In Plain English: An ArcheAge Lawsuit and the Fraudulent 10% Discount

(Legal Disclaimer: I am not a lawyer, and as such nothing in this column constitutes legal advice. All opinions expressed are my own and based on research into case precedent and interpretation of relevant laws and statutes, as well as discussion with the MMO Fallout legal team)

It has been four long years since ArcheAge launched in the west and some people are still wondering: How did Trion Worlds avoid getting sued for its rather blatantly false advertising regarding that 10% discount for Patrons that never surfaced, and was the advertising of the game against the law?

If you’ve forgotten or just weren’t around, when Trion Worlds was initially pitching its founders packages to the west, they advertised a perk for Patrons that included 10% discounts on cash shop purchases. The page advertising the promotion had been stealthily edited close to launch to include the wording that the perk wouldn’t be applied immediately, only for Trion to throw their hands up months later and admit that not only would the perk not be coming, but that they had no concrete knowledge that it was ever going to happen. The discount was replaced with a 10% bonus to credits purchased and not applied retroactively to people who picked up their credits during the beta or to credits received from the Founder’s pack. All because Trion Worlds and XL Games no longer felt like programming it in.

I pointed out at the time that if anything in the world of forum users threatening to sue had the most weight, it would probably be this, and I was not wrong. In September 2015 a class action lawsuit was filed in California court by plaintiff Aaron Van Fleet against Trion Worlds in regards to the 10% discount as well as making claims that ArcheAge’s loot boxes constitute an illegal lottery. MMO Fallout missed this story, personally I’m blaming the editorial team who haven’t shown up for work since 2009.

1. $1000 In Cash Shop Purchases and the Digital Lottery

The lawsuit charges that the 10% bonus is an inadequate replacement as it excludes head start credit purchases, founders pack purchases, and those who buy credits through in-game purchases (APEX). Furthermore, the plaintiffs note that Trion Worlds made false statements to the existence of the 10% discount despite knowing that those claims were false, that the discount did not exist at the time, and that it may not exist at all.

This charge is a hard one to deny, and depending on how Trion Worlds makes their defense may come down to how the court views advertising. Trion Worlds mounted an early defense publicly by claiming that the page on the website and Trion’s streams didn’t constitute advertising. Someone might point out that No Man’s Sky was cleared of charges surrounding its misleading advertising, however that ruling was made by a UK court and would not have an effect on how a California court would implement differently worded state laws. This is likely going to come down to whether the court views the replacement as adequate, whether Trion’s justification for not implementing the discount is satisfactory, and how much of their claims leading up to launch can be considered binding advertising.

Now let’s talk about the illegal lottery bit of this lawsuit, which I will start with this snippet from the docket:

Many ArcheAge players have spent more than $1,000 each to purchase supply crates that offered the chance at a Rare Prize Many players have expressed in online forums that they feel they were cheated by Trion’s sale of supply crates. For example, m January 8 2015, a player posted on Trion’s public forum a message board thread titled, “Whelp this is why gambling is illegal online.” Several users complained about the amounts they spent on supply crates and Trion’s entire business model (e g, “spent almost 15k creds and only got 11 about 500G worth of useless Junk”). A true and correct copy of the thread is attached hereto as Exhibit A.

In my humble opinion as a non-lawyer, this is where the lawsuit loses its footing. The docket cites California Penal Code to try and kick the cash shop lootboxes as an illegal lottery, seeking restitution in the form of Trion Worlds being forced to offer refunds. I’m no lawyer, but I have high doubts that this charge will hold up in court given the low likelihood that the judge would qualify digital goods as property in the sense that they would be covered under California’s lottery laws. The kind of impact that this would have on the industry is massive, would effectively criminalize countless companies, and would set major precedent where it doesn’t currently exist. I don’t see the court making this kind of decision, particularly not over this lawsuit.

California defines a lottery as “any scheme for disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property,” and I highly doubt that a loot box in a game would be viewed by the court as existing in the same category as sweepstakes and promotional giveaways. Disregarding the idea that this is clearly not a lottery system, Trion Worlds would likely be safe even classified as a lottery, as an illegal lottery would require forced payment to participate (credits can be acquired without paying real money) and a clear win-lose with the prize (loot boxes always distribute prizes). This is why all of those sweepstakes you see from TV to cereal boxes have “no purchase necessary” written on them, it’s so they don’t get caught up in state lottery laws.

