Motion for Preliminary Injunction in PATREON, INC. VS. PAUL MICHAEL AYURE ET AL| Trellis.Law

On June 02, 2020 a Request,Application was filed involving a dispute between Patreon, Inc., and Ayure, Paul Michael, Ball, William A., Barney, Jacob, Beck, Matthew, Bender, Andrew, Benoit, Steven, Benton, Dylan, Brierly, Thomas E., Buhk, Steven Wayne, Cesaro, Christian, Clark, Tyler, Colt, Shannon, Conklin, Michelle, Conklin, Philip, Dahl, Brian, Danesi, Christopher L., Decosta, Ryan, Diebold, Peter, Donley, Christine, Drew, Royster, Dugger, Cheryl, Eggen, Andrew, Fabbri, Nicholas William, Filippini, Blake, Garland, Garrett J., Gaverick, David, Gebhardt, Gretchen Von, Giles, Imogen, Giottonini, Joseph Brandon, Haase, Martii, Hand, Douglas, Harsha, Samuel, Harvey, Matthew, Hetrick, Melissa, Hill, Christopher, Hill, Samual, Hinker, Marcie, Hiser, Kathryn, Hollister, Michael, Howard, Clay, Johnson, William Lamar, Jupio, Andrew, Kanian, Rich Michael Badish, Kilman, Rj, King, Jeremiah, Kozel Jr., Steven E., Lawson, Jefferson, Lawson, Jill A., Loomis, Russell W., Mackaman, Jason, Magana, Abel, May, Luke, Mcaleese-Locke, Caitlin, Morey, Nathan, Novak, Jason, Plaxton, Andrew Joseph, Pyrich, James A., Ragon, Roxanne, Ramsey, Cory, Redmond, Joseph, Reslock, Lee, Robinson, Cheryl, Royster, Drew, Shumaker, Samantha, Swoger, William J., Webber, Ryan, Weller Jr., Mark, Winston, Sky, Yoder, Matthew B., York, Brian Scott, Zintsmaster-Howell, James, for OTHER NON EXEMPT COMPLAINTS (VERIFIED COMPLAINT FOR DECLARATORY JUDGMENT) in the District Court of San Francisco County.

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1 Fred Norton (CA SBN 224725)
Bree Hann (CA SBN 215695)
2 Tyler M. Layton (CA SBN 288303)
THE NORTON LAW FIRM PC ELECTRONICALLY
3 299 Third Street, Suite 106
Oakland, CA 94607 F I L E D
Superior Court of California,
4 Telephone: (510) 906-4907 County of San Francisco
fnorton@nortonlaw.com
5 bhann@nortonlaw.com 07/06/2020
tlayton@nortonlaw.com Clerk of the Court
BY: SANDRA SCHIRO
6 Deputy Clerk
Attorneys for Plaintiff
7 PATREON, INC.

8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 IN AND FOR THE COUNTY OF SAN FRANCISCO
10
PATREON, INC. CASE NO.: CGC-20-584586
11
Plaintiff, PLAINTIFF PATREON, INC.’S REPLY
12 IN SUPPORT OF REQUEST FOR
v. PRELIMINARY INJUNCTION
13 PAUL MICHAEL AYURE, et al., [Filed concurrently with Declarations of
14 Colin Sullivan and Tyler M. Layton in
Defendants. Support of Reply; Objection to Shepard
15 Declaration in Support of Defendants’
Opposition to Motion for Issuance of
16 Preliminary Injunction]

17 Hearing Date: July 13, 2020
Time: 9:30 a.m.
18 Dept. No.: 302
19

28
1

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1
TABLE OF CONTENTS
2
I. BACKGROUND FACTS ................................................................................................................... 2
3

4 II. THE COURT SHOULD ISSUE THE PRELIMINARY INJUNCTION ........................................... 3
5
A. Patreon Is Likely To Prevail On The Merits .................................................................................... 3
6
1. Defendants Are Subject to the 2020 Terms of Use ...................................................................... 3
7
2. This Court Should Enforce The Agreement To Litigate Defendants’ Non-Arbitrable Claims In
8 This Court ........................................................................................................................................... 8

