Trouble brewing with Patreon.

[tomaO2]

Anyone paying attention to this?

Started with {scrubbed}.

Because Patreon had rules saying that you can't file as a group, they had to each file an individual case. Each case filed costs Patreon money, because they have to front the costs of arbitration.

This could open the flood gates.

{scrubbed}. If enough of them do so, Patreon would be on the hook for millions of dollars they don't have the funds to pay. If they don't pay, my understanding is that they automatically lose the case.

Given the number of webcomic creators that use Patreon, including the Giant himself, this has the potential to suddenly cut off a lot of people from their funding. There is a real possibility here that Patreon could be going bankrupt in a year or so. Especially if others that have been kicked join in on the pile on.

It's not a crisis at this point, and may amount to nothing, but it bears keeping an eye on. Also, keep in mind that they might start taking money meant for the creators while the cases are ongoing, so bad things could happen earlier than you might expect.

I'd suggest mentioning it to any webcomic creator you happen to be able to contact, so they can start to consider alternative funding. I hear Subscribe Star might be a viable alternative. Better safe than sorry.

[C-Dude]

Huh...
Companies have been pushing arbitration clauses for years now because it saves them the expense of facing a class-action court case. It's intriguing that the call for individual arbitration might be its downfall. If something big comes of this situation, I imagine many services will be updating their terms of service to 'plug the leak', as it were.

Patreon might be able to mitigate its damages by bypassing the arbitration with cash settlements, which--while expensive--will certainly be less expensive than individually arbitrating every case. They might also be able to space them out (I don't know how long their terms allow for resolving an arbitration call), arbitrating the first case and deciding on a reasonable settlement for the rest. It also might be argued that the fans doing this after the terms were changed are deliberately acting in bad faith, or they might fall under the new terms simply by their effort to delete their accounts. I know Microsoft does that all the time, rolling out terms with effective dates months before their OS displays them, with the statement that 'use of the product after <date that was weeks ago> constitutes agreement to these terms'.

Patreon taking more than their contracted cut from other creators sounds illegal (and might even be embezzlement; their content creators are not a personal piggy bank), but they may raise their percentage of the take as a reaction to this.

[tomaO2]

Yea, it was considered the better option to stop people from launching class-action by many companies. I think there was a recent change in California law that made this arbitration option more appealing? Like, it seems to be a really glaring lapse in judgement to be unable to foresee this possibility.

I don't think a judge would be saying that future cases requesting arbitration are operating in bad faith, because Patreon just did an entire court case to stop this in the first place. The rule was that if you file for arbitration, you need to tell them first. When they did, Patreon realized that this could cost a lot of money, so they immediately changed the terms, and then asked a judge to squash the arbitration suit so that this could be settled in a single court case.

The judge just denied this, due to the fact that Patreon, itself, was acting in tremendously bad faith, and when Patreon said that this could open floodgates for others doing the same thing, the judge made it clear that he did not care. Patreon losing this motion is why there is a sudden spike of interest in doing so. There's blood in the water, because they see that this can work. The actual arbitration cases have not been decided, and Patron might win them, but they still have to pay upfront the legal fees for every single case that comes their way. If this happens, I doubt they will be taking settlements either, given that the goal of most will be to destroy Patreon. They will fight to the bitter end.

Patreon does not have deep pockets, so this, alone, could bankrupt them. Regardless of whether or not Patreon wins them.

As for taking money, yes, raising fees would be the most likely method.

[FLHerne]

I wasn't able to find a writeup of this on any of the tech or law blogs and sites that I typically read, which love schadenfreude of this kind and report on it regularly.

In fact, all the articles I found about it come from sites at one end of the political spectrum, with similar views to the banned creators mentioned, including at least some that are well-known for backing extreme conspiracy theories.

(I'd be less vague, but I think that's as far as the forum rules allow.)

It seems improbable to me that this issue would cause much disruption to the company even if the hypothetical thousands of claims are really made - $5 million sounds like a lot, but it's about 1% of annual turnover and the company has raised dozens of times that in individual funding rounds.

That being the case, my suspicion is that the original reporting - I'm sure the OP has relayed it in good faith - is more about trying to create uncertainty and damage Patreon's business, as retribution for the bans, than a genuine risk to users.

