The Nuclear Option- Player Suits Against NCSoft?: Part One: A Very Brief Overview of FraudRecently, someone (probably a player with some business expertise) posted a “white paper” on NCSoft’s shutdown of CoH to a blog. It summarizes many of the points that have been made in these fora about how bad a decision this was from a business standpoint. If you haven't read it, I recommend taking a look at it. It summarizes a lot of good points in pretty clear language.
But one paragraph got a lot of people excited. It discussed the possibility of "fraud charges [sic] against NCSoft in the U.S. and U.K. courts."
Several posters here, including one very prominent and respected one, have expressed interest in the writer’s suggestion that players could institute a class action against NCSoft for fraud.
Before I go any further, let me state again, emphatically,
this is not intended as legal advice. If you really want to investigate the possibility of a lawsuit against anyone, consult an attorney of your choice, preferably in person. I cannot stress this enough. This post, and all my others on this forum, are not intended to tell you how to manage your legal affairs, nor are they intended as offers of representation. The decision of whether to sue belongs to the client (that’s you, in this scenario), after consulting with a competent attorney.
In my view, while players probably could begin such a suit, it would not be a good idea, because it’s unlikely to be successful. This is definitely a case where “could” is not the same as “should.” The risks, costs, and challenges are probably greater than the potential rewards involved. Most importantly in “bottom line” terms, this is not a route to get NCSoft to reinstate CoH or to obtain the IP rights to the game.
There are two broad areas of problems in any such suit against NCSoft: procedure and substance. These terms get tossed around a lot in the law. “Procedure” is the law of “how legal stuff is done.” It deals with things like how and when lawsuits are filed, how motions work, how trials work, and the like. “Substance” is the particular law at issue in any given case. For instance, in a criminal case where someone is accused of robbing a bank, the relevant substantive law is the criminal law of bank robbery.
Here, the procedural law is the law of civil procedure in the federal courts, and the substantive law is the law
of fraud. This post deals with the substantive issues.
As I understand the problem, the argument is that players were defrauded by NCSoft because it misled them into believing CoH would not be shut down when it was. So, is there fraud? I'd say "probably not,” based on the evidence available to us at the moment.
Fraud, in most jurisdictions, requires five or six elements to be proved. Think of the elements like a checklist. If the plaintiff (the player, here) can’t prove them all, he loses.
First, there has to be a false representation. Second, that representation has to relate to a material fact; it isn't fraud if someone lies about something unimportant. Third, the defendant has to know the representation is false when he makes it. Just doing something by mistake doesn't count. Fourth, the representation has to be made with the intent to deceive. Again, just a "mistake" isn't enough. Fifth, the plaintiff has to have taken some action in reliance upon the representation. Some jurisdictions also require a sixth element, that the plaintiff has suffered some kind of damage (usually, loss of money) due to the fraud.
Notice how several of those elements follow on from the first one. If the plaintiff can’t show the defendant made a false representation, then the whole case suffers cascade failure like a scrapper under attack by Vanguard.
In most jurisdictions, all the elements have to be proved by "clear and convincing" evidence. That's less than "beyond a reasonable doubt," but it's more than "a preponderance of the evidence" (i.e., a tiny scintilla more than 50%), which is the standard for most civil actions. Proof by clear and convincing evidence isn’t an easy standard to meet.
Here, I think there are problems for the potential player-plaintiff with several of the elements.
First, I think NCSoft can believably argue that it didn't make a false representation. A false representation doesn’t have to be an active lie; it can be an omission, as the plaintiff would argue in this case. For instance, it can be fraud to sell someone a house with a cemetery in the basement without telling the buyer.
But I’m not sure NCSoft made that kind of omission here. It never told anyone "the game will last indefinitely" or even "the game will last three months." It never even stated that players would be able to spend the Paragon Points they'd bought on anything. Indeed, it stated in several different places that it reserved the right to discontinue services at any time. The sole evidence for the alleged misrepresentation is that development and sales were ongoing until the announcement of the shutdown. Personally, I don’t think that’s enough to constitute a misrepresentation.