9 3. Defendants’ Improper Claims in Arbitration Have Caused Past and Ongoing Harm to Patreon 9

10
B. The Balance Of Harms Favors A Preliminary Injunction Preserving The Status Quo ................. 10
11

12 III. CONCLUSION ................................................................................................................ 11

28
i

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 TABLE OF AUTHORITIES

2 Page(s)
3 Cases
4 Baltazar v. Forever 21, Inc.,
5 62 Cal.4th 1237 (2016) ....................................................................................................................... 8, 9
6 Dodge, Warren & Peters Ins. Servs., Inc. v. Riley,

7 105 Cal.App.4th 1414 (2003) ................................................................................................................. 7
E. & J. Gallo Winery v. Andina Licores,S.A.,
8
446 F.3d 984 (9th Cir. 2006) ................................................................................................................ 12
9
Hall v. Live Nation Worldwide, Inc.,
10 146 F.Supp.3d 1187 (C.D. Cal. 2015) .................................................................................................... 7
11 Henry Schein, Inc. v. Archer and White Sales, Inc.,
12 139 S.Ct. 524 (2019) ............................................................................................................................. 10

13 In re Facebook Biometric Info. Privacy Litig.,
185 F.Supp.3d 1155 (N.D. Cal. 2016) .................................................................................................... 6
14
Metro. Life Ins. Co. v. Bucsek,
15
919 F.3d 184 (2d Cir.)........................................................................................................................... 11
16
Milliner v. Bock Evans Fin. Counsel, Ltd.,
17 114 F. Supp.3d 871 (N.D. Cal. 2015) ................................................................................................... 12
18 Paramedics Electromedicina Comercial Ltda. v. GE Med. Sys. Info. Techs., Inc.,
19 2003 WL 23641529 (S.D.N.Y. June 4, 2003) ................................................................................ 12, 13
Pinnacle Museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC,
20
55 Cal.4th 223- (2012) ............................................................................................................................ 7
21
San Francisco Police Officers’ Assn. v. San Francisco Police Com.,
22
27 Cal.App.5th 676 (2018) ................................................................................................................... 10
23 Song Fi v. Google, Inc.,
24 108 F.Supp.3d 876 (N.D. Cal. 2015) .............................................................................................. 4, 5, 6
25
Statutes
26
Business and Professions Code section 17200 ........................................................................................... 9
27
Civil Code section 1770 .............................................................................................................................. 9
28
ii

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 In an effort to avoid the dispute resolution clause they all knowingly accepted, 67 of the 72

2 Defendants respond by claiming that clause is “unconscionable,” and Patreon has “unclean hands.”

3 Defendants offer no evidence in support of these affirmative defenses; the actual evidence of

4 Defendants’ misconduct eviscerates them. Defendants next contend Patreon will suffer no injury at all

5 if Defendants are allowed to breach their agreements and continue their strategy of multiplying

6 meritless lawsuits in the hopes of overwhelming Patreon with litigation costs Defendants can never

7 repay. Defendants’ arguments only reinforce the obvious: the Court should grant the injunction.

8 I. BACKGROUND FACTS

9 The facts bear repeating: In November 2019, Patreon learned it was the intended target of a

10 coordinated attack designed to “exploit” an unintended consequence of mandatory individual

11 consumer arbitrations and recent changes to California law. Shortly after Patreon terminated alt-right

12 comic Owen Benjamin Smith for breaching the platform’s prohibition on hate speech, Patreon heard

13 from a purported “consultant,” Farley Duvall, who explained how the scheme would work. A hundred

14 or even a thousand supporters of Smith would file individual consumer arbitration demands against

