Richard Lewis: Twitch file objection in Phantomlord case ruling - Dexerto

Richard Lewis: Twitch file objection in Phantomlord case ruling

Published: 6/Nov/2019 11:32 Updated: 6/Nov/2019 14:08

by Richard Lewis


As many legal analysts expected, Twitch’s legal counsel have filed an objection against the court’s ruling that the $50,000 limited liability clause in their contract with the popular streamer James “Phantomlord” Varga was “unconscionable”.

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The decision was touted as a significant victory by Varga’s legal team as the ruling would allow him to seek uncapped damages for his removal from Twitch for a number of infractions. On a YouTube livestream Varga had stated that he wished to seek damages in the range of $35 million.

The key argument to the court siding with the notion that the clause was “unconscionable” was that the limitation of damages, while applying to both parties, heavily favoured the corporate entity of Twitch. Varga’s earnings – which were reported to be in the region of $10,000 per month at the time the contract spanned – were also a factor in the judgment. On this basis it was reasoned that should Varga wish to seek damages for any reason, he could be entitled to a “much higher sum.”


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Naturally, Twitch’s legal team do not agree with this interpretation of the relevant case law and filed a nine-point objection in mid-October. As findings in the court’s ruling are initially only ‘tentative’ there is a chance that should the objections be deemed sound the court could reverse its ruling.

The objection opens up by disputing the court’s findings that “it is not apparent that…Varga thought Own3D [the previous streaming service he was contracted to] was in serious financial difficulties or about to go under.” The rebuttal points out that this is contradicted by Varga’s own testimony under deposition, and this is substantiated by a testimony from former Twitch executive Stuart Saw that multiple streamers from Own3d had raised concerns about non-payment. It is their opinion that it is highly likely that Varga was aware of Own3d’s financial troubles and therefore this awareness played a factor in Varga’s decision to move to Twitch.


PhantomLordTwitch’s lawyers are disputing the ruling that the limited liability clause was “unconscionable”.
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This leads into the second point that the court found that Saw and Varga’s handler and confidant, Jason ‘Opie’ Babo, “went out of their way to induce Varga to believe that Own3d was doomed.” The grounds for objection here are that they believe the finding is vague and implies an act of deception on the part of the Twitch personnel. 

In actuality, if we take the first point as fact, Varga would have been well aware of Own3d’s financial problems and was well served in looking to jump ship. The company did not pay money owed to Varga so Twitch, as part of their agreement, paid this outstanding amount to make him “whole”. With all of these as factors Twitch’s lawyers state that there is no evidence to suggest Saw and Babo “induced” anyone to do anything.


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Further objection is raised by the court’s characterisation of the esports landscape at the time of the agreement. The tentative finding stated: “There were alternatives at the time, mentioned in Twitch’s Closing Brief at e.g., 10, but none compared to either Own3D or Twitch, and I find they were not practical alternatives for Varga.” Twitch’s counsel object to this interpretation on the grounds that the statement doesn’t explain why services that existed at that time were not “practical alternatives.”

Addressing the court’s findings that Varga had not utilised any of his leverage during negotiations as he wasn’t aware he had any, Twitch’s lawyers pointed to several factors that they believe make this interpretation inaccurate. They point out that during testimony Twitch stated that Varga did negotiate and pushed them towards a higher revenue split and CPM during those negotiations.


 “This evidence is incompatible with the finding that Varga did not understand his bargaining leverage, but rather shows that he understood it and used it,” the lawyers conclude. They add that just because Twitch were keen to sign him and gave him the best deal doesn’t mean that he couldn’t have negotiated further. They also remind the court of several deposition transcripts from Twitch executives that point out that every term on the Twitch contract at that time was negotiable and it was standard practice for there to be redline re-issues of agreements between streamers.

@PhantomL0rd TwitterPhantomlord was initially banned from Twitch in 2016.
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In regards to the court’s finding that, because Varga didn’t use an attorney during negotiations, “there was a significant disparity in legal sophistication” between the parties, the objection states that it falls short of meeting the legal standard that “oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.” They point to the earlier established facts that Varga, while not using an attorney, did negotiate terms and did so successfully. They ask the court to explain how any oppression took place or amend this part of their tentative findings.


Twitch’s lawyers then go on to dispute the $10,000 per month figure, saying there was no substantiating evidence in the ruling that pointed to this being accurate. If it was accurate, they add, $50,000 of damages would be five times the individual’s monthly salary, which they state they believe to not be unreasonable. Furthermore, they add that following the court’s assumptions that $10,000 was the peak of Varga’s earnings that means that for large parts of the contract he earned less, making the $50,000 of damages even more reasonable by comparison.

Finally, they dispute the court’s assertion that there is an “absence of justification for the limitation of liability.” Citing the findings in the case of Darnaa v. Google, which focused on YouTube, they argue that similarly Twitch “must maintain the ability to ensure the integrity, lawfulness and appropriateness of its services, which are offered for free to the public, without the threat of runaway liability from its hundreds of thousands of content providers based around the world.” They conclude that “Twitch cannot protect its users from this type of content if its management of that content is subjected to unlimited liability.”

The court should now make a decision about whether to amend or alter its ruling based on these objections later in the month.