Statement of Facts

The case, TJ Paris, ps ctx protection soc. 3, 27 mars 2024, n° 22/02668, involved an esports player who had entered into a contractual agreement with an American esports club to participate in Counter-Strike competitions from 2016 to 2017. The employment contract in question was titled a “self-employed worker contract,” under which the player was ostensibly hired as an independent contractor. This classification has significant legal and financial implications, primarily regarding tax and social security liabilities.

The French URSSAF Caisse Nationale, responsible for the collection of social security and family benefit contributions, challenged the contractual classification. URSSAF initiated a recovery action claiming that the income derived by the player under this contract should be subject to contributions as “non-commercial profits,” according to Article L131-6 of the French Social Security Act. The agency’s position was that the player’s engagement bore all the hallmarks of traditional employment rather than those of an independent contractor.

The player contested URSSAF’s assessment, arguing that despite the contractual designation as a self-employed worker, the actual terms and conditions of his engagement demonstrated a dependency and subordination typical of an employment relationship. This challenge led to judicial scrutiny of the nature of the contractual relationship between the player and the esports club.

Legal Framework and Tribunal’s Analysis of the Employment Contract

The tribunal’s analysis centered on distinguishing between self-employed status and employment based on the degree of subordination to the employer, as characterized by French labor law. Article L.8221-6-1 of the French Labour Code defines independent contractors as follows:

“is presumed to be an independent contractor, any individual whose working conditions are defined exclusively by himself or in a contract, in conjunction with his customer”.

The French Labour Code stipulates that individuals registered as self-employed service providers are generally assumed not to have an employment contract with their clients while carrying out their activities. Nevertheless, this assumption can be challenged. The same legal provision notes that an employment contract may still be recognized if the registered individual delivers services in circumstances that create a continuous subordinate relationship with the client.

The judges meticulously reviewed the contractual obligations and daily activities imposed by the esports club on the player, which included:

• Mandatory participation in specific competitions as directed by the club.
• A set schedule for training and streaming that the player was required to follow.
• Requirements to wear the club’s uniform during official events and partake in promotional activities.

These conditions, alongside regular monthly payments and the provision of accommodations and travel arrangements by the club, clearly illustrated an employer-employee relationship, as the club exerted substantial control over the player’s professional activities.

Analysis of the Tribunal’s Ruling

The judges’ assessment focused on various aspects of the player’s contract and daily work engagements that pointed toward an employment relationship. The following elements were particularly influential in the tribunal’s decision:

• Subordination and Control: The club required the player to participate in specific competitions, adhere to a strict training schedule of 15 hours per week, and engage in a minimum of 20 hours of streaming per month. Such requirements are indicative of an employer’s control over the employee’s work activities.
• Contractual Obligations: The contract stipulated that the player wear the team uniform during competitions and participate in marketing activities dictated by the club. These obligations demonstrate the club’s control over the player’s professional image and public engagements, further evidencing an employment relationship.
• Economic Dependency: The regular payment between EUR 4,000 and EUR 5,000, alongside provisions for accommodation and travel for competitions, indicated an economic dependency typical of an employment relationship rather than freelance or self-employed arrangements.
• Termination Conditions: The contract allowed the club to terminate the agreement if the player failed to meet the set obligations or was unable to provide services for at least 30 consecutive days. This level of control and the potential for penalization align with the characteristics of an employee-employer relationship.

Implications of the Ruling

For Esports Clubs: The reclassification of service contracts to employment contracts suggests that esports clubs need to meticulously review and possibly revise their contractual practices. Clubs may face increased financial liabilities due to obligations to pay social security contributions and potential penalties for previously undeclared work, as outlined in articles L8223-1 and L8211-1 of the French Labour Code. This ruling may compel clubs to establish clearer, more structured employment agreements, potentially increasing operational costs but providing more stability and clarity for both parties involved.

