LGJ: Class Dismissed

Each week Mark Methenitis contributes Law of the Game on Joystiq ("LGJ"), a column on legal issues as they relate to video games:

It seems almost weekly a new article appears on Joystiq referencing yet another class action filed against the game industry. If it's not consoles, it's kick pedals. As a result of this class action proliferation, I was asked by a reader to explain this whole class action concept in a little more detail. I'm sure most people have some idea of the basic concept behind the class action, but not necessarily why it's become the weapon of choice, so to speak, of certain disgruntled gamers or what these lawsuits actually entail.

The basic idea behind a class action suit is to resolve a large number of suits with similar elements in one proceeding, rather than requiring each to have its own proceeding. These similarly situated plaintiffs make up the 'class' in the class action. Taking the red ring suit as an example, there are a large number of people whose Xbox360s red ringed who could file suit under the theory presented. Rather than force Microsoft to potentially deal with each suit individually, they can deal with that 'class' in a single legal action. In reality, that's a gross oversimplification of the process.

These suits actually work in the opposite way than many people expect. Rather than acting to allow the defendant to aggregate suits, it is generally a plaintiff who brings suit on behalf of the 'class' represented. It is probably worth noting that there are both Federal class actions and state level class actions in the United States, although not all states have class actions. It's also worth noting that while class actions do exist outside the US, they are far more common in the US than elsewhere. With that in mind, most of the descriptions here are general, and not specific to any particular form of class action.

The first major hurdle for the plaintiff is getting the class certified. A class has to have a few essential elements. First, the class has to have enough people, and a general benchmark is more than 30. Second, the group of people has to have a commonality of damages related to a common issue. In the Harmonix case, the common damage is the Rock Band pedal and the common issue is a defective product. Third, the same event or time period must apply to all plaintiffs. Fourth, all plaintiffs must take the same legal argument. As you might have noticed in some of the suits over similar topics, not everyone sues on the same grounds or based on the same legal theory. One of the class action ground rules is that everyone must be on board with the same legal argument. Fifth, the law firm representing the class must be able to handle such a case, which includes atypical law firm activities like managing the class members and handling payments of the potential judgment to all of the class members. Finally, the defendant must be able to pay the potential damages.

The last element is part of what makes class actions popular and potentially lucrative, but has also led many legal scholars to additional criticisms of the concept, especially more recent peripheral elements like SueEasy.com. Class action defendants are typically huge corporations with deep pockets. As a result, the judgements are typically very large on the aggregate. This, however, creates a bit of a double-edged sword. On the one hand, many attorneys will accept these cases on contingency as the potential financial windfall is huge. This also means whoever wants to bring the suit isn't out any money, making it an easy mechanism for whoever brings the suit to the law firm. On the other hand, between the number of plaintiffs and the contingent fee coming off the top of the verdict, the payment to the class members is often very, very small.

So why are so many suits going this direction, especially in the gaming world? In short, my theory is that it's largely a function of the individual suits being financially impractical. Think of it this way: If I were to, alone, sue Harmonix over my broken Rock Band drum pedal, what would my damages be? I'd say the pedal is worth maybe $20, or the price of a full drum kit if the pedal can't be secured alone, plus maybe some punative damages. So why am I going to spend potentially thousands or tens of thousands of dollars to sue over it? On the other hand, if I can get 50,000 people who all bought Rock Band in on it, then the numbers work more in favor of the suit. Even an Xbox360 at full value isn't worth enough to justify an individual suit, but 100,000 of them certainly would be. It's basically an economy of scale that is a direct result of the high cost of litigation today.

Are class action lawsuits the best answer to issues like these? While I'm sure class action attorneys would disagree, I don't think they're the best solution, but they likely are the best available and reasonably practical solution given the framework we have to work in. However, that's not to say that all class actions are valid or should be successful either. Just like anything, be that groups of lawsuits or groups of video games, there are good ones and bad ones in the bunch. The hope is that the good ones succeed and the bad ones do not, though I think anyone can recognize that isn't always the case.

Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.

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