[tomaO2]

All this stuff actually happened though. Even if it's not as severe to the business model as I was lead to believe, isn't it worth reporting on?

An arbitration was filed on Patreon, they changed the rules right after to avoid trying individual cases, because they didn't want to pay for every case, and a judge denied it. That's pretty scummy behavior on Patreon's part (they specifically had rules that you had to file notice first, which is they only reason they could change the rules before going to trial in the first place), and deserves to be called out. Even if it doesn't amount to the most money, it still a perfectly fine schadenfreude article as is.

{scrubbed}. Additionally, Patreon does keep needing to receive funding from outside ventures, so they are clearly not on the most stable footing financially.

I'd imagine this will hurt them, regardless, and it's their own fault for the way they treated their users. It's worth keeping an eye on, I'm baffled at being told that these other websites don't consider it newsworthy. What part of this is not worth reporting on?

[Peelee]

The Mod on the Silver Mountain: I've moved this from Webcomics to Mad Science and Grumpy Technology, since it is discussing a website and not actual comics.

Please avoid any political discussion. This includes people who, even if not employed by the state, are notable activists, pundits, or otherwise outspoken regarding political issues.

[Razade]

Considering Patreon added 100,000 new users over the last few months I think maybe the alarm bells are being triggered far too loudly. I only posted this because there's also a thread in "Site problems".

The fact is no major news site of any repute is picking this story up, and it would actually be a rather big story if it had any real credence to it. Are they going to have to pay up? Probably. Patreon's business model probably isn't sustainable but the concern that it might collapse at the first sign of a small wave of aggrieved influences seems panicked at best.

This recent controversy doesn't even garner enough traffic to push "Patreon controversy" to the top 10 slot on a google search. Not even when a "2020" is appended to it.

[tomaO2]

In fairness, the first news article I pull up on google is that talks about the case say, "it backfired", which was due to the counter suing of Patreon. The judge blocked that. It clearly didn't backfire, yet the first article that pops up says it did (it has been updated, but most people don't read entire articles).

Further research has shown (and you really have to search around to low traffic spots to get details) that what the judge did was block the preliminary injunction, which I believe means that Patreon is still going forward with that line of counter-attack, it just means that it will be going on at the same time as the arbitrations. If Patreon succeeds later on, then that would stop bigger groups, capable of doing much more financial damage, from applying the same tactic. Meaning there is no particular worry, as the present group can't really deal major damage on their own.

There is also question of how much money the arbitrations will cost, as the cases may be determined to be frivolous. It's probably not as serious as some commenters are making it out to be, but it's not as frivolous as some news agencies dismissed it as being.

[BeerMug Paladin]

If there were ever any serious trouble for the company, I'm fairly confident another company with a similar operation would spring up before long. There might even already be a similar company operating on a smaller scale. Don't know.

I don't know anything about this particular situation, but it seems to me that there's a lot of social media influencer types who like to pretend to be more important/knowledgeable than they actually are. People who do that kind of thing tend to be pretty unreliable sources in terms of things that happen within their eyesight or their earshot. Doubly-so if the influencer feels they have some kind of personal stake in the subject matter.

It's actually not always trivially easy to determine how important a story is and how best to report on that information in a trusty, accurate way. That's why it's best to wait for other sources than those not directly involved. Long story short, journalism is a field of expertise that exists for a reason. I vote on waiting to call this "trouble" when it starts getting reputable press attention.

[Razade]

In fairness, the first news article I pull up on google is that talks about the case say, "it backfired", which was due to the counter suing of Patreon. The judge blocked that. It clearly didn't backfire, yet the first article that pops up says it did (it has been updated, but most people don't read entire articles).

Further research has shown (and you really have to search around to low traffic spots to get details) that what the judge did was block the preliminary injunction, which I believe means that Patreon is still going forward with that line of counter-attack, it just means that it will be going on at the same time as the arbitrations. If Patreon succeeds later on, then that would stop bigger groups, capable of doing much more financial damage, from applying the same tactic. Meaning there is no particular worry, as the present group can't really deal major damage on their own.

There is also question of how much money the arbitrations will cost, as the cases may be determined to be frivolous. It's probably not as serious as some commenters are making it out to be, but it's not as frivolous as some news agencies dismissed it as being.