For Players: Esports players may find this ruling beneficial as it provides a clearer path to securing employment benefits, including social security, health insurance, and guaranteed wages. This could also empower players to challenge unfavorable contractual terms and seek reclassification as employees to gain the protections and benefits that employment status confers.

For the Esports Industry: The decision may prompt a broader reevaluation of how esports professionals are classified across the industry. It challenges the current contractual norms and may lead to more standardized employment practices. While this could increase costs for esports organizations, it also has the potential to professionalize the industry further, attracting more stable investments and improving the overall working conditions for players.

Conclusion

The Paris Tribunal Judiciaire’s decision of 27 March 2024 is a very important one for the esports industry. As the sector continues to grow and professionalize, the legal definitions and frameworks that govern these professional relationships will be crucial. Esports organizations and players must take these changes carefully into account, balancing competitive interests with legal compliance and fair labor practices.

Via: Victoire-Avocats

This lawsuit, just like Casey Dunn et al. v. Activision Blizzard et al., on which ELN reported before, accuses companies, including Epic Games, Mojang Studios, and Roblox, of designing games that create an excessive video games addiction in children, leading to serious detrimental effects on their physical, social, and mental health.

Context and Background of the Case

In a legal filing that marks a significant escalation in the scrutiny of video game companies’ practices, a lawsuit has been filed in the U.S. District Court for the Western District of Missouri, Central Division. The case, bearing the number 2:24-cv-4055, has been initiated by Carey Courtwright, representing her minor child K.C. This legal action addresses serious concerns about the design and operation of video games that allegedly lead to addiction among young players. K.C., who began engaging with video games at the tender age of six, is presented as a victim of these manipulative gaming practices.

Defendants in the Lawsuit

The defendants listed in this lawsuit are some of the most prominent names in the gaming industry:

• Epic Games, known for Fortnite
• Mojang Studios, the creators of Minecraft
• Meta Platforms, the conglomerate formerly known as Facebook
• Roblox Corporation

These companies are accused of creating and maintaining gaming environments that exploit psychological vulnerabilities in children.

Detailed Allegations of Video Games Addiction Triggers

The lawsuit articulates specific tactics employed by the defendants which are purportedly designed to foster addiction:

• Reward Systems and Feedback Loops: Games are structured to release dopamine in response to achievements within the game, perpetuating a cycle of engagement that can lead to excessive and unhealthy gaming habits.
• Limited Transparency and Predatory Monetization: The true costs of in-game transactions are often concealed or minimized, exploiting cognitive biases and leading players, particularly young ones, to spend money without a full appreciation of the cumulative costs.
• Fear of Missing Out (FOMO): By introducing time-limited events and exclusive in-game items, the games tap into a player’s fear of missing out, which can compel continuous or increased expenditure to remain competitive or included in gaming communities.
• Targeting of ‘Whales’: These companies strategically identify and exploit major spenders within their games — often referred to as “whales” — by encouraging them to spend large amounts of money through tailored incentives.
• Lack of Parental Controls: The complaint criticizes the insufficient mechanisms provided to parents to monitor and control their children’s gaming activity effectively, which exacerbates the problem of unregulated access and expenditure.

Human Costs and Plaintiff’s Burden

The complaint vividly describes the adverse effects on K.C.’s life due to the alleged gaming addiction. These include a noticeable decline in academic performance, social withdrawal from peers and activities, and the development of physical symptoms such as pain in the hands, eyes, and back, as well as disrupted eating patterns. Moreover, K.C. has reportedly suffered from mental health issues, including depression and anxiety, which were intensified by the inability to disengage from gaming. The plaintiff, Carey Courtwright, shares the emotional and financial burden inflicted by this ordeal, emphasizing the considerable expenses accrued through medical treatments and in-game spending by K.C.

Legal and Industry Implications

This lawsuit is part of an emerging trend where legal actions are increasingly highlighting the potential negative impacts of video games on minors. Similar to the issues raised in Colvin et al v. Roblox Corporation et al, this case underscores the urgent need for the industry to adopt more ethical practices in game design and marketing. The outcome of such lawsuits could potentially lead to stricter regulations and standards governing game development and marketing, particularly regarding the mechanisms that promote prolonged engagement and spending in games.

