Judge Rules Twitch Contract Clause “Unconscionable,” Phantoml0rd Can Sue for Damages Over Original $50,000 Cap

By Staff | October 3, 2019

For Immediate Release
Media Contact:

Natalie Bauer Luce
Culloton + Bauer Luce

Chicago—The Quinlan Law Firm LLC (QLF) today announced a San Francisco County Superior Court judge has ruled in favor of its client, influential livestreamer James “Phantoml0rd” Varga, with a decision that rendered streaming platform Twitch’s limited liability clause in its players’ contract as “unconscionable” and therefore unenforceable. The decision allows Varga to seek damages in excess of Twitch’s original $50,000 cap and marks a significant legal victory for potentially thousands of content producers who have signed contracts with Twitch.

Varga sued Twitch for violating its terms of service after banning him in 2016 from the platform, alleging claims of breach of contract, intentional misrepresentation, negligent misrepresentation and unfair competition, with the damages Varga suffered as a result of his wrongful termination potentially amounting to millions of dollars. The lawsuit, which went to trial in August over the validity of the $50,000 cap on damages contained in Twitch’s contract, has been characterized as one of the “most significant lawsuits in streaming history.”

“This is an important decision not only for Mr. Varga to seek full compensation for the losses he has suffered as a result of Twitch’s wrongful termination, but it also makes the case for hundreds if not thousands of other streamers who have signed contracts with Twitch should they similarly find themselves unfairly singled out by the platform’s administrators and cut off from their main source of income,” said William J. Quinlan, who represents Varga.

In ruling Twitch’s contract as “unconscionable” and the $50,000 cap to be invalid, Judge Curtis E.A. Karnow found that the platform’s $50,000 cap was “so incommensurate” with the amount the parties would have expected Varga to earn at the time he signed his contracts with Twitch that it was “overly harsh and unreasonably and unfairly one-sided.” The ruling also points out that the absence of any reasonable competitors to Twitch gave it superior bargaining power over Varga and that Twitch had failed to present any evidence demonstrating that other livestreamers had been able to negotiate the terms of their contracts with Twitch. Judge Karnow further found that the unfair circumstances surrounding the signing of the contracts were exacerbated by the “significant difference” in the parties’ legal sophistication at the time the second contract was signed, when “Varga was a 26 years old living with his parents” with “little to no legal experience,” while Twitch had retained the services of the large law firm Wilson Sonsini to draft the form contracts it used with all of its livestreamers.

The victory comes as QLF prepares to open a new office in Menlo Park, Calif., where it will be able to better serve its growing list of clients in the gaming and tech industries in Silicon Valley.

The case, Varga v. Twitch Interactive, Inc., case number 18-1564337, is being handled by Quinlan and Associate Eric Schmitt.

About the Quinlan Law Firm LLC
The Quinlan Law Firm, LLC is a national complex litigation practice headquartered in Chicago, with offices in Phoenix and Redwood City. Founded in 2006, the firm oversees all aspects of litigation from the circuit court to the appellate court. Principal and founder William J. Quinlan, former General Counsel to the State of Illinois and a litigator for over 20 years, brings his extensive government and litigation experience to guide clients in developing custom strategies that meet their legal needs as well as their ultimate business goals. The Quinlan Law Firm, LLC serves as outside counsel to numerous corporations, as well as litigation counsel to both businesses and individuals. The Quinlan Law Firm, LLC brings together a team of talented litigators with experience in handling complex commercial litigation, as well as the ability to assist with the day-to-day legal matters that arise in the daily operations of the business world, from employment matters to contract drafting and negotiation. For more information, visit www.quinlanfirm.com.