I haven't seen any news agencies dismiss it. I haven't seen any credible, major, news agencies even report on it. Low traffic websites aren't going to cut it for this. If it were an actual news story it'd be everywhere not to mention trending on twitter and all other various social media sites. This would be a big deal.

I'm not interested in talking about the legal aspect. I'm well aware of it, as I did as much poking around as I could before commenting here.

It's a few angry social media sorts whipping their fanbases to try and get at Patreon.

[tomaO2]

Well, if you want to think of it in those terms, I have to ask you, is Patreon even important enough to get major media attention? Especially this early on? If I type "patreon news" on google, and scroll down the news articles about it. I'm not seeing Fox, Cnn, Newsweek, or the New York Times. Um, Forbes made a couple articles on it. I guess that's fairly large media group.

Still, this isn't Facebook, youtube, or twitter. It's not a place where big projects happen, like with Kickstarter. It didn't get a big wave of hype like Zoom and Tic Tok. There are no celebrities that get donations here. It hasn't really made the kind of mark that really gets media attention. In the grand scheme, it's pretty small potatoes.

It's really important to a certain segment, such as, say, webcomic creators, but how many webcomics get major attention? In the end, I wouldn't be surprised at all if the major media slept on this until the court case finished, and maybe not even then.

[Razade]

Well, if you want to think of it in those terms, I have to ask you, is Patreon even important enough to get major media attention? Especially this early on? If I type "patreon news" on google, and scroll down the news articles about it. I'm not seeing Fox, Cnn, Newsweek, or the New York Times. Um, Forbes made a couple articles on it. I guess that's fairly large media group.

Yes. Patreaon does get mentioned on Forbes semi-frequently and this would be big enough to have some news there. Forbes is one of the premier news venues for economics and that general sphere.

Still, this isn't Facebook, youtube, or twitter. It's not a place where big projects happen, like with Kickstarter. It didn't get a big wave of hype like Zoom and Tic Tok. There are no celebrities that get donations here. It hasn't really made the kind of mark that really gets media attention. In the grand scheme, it's pretty small potatoes.

The top earners on Patreon make over 15,000 bucks a month. The top earner that I can find with a cursory glance makes 154 thousand dollars a month. Six. Digits. I think you vastly underestimate just how important and big Patreon is.

It's really important to a certain segment, such as, say, webcomic creators, but how many webcomics get major attention? In the end, I wouldn't be surprised at all if the major media slept on this until the court case finished, and maybe not even then.

And youtuber content creators and all sorts. Dismissing it as a "webcomic hangout" is crazy. Legitimate artists make money on Patreon, podcasts seem to be a huge contributor for the venue. The list is wide and varied. Jim Sterling, a fairly well known youtuber is making (according to metrics so take it worth a gain of salt) some 15K a mont and he's in the top 50 earners.

[Telok]

Which jurisdiction? A large number of courts across the USA have some sort of online public access to filings, especially if they've implemented efiling. Perhaps not the gritty details or all the documents, but often something. I have some ability to filter that sort of stuff if I know at least the state. Case title, parties (beyond Paetron of course), and date of filing help to narrow things down too.

[tomaO2]

My understanding is that the jurisdiction is San Francisco, California.
I believe it happened in early January of this year. There are reports of Patreon being sued for 3.5 million that give the timeframe of when this went down. Along with the talk of them suddenly changing terms of service to prevent the arbitration from happening.

Case Number: CGC20584586?

I found what I think is the case register, and it says it was generated on 2020-08-04 2:22 am, for what that is worth, but I don't want to link it.{Scrubbed}

[Knaight]

Yes. Patreaon does get mentioned on Forbes semi-frequently and this would be big enough to have some news there. Forbes is one of the premier news venues for economics and that general sphere.

It does, but there are a few factors working against it. The space it's in tends to be taken a bit less seriously than other comparably sized companies, and while it's by no means small it's also not exactly Facebook or Amazon. During normal times it can still fly below the radar, only cropping up intermittently.

These are not normal times, and there is somewhat larger news on the daily, starting with the whole "global plague" thing.

[Razade]

It does, but there are a few factors working against it. The space it's in tends to be taken a bit less seriously than other comparably sized companies, and while it's by no means small it's also not exactly Facebook or Amazon. During normal times it can still fly below the radar, only cropping up intermittently.