15 Patreon, claiming they were injured by Smith’s termination. The claims would be meritless, as

16 Patreon’s user agreements, like those of other Internet platforms, expressly grant it complete discretion

17 to terminate any user for any reason. Compl. ¶¶ 18-25; Sullivan Decl. ¶¶ 14-22, Exhs. A, B; Reply

18 Declaration of Colin Sullivan, ¶¶ 3-5, 2.

19 But the scheme did not depend on meritorious claims, it depended on multiplicity of claims.

20 Consumer arbitration rules would require Patreon to pay a non-refundable $1,250 commencement fee

21 in each separate case. Then Patreon would have to pay 100% of the arbitration fees in each separate

22 case, plus its own legal fees. Victory would be Pyrrhic, as the one-sided arbitration costs and legal

23 fees would amount to millions or even tens of millions of dollars. And in California, at least, the

24 arbitrator would lack authority to award costs to the prevailing party. A few days later, Duvall’s co-

25 conspirator, Defendants’ arbitration counsel Philip Mann, followed through on the threat, notifying

26 Patreon that he represented 83 Smith supporters (later 100) and demanding that Smith be paid $2.2

27 million (later $3.5 million). Neither Duvall nor Mann ever mentioned the merits of the claims,

28 because merits were irrelevant. The “exploit” depended solely on multiplying claims to multiply
2

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 Patreon’s costs. Meanwhile, another conspirator, Theodore Beale, used his blog and YouTube videos

2 to encourage as many people as possible to assert claims. Duvall threatened that the scheme had

3 extracted settlements as high as $20 million. Compl. ¶¶ 18-25; Sullivan Decl. ¶¶ 14-22; Sullivan

4 Reply Decl, ¶¶10-16, Exh. H.

5 Patreon was not defenseless in the face of this extortion. Its existing agreement with its users

6 expressly permitted Patreon to amend its terms, including its dispute resolution term. Thus, Patreon

7 provided notice to all users that, as of January 1, 2020, any claim concerning the termination of

8 another user had to be filed in court, not arbitration. Every Defendant in this lawsuit had actual prior

9 knowledge, not just notice, of the amendment, as did their attorney Mann. No Defendant gave up the

10 benefits of a Patreon account to avoid the amended terms. Instead, they stuck to the scheme. They

11 waited until after January 1, 2020, and then filed 72 arbitration demands. Patreon challenged JAMS’s

12 jurisdiction and sought a stay, but JAMS decided that any jurisdictional challenge or stay request must

13 be made 72 times, to 72 arbitrators, after Patreon paid for 72 arbitrations. With JAMS ineffective,

14 Patreon invoked its contractual right to bring suit here.

15 II. THE COURT SHOULD ISSUE THE PRELIMINARY INJUNCTION

16 A. Patreon Is Likely To Prevail On The Merits

17 1. Defendants Are Subject to the 2020 Terms of Use

18 There is no dispute that every Defendant agreed to Patreon’s Terms of Use in effect prior to

19 January 1, 2020 – these “2019 Terms” provide the basis for Defendants’ claim they have a right to

20 arbitrate. There is also no dispute that the 2019 Terms granted Patreon the right to amend the terms,

21 provided it gave notice of material changes. Defendants seek to avoid the effect of the “2020 Terms”

22 by making four arguments: (1) they did not receive prior notice; (2) they did not accept the 2020

23 Terms; (3) the 2020 Terms are unconscionable; and (4) the 2020 Terms do not require their claims to

24 be decided by the Court. None of these arguments are supported by evidence, and none have merit.

25 a. Though Notice Was Not Required, Every Defendant Had Actual Prior
Knowledge of the Amendment
26
Defendants assert that: (a) 21 Defendants received no notice of the amendment at all; (b) 14
27
Defendants received “defective notice” only after they filed their demands for arbitration; and (c) 37
28
3

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 Defendants simply received “defective notice.” Opp. at 5:17-24. Defendants are wrong.

