8 ms·

Washington state sues Kickstarted game creator who failed to deliver

161 points by kryptiskt 13y ago

Mithaldu 13y ago
The important bit here is not the non-delivery, but the fact that the creator failed to keep up communication about the project. The suit states that Kickstarter rules state that the creator is legally bound to fulfill, but may delay as much as need, but also must communicate regularly. The project in question stopped communicating in July 2013, so the accusation is demonstrated intent to not deliver, thus breaking the legally binding contract.
- dragonwriter 13y ago
  > The suit states that Kickstarter rules state that the creator is legally bound to fulfill, but may delay as much as need, but also must communicate regularly. The suit does not state anything about creators being allowed to "delay as much as need". > so the accusation is demonstrated intent to not deliver No, the accusations are, in the first cause of action, representing that rewards would be delivered in approximately December of 2012 and not delivering them and, in the second cause of action, failure to provide refunds to those who requested them, and failure to offer refunds to those who had not requested them, given the failure to deliver. http://www.scribd.com/doc/221464947/State-of-Washington-vs-Asylum-5-1-2014 http://www.scribd.com/doc/221464947/State-of-Washington-vs-A...
  - Mithaldu 13y ago
    Note specifically the middle part of 4.9. It does not say word-for-word the same thing i said, but it very strongly implies that delays are fine (and in fact they normally are accepted on kickstarter) as long as communication is kept up. Also note the kickstarter FAQ itself: https://www.kickstarter.com/help/faq/kickstarter+basics#faq_41859 https://www.kickstarter.com/help/faq/kickstarter+basics#faq_... It's not uncommon for things to take longer than expected. Sometimes the execution of the project proves more difficult than the creator had anticipated. If a creator is making a good faith effort to complete their project and is transparent about it, backers should do their best to be patient and understanding while demanding continued accountability from the creator.
    - dragonwriter 13y ago
      > Note specifically the middle part of 4.9. It does not say word-for-word the same thing i said, but it very strongly implies that delays are fine (and in fact they normally are accepted on kickstarter) as long as communication is kept up. The suit says that the Kickstarter FAQ strongly suggests keeping up communication in the event that delays are unavoidable, that does not say that the creators are allowed to delay as much as they need. Particularly, there is nothing inconsistent about it being a recommended course of action in the event that a binding obligation is not able to be met -- the fact that something is required doesn't always mean it is possible.
      - saraid216 13y ago
        I feel obligated to point out that you guys are discussing the exact issue that the case will hopefully set some precedent for: that is, what constitutes an acceptable delay. My guess is that it will shake out that any delay is actionable for a suit, but communications are a mitigating factor. It depends a lot on what kind of defense Altius goes for.
        dragonwriter 13y ago
        > I feel obligated to point out that you guys are discussing the exact issue that the case will hopefully set some precedent for: that is, what constitutes an acceptable delay. We're really not, we're discussing what the suit actually says. What is actually an acceptable delay is a separate question.
        enjo 13y ago
        I would be SHOCKED to see this go to trial. Not over $25k. The money is long ago spent (I'd bet) so the whole thing is a real waste of time.
        zecho 13y ago
        I'm inclined to agree on the specifics of this case, but not in the abstract. Kickstarter and other crowd funding entities represent an interesting dearth of case law. Here, consumers aren't necessarily protected by either consumer laws or by investment laws. Considering large corporations have purchased Kickstarted projects and major films have been produced with crowd funding, these are very important issues to begin sorting out.
waterlesscloud 13y ago
Right on the Kickstarter FAQ page- "Is a creator legally obligated to fulfill the promises of their project? Yes. Kickstarter's Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill. (This is what creators see before they launch.) This information can serve as a basis for legal recourse if a creator doesn't fulfill their promises. We hope that backers will consider using this provision only in cases where they feel that a creator has not made a good faith effort to complete the project and fulfill." https://www.kickstarter.com/help/faq/kickstarter+basics?ref=help_nav https://www.kickstarter.com/help/faq/kickstarter+basics?ref=...
- iandanforth 13y ago
  Kickstarter doesn't get to make law. Just because a TOS says you're legally obligated to do something doesn't mean you are. In fact given the very public nature of kickstarter's failures, and their own disclaimers about the risk associated with backing a campaign, it will be extremely difficult to make the case that this falls under standard consumer protection laws. You're not making a purchase, your taking a risk to finance a project. That is the entire and sole point of kickstarter.
  - MichaelApproved 13y ago
    They're not making law, they're facilitating contractual obligations between the creator and the backer. Backer gives creator money, creator agrees to a contractual obligation to fulfill that promise. Nothing new here.
    - iandanforth 13y ago
      Contract law, fine. But this is the consumer protection act specifically http://apps.leg.wa.gov/rcw/default.aspx?cite=19.86.020 http://apps.leg.wa.gov/rcw/default.aspx?cite=19.86.020. My argument is that there is ample proof that kickstarter is not engaged in trade and commerce relevant to this law. For example "It's hard to know how many people feel like they're shopping at a store when they're backing projects on Kickstarter, but we want to make sure that it's no one." - https://www.kickstarter.com/blog/kickstarter-is-not-a-store https://www.kickstarter.com/blog/kickstarter-is-not-a-store . The fundamental nature of speculative projects is that they can fail. If this case goes forward and is found against the creators for reasons other than explicit fraudulent activity with no attempt whatsoever to complete the project then it will be terrible law and undermine kickstarter completely.