Sure, but dismissing it as not newsworthy compared to Youtube of Facebook seems the wrong track. Patreon services both of those venues as a means for crowdsharing revenue.

These are not normal times, and there is somewhat larger news on the daily, starting with the whole "global plague" thing.

Yeah, while COVID is a serious deal for a lot of reasons, I personally find the whole "global plague" thing a bit of hyperbole. This isn't airborne ebola or the Spanish Flu or smallpox or anything, maybe "health crisis" would be a better term, because that's at least the level it's at. The doom and gloom and the "if we survive" narrative I've seen elsewhere seems less productive than being sensible about this whole thing. Thank goodness for that, by the by. I don't really see COVID doing much to push Patreon more or less into the news cycle than it would normally be outside of...more people are using it because it's a good way to generate income when you work from home.

[Yora]

It's really important to a certain segment, such as, say, webcomic creators, but how many webcomics get major attention? In the end, I wouldn't be surprised at all if the major media slept on this until the court case finished, and maybe not even then.

There's always a lot of wishful thinking and blind faith even in industry journalism.
Right now there's a huge financial scandal in Germany about the new golden child of the German finance business turning out to be a fraud. Some journalists reported about it a long time ago, but everyone dismissed them as mean spirited naysayers who are just envious. Even German regulators ignored them. And now everyone is surprised pikatchu face.

Or take the global finance crash in 2007. Plenty of people knew it was coming, tried to warn everyone, and were dismissed as being either dumb or trying to sabotage everyone.

Journalism turning a blind eye on major stories of failure and risk happens all the time, even at the highest levels. Patreon and independent creators are niche and small fries as mainstream economy journalism goes. It is absolutely believable that huge stories that happen in that field get completely ignored.

What about stories about Kickstarter having massive declines? Anyone report about that?

I've been hearing stories about Patreon being fishy and warnings to protect your financial security of Patreon money for a good while. I don't think they are safe, and when it would crash, it probably would come fast. And then everyone will pretend that nobody tried to warn them.

[Rockphed]

I've been hearing stories about Patreon being fishy and warnings to protect your financial security of Patreon money for a good while. I don't think they are safe, and when it would crash, it probably would come fast. And then everyone will pretend that nobody tried to warn them.

I have heard one of the creators I follow grumble about every 6 - 12 months for the last 3 years that Patreon keeps changing their methods of calculating how much they are getting and changing their fee schedule. I think their biggest reason for staying with Patreon instead of finding another crowd-source funding solution is that then they would have to move several years worth of content and have to move their subscribers (which would probably have a less than 100% success rate).

[Rogar Demonblud]

Having read the filing, it feels a lot like a standard greenmail 'nuisance suit'. I doubt there's a lot of reason to worry, arbitration is set up to make those unprofitable since what you pay your lawyer quickly outpaces what the settlement would be. Patreon likely doesn't have that issue since they're paying the lawyers a retainer anyway (as a basic business expense).

[Palanan]

What is "greenmail" in this context?

[Razade]

What is "greenmail" in this context?

Blackmail but instead of threats of exposure or violence, you're using money to threaten them. The term here would actually be Abusive Litigation, the offenders using their support to file superfluous or excessive legal filings to threaten or harass.

[Yora]

I have heard one of the creators I follow grumble about every 6 - 12 months for the last 3 years that Patreon keeps changing their methods of calculating how much they are getting and changing their fee schedule. I think their biggest reason for staying with Patreon instead of finding another crowd-source funding solution is that then they would have to move several years worth of content and have to move their subscribers (which would probably have a less than 100% success rate).

The last big one I heard is Patreon locking accounts for undisclosed breaches of terms of service, and claiming that all money that has not been cashed out to a private bank account is voided and will not be paid out to the owners. And Patreon was not even denying any of that incident, claiming that this is their right.
I don't know about American terms of service, but in German law this is just plain illegal and would probably constitute theft.

[tomaO2]

Having read the filing, it feels a lot like a standard greenmail 'nuisance suit'. I doubt there's a lot of reason to worry, arbitration is set up to make those unprofitable since what you pay your lawyer quickly outpaces what the settlement would be. Patreon likely doesn't have that issue since they're paying the lawyers a retainer anyway (as a basic business expense).