2 As a threshold matter, Patreon must provide advance notice of a Terms update only for

3 “material changes that adversely affect” users’ rights. See 2019 Terms at 16 (“Everything else”)

4 (emphasis added). 1 Neither of the two relevant changes Patreon made in January 2020 materially or

5 adversely changed Defendants’ rights; neither required notice.

6 First, Patreon merely confirmed what was already true: users may not bring claims against

7 Patreon based on its decision to terminate another user’s account. Under the 2019 Terms, Defendants

8 already agreed Patreon had the express authority to terminate users at its discretion. 2 As any

9 termination by Patreon is contractually authorized, no one could ever have a claim against Patreon for

10 terminating any account. See, e.g., Song Fi v. Google, Inc., 108 F.Supp.3d 876, 885 (N.D. Cal. 2015)

11 (In California, “conduct authorized by a contract cannot give rise to a claim for breach of the

12 agreement”). 3 While the 2020 Terms emphasize this point, they did not materially or adversely

13 change the parties’ respective rights – Patreon had the same termination right, and users had the same

14 inability to challenge a termination, before and after the 2020 update.

15 Second, the 2020 Terms specify that actions to enforce (a) the dispute resolution clause, or (b)

16 the agreement not to bring a claim based on Patreon terminating another’s account, are not subject to

17 mandatory arbitration. Any such claim must be submitted to a court to decide both arbitrability and

18 the right to relief. 2020 Terms at 16 (“Dispute resolution”). Defendants offer no argument that

19 litigating these claims in a California state court, instead of a JAMS arbitration, in either case under

20
1
Both versions of the Terms of Use state: “We may sometimes make changes to these terms and
21 policies. If we make material changes that adversely affect your rights, then we will let you know
before the changes come into effect. Continuing to use Patreon after a change means you accept the
22
new terms or policies.” See, e.g., 2019 Terms, at 16 (“Everything else”); 2020 Terms at 18.
23 2
See 2019 Terms at 10 (“Account deletion … We can terminate or suspend your account at any time at
our discretion.”).
24
3
Patreon is not attempting to avoid claims that arose before the effective date of the 2020 Terms of Use,
25 as Defendants claim. Opp. at 5:11-12. Under any iteration of the Terms of Use, Defendants never had
the right to assert the claims they are now pursuing in arbitration, no matter when those claims arose.
26
Further, a JAMS arbitrator has already agreed with Patreon on this issue, dismissing with prejudice
27 identical claims right-wing provocateur Milo Yiannopoulos asserted, under the 2019 Terms, after
Patreon terminated his account. See Layton Reply Decl. Exh. A. In that case, Mr. Yiannopoulos was
28 represented by Defendants’ arbitration counsel Richard Sprague.
4

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 California law, is a material or adverse change to any right they held. In fact, the choice of forum has

2 no adverse effect on their rights, it merely eliminates Defendants’ opportunity to inflate the nuisance

3 value of their claims by imposing one-sided costs on Patreon.

4 Thus, no notice was required at all. But Patreon did provide notice, and every Defendant had

5 actual, prior knowledge of the Amendment, as demonstrated by five undisputed facts:

6 • On or before December 24, 2019, Patreon sent emails to 59 of the 72 Defendants at the email
address each Defendant used to create their Patreon account, notifying them of the change to the
7 Terms. Sullivan Reply Decl. ¶¶27, 28, Exh. J.
8 • Patreon published the change to the Terms on its website on December 20, 2019. Id. ¶ 26.
9 • Also on December 20, 2019, co-conspirator Beale published a blog post about Patreon’s
amendment and Defendant’s lawyers’ assessment of its effect on Defendants’ scheme. Id. ¶29,
10 Exh. K.
11 • Arbitration counsel Mann – who represented every single Defendant as of December 16, 2019 –
wrote to Patreon on December 23, 2019, stating that “I noted that Patreon has revised its Terms
12 of Use in what appears to be a response to the claims I will be filing soon on behalf of my
clients. I suggest that we have a conversation before the end of the year so that we can discuss
13 these revisions to the ToU . . .” Id. ¶¶20, 30 Exhs. I and L.
14 • By January 3, 2020, every single one of the 72 Defendants had filed an arbitration demand
alleging that the amended Terms violated their rights under California law. Id. ¶ 32.
15
Defendants have no contrary evidence of any kind. 1 Defendants’ arguments that notice was
16
“defective” because they were not on “inquiry notice,” or they received notice only after they
17
commenced their arbitrations, are knowingly false. Defendants’ attorney actually inquired about the
18
amendment before it went into effect, and Defendants sued to challenge the amendment within two
19
days of its effective date. Every Defendant had prior knowledge of the amendment.
20
b. Defendants Continued to Use The Patreon Platform After The 2020
21 Terms’ Effective Date

