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Class-Action Loot Box Lawsuit against Lilith Games Dismissed (with Leave to Amend)
This is an interesting order on a motion to dismiss in a loot box class-action case where the court opines on what reasonable people expect about loot box odds even when the publisher doesn’t disclose anything. While the defense would have been even stronger had the game publisher disclosed the drop rates, it’s notable that the publisher still prevailed despite failing to do so, based on notions of common sense.
The class-action complaint alleged deceptive practices in connection with Lilith’s Games’ “Rise of Kingdoms” (RoK) mobile game. The plaintiffs alleged that they were duped into spending thousands of dollars on in-game purchases of gems to play rigged loot box card and wheel games that had unfavorable odds for players. Specifically, plaintiffs alleged that Lilith misrepresented the chances of receiving valuable items for games that required gems to play, secretly sponsored some players and gave them free in-game resources, and failed to enforce the ToS, which allowed some players to share their accounts thereby making the game more difficult and more expensive for players who followed the rules.
The plaintiffs alleged to have spent $8,000 to $15,000 each on purchases of bundles of gems to use in the loot box games within RoK. They allegedly paid to play games called “Card King,” the “Garden of Infinity” and “Wheel of Fortune” 50 or more times at a sitting in hopes of winning prizes. The plaintiffs assumed certain odds based on the use of six-sided dice, 12-spoke wheels and other features, but had no way of knowing the real odds since Lilith did not disclose them. When the plaintiffs didn’t win at what they believed was the statistically expected rate, they concluded the games were rigged and cited to videos on Facebook and YouTube in the complaint to support this claim.
The plaintiffs brought claims based on the:
California Consumer Remedies Act (Cal. Civ. Code § 1750, et seq.);
Unfair or Unlawful Business Practices (Cal. Bus. & Prof. Code, § 17200, et seq.);
Unfair or Unlawful Contest or Sweepstakes (Cal. Bus. & Prof. Code, § 17539.1, et seq.);
California’s False Advertising Law (Cal., Bus. & Prof. Code §§ 17500, et seq.); and
Breach of the covenant of good faith and fair dealing.
Order granting Motion to Dismiss
Since some of the claims were based on claims of fraud/deception, the court applied a heightened pleading requirement under FRCP Rule 9(b), which requires parties to “state with particularity the circumstances constituting fraud or mistake.” The court concluded that since Lilith did not post odds for the RoK games, it could not have affirmatively misled the plaintiffs. It also found the references to third party videos on YouTube and Facebook “wholly speculative musings” and at several points “largely incomprehensible.” The court chided plaintiffs, saying:
Dropping hyperlinks to what is in effect gossip on the Internet is not the type of plausible allegation of fact that Rules 8 and Rule 12(b)(6) contemplate.
The court also rejected the plaintiffs’ contentions about Lilith misleading players based on how the loot system operated. Plaintiffs had taken the position that because the “Wheel of Fortune” game featured a 12-spoke wheel, this implied players who spun the wheel had a 1 in 12 chance of winning the best prize while spinning the wheel. The court disagreed, finding that “nothing in the presentation of the wheel alone plausibly indicates that players had an equal chance of landing on a given spoke.” Instead, the court found that it “is just as plausible that the odds of hitting a given spoke were not equal,” because “[s]ome of the prizes on the wheel were among the most valuable and rare items available to players, and it is not implausible that it would be more difficult to win them even on what was digitally displayed as an equally divided wheel.” The court observed that “[p]laintiffs’ own characterization of loot boxes as awarding rare and valuable goods on a ‘very low percentage of occasions’ is consistent with the commonplace understanding that rare and valuable items are not equally available as winnings in a game.”
The court next considered the plaintiffs’ allegations about account sponsorship and Lilith’s non-enforcement of the ToS, but found these allegations also lacked sufficient particularity and pointed out other possible explanations for players losing (e.g., to more powerful players).
At first blush, the court’s reasoning might seem strange. It’s useful, though, to compare RoK’s “wheel” game to the well-known “Wheel of Fortune” game show. If you’ve ever watched “Wheel of Fortune,” you might initially observe that, when a contestant spins the wheel, the chances of the marker landing on a particular wedge (at least those of the same width) are basically the same. For example, if you are trying to calculate the odds of landing on the million dollar prize, you may see that it is initially based on the number of wedges visible — i.e., 1 in 72 chance. However, landing on that wedge only gives you a chance to get the million-dollar prize. You still have to win the game, make it to the bonus round without landing on the bankruptcy wedge (1 in 12 chance each spin), spin for a prize envelope and hope that the prize envelope is the one that has the million dollar prize in it (1 in 24 chance). So, the effective odds of winning the million-dollar prize are far, far worse than initially appears. (Maybe that’s why only three people have ever won it.)
In RoK, the court basically says it’s similar. Reasonable people would understand it’s not really going to be 1 in 12 odds, even if the wedges appear equal to all the others in dimensions. The court refers, conceptually, to a “commonplace understanding” and implies that people intuitively know it’s going to be harder to win rare prizes than common ones.
Another interesting observation is that the court rejected Lilith’s Communications Decency Act (CDA) defense. While this was recently successful for Google in defending against a loot box class-action, the distinction here is that Lilith created the content in question whereas Google, as a platform/host, didn’t.
The court gave the plaintiffs leave to amend for “one last round,” but it seems dubious that this case will survive much longer.