Three Year PhantomL0rd v. Twitch Suit Comes to an End
THE PARTIES
Plaintiff: James “PhantomL0rd” Varga
Plaintiff's Firm: The Quinlan Law Firm
Defendant: Twitch Interactive, Inc.
Defendant’s Firm: Davis Wright Tremaine
THE BIG PICTURE
A popular video game streamer wins a personally pyrrhic victory after Twitch permanently banned him from the platform in 2016.
BACKGROUND
James “PhantomL0rd” Varga was a popular Twitch streamer from 2012 to 2016. On July 1, 2016, gambling on Counterstrike: Global Operations (“CSGO”) skins became an issue for Valve after a player sued Valve for knowingly allowing an “illegal online gambling market” (this initial suit filed in the S.D. Fla. was withdrawn with plaintiff refiling in W.D. Wash. in August 2016). Valve does not provide the ability to gamble on skins directly but does allow for the transfer of skins, and a small industry of CSGO skin betting sites soon followed and continues to this day. In response to the controversy surrounding the CSGO gambling sites, Valve began issuing cease and desist letters to CSGO gambling sites and presumably reached out to Twitch, where many streamers had been advertising these gambling sites. As a result, Twitch issued a statement on July 13, 2016:
As a reminder, per Twitch’s Terms of Service, broadcasters are not permitted to stream content that breaks the terms of service or user agreements of third-parties. As such, content in which the broadcaster uses or promotes services that violate Valve’s stated restrictions is prohibited on Twitch.
On July 16, 2016, it was reported that Varga owned a CSGO gambling site, CSGO Shuffle (though Varga later denied this). According to reports at the time, not only did he own the site, but he promoted the site on his stream without disclosing his ownership. On top of that, there were allegations that he rigged bets within the site in his favor so that it would look to viewers like they could win big on the site as well. On July 19, 2016, Twitch placed a permanent ban on Varga’s stream.
THE SUIT
On February 14, 2018, nearly 2 years after his ban, Varga sued Twitch for breach of contract, breach of implied covenant of good faith and fair dealing, intentional misrepresentation, and negligent misrepresentation. (Varga v. Twitch Interactive, Case No. CGC18564337 (S.F. Superior Court 2018)). Varga alleged that the contract, which the parties entered into in 2012, required notice for termination and that Twitch never provided such notice beyond vague gestures towards Twitch’s terms of service and a cure period of 30 days. Varga also alleged that Twitch’s own representative told him he could stream the content, attaching communications where the Twitch representative said:
don’t do the cs:go gambling as the main focus of the stream. don’t let it go 30 minutes at a time. play some, then do a bit if you want. Just not [t]he focus of your stream
And later:
You have been reported against because of the whole CS:GO gambling for longer than 30 minutes situation. You shouldn’t be doing it for longer than a few minutes to just play it safe, honestly … it’s a cluster***. this entire rule is confusing as hell haha … so time it, do what you think is correct … honestly this whole longer than 30 is just odd to me. why you can do it for 30 but not longer hah is it 30 in 1 sitting, is it 30 cooldown 30 not even i know.
In response, Twitch countersued for:
Breach of Contract - alleging that Varga repeatedly violated the agreement and Twitch’s terms of service; and
Fraud - alleging that Varga failed to disclose his ownership in the CSGO gambling sites or that he was manipulating gambling outcomes on the site.
THE VERDICT
On April 23, 2021, after a 16-day trial, Varga prevailed. The jury found for Varga on all of his claims except for intentional misrepresentation and essentially found against Twitch on all of Twitch’s counterclaims. For damages, the jury awarded Varga $20,720.34. Even though the jury found for Varga, the awarded damages were fairly minimal and included nothing for Future Lost Earnings, Lost Earning Capacity, or any Tort Damages (even though he was entitled to Tort Damages based on the jury verdict). The award was also far lower than the $35,000,000 Varga requested (full breakdown in images below):
As a side note, the contract between Varga and Twitch contained a $50,000 cap on damages, but this was held unconscionable, so Twitch's damages could have been far higher. While Varga ultimately won the suit, more than three years of litigation and 16 days of trial probably cost him far more than $20,720.34, though there is still time for him to request attorney’s fees. So while he won a moral victory, and has perhaps forced Twitch to be more careful when banning streamers, it probably ended up costing him a great deal of time and money to do so.
Note: In California, if you recover less than the jurisdictional minimum ($25,000 for unlimited civil cases), the court has more discretion in awarding attorney’s fees, and can even deny your entire request for attorney’s fees, even if you otherwise would have been able to recover them. CA Code of Civ. Proc. Section 1033. This could make the victory even more pyrrhic.
TAKEAWAYS
For video game services like Twitch, there are a couple of lessons to be learned here. First, be very careful about how your representatives communicate with users/players. The Twitch representative’s statements seemingly giving Varga permission to continue streaming his gambling content so long as he stayed below 30 minutes at a time probably influenced the jurors. Second, if your contracts or terms of service outline a process that will be taken in cases of termination or breach such as adequate notice or cure periods, follow them. For streamers, know your rights, but it could be very, very expensive to enforce them.