Patreon Loses Lawsuit Against Owen Benjamin Fans - Mike Cernovich

Today a trial court denied Patreon’s motion for a preliminary injunction. Patreon lost their lawsuit in court and must not proceed to arbitration. (Read the Court’s order here.)

Patreon, a platform popular with podcasts, journalists, and comedian faces significant legal peril due a fascinating quirk of California law that no one seemed to have noticed.

Tech companies face almost total protection from lawsuits due to a law created by Congress to encourage freedom of speech on the web. Because of this, companies have gotten sloppy with the Terms of Service.

Patreon’s Terms of Service, like nearly every other tech companies, provide that anyone who wants to use Patreon must do so in arbitration. Patreon’s TOS also ban class actions or any joint actions.

Patreon’s TOS mandate arbitration and ban class actions because individual consumers who suffer small harms aren’t able to find a lawyer to take their case. Again, all tech companies do this. Let’s not single out Patreon. Here is Amazon:

Here is PayPal:

Owen Benjamin Gets Banned. Dozens of his backers individual claims for arbitration.

Patreon, by banning a Creator, disrupts the economic relationship between Creator and Backer. In legal terms this is called tortious interference with a business relationship.

Patreon, under California law, must pay the arbitration fees in advance. These fees can be upward of $10,000 per case.

If dozens of backers move for individual arbitration against Patreon, you can start doing the math.

Benjamins’ Backers Put Patreon on Notice; Patreon Unilaterally Amends its TOS to Bar the Claims the Parties were Going to Bring.

In early December, numerous defendants told Patreon that they intended to move for individual arbitration.

Patreon’s TOS suggest that contacting them before seeking arbitration is required, although this provision could be read as a request rather than a demand.

Because Patreon wrote the TOS, the terms will be resolved against Patreon. In law this is known as contra proferentem. Any ambiguous language will be read in favor of the party who did not draft it.

The TOS, to me and many others, looks like a pre-filing demand. Others may claim the terms read otherwise. Contra proferentem applies.

Two or three weeks later, Patreon unilaterally altered the Terms of Service by adding this clause:

Patreon claimed that its unilateral change to the TOS “remain in effect even if you no longer have an account.”

Yes, Patreon literally changed its TOS after it was contacted by arbitration claimants, who were required to contact Patreon before moving for arbitration.

Patreon filed a Mass Action against the Arbitration Claimants.

Patreon lost several procedural motions before arbitrations. After losing these motions, they sued the arbitration claimants in California State Court.

Realizing that the arbitration fees would be in the millions of dollars range, Patreon filed a group action against all 72 arbitration claimants. Patreon sought an injunction, that is, they want the Court to order the arbitrations to be stopped.

Here is what Patreon’s TOS says about group actions:

To drop my lawyer’s latin again, contra proferentem. Patreon can’t claim that when they said that “other groupings of parties is allowed,” applies only to arbitrations. That provision is subject to an ambiguous reading at best.

How can Patreon file a group action against 72 defendants when Patreon barred group actions? They can’t.

The Patreon Hearing.

The 72 defendants were represented by well-known First Amendment lawyer Marc Randazza.

The Court issued a tentative (not final) order denying the injunctions.

During the hearing, Patreon’s counsel brought up additional cases that it claimed applied to the lawsuit.

The Court suggested that Randazza file a supplemental motion addressing those new cases Patreon’s counsel cited.

Reporting live from a major legal action involving Patreon and several former patrons of Owen Benjamin.

Several former patrons of Benjamin filed arbitration actions against Patreon after Benjamin was banned.

Patreon then sued those former backers in California state court.

— Reclaiming My Time Cernovich (@Cernovich) July 13, 2020

Under the Court's preliminary ruling,

ANY LARGE CREATOR banned by Patreon

can have his or her backers move for arbitration.

Patreon will have to pay millions of dollars in legal fees upfront.

This is a HUGE workaround for Big Tech censorship.

— Reclaiming My Time Cernovich (@Cernovich) July 13, 2020

The judge is seeking further briefing on a procedural legal issue and will take the matter under submission.

The tentative ruling went against Patreon, but the Court is going to ask for further briefing.

We will have to wait a couple of weeks for a formal judgment!

*Suspense*

— Reclaiming My Time Cernovich (@Cernovich) July 13, 2020

Patreon will probably lose, and should lose, its State Court action.

Patreon’s TOS required parties to use arbitration. Group actions were banned. The parties complied with the TOS, first by putting Patreon on notice as to their claims.

Once the parties put Patreon on notice of their claim, Patreon was barred by well-established law from amending the TOS in a way that would foreclose those claims.

The Implications?

If a popular creator were banned from PayPal, could he or she have her backers move for arbitration as well?

That’s a specific question that many lawyers are looking at now.

Patreon, like Door Dash before it, banned class actions before decision that group actions are in fact an inefficient way of resolving cases.

Here is what a federal judge told one tech company who complained about a “loophole” being used by the parties:

DoorDash Ordered to Pay $9.5M to Arbitrate 5,000 Labor Disputes:

SAN FRANCISCO (CN) – Rejecting claims that the legal process it forced on workers is unfair, a federal judge Monday ordered food-delivery service DoorDash to pay $9.5 million in arbitration fees for 5,010 delivery drivers’ labor demands against the company.

“You’re going to pay that money,” U.S. District Judge William Alsup said in court. “You don’t want to pay millions of dollars, but that’s what you bargained to do and you’re going to do it.”

Of course anything can happen in a court of law, and the judge will be issuing a final ruling in a few weeks from now.

Read my prior coverage here:

Patreon Faces New Legal Peril Under California Law

https://www.cernovich.com/patreon-lawsuit-owen-benjamin/