22 Defendants concede the contract they agreed to allow Patreon to amend the Terms, and that

23 “[c]ontinuing to use Patreon after a change means you accept the new terms or policies.” Opp. at

24 5:13-15. Not a single Defendant deleted their account prior to January 1, 2020. Sullivan Reply Decl.

25 ¶34, Exh. J. Only three deleted their accounts before Patreon filed this lawsuit. Every Defendant had

26 prior knowledge of the amendment and chose to continue to receive the benefits of Patreon

27 1
To support their notice argument, Defendants rely solely on an incompetent attorney declaration, made
28 on information and belief. See Patreon’s Objection to Shepard Declaration.
5

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 membership. Further, 50 of the 72 Defendants went further and logged into their Patreon accounts

2 after January 1, 2020. Sullivan Reply Decl. ¶34 Exh. J. 1 Many of these Defendants logged in

3 repeatedly, as many as five, ten, twenty, forty, or in one case, over sixty times. See id. These facts are

4 sufficient to establish Defendants are subject to the 2020 Terms. See, e.g., In re Facebook Biometric

5 Info. Privacy Litig., 185 F.Supp.3d 1155, 1164, 1167 (N.D. Cal. 2016) (updated terms accepted by any

6 use after email notice); Mot. Sec. III.B.1 (citing cases).

7 Though no Defendant deleted their account before the effective date, they next claim their

8 continued use of Patreon following the 2020 Terms’ effective date cannot be consent because their

9 login activity came after Defendants filed arbitration demands. Opp. at 6:10-12. Defendants cite no

10 authority for this proposition. To the contrary, California law is clear that continued use of an internet

11 platform following notice of a terms of service update constitutes assent to the updated terms –

12 including the effective date. See Mot. Sec. III.B.1 (citing cases); see also Hall v. Live Nation

13 Worldwide, Inc., 146 F.Supp.3d 1187, 1198 (C.D. Cal. 2015) (lengthy list of cases affirming that

14 parties can agree to an effective date that is prior to assent).

15 Defendants are left to argue that neither their deliberate decision to keep their accounts active

16 after January 1, 2020 (for all Defendants) nor their deliberate activity of logging into their accounts

17 (for 50 Defendants) constitutes “use.” Opp. at 6:12-16. The Court need not accept Defendants’ novel

18 and narrow construction of the word “use” to require more than logging into their Patreon accounts.

19 In fact, a user can access the Patreon site and review content without logging in at all. Sullivan Reply

20 Decl. ¶ 35. If the Court is inclined to seek factual development on the extent or nature of the

21 Defendants’ pre- and post-amendment “use” of Patreon, a preliminary injunction should issue to

22 preserve the status quo to allow that inquiry. See Dodge, Warren & Peters Ins. Servs., Inc. v. Riley,

23 105 Cal.App.4th 1414, 1418 (2003) (general purpose of a preliminary injunction is to preserve status

24 quo pending a determination on merits of the action).