I believe you are missing an important aspect. First off, while I'm sure they have lawyers on retainer, it's doubtful they have anywhere near enough to cover the number of cases being brought fourth.

There is also the fact that the plaintiffs only need to pay a set amount to start the process. I believe the sum is $250. Patreon is required to pay the rest.

Patreon pays for its own lawyer, and the lawyer of the other side. That is the crux of the greenmail. It doesn't matter if they win or not. This is why the more people that file suit, the more this becomes costly for patreon. Patreon realised this, which is why it wanted to shift things to a class action law suit, so that they would only need to pay 1 lawyer, instead of paying for for 140 (there's around 70 cases right now). Depending on how long each arbitration lasts, each case can cost tens of thousands of dollars.

Now, if the claim is realised to just be a nuisance and dismissed quickly, then costs will be much less. There is also the possibility of Patreon recouping some costs from the plaintiffs if/when they win the cases. There are laws that could prevent this though, so it's not a guarantee. I'm not really sure how it would go, but I really can't say either way right now.

[Peelee]

I believe you are missing an important aspect. First off, while I'm sure they have lawyers on retainer, it's doubtful they have anywhere near enough to cover the number of cases being brought fourth.

That is not how arbitration works.

Patreon pays for its own lawyer, and the lawyer of the other side.

That is not how the American legal system works.

[tomaO2]

Well, if that isn't the case, I'm glad to hear it, but the idea that Pareon would have to pay all legal fees was the primary driver of why people were saying Patreon might go bankrupt and, to the best of my ability to tell, that's exactly how it works in California. I think it's a new law, which is why it caught Patreon flat footed.

A quick google of "who pays for arbitration in California?" gives me this information.

Should every employer implement arbitration agreements?

No. The decision to implement an arbitration agreement should be reviewed with an employment lawyer to discuss the positives as well as the negatives of arbitration agreements. As discussed above, there are a lot of benefits of having an arbitration agreement in place, but it does not come without a few drawbacks. The primary drawback is that in California, the employer must pay all of the arbitrator’s fees in employment cases. Arbitration fees can easily be tens of thousands of dollars – a cost that employers do not need to pay in civil cases. However, if the company values the confidentiality and speed of process provided in arbitration, this extra cost may well be worth it.

https://www.californiaemploymentlawr...0civil%20cases.

The website seems official enough. I think that employment works since there is a payment for service model? Patreon counts as a third party though, so I don't know details of how it applies, exactly. However, the point is that they have to pay for the court fees upfront, and may, or may not, be able to reclaim these fees after the trial is over.

I wouldn't have bothered posting if bankrupting Patreon was contingent of the platifs winning the court cases, court costs is the main danger. At least, this is my understanding.

[Rockphed]

That is not how arbitration works.

That is not how the American legal system works.

If Patreon loses they might have to pay the reasonable legal fees in addition to whatever damages are assessed. I don't really pay that much attention to legal news.

[Anymage]

This isn't the first time that a group of people decided to coordinate their arbitration claims to get back at a company that decided to insert an arbitration clause. It's definitely painful for the company, but I can't think of anybody who went under due to it.

On top of that, Patreon has proved that it can make money. (Source: they've remained solvent so far.) On the off chance that these charges could actually put them under instead of just being some bluster from people who are against Patreon, I see it being far more likely that someone else swoops in to buy up the remains than for the content creators at the end to have to find a new service/funding source.

[Rogar Demonblud]

Your problem, Toma, is that this is not an employment related arbitration. The other problem is that California law makes it pretty easy to quash an arbitration if the court thinks it is done in bad faith (thank you Hollywood), and the fact Patreon can show social media posts to prove that this is a dedicated harassment campaign...well, I'm not placing any bets on this.

[Xyril]

That is not how arbitration works.

Umm, yes it is, in many cases.

Alternative dispute resolution pretty much means whatever the contract says it does--in most cases, that means going before a (theoretically) neutral arbiter who essentially acts as a private judge. In most cases they are, in fact, former judges. The contract will also set the rules of procedure for the arbitration--this is usually intended to make things simpler (and cheaper) for both parties. However, it does not mean that both parties would or should waive their right to have someone advocate for their position. In fact, the majority of ADR you see allows both parties to independently hire representation, but puts all of the costs on them.