Exhibit A is literally about 50 pages of threads from the ArcheAge forums of people complaining about the cash shop, a notion that not only strikes me as a massive waste of the court’s time but also irrelevant to the case at hand, potentially damaging to the plaintiff’s argument, and one likely to be ignored by the court. It paints a picture that the plaintiffs are merely attempting to stretch the definition of California’s penal code to include the loot boxes because they are feeling buyer’s remorse, not out of genuine belief or concern that the loot boxes violate the law.

2. Binding Arbitration and the Supremacy of the Terms of Service

Here is where the lawsuit gets interesting.

We know from Bassett v Electronic Arts that generally arbitration clauses are accepted by the courts as binding (at least in New York they do), but what happens when one agreement contradicts another? Trion Worlds has an End User License Agreement and Terms of Use, two separate documents. It came out during the proceedings that while Trion’s TOU compels arbitration, that their End User License Agreement states that the venue for any claims is the San Mateo district court. Trion in turn attempted to compel arbitration, citing its Terms of Use.

Unfortunately Trion wrote themselves into a corner, as the court ruled that not only does the Terms of Use state that the use of Trion’s game clients is governed by the EULA, but that the specific language used in the EULA makes the venue mandatory under California law. Trion further tried to claim that its EULA agreed to upon creating an account does not apply to its games, which the court rejected as the EULA contains several pages referring to the purchase and use of digital goods. The court did find that Trion’s belief that the Terms of Service applied to the claims was reasonable, albeit incorrect, so nothing malicious was going on here.

Despite this ruling, Trion Worlds attempted to have the case dismissed and taken to arbitration. The two parties held a hearing with the presiding Judge on April 8, 2016 and on June 8 the court rejected the claim for arbitration. As ruled previously, Trion’s End User License Agreement, which stipulated that any claims must be taken to San Mateo County Court, superseded the Terms of Use which called for forced arbitration.

Additionally, the court rejected Trion’s claim that the EULA and TOU are agreed as part of the same transaction, noting that the EULA is agreed upon at account creation and the Terms of Use not until the user downloads the game, meaning the former can be agreed to without the latter. The decision goes on to note that some parts of Trion’s Terms of Use may be illegal as they conflict with state laws regarding liability, which Trion acknowledged.

In August 2016, Trion Worlds appealed the court’s denial of arbitration and now we slide on out of the San Mateo District Court and into our new home in the First District Court of Appeals.

3. The First District Court of Appeals Says No

Trion Worlds’ appeal regarding their motion to compel arbitration took us to the California 1st District Court of Appeals and since then, well, not much has happened. Both parties were given a ten minute oral argument and on the second of April, just over a week ago, the court ruled against Trion Worlds. Apparently the explicit instructions that the EULA supersedes the Terms of Service translates exactly the same no matter what California court you happen to be in.

But don’t take my word for it, read this statement from the court:

“Trion’s Terms of Use does contain an arbitration clause, but it also provides it is “in addition to, and does not replace or supplant” the ArcheAge EULA, and, in the event of a conflict or inconsistency, the ArcheAge EULA “shall supersede” it. Based on this provision in the Terms of Use, we conclude the parties did not agree to arbitrate their dispute, and we affirm the trial court’s order denying the petition to compel arbitration.”

In its appeal, Trion Worlds attempted to claim that the EULA incorporates the TOU, which the court promptly ignored and didn’t answer as it had already ruled that the governing document, the EULA, demanded trial in the San Mateo County court and the burden of proof is on the party demanding arbitration to prove otherwise.

“Thus, when addressing the threshold question of whether the parties agreed to arbitrate their dispute, which relates to purchases associated with the ArcheAge game, the Terms of Use provides we must start with the ArcheAge EULA. It does not provide for arbitration. Based on the clear language of the applicable agreements, the agreement to litigate any state law cause of action relating to the ArcheAge EULA in San Mateo County supersedes the agreement to arbitrate other kinds of disputes. Trion cannot satisfy its burden of proving the existence of a valid agreement to arbitrate this dispute.”

4. Back To County Court We Go

Unfortunately this is where the story ends for now. It looks like we’ll be heading back to San Mateo County Court to continue the lawsuit as both sides prepare their arguments. MMO Fallout will have more details on this case as it appears.

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