25 c. The 2020 Terms Are Not Unconscionable

27 1
Contrary to Defendants’ assertion, Patreon does not contend that each Defendant logged in after
28 January 1, 2020. Compare Verified Complaint ¶ 3 and Sullivan Decl. ¶¶ 10-11 with Opp. 6:8-9.
6

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 Defendants next raise the affirmative defense of unconscionability. Unconscionability is a

2 doctrine to remedy oppression, surprise, and overly harsh or one-sided results. See Pinnacle Museum

3 Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC, 55 Cal.4th 223, 246- (2012). Defendants have none of

4 those complaints. Defendants and their attorney had actual prior knowledge of the 2020 amendment,

5 which (a) confirmed, as had always been the case, that Patreon has the absolute right to terminate any

6 user from its platform and a user has no claim for terminating anyone else; (b) mandated a public court

7 forum for challenges to the dispute resolution clause and for meritless claims based on removal of

8 another user, (c) in order to eliminate the “exploit” Defendants hoped would allow them to extract a

9 multi-million dollar settlement unrelated to the merits.

10 Defendants make two arguments for procedural unconscionability. First, they claim that the

11 notice was unclear or deceptive. Opp. at 7:1-10. But it was clearly neither, as Beale blogged about

12 the amendment and its effect on Defendants’ not-yet-filed claims on December 20; Mann wrote

13 Patreon to discuss the effect of the amendment on Defendant’s claims on December 23; and every

14 Defendant managed to sue Patreon over the amendment by January 3. Defendants understood the

15 amendment perfectly well before it took effect. Second, Defendants note the amendment was

16 presented on a take-it-or-leave-it basis. Id. at 8:5-8. But that fact alone is insufficient to establish

17 procedural unconscionability, particularly where Defendants saw the change and were under no

18 compulsion to accept. See, e.g., Baltazar v. Forever 21, Inc., 62 Cal.4th 1237, 1245 (2016) (rejecting

19 unconscionability challenge to adhesion contract).

20 Defendants’ only argument for substantive unconscionability is that the Amendment “imposed

21 a requirement that Defendants attempt to talk with Patreon to resolve their claims before seeking

22 arbitration.” Opp. at 7:19-20. Defendants do not explain how this impaired their rights, but there is no

23 such requirement anyway. Both the 2019 and 2020 Terms state, under the “Dispute resolution”

24 headings: “If you have a problem, please talk to us,” and “[w]e encourage you to contact us if you

25 have an issue.” (emphasis added) This is not a requirement, Patreon never imposed a requirement to

26 “talk” as a pre-condition to suit, and this language caused no delay in Defendants’ ability to file their

27 demands for arbitration. In any event, Defendants had already made a demand, and Patreon had

28 rejected it, well before Patreon even sent out its notice. Sullivan Decl. ¶¶ 18-19. Defendants
7

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 nonetheless waited to sue because they hoped that the effective date of California SB 707 would

2 increase the extortionate effect of their “exploit.” 1

3 2. This Court Should Enforce The Agreement To Litigate Defendants’ Non-
Arbitrable Claims In This Court
4
Here Patreon seeks to enforce Defendants’ agreement in the 2020 Terms (1) not to assert
5
claims related to the termination of another’s account and (2) if they nonetheless do assert such claims,
6
this Court will determine both arbitrability and the merits. 2020 Terms at 11 (“Account deletion”); 16
7
(“Dispute resolution”). As all of Defendants’ claims relate to the termination of Owen Smith’s
8
account, they must all be resolved here. See Mot. Sec. II.E.
9
In opposition, Defendants first argue Patreon has conceded the arbitrability of their Civil Code
10
section 1770 (the “CLRA”) and Business and Professions Code section 17200 (the “UCL”) claims
11
because Patreon has “ignored” these claims in its motion and Complaint. Opp. at 8:1-5. That is
12
incorrect. Defendants’ CLRA and UCL claims assert that the 2020 Terms are “null and void” and do
13
not apply to them. See, e.g., Patreon’s Complaint, Exh. C (Ayure v. Patreon Statement of Claims) at ¶
14
9. Meanwhile, Patreon’s first claim in this Court seeks a declaration that Defendants are subject to the
15
2020 Terms. Compl. ¶¶ 32-39. This declaration would eliminate Defendants’ CLRA and UCL
16
claims. Rather than concede the arbitrability of Defendants’ UCL and CLRA claims, Patreon has
17
sought declaratory and injunctive relief directly opposed to them. See id.; see also Mot. Sec. III.B.1
18
(“Defendants Are Subject to Patreon’s Current Terms of Use”).
19
Defendants next argue that JAMS is the proper tribunal to decide the arbitrability of their
20
breach and tortious interference claims because “[t]he JAMS Rules state that the arbitrator has
21
jurisdiction and authority to decide questions of arbitrability.” Opp. at 9:23-25. That would be true if
22
Patreon had not amended the Terms, and the Defendants had not accepted. But in the 2020 Terms,
23
Patreon and Defendants expressly agreed to exclude such claims from the parties’ arbitration
24
agreement. The 2020 Terms actually state that claims are subject to arbitration under JAMS Rules
25