Entertainment Software Association’s Statement (Update)

Having read our article, the Entertainment Software Association (ESA) has provided a statement that offers a broader industry perspective. The ESA, a trade association that represents the U.S. video game industry and includes several of the defendants in the lawsuit as its members, has articulated its stance on the issues central to the lawsuit.

The ESA emphasized its commitment to player safety and digital wellness, stating:

“Video games are among the most dynamic, widely enjoyed forms of entertainment in the world. We prioritize creating positive experiences for the entire player community and provide easy-to-use tools for players, parents, and caregivers to manage numerous aspects of gameplay.”

Moreover, the ESA addressed the claims made in the lawsuit directly, noting:

“Claims that say otherwise are not rooted in fact and ignore the reality that billions of people globally, of all ages and backgrounds, play video games in a healthy, balanced way.”

This statement underscores the ESA’s viewpoint that while the lawsuit raises important concerns about player safety and addiction, the claims do not necessarily reflect the broader reality of gaming as an activity enjoyed healthily by a vast global audience.

Conclusion

This lawsuit could set important precedents regarding the accountability of video game developers and platforms in safeguarding the well-being of their youngest and most vulnerable users. The broader implications for the industry could include a reevaluation of game design ethics, the introduction of more stringent parental controls, and a more transparent communication regarding the costs associated with in-game content. The video game industry may need to balance commercial interests with a heightened responsibility towards its user base, especially children, in light of growing legal scrutiny.

Image source: DallE3

Carey Courtwright, individually and on behalf of K.C., a Minor v. Epic Games et al

Court: United States District Court for the Western District of Missouri, Central Division
Case No.: 2:24-cv-4055

Defendants

1. Epic Games
   • Counsel not listed
2. Mojang Studios
   • Counsel not listed
3. Meta Platforms
   • Counsel not listed
4. Roblox Corporation
   • Counsel not listed

Plaintiff

1. Carey Courtwright (Individually and on behalf of her minor child, K.C.)
   • Counsel to Carey Courtwright:
     • Tyler W. Hudson, Eric D. Barton, and Melody R. Dickson of Wagstaff & Cartmell LLP
     • Breean “BW” Walas, Tina Bullock, and Danielle Ward Mason of Bullock Ward Mason LLC
     • Charles M. Stam of Thompson Stam PLLC

Case Background of the Roblox Litigation

Roblox, a platform that combines gaming with social networking, has been accused of facilitating illegal gambling activities targeted at minors through its virtual currency, Robux. Plaintiffs Rachelle Colvin and Danielle Sass allege that Roblox’s system enabled minors to engage in gambling via third-party sites that were intricately linked to the Roblox platform, thus breaching the Racketeer Influenced and Corrupt Organizations Act (RICO) and other pertinent statutes​​. This is just one of many cases against Roblox.

Specific Allegations Against Roblox

1. Misleading Representations: Roblox’s terms of service claim that it does not allow activities involving simulated gambling using Robux. However, the lawsuit asserts that Roblox has misled consumers, particularly parents, about the safety and appropriateness of its platform for children​​.
2. Facilitation of Gambling: Despite these terms, Roblox is accused of actively facilitating and profiting from gambling activities by tracking and recording the flow of Robux used for gambling on third-party sites, thereby enabling this ecosystem​​.
3. Profit from Illegal Activities: It is alleged that Roblox profits significantly from these transactions by charging a transaction fee, including when Robux are converted back into real currency by these gambling entities, effectively receiving a cut from the illegal use of its platform​​.

Claims Made in the Roblox Litigation

The lawsuit brings multiple claims under both federal and state laws, including violations of the RICO, the California Unfair Competition Act (UCL)¹, and for negligence, among others. These claims focus on the creation and maintenance of an illegal gambling operation, misleading business practices, and the unjust enrichment of Roblox at the expense of its users​​.