deleted 13y ago
[deleted]
- ceejayoz 13y ago
  It's entirely sensible. If you beat me up and I incur $10k in ER bills, chances are prosecuting you is going to cost more than that. The point is not to recoup the costs, but to make it risky for others to do the same thing.
  - aaronem 13y ago
    If someone beats you up and you incur a mere $10K in ER bills, it can't have been that much of a beating, but your point stands nonetheless.
  - nmjohn 13y ago
    The difference there is civil vs. criminal. I absolutely would support it if they were being charged with fraud, as in your example I would be charged with assault. But a civil suit for such a small dollar amount typically goes to small claims court.
    - dragonwriter 13y ago
      > The difference there is civil vs. criminal. Its really not -- civil penalties that are not about restitution -- like the $2,000 per violation penalty attached to the consumer protection law Washington is invoking here -- serve a very similar function to criminal fines. > I absolutely would support it if they were being charged with fraud They are being charged with violations of Washington's Consumer Protection Act including "unfair or deceptive acts or practices in trade and unfair methods of competition". Which isn't a whole lot different than "fraud".
- CamperBob2 13y ago
  (Shrug) That's a legitimate function of government. Do you want to live in the THX-1138 world, where the cops stop chasing you as soon as you make them spend enough money?
nostromo 13y ago
All over $25k? Doesn't that seem much too low to be worth the AG's time? The top reward tier was only $93. It's hard to imagine a person can even mount a defense against a state AG for less than $25k... Yes, they f'ed up. But unless it was malicious, this seems like an excessive response. I suspect an AG is trying to make a name for him or herself.
- protomyth 13y ago
  Kickstarter's a known internet site so it is probably worth it for the publicity. Its the AG version of a committee meeting calling CEOs for some "wrong doing"[1]. 1) note the quotes and yes, I think there is an element besides "guardian of the voters" here.
- orik 13y ago
  It's easy to make an attack on a politician and dismiss things, but I think it's much more likely that someone (Bob Ferguson) is trying to set a precedent on crowdfunding and their obligations to the funders.
  - nostromo 13y ago
    Makes sense. But they should wait for a better case. This seems like a founder that underestimated the amount of time and resources required to start a company and produce a product. It sucks, but it happens. Maybe a better case would be the guy that lit the backer rewards on fire because he got tired of their pestering. (https://www.kickstarter.com/projects/73258510/sad-pictures-for-children/posts/759318 https://www.kickstarter.com/projects/73258510/sad-pictures-f...)
    - jamesaguilar 13y ago
      I dunno. If I were the AG, I'd want to go after someone who was mentally competent to defend themselves. Everything I'm reading about this Pictures for Sad Children guy seems to indicate that he's at a minimum severely depressed and perhaps not quite all there. Plus, there seems to be near zero chance of recovering damages, and a default judgement does little to establish precedent.
etler 13y ago
Is there a precedent for this in traditional investing, such as a case where an angel invests in a company and the founders take the money and run, or blow it without making a real attempt at the company?
anigbrowl 13y ago
A positive aspect of this is that the AG is suing the creator rather than Kickstarter itself, which sets a good precedent.
itsameta4 13y ago
I feel like perhaps if the creator can't deliver, he should make public all work produced by the deadline. That way, at least if an interested party among the backers wanted to pick up where the creator left off, they'd be able to do so. This seems like something Kickstarter could fairly easily work into their TOS.
devindotcom 13y ago
I just talked with the assistant AG in charge of this case. He seems pretty with it, and they're not trying to do anything crazy here - they see it as a pretty straightforward breach of contract sort of thing. They chose this case because it seemed "very clean" and likely to have a solid outcome that would be a good deterrent for bad actors and encourage backers who get shafted.
- dredmorbius 13y ago
  I think you a word.
  - dredmorbius 13y ago
    OK, perhaps not. I was reading "pretty with it" as missing a modifier to "with" (e.g., "pretty upset with it"). Realize now that it can be read as-is. My error.
    - devindotcom 13y ago
      Funnily enough, the other guy who responded me did forget a
      - dredmorbius 13y ago
        I've discovered that pointing out someone who forgot a is a dangerous thing to
- rasz_pl 13y ago
  Its not that clear cut case. Project wasnt a pure fantasy, failure to deliver could be caused by business errors. There are multiple better cases where its clear they were started as scams. For example: https://www.indiegogo.com/projects/healbe-gobe-the-only-way-to-automatically-measure-calorie-intake https://www.indiegogo.com/projects/healbe-gobe-the-only-way-... https://www.indiegogo.com/projects/mu-thermal-camera-a-great-tool-to-save-on-energy-costs https://www.indiegogo.com/projects/mu-thermal-camera-a-great...
rasz_pl 13y ago
At leasy KS doesnt promise to vet projects like IGG did (before deciding its more profitable to actively support scams) http://pando.com/2014/04/03/after-pando-shows-clear-evidence-of-fraud-on-indiegogo-company-responds-by-deleting-anti-fraud-guarantee/ http://pando.com/2014/04/03/after-pando-shows-clear-evidence...
larvaetron 13y ago
I guess Kickstarter is a store now.
larvaetron 13y ago
Are backers consumers or investors?
- morgante 13y ago
  Consumers.
- nolok 13y ago
  They're consumers, what websites like kickstarter call crowd funding is not very different to good old pre-ordering legally speaking. And if you pre-order a product you have a right to delivery or getting your money back.

