Entertainment

Twitch lose appeal in PhantomLord case, potential damages remain uncapped

by Richard Lewis

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Court documents from the ongoing lawsuit between streaming platform Twitch and James 'Phantomlord' Varga show Twitch have lost their appeal to prevent Varga from claiming more than $50,000 in damages.

The amount was stipulated in a limited liability clause in the contracts that Varga had signed with Twitch but was subsequently ruled “unconscionable” by the Superior Court of California. As we reported last month, Twitch immediately filed an appeal against the ruling. Still, that appeal has now been ruled unsuccessful, meaning Varga and his legal team may now pursue whatever amount in damages they deem pertinent.

The rationale for the decision was presented by Judge of The Superior Court Curtis E.A. Karnov. The ruling does acknowledge that some of the legal arguments presented by Varga’s team were strange, most notably that the clause was a “surprise” when Varga himself never reviewed the agreement at any point. Despite this, the court upheld the findings of unconscionability on the following grounds.

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First, the court ruled that there was an element of oppression to Varga’s signing of the contract. “Varga reasonably could have concluded, and probably did as a result of his call with [Twitch employees] that he could not have maintained his popularity for long without Twitch.

"By the time of the 2014 amendment, Own3d was gone, and there were no reasonable alternatives to Twitch for one intent on becoming or maintaining status as a top streamer. This weighs in favor of a finding of oppression.”

Twitch: PhantomLord
Twitch: PhantomLord
Twitch have lost their appeal to prevent Phantomlord from claiming more than $50,000 in damages.

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Secondly, the court found that Twitch did not provide a solid justification for the existence of the limited liability clause in the first place. In their arguments, they cited Darnaa, LLC v Google LLC as a case that explained why such limited liability clauses were necessary.

The Judge states this case isn’t adequate and makes no such argument, instead only presenting “justification for the fact that the parties have different obligations under the indemnification clause of the contract.” It concludes that the argument failed to demonstrate “a valid commercial need” for the existence of the liability clause.

Crucially the contract was found to be substantively unconscionable, meaning the contract was objectively unfair, on the basis that Varga’s monthly income was between $5000 or $10,000, meaning a limit of $50,000 in potential damages is incommensurate with that. The court rejected the arguments presented by Twitch that hypothetical unconscionability should not be considered.

Twitter: PhantomL0rd
Twitter: PhantomL0rd
Phantomlord was initially banned from Twitch in 2016.

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“From a practical point of view… limiting recovery to $50,000 virtually kills off the odds of a suit against Twitch at all," the court concluded.

"The agreement doesn’t appear to have an attorney fees clause, and few – if any – lawyers would take on a contingency case against Twitch for some reasonable percentage of $50,000. The cap is unconscionable.”

While a blow to Twitch, this ruling has no impact on whether or not the court will later find if Varga had violated his side of the agreement when the proceedings continue. Both parties are now in discussion as to how the case will proceed.