
State court orders Kickstarted game creator to pay $54k for failing to deliver - Impossible
http://www.gamasutra.com/view/news/253471/State_court_orders_Kickstarted_game_creator_to_pay_54k_for_failing_to_deliver.php
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ghayes
There are risks involved in a Kickstarter. I'm sure these are spelled out in
the terms and conditions in funding a Kickstarter. While fraud should be
protected, a good-hearted attempt that fails should be covered by that
contract, in my opinion.

~~~
NelsonMinar
The old terms and conditions in funding a Kickstarter were very clear. Either
the project delivered, or else all the backers got their money refunded.
There's no "good hearted" about it in the contractual materials.

The truth is that no one's ever collected from this and there have been a lot
of funded, failed Kickstarter projects that never refunded anything. Until
this one.

A lot of people say Kickstarter shouldn't be like this, that no one should
expect refunds. But that wasn't the way the site worked until a couple of
years ago when the TOS changed.

~~~
ctdonath
IIRC, refund was mentioned but absolutely no mechanism (legal nor financial)
was in place to ensure it happened, relying on the failing company's
obligations to suffice. That doesn't work too well when the whole point is the
one entity tasked with performing the refunds doesn't have any money (anymore)
or means to do so.

I'm wondering myself, having payed into a project which keeps promising
"almost there" and nearly a year late shows little more than a video of a lame
prototype unlike what most backers expect. Trying to stay optimistic, but
resigned to it falling thru - and there being no money remaining to refund.

~~~
codingdave
I think this article shows exactly the mechanism to enforce it - you sue for
breach of contract.

Now, for most people, getting their 20 bucks back is not worth the trouble and
costs of a lawsuit. Which is exactly why the suit in this case was carried out
at a higher level, taking advantage of the fact that the guy running the
project as well as some backers lived in the same jurisdiction.

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seesomesense
Asylum Playing Cards were a long running scam. Good to see that the Attorney
General's office finally went after them.

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equil
ever since that hanfree story [0], Kickstarter has been a bit more explicit
about creator obligations [1]. Creators are now told to "make every reasonable
effort to find another way of bringing the project to the best possible
conclusion for backers" should the project fail or rewards not make it to
backers. The terms of use also has an explicit warning about possible legal
action at the bottom.

[0] [http://www.businessinsider.com/how-one-stupid-mistake-
and-35...](http://www.businessinsider.com/how-one-stupid-mistake-
and-35000-from-kickstarter-made-an-average-guy-bankrupt-2013-1)

[1] [https://www.kickstarter.com/terms-of-use#backer-
creator](https://www.kickstarter.com/terms-of-use#backer-creator)

~~~
makomk
That's actually a watered-down version of what Kickstarter had before, with
significantly less protection for backers. Previously the ToS said creators
had to give either the rewards they'd promised or a refund. Kickstarter made a
big deal about protecting backers a few years ago after ZionEyez took a
quarter of a million in backer funds and then disappeared to a tropical beach
never to be heard from again, then quietly removed those protections and more
after the heat died down.

~~~
TazeTSchnitzel
Not requiring a refund does seem somewhat reasonable. It's not as good for the
backers, but won't terrify the companies being funded with a super-massive
liability.

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joesmo
Always set up an LLC or Corporation before doing any kind of business that
could involve such liabilities. The $500-$1000 it costs to do that is
obviously well spent money, but most people don't realize that till they're
facing bankruptcy. Think of it like health insurance for your business: if you
don't have it and something goes wrong, you're fucked. Then again, lots of
people who could afford to pay skimp on health insurance and put themselves at
risk of bankruptcy every single day, so it does take a little bit of awareness
of reality.

------
fapjacks
AWESOME. Awesome! That's all I can say. I'm SO glad to see this happen. It
will go a long way to reassure nervous backers to back interesting projects
and to stop thieves and scammers like the hilariously-fake Bleen[0].

[0]: [https://www.indiegogo.com/projects/bleen-3d-without-
glasses](https://www.indiegogo.com/projects/bleen-3d-without-glasses)

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746F7475
It was only a matter of time something like this happened. In best case there
will be less bad Kickstarters and scams, in worst case kickstarting will
become a thing of the past. Unless you are 100% sure you can deliver the
product you risk having to pay back everything.

