near a spot where a high-value monster will appear and killing it when it does — over and over.

    See (referring to first-person shooter spawn camping, where players set up shop over the point where “killed” players are resurrected, but the idea is the same).

  3. on 26 Nov 2007 at 7:00 pmMitch

    I don’t see a real point to camping spawns for WoW though since most items of value are used for yourself, and have no great resale value. Its not like Everquest in which spawn camping can result in very good deals for a player. The very rare drops require a group, or an instance, both which are not very efficient. While I agree the argument is valid, but it is not a very strong argument from a players perspective in my opinion. Its like charging a minor 5 years prison time for stealing some gum.

  4. on 27 Nov 2007 at 9:20 amBrian

    It is true that many of the best items drop in instanced areas, but there are many components that drop from non-instanced mobs. I’m not familiar with outlands mobs/drops, but prior to the expansion there was a hunter that was always farming the Toxic Horrors – day and night. Every time I went there to try to get some Essences for enchants that same hunter was there tapping the mobs as fast as possible – making it darn near impossible for other players.

    Yes farmers (who are quite likely supplying the gold sellers) do have a detrimental effect on the price of goods in the game. I’m not an economist, but it makes me wonder how much the greater supply of rarer items offsets the prices of those items compared to the inflation from the jacked up money supplies.

    While I agree this seems a trivial matter compared to RL issues, it probably does make some difference in “the price of tea in china.”

  5. on 01 Jan 2008 at 12:53 pmPeter Hanley

    I would argue that in cases where a game economy has “matured” (i.e. a threshold number of players have one or more characters at max level) farmers that keep the market flush with rare items have a good effect on the game economy, because the abundance of “rare” goods tends to drive the price down, making items less valuable.

    The problem with all virtual game economies that I’ve come across is that if you have a large number of players whose income is measured in top denomination/hour played (i.e. a character makes 5 gold per hour of play) then prices for items will have a convenience tax, sometimes far outstripping a rational analysis of the item’s value. In other words, a rare drop has several gold/plat tacked on to it’s value simply because a high level character can decide to buy it for another of their lower level characters at a price that far exceeds the value of the item, but because the high level character is so wealthy it’s still a trivial purchase.

    For new players, this presents a problem in that they often can not (or have greater than designed difficulty) acquiring the items they believe they need to make the game fun or optimized or whatever. This is the target market of the gold farmers, and until this aspect of game design is changed, the gold farmers will be a fact of life for game players.

    Unfortunately, there are a number of ways to combat this (restrict players to one character per server, disallow trading of items, etc.), but they have bad consequences for game design for most players.

    I do have one question about this suit though — could it backfire? I feel like there have been a number of lawsuits around MMORPG eulas that have been settled/dropped/otherwise fixed by the game companies (the ebay gold farming guide and the Lambda v Vivendi suit spring to mind), and it’s made me wonder if they suspect that their base assumption that they are sovreign over their virtual worlds is fundamentaly unsupportable in court.

    Lambda certainly felt sure that they would be able to demonstrate that MMORPGs are more akin to theme parks or public entertainment spaces than sovereign worlds… is it legal to sell the tickets from skee ball games? If it is, that would infer to me that selling mmorpg currency would also be legal.

    But, I’m asking the lawyer =)

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