161 points by kryptiskt 13y ago

The important bit here is not the non-delivery, but the fact that the creator failed to keep up communication about the project. The suit states that Kickstarter rules state that the creator is legally bound to fulfill, but may delay as much as need, but also must communicate regularly. The project in question stopped communicating in July 2013, so the accusation is demonstrated intent to not deliver, thus breaking the legally binding contract.

dragonwriter 13y ago
> The suit states that Kickstarter rules state that the creator is legally bound to fulfill, but may delay as much as need, but also must communicate regularly. The suit does not state anything about creators being allowed to "delay as much as need". > so the accusation is demonstrated intent to not deliver No, the accusations are, in the first cause of action, representing that rewards would be delivered in approximately December of 2012 and not delivering them and, in the second cause of action, failure to provide refunds to those who requested them, and failure to offer refunds to those who had not requested them, given the failure to deliver. http://www.scribd.com/doc/221464947/State-of-Washington-vs-Asylum-5-1-2014 http://www.scribd.com/doc/221464947/State-of-Washington-vs-A...
- Mithaldu 13y ago
  Note specifically the middle part of 4.9. It does not say word-for-word the same thing i said, but it very strongly implies that delays are fine (and in fact they normally are accepted on kickstarter) as long as communication is kept up. Also note the kickstarter FAQ itself: https://www.kickstarter.com/help/faq/kickstarter+basics#faq_41859 https://www.kickstarter.com/help/faq/kickstarter+basics#faq_... It's not uncommon for things to take longer than expected. Sometimes the execution of the project proves more difficult than the creator had anticipated. If a creator is making a good faith effort to complete their project and is transparent about it, backers should do their best to be patient and understanding while demanding continued accountability from the creator.
  - dragonwriter 13y ago
    > Note specifically the middle part of 4.9. It does not say word-for-word the same thing i said, but it very strongly implies that delays are fine (and in fact they normally are accepted on kickstarter) as long as communication is kept up. The suit says that the Kickstarter FAQ strongly suggests keeping up communication in the event that delays are unavoidable, that does not say that the creators are allowed to delay as much as they need. Particularly, there is nothing inconsistent about it being a recommended course of action in the event that a binding obligation is not able to be met -- the fact that something is required doesn't always mean it is possible.
    - saraid216 13y ago
      I feel obligated to point out that you guys are discussing the exact issue that the case will hopefully set some precedent for: that is, what constitutes an acceptable delay. My guess is that it will shake out that any delay is actionable for a suit, but communications are a mitigating factor. It depends a lot on what kind of defense Altius goes for.
      - dragonwriter 13y ago
        > I feel obligated to point out that you guys are discussing the exact issue that the case will hopefully set some precedent for: that is, what constitutes an acceptable delay. We're really not, we're discussing what the suit actually says. What is actually an acceptable delay is a separate question.
      - enjo 13y ago
        I would be SHOCKED to see this go to trial. Not over $25k. The money is long ago spent (I'd bet) so the whole thing is a real waste of time.
        zecho 13y ago
        I'm inclined to agree on the specifics of this case, but not in the abstract. Kickstarter and other crowd funding entities represent an interesting dearth of case law. Here, consumers aren't necessarily protected by either consumer laws or by investment laws. Considering large corporations have purchased Kickstarted projects and major films have been produced with crowd funding, these are very important issues to begin sorting out.