~~~
nsajko
The KS terms and conditions have changed, refunds are no longer obligatory
(since Oct 2014?).

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hathym
All they need is another kickstarter compain to pay for the legal fees :D

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bentrevor
Does double jeopardy apply here? As in, can another state sue for the same
thing?

~~~
ams6110
Double jeopardy protection is for criminal charges, not civil.

~~~
Flammy
Apparently double jeopardy doesn't apply in two different states, regardless
of the type of charges. Which fits my limited expectations around it - it
prevents a single court system from attempting multiple times on the same
case... A second US State would have no restrictions against them.

[http://criminal.findlaw.com/criminal-rights/charged-twice-
in...](http://criminal.findlaw.com/criminal-rights/charged-twice-in-different-
states.html)

~~~
glesica
Yeah, but wouldn't it really be a different crime anyway? I mean, state A
would charge you for ripping off people in state A, state B would charge you
for ripping people off in state B. Two, presumably disjoint, sets of people.

~~~
DrStalker
This ruling is only for backers in Washington so that appears to be exactly
the case; other states and countries can still file their own lawsuits if
motivated to do so.

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Cacti
Restitution due to the actual people involved: $668

Money due in "penalties" and "fees" to the state: $54,000

Yay, graft!

~~~
pdabbadabba
Huh? The penalties are to make sure that people are deterred from defrauding
customers even in relatively low dollar amount cases like this one, and the
rest was to pay the backers' legal fees. They only paid $668 in restitution
because only 31 backers sued.

What's the problem?

~~~
makomk
The problem is that they have something like $25,000 in other backers who
haven't been refunded, and those penalties and fees mean the creator almost
certainly won't be able to refund them.

~~~
pdabbadabba
I'm not sure why you were down-voted. You make a decent point--though I'm not
sure what the solution to this problem is short of abolishing civil penalties
altogether. (Though I suppose it would be possible to set up some rather
complex system where future plaintiffs can recover from the previously
collected civil penalties held by the state,)

And certainly the issue you point out doesn't justify the "Yay, graft!"
comment above.

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smegel
Who were the "consumers" and what did they "buy"?

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gadrfgaesgysd
If I fund a company and it fails, then I don't have any right to sue them for
lost "revenue". Right?

What is the difference in the case of Kickstarter. They are a crowd _funding_
platform are they not?

I have seen this system abused many times. For many it is just a store.
Kickstarter should have stricter rules, but why should they, the liability is
on the creators and if they succeed, Kickstarter collects some percentage.

~~~
minimaxir
You may want to read the original complaint:
[http://www.scribd.com/doc/221464947/State-of-Washington-
vs-A...](http://www.scribd.com/doc/221464947/State-of-Washington-vs-
Asylum-5-1-2014)

This is a bit more malicious than "things didn't work out."

~~~
gadrfgaesgysd
At a glance the problem seems to be they didn't deliver.

If you read it, can you write a short summary of their malicious acts?

~~~
zyxley
The important bits:

> 4.15 Defendants represented on the Asylum Playing Cards Campaign website
> that delivery of the rewards to all backers (e.g. the Asylum playing cards
> themselves, as well as the various add-on rewards) would take place in
> December 2012.

> 4.16 Defendants have not posted an update to the Asylum Playing Cards
> Campaign website since July 13, 2013.

...

> V. FIRST CAUSE OF ACTION - MISREPRESENTATIONS AND THE FAILURE TO DELIVER
> REWARDS

...

> 5.2 In the context of operating the Asylum Playing Cards Kickstarter
> campaign, Defendants engaged in the following acts or practices constituting
> unfair or deceptive acts in trade or commerce:

> a. Misrepresenting either directly or indirectly that Backers who paid for
> Rewards through the Kickstarter Campaign would receive those Rewards in
> approximately December 2012;

> b. Failing to deliver the promised Rewards to Backers after the Backers paid
> money to Defendants via the Kickstarter Campaign.

...