I would argue (and you can bet NCSoft’s attorney would argue the same to a jury) that the situation here is more like that of a cleaning service or other subscription-based business that suddenly goes out of business. If such a business shuts down, its customers are entitled to damages for the unfulfilled portion of their contracts (which NCSoft is paying here, as Aggelakis has pointed out in large letters in the thread that inspired this post). But the service hasn’t defrauded the customers, no matter how suddenly it shuts down.
The first element is a major stumbling block because several of the other elements, like the fifth, rely on its being present. No false representation, no action taken based on one, no knowing misrepresentation, etc.
But if the first element is satisfied, I think the second element is probably satisfied, too. The fact at issue (how long the game will operate) is probably material. However, a judge or jury not experienced with games might not agree with me.
The third element would be very difficult to prove. There's simply no evidence that NCSoft knew when the players purchased their items that City of Heroes would be shut down. What does it mean for an entity that isn't a single person to "know" something, anyway? In my view, and I'm sure NCSoft would argue the same, it didn't "know" what its course of action with regard to CoH would be until it held a bunch of meetings and adopted a formal policy. Discovery (a phase of litigation where the parties ask each other questions to look for evidence) might reveal otherwise, but to me, the circumstances suggest that it issued its press release almost immediately after it decided on the shutdown.
(Think how much this explains about how sudden the shutdown seemed. If the shutdown
hadn’t been that sudden, NCSoft might have been vulnerable to fraud claims for the reasons people have stated in other threads. More importantly from its point of view, it would have been incurring new contract obligations, and thus new damages to be paid in the event of the breach it was planning, every day. It also explains why Paragon Studios employees didn't know until the public did.)
As an aside, if someone did start a fraud case, this would be one area where the plaintiff would want to focus his discovery: what did NCSoft know and decide, and when did it know it? (I'll talk more about discovery in a future post.)
The fourth element, intent to deceive, is nearly always the hardest to prove. This case is no exception. Even assuming that NCSoft "told" the players the game would remain in operation by continuing to sell CoH material, there's no evidence that it did so not only intending to shut down the game, but also intending to trick players into buying things. In actual cases, intent to deceive is usually proved by evidence of things like secrecy or hurriedness of a transfer (in cases about defrauding creditors, which are the kind I know best). In a "standard" fraud case like this one, discovery would focus on trying to get a hold of internal NCSoft memos and the like, the documents that led up to the decision to shut down. When was the first discussion of a shutdown? More importantly, when did NCSoft first start considering what to do about player purchases (subscription, Paragon Market, etc.)? It's doubtful there's a smoking gun along the lines of a memo saying, "Let's just let them buy stuff, but not give it to them and never refund their money," but you never know. It's going to be very difficult to find this kind of thing. These sorts of intangibles rarely get written down.
Also, littering.
(Just kidding.)
I should mention that this lack of evidence isn't just a problem at the trial stage of litigation. Fraud has to be "pled with particularity." That means that, when you file your complaint to start off the lawsuit, you can't just say, "I believe NCSoft intended to deceive me." You have to allege some support for the proposition, along the lines of "I believe NCSoft intended to deceive me because of the following five things I expect to prove at trial."
I think the fifth element is probably satisfied, assuming the first one is. Players did indeed buy CoH material. If the player-plaintiff wins on the first element, he probably wins this one, too. Again, if the first element isn't there, this one isn't, either.
The sixth element, damages, is a major problem. If players are given refunds, then they haven't suffered monetary damages. From everything I've read, NCSoft has done a fine job on its CYA work here.
Overall, I just don’t see a strong case for fraud. But for those of you very committed to the idea of suing NCSoft, I urge you to consult a reputable attorney in real life.
Edited to complete a sentence, discuss more about intent to deceive, and include reference to littering.