Relief Sought

The plaintiffs seek monetary damages, restitution for the losses incurred by the minor users and their guardians, and injunctive relief to prevent further illegal gambling operations. They also demand a jury trial to adjudicate these claims​​.

The Motion to Dismiss

On 26 and 28 March 2024, the court partially granted Roblox’s motion to dismiss. The court dismissed the RICO claims which was significant. The court held that the plaintiffs failed to demonstrate that Roblox was engaged in a “qualifying enterprise” under RICO, as they could not show a common purpose or concerted action beyond regular business operations. The court’s findings demonstrate a challenge plaintiffs usually face when applying traditional legal frameworks like RICO to the fluid, expansive, and often nebulous operations of digital platforms, which are designed to maximize user engagement and revenue through complex, layered interactions that may not neatly fit into existing legal categories.

Claims Advancement

However, the advancement of claims under the UCL and for negligence opens substantial grounds for legal debate and analysis. The UCL’s broad scope, aimed at combating unlawful, unfair, or fraudulent business acts or practices, provides a robust framework for addressing alleged misconduct in digital settings. The court’s decision to let these claims proceed suggests a recognition of potential oversight and management failures by Roblox in preventing the use of its platform for gambling activities, especially those involving minors.

The negligence claims hinge on whether Roblox failed to exercise reasonable care to avoid foreseeable harm to its users, particularly children, who might be drawn into gambling with real-world economic consequences.

Unjust Enrichment

The court also allowed the unjust enrichment claim to proceed. By allowing this claim to proceed, the judge recognized that the compensation sought by the plaintiffs might not be covered fully by direct monetary damages. This decision emphasizes the need to consider a broader economic context of transactions on platforms like Roblox, where the company’s revenue model directly benefits from the engagement and expenditures of its users, including those activities that skirt or cross legal boundaries.

Implications for Digital Currency and Platform Liability

This litigation spotlights the need for stricter regulatory scrutiny of digital currencies like Robux or gambling aspects in video games in general. As these currencies blur the lines between virtual assets and real-world value, the potential for misuse increases, necessitating clearer regulations and standards. This case could prompt lawmakers and regulators to examine more closely how digital currencies are managed on platforms, especially those accessible to minors.

The case also raises critical questions about the duty of platforms to protect users from harm. The allegations suggest that Roblox could and should have done more to prevent its platform from being used for gambling.

Conclusion

Colvin et al v. Roblox Corporation et al is an interesting case at the intersection of technology, law, and ethics, offering a crucial legal precedent for digital platform governance. As the case progresses, it will provide valuable insights into how digital platforms can be held accountable for the activities they enable and profit from.

This case will likely have far-reaching implications for legal practices, platform operations, and the legislative landscape governing digital interactions and economies, making it a critical watchpoint for legal professionals and platform operators alike.

Colvin et al v. Roblox Corporation et al

Court: United States District Court, Northern District of California
Case No.: 3:23-cv-04146

Defendant Roblox Corporation

• Counsel to Roblox Corporation: Cooley LLP
  • Kyle Wong
  • Robby Lee Ray Saldana, Washington, DC
  • Tiana A. Demas, Chicago, IL

Defendant RBLXWild Entertainment LLC

• Counsel not listed

Defendant Satozuki Limited B.V.

• Counsel not listed

Defendant Studs Entertainment Ltd.

• Counsel not listed

Plaintiffs Rachelle Colvin and Danielle Sass

• Counsel to Plaintiffs: Weitz & Luxenberg, P.C.
  • Aaron Freedman, New York, NY
  • Devin Lynn Bolton, Los Angeles, CA
  • James J. Bilsborrow, New York, NY

Minor Plaintiffs G.D. and L.C.

• Represented by the same counsel as Rachelle Colvin and Danielle Sass.

1. Cal. Bus. & Prof. Code § 17200 et seq. ↩︎