That's what's really surprising about the Patreon case to me--the fact that Patreon seems to have accepting fee-shifting in the customer's favor, even in cases where Patreon prevails. Big companies often insert one-sided fee-shifting language into their contracts--basically, if they win, the customer pays for both parties fees, but if the customer prevails, they often still pay their own fees. One reason arbitration clauses are controversial is because they're often associated with this sort of fee-shifting, but they're not exclusively so. A lot of companies have similar fee-shifting applied to civil suits as well--in fact, this is so prevalent that at least one state has enacted a forced reciprocity law.

The fact that Patreon drafted a contract where they took on all of the costs of arbitration tells me that they're trying very hard to look like a good guy to deal with, or that they felt that they were getting a huge benefit for that concession. And keep in mind, this is a largely boilerplate contract and not an entirely even negotiation between parties--more of a meta-negotiation. This means that Patreon, thinking ahead to what sort of terms might scare off potential users, probably decided that they had to be able to say, "Hey, in case of any disputes, we'll use arbitration instead of expensive civil litigation, and Patreon will pay costs for all parties" in order to get people enough people to agree to the rest of the terms.

That is not how the American legal system works.

Again, yes it is, in some cases. The American legal system does, in many cases, delineate specific classes of cases or circumstances where fee-shifting is allowed. What's one very large set of circumstances where this is the case? Anything arising out of a contract where both parties specifically agreed to fee-shifting.

More importantly, you're once again missing the most salient fact: This isn't "the American legal system" yet. It's arbitration. You might be confused by the fact that there's been a filing in court, but that is--in a legal sense--a related but distinct issue.

From what I have gathered, the contract between Patreon and its users sets up a system of arbitration as a mandatory alternative to a civil trial. The terms of arbitration, the rules of procedure, even the very fact that there must be arbitration are all set by contract. (By default, everyone has a right to seek redress in civil court. Mandatory arbitration clauses are only mandatory because all parties waive that right when they enter into a contract.) The only reason this could even go to court at all is that those very terms of that contract (more specifically, the way those terms were unilaterally altered) came under dispute, and it would obviously be impossible to use the arbitration clause to settle the question of whether the altered arbitration clause or the original arbitration clause should be used to govern the arbitration.

In these situations, the most likely results will be that the court interprets the contract one way or another--it determines whether the change by Patreon is valid under the original contract and applicable law, tells the parties which version of the contract is valid and will thus govern the arbitration, and then kicks it back to their private dispute resolution. There are circumstances where one party sues to challenge the validity of the arbitration clause itself (specifically, the part where they waived their right to immediately sue in court over the original controversy), and as you might guess, those cases provide one possible outcome where arbitration is scrapped entirely. However, so long as the court upholds the arbitration language, they pretty much wash their hands of the case.

Maybe this analogy would help you to understand a bit better. Say two teams agree to play an exhibition game so long as "Gary the Ref" will act as the head referee. The Bugbears thought they were agreeing to Gary Jones the referee. The Owlbears thought they were agreeing to Gary Smith. If they sue in court, the judge will likely rule on which Gary will ref, or scrap the original contract entirely and let the teams start negotiating again. What the the judge absolutely will not do is put on a black and white striped shirt and go ref the game himself, because the scope is his inquiry is limited to that one issue.

Right now, the case in court is settling the dispute over which ref will call the game--and basically the only possible outcome where the original controversy ends up in civil court would be if the judge rules that the original contract was so deeply flawed that it would be unreasonable to enforce.

[Azuresun]

There's always a lot of wishful thinking and blind faith even in industry journalism.
Right now there's a huge financial scandal in Germany about the new golden child of the German finance business turning out to be a fraud. Some journalists reported about it a long time ago, but everyone dismissed them as mean spirited naysayers who are just envious. Even German regulators ignored them. And now everyone is surprised pikatchu face.

Or take the global finance crash in 2007. Plenty of people knew it was coming, tried to warn everyone, and were dismissed as being either dumb or trying to sabotage everyone.

Make enough predictions of doom and you'll be right about something eventually. And a lot of commentators are really good at making it retroactively sound like whatever does happen, they had been predicting all along.

We remember the doomsaying that turns out to be accurate, and forget about the prophecies that turned out to baseless speculation or empty shells of media hype.