waterlesscloud 13y ago

Right on the Kickstarter FAQ page- "Is a creator legally obligated to fulfill the promises of their project? Yes. Kickstarter's Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill. (This is what creators see before they launch.) This information can serve as a basis for legal recourse if a creator doesn't fulfill their promises. We hope that backers will consider using this provision only in cases where they feel that a creator has not made a good faith effort to complete the project and fulfill." https://www.kickstarter.com/help/faq/kickstarter+basics?ref=help_nav https://www.kickstarter.com/help/faq/kickstarter+basics?ref=...

iandanforth 13y ago
Kickstarter doesn't get to make law. Just because a TOS says you're legally obligated to do something doesn't mean you are. In fact given the very public nature of kickstarter's failures, and their own disclaimers about the risk associated with backing a campaign, it will be extremely difficult to make the case that this falls under standard consumer protection laws. You're not making a purchase, your taking a risk to finance a project. That is the entire and sole point of kickstarter.
- MichaelApproved 13y ago
  They're not making law, they're facilitating contractual obligations between the creator and the backer. Backer gives creator money, creator agrees to a contractual obligation to fulfill that promise. Nothing new here.
  - iandanforth 13y ago
    Contract law, fine. But this is the consumer protection act specifically http://apps.leg.wa.gov/rcw/default.aspx?cite=19.86.020 http://apps.leg.wa.gov/rcw/default.aspx?cite=19.86.020. My argument is that there is ample proof that kickstarter is not engaged in trade and commerce relevant to this law. For example "It's hard to know how many people feel like they're shopping at a store when they're backing projects on Kickstarter, but we want to make sure that it's no one." - https://www.kickstarter.com/blog/kickstarter-is-not-a-store https://www.kickstarter.com/blog/kickstarter-is-not-a-store . The fundamental nature of speculative projects is that they can fail. If this case goes forward and is found against the creators for reasons other than explicit fraudulent activity with no attempt whatsoever to complete the project then it will be terrible law and undermine kickstarter completely.

deleted 13y ago

[deleted]

ceejayoz 13y ago
It's entirely sensible. If you beat me up and I incur $10k in ER bills, chances are prosecuting you is going to cost more than that. The point is not to recoup the costs, but to make it risky for others to do the same thing.
- aaronem 13y ago
  If someone beats you up and you incur a mere $10K in ER bills, it can't have been that much of a beating, but your point stands nonetheless.
- nmjohn 13y ago
  The difference there is civil vs. criminal. I absolutely would support it if they were being charged with fraud, as in your example I would be charged with assault. But a civil suit for such a small dollar amount typically goes to small claims court.
  - dragonwriter 13y ago
    > The difference there is civil vs. criminal. Its really not -- civil penalties that are not about restitution -- like the $2,000 per violation penalty attached to the consumer protection law Washington is invoking here -- serve a very similar function to criminal fines. > I absolutely would support it if they were being charged with fraud They are being charged with violations of Washington's Consumer Protection Act including "unfair or deceptive acts or practices in trade and unfair methods of competition". Which isn't a whole lot different than "fraud".
CamperBob2 13y ago
(Shrug) That's a legitimate function of government. Do you want to live in the THX-1138 world, where the cops stop chasing you as soon as you make them spend enough money?