> VI. SECOND CAUSE OF ACTION - FAILURE TO REFUND

...

> 6.2 In the context of operating the Asylum Playing Cards Kickstarter
> campaign, Defendants engaged in the following acts or practices constituting
> unfair or deceptive acts in trade or commerce:

> a. Failing to provide refunds to Backers who requested one after they did
> not receive their Reward in a timely fashion from Defendants' Kickstarter
> Campaign;

> b. Failing to offer refunds to any other Backer, whether a refund was
> requested or not, after Defendants were unable to deliver the Rewards to any
> backer within a reasonable timeframe.

~~~
gadrfgaesgysd
That seems fair. If you promise something and fail to deliver, i.e. treat
Kickstarter as a store, then you should be liable.

~~~
BryantD
And, in fact, the Kickstarter ToS acknowledges this obligation. Lengthy quote:

When a project is successfully funded, the creator must complete the project
and fulfill each reward. Once a creator has done so, they’ve satisfied their
obligation to their backers.

Throughout the process, creators owe their backers a high standard of effort,
honest communication, and a dedication to bringing the project to life. At the
same time, backers must understand that when they back a project, they’re
helping to create something new — not ordering something that already exists.
There may be changes or delays, and there’s a chance something could happen
that prevents the creator from being able to finish the project as promised.

If a creator is unable to complete their project and fulfill rewards, they’ve
failed to live up to the basic obligations of this agreement. To right this,
they must make every reasonable effort to find another way of bringing the
project to the best possible conclusion for backers. A creator in this
position has only remedied the situation and met their obligations to backers
if:

they post an update that explains what work has been done, how funds were
used, and what prevents them from finishing the project as planned; they work
diligently and in good faith to bring the project to the best possible
conclusion in a timeframe that’s communicated to backers; they’re able to
demonstrate that they’ve used funds appropriately and made every reasonable
effort to complete the project as promised; they’ve been honest, and have made
no material misrepresentations in their communication to backers; and they
offer to return any remaining funds to backers who have not received their
reward (in proportion to the amounts pledged), or else explain how those funds
will be used to complete the project in some alternate form. The creator is
solely responsible for fulfilling the promises made in their project. If
they’re unable to satisfy the terms of this agreement, they may be subject to
legal action by backers.

------
javajosh
I think it's great to keep people honest - if I spend real money on an idea,
and the progenitor of that idea just uses the money for a trip to Hawaii (or
whatever) then yeah, that's a wrong that needs correcting.

But check this out:

 _> Nash and Altius Management have been ordered to pay their 31 backers in
Washington a total of $668 in restitution, as well as $23,183 in legal fees
and $31,000 (a grand per backer burned) in civil penalties for violating the
state Consumer Protection Act, but it's yet unclear whether they've actually
done so. Gamasutra has reached out to the Washington state Attorney General's
office for further details._

So, the 31 Washington people actually harmed get $20 each; lawyers get
$23,000, the _state_ gets $31,000.

Someone please tell me how this is justice.

[Edit: it's actually much worse, because this is _just for Washington state_.
Consumer protection lawyers in any state with a harmed investor could go after
the wrong-doers, with similar payouts: 1K to people, 50k to the state and
lawyers. A 50:1 ratio applied in all 50 states would yield a whopping 2500:1
ratio of punitive to actual damages. That's $50k in making things right, and
$125M in punitive fees]

~~~
gadrfgaesgysd
The backers got their money back. And the defendant lost a lot more money than
just the restitution. The penalty was harsh, but I don't see why it was
unjust.

Do you think the plaintiffs should get _more_ money than they deserved?

~~~
csallen
It's unfortunate that our legal system is set up in such a way that you would
need $24k in legal fees to settle a case like this.

~~~
gadrfgaesgysd
teraflop gave a great answer why this is so:
[https://news.ycombinator.com/item?id=10206606](https://news.ycombinator.com/item?id=10206606)

~~~
teraflop
Well, I wasn't really talking about the magnitude of the costs involved. You
could certainly argue that a case like this requires too many hours of
lawyers' time, or that those hours are overvalued. I don't personally know of
any better alternative systems that would be useful to compare against.