26
1
27 Patreon’s Complaint seeks a declaration that California procedural rules concerning arbitration do
not apply to non-California Defendants pursuing arbitration outside of California, but the preliminary
28 injunction motion is narrower. Patreon disputes Defendants’ arguments on this point, Opp. 12, but the
Court need not reach this issue to grant the preliminary injunction.
8

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 “except as expressly provided below,” and then state that “the court rather than an arbitrator must

2 decide” the issue of arbitrability and the right to relief in disputes over the dispute resolution clause or

3 termination of another’s account. 2020 Terms at 16 (“Dispute Resolution.”).

4 Defendants cite Henry Schein, Inc. v. Archer and White Sales, Inc., 139 S.Ct. 524, 530 (2019),

5 as holding “parties may delegate threshold arbitrability questions to the arbitrator, so long as the

6 parties’ agreement does so by clear and unmistakable evidence.” (internal quotations omitted.) But,

7 the 2020 Terms do not delegate, they expressly reserve the threshold arbitrability question for a court.

8 San Francisco Police Officers’ Assn. v. San Francisco Police Com., 27 Cal.App.5th 676, 687–88

9 (2018) (trial court “properly made the arbitrability determination in the first instance,” based on

10 agreement that “arbitrability is to be determined by the court when a grievance is filed”); see also

11 Metro. Life Ins. Co. v. Bucsek,, 919 F.3d 184 (2d Cir.), cert. denied,140 S.Ct. 256 (2019)

12 (distinguishing Henry Schein; where parties did not expressly delegate arbitrability issue, court

13 decided arbitrability and held dispute non-arbitrable).

14 Finally, Defendants argue their breach and interference claims “need not be characterized as

15 ‘claims related to the suspension or termination of another person’s account.’” Opp. at 10:4-8. Of

16 course they are, as described above and expressly acknowledged by Defendants’ own arbitration

17 counsel. See Sullivan Decl., Exh. D (“In addition to my representation of Mr. Smith, I [Phil Mann]

18 also represent the (currently) 83 individual claimants … with respect to the wrongful deplatforming of

19 Owen Benjamin Smith.”); Compl. Exh. C (Arbitration Claim) at ¶¶ 6, 10, 19, 26, 33, 34-36.

20 3. Defendants’ Improper Claims in Arbitration Have Caused Past and Ongoing
Harm to Patreon
21
Patreon has explained how Defendants’ improper claims have caused past and continuing
22
damage. See Mot. Sec. II.E., III.B.4. In opposition, Defendants shrug that Patreon will incur costs
23
wherever Defendants’ claims are litigated. Opp. at 11:18-25. But, Defendants expressly agreed that
24
they would not assert the claims Patreon is now defending in arbitration. Those costs exist only
25
because Defendants brought improper claims, and are compounded by Defendants raising them in
26
arbitration, where Patreon would be responsible for (and likely cannot recover) 100% of the fees.
27
Sullivan Reply Dec. ¶¶ 40-41. This is the lynchpin of Defendants’ nuisance arbitration strategy against
28
9

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 Patreon – where one meritless claim is unlikely to extract a concession, the weight of nearly one

2 hundred may. Patreon amended its Terms to counter this “exploit,” and Defendants’ flouting of that

3 agreement has harmed Patreon. Sullivan Decl. ¶ 23; Sullivan Reply Decl. ¶ 23.