nostromo 13y ago

All over $25k? Doesn't that seem much too low to be worth the AG's time? The top reward tier was only $93. It's hard to imagine a person can even mount a defense against a state AG for less than $25k... Yes, they f'ed up. But unless it was malicious, this seems like an excessive response. I suspect an AG is trying to make a name for him or herself.

protomyth 13y ago
Kickstarter's a known internet site so it is probably worth it for the publicity. Its the AG version of a committee meeting calling CEOs for some "wrong doing"[1]. 1) note the quotes and yes, I think there is an element besides "guardian of the voters" here.
orik 13y ago
It's easy to make an attack on a politician and dismiss things, but I think it's much more likely that someone (Bob Ferguson) is trying to set a precedent on crowdfunding and their obligations to the funders.
- nostromo 13y ago
  Makes sense. But they should wait for a better case. This seems like a founder that underestimated the amount of time and resources required to start a company and produce a product. It sucks, but it happens. Maybe a better case would be the guy that lit the backer rewards on fire because he got tired of their pestering. (https://www.kickstarter.com/projects/73258510/sad-pictures-for-children/posts/759318 https://www.kickstarter.com/projects/73258510/sad-pictures-f...)
  - jamesaguilar 13y ago
    I dunno. If I were the AG, I'd want to go after someone who was mentally competent to defend themselves. Everything I'm reading about this Pictures for Sad Children guy seems to indicate that he's at a minimum severely depressed and perhaps not quite all there. Plus, there seems to be near zero chance of recovering damages, and a default judgement does little to establish precedent.

etler 13y ago

Is there a precedent for this in traditional investing, such as a case where an angel invests in a company and the founders take the money and run, or blow it without making a real attempt at the company?

anigbrowl 13y ago

A positive aspect of this is that the AG is suing the creator rather than Kickstarter itself, which sets a good precedent.

itsameta4 13y ago

I feel like perhaps if the creator can't deliver, he should make public all work produced by the deadline. That way, at least if an interested party among the backers wanted to pick up where the creator left off, they'd be able to do so. This seems like something Kickstarter could fairly easily work into their TOS.

devindotcom 13y ago

I just talked with the assistant AG in charge of this case. He seems pretty with it, and they're not trying to do anything crazy here - they see it as a pretty straightforward breach of contract sort of thing. They chose this case because it seemed "very clean" and likely to have a solid outcome that would be a good deterrent for bad actors and encourage backers who get shafted.

dredmorbius 13y ago
I think you a word.
- dredmorbius 13y ago
  OK, perhaps not. I was reading "pretty with it" as missing a modifier to "with" (e.g., "pretty upset with it"). Realize now that it can be read as-is. My error.
  - devindotcom 13y ago
    Funnily enough, the other guy who responded me did forget a
    - dredmorbius 13y ago
      I've discovered that pointing out someone who forgot a is a dangerous thing to
rasz_pl 13y ago
Its not that clear cut case. Project wasnt a pure fantasy, failure to deliver could be caused by business errors. There are multiple better cases where its clear they were started as scams. For example: https://www.indiegogo.com/projects/healbe-gobe-the-only-way-to-automatically-measure-calorie-intake https://www.indiegogo.com/projects/healbe-gobe-the-only-way-... https://www.indiegogo.com/projects/mu-thermal-camera-a-great-tool-to-save-on-energy-costs https://www.indiegogo.com/projects/mu-thermal-camera-a-great...

rasz_pl 13y ago

At leasy KS doesnt promise to vet projects like IGG did (before deciding its more profitable to actively support scams) http://pando.com/2014/04/03/after-pando-shows-clear-evidence-of-fraud-on-indiegogo-company-responds-by-deleting-anti-fraud-guarantee/ http://pando.com/2014/04/03/after-pando-shows-clear-evidence...

larvaetron 13y ago

I guess Kickstarter is a store now.

larvaetron 13y ago

Are backers consumers or investors?

morgante 13y ago
Consumers.
nolok 13y ago
They're consumers, what websites like kickstarter call crowd funding is not very different to good old pre-ordering legally speaking. And if you pre-order a product you have a right to delivery or getting your money back.