Cruz Law, PLLC

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Esports gets its first big contract lawsuit

Esports has its first big contractual lawsuit as Turner Tenney, also known as “Tfue” sued Faze Clan Inc. (“Faze Clan”) earlier this month in the Superior Court of the State of California.  The lawsuit underscores an issue in the nascent sport.

The Complaint states that Tfue is a 21 year old professional gamer and content creator/streamer.  His videos are viewed by millions, sponsors are willing to pay for Tfue to perform in and create videos that will, at least in part, promote their goods, services and brands.

Gaze Clan is an esports entertainment company according to Tfue.  He signed a “Gamer Agreement” with Faze Clan when he was 20 and describes the contract as “grossly oppressive, onerous and one-sided.  Notably, Tfue underscores that Faze Clan was to receive up to 80% of the revenue paid by third-parties for his services.

Tfue also claims that they violate California’s Talent Agency Act as he claims that it protects artists and Faze Clan is an unlicensed talent agency operating within the state.

In addition to the alleged illegal contract and illegal procurement of employment, Tfue claims that it has diverted money owed to him for themselves.

Tfue claims that the Gamer Agreement had an initial term of six months and would automatically be extended for an additional thirty-six months if certain conditions were met.  As part of the lawsuit, he is requesting termination of his Gamer Agreement.

Despite letters from his attorney regarding a breach of the Gamer Agreement, Faze Clan, denied that it had breached the agreement.

In addition, Tfue claimed certain sections of the contract were in violation of state law including an exclusive “Matching Right” section

He also claims that Faze Clan passed up on a sponsorship deal for him due to a conflict the company had with one of its competitors.

This lawsuit is unique in esports as there has been few, if any, contractual disputes that have gone this far.  FazeClan claimed that it would release the full contract so that the public can see the terms.  This seems like a very good PR move but bad litigation strategy.

Faze Clan recently released this video which responds to allegations in the lawsuit and give some context to the situation.  In it, they state that Tfue had previously signed a Gamer Agreement with another organization and had attorney to look over his contract.  Moreover, they believe that he was set on starting his own organization and was looking for a way out.

This will certainly a lawsuit to watch.  Esports is evolving and contractual disputes are bound to occur as players become more savvy about what they are signing.

Changes made to Washington Business Corporation Act

Late last month, Governor Jay Inslee signed into law amendments to the Washington Business Corporation Act.


Among the changes which will affect businesses:

  • A shareholder of a corporation formed on or after January 1, 2020, has no preemptive right to acquire the corporation’s unissued shares…
  • RCW 23B.06.300 and 2002 c 297 s 19 are each amended to read as follows:
    • (1) The shareholders of a corporation do not have a preemptive right to acquire the corporation’s unissued shares except to the extent the articles of incorporation provide otherwise or as set forth in subsection (2) of this section. A statement included in the articles of incorporation that “the corporation elects to have preemptive rights,” or words of similar import, means that the provisions set forth in subsection (3) of this section apply except to the extent that the articles of incorporation provide otherwise.
    • (2) Unless the articles of incorporation provide otherwise, the shareholders of a corporation formed before January 1, 2020, have a preemptive right to acquire the corporation’s unissued shares.
  • A sale, lease, exchange, or other disposition of a corporation’s property and assets, other than in the usual and regular course of its business requires approval of the corporation’s shareholders if the disposition would leave the corporation without a significant continuing business activity.

While the changes may not be groundbreaking, they should be taken into consideration by companies.

Tribal casino files lawsuit against Valve for “skins” gambling claiming it illegal

A “skins gambling” lawsuit was filed in Washington State last month by a Native American Tribe that owns the Quinault Beach Resort and Casino citing that Valve’s CS:GO use of skins is illegal gambling.  The Quinault Nation argues that Valve’s video game, Counter Strike: Global Offensive, did not have a license to operate, facilitate or otherwise engage in any form of gambling. The lawsuit was filed in Grays Harbor County, Washington.

Quinault Nation is a federally recognized sovereign Indian Nation consisting of Quinault and Queets tribes and descendants of five other coastal tribes.  It owns and operates and Indian gaming casino licensed by Washington state and regulated by the Washington Gaming Commission.

Valve is a Bellevue-based video game and online content platform company.  “Skins,” as defined by the lawsuit are primary currency used “by illegal, unregulated, and unlicensed online gambling website.”  They are “add-ons” to enhance the video game experience.  They can be bigger guns, different outfits and more.  These “skins” must be purchased with money and are not included as part of buying the video game.

According to the lawsuit, Valve was complicit with the “skins” economy as it offered a “key” for $2.50 to access virtual items that were worth much more than the value of the token.  It also “allowed gambling websites to use Valve accounts on Valve’s servers and Valve’s computers to effectuate gambling transactions.”

Below is an example that was embedded in the lawsuit.

The Quinault Nation is requesting a court order requiring Valve to stop offering crate opening online slot machine gaming until a time in which the Washington Gaming Commission can examine it to determine if it requires a license.

The lawsuit builds on previous litigation which included an attempt to bring a class-action lawsuit against Valve but those lawsuits were sent to arbitration as individual cases pursuant to a class action wavier and arbitration clause in Valve’s Subscriber Agreement.

Here, The Quinault Nation has an interest in Valve’s alleged “skins” gaming as they believe it takes away from its own legal and licensed gambling enterprise.  They believe that Valve is engaging in unfair competition with the legally licensed, regulated gambling.  Notably, it explains that this is due to neither Valve or internet gambling sites using Valve’s virtual items having to abide by gaming laws and regulations, and consumers and the plaintiffs being harmed as a result.  It cites a consumer protection component as well since there are scammers out there that are not regulated that may sell fraudulent items on web sites.

Coachella battles film festival over “chella”

Coachella, the ultra-popular music festival annually held in the Inland Empire of California is going to court in a trademark lawsuit over “Chella.”  According to the Festival, Filmchella describes itself as the “Coachella for Films.”

The trial court recently denied Coachella’s Motion for Partial Summary Judgment. The Court noted that there would not be a likelihood of confusion and despite some similarities, there were “important differences.”

https://www.scribd.com/embeds/388919298/content#from_embed

Court Denies Coachella’s Motion for Partial Summary Judgment

https://www.scribd.com/embeds/388919929/content#from_embed

My appearance on the Thinking Like a Lawyer Podcast

I was recently on the Thinking Like a Lawyer podcast talking the Conor McGregor lawsuit from his pre-fight antics in August 2016. Ironically, a week later, he was sued by Michael Chiesa for throwing a dolly at a bus the fighter was on in April 2018.