4 B. The Balance Of Harms Favors A Preliminary Injunction Preserving The Status Quo

5 In light of Defendants’ litigation strategy to exploit the JAMS rules to maximize Patreon’s

6 exposure, to extract a settlement unrelated to the merits, and to deprive Patreon of its chosen forum

7 while bringing excluded claims, the balance of harms favors Patreon. 1 Defendants nonetheless argue

8 Patreon’s injury is not irreparable because it “can be adequately compensated by money damages.”

9 Opp. at 13:20-21. Defendants, again, are mistaken.

10 First, requiring Patreon to arbitrate the 72 claims forever denies it the choice of exclusive

11 forum Defendants agreed to in the 2020 Terms. Mot. Sec. III.B.4. Defendants’ own authority

12 recognizes that an “arbitration provision can be construed as a forum selection clause,” see Milliner v.

13 Bock Evans Fin. Counsel, Ltd. 114 F. Supp.3d 871, 876 (N.D. Cal. 2015), and courts often issue anti-

14 suit injunctions to protect a party’s contractual choice of forum and prevent duplicative or vexatious

15 suits elsewhere. See, e.g., E. & J. Gallo Winery v. Andina Licores,S.A., 446 F.3d 984, 989 (9th Cir.

16 2006) (reversing district court and granting request for anti-suit injunction). Loss of the chosen forum

17 alone is irreparable harm. See Paramedics Electromedicina Comercial Ltda. v. GE Med. Sys. Info.

18 Techs., Inc., 2003 WL 23641529, at *12 (S.D.N.Y. June 4, 2003) (issuing anti-suit injunction;

19 deprivation of contractually agreed forum “constitutes irreparable harm”).

20 Second, requiring Patreon to arbitrate the 72 claims effectively denies Patreon the speedy

21 remedy Defendants agreed to – prompt resolution of whether Defendants may assert their claims at all.

22 This injury also cannot be remedied by money alone.

23 Third, while Patreon does stand to incur substantial costs – that is the entire point of

24 Defendants’ “exploit” strategy – it is Defendants’ position and intention that Patreon cannot recover

25
1
Defendants assert Patreon is “not entitled to an injunction that covers 72 defendants as a Group”
26
because “there are differences among the defendants that could require a case-by-case analysis” of the
27 applicability of the 2020 Terms. Opp. at 13:8-19. But, if a Defendant contends he or she is somehow
different from the other 71 people who received notice, kept their Patreon accounts, and filed verbatim
28 claims, he or she must offer evidence to show it. Defendants offer no evidence.
10

PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1 those costs in arbitration. In court, however, Patreon would not incur those costs at all, and would be

2 entitled to costs as a prevailing party against California and non-California Defendants alike.

3 Fourth, even if Patreon prevails in arbitration and is awarded its arbitration costs (by an

4 arbitrator or after prevailing in 72 malicious prosecution actions), there is no reason to believe that the

5 72 individuals could pay the hundreds of thousands or millions of dollars in costs that Defendants have

6 already threatened to inflict. Sullivan Reply Decl. ¶ 41. Defendants offer no evidence they can pay;

7 to the contrary, many of the Defendants are apparent credit risks. Id. ¶ 41(d).

8 By contrast, a temporary stay of the 72 individual arbitration proceedings will not harm

9 Defendants at all. Defendants cite only their “contractual right” to arbitrate these claims, but they

10 have no such right. Id. Even Defendant eventually win that issue (they will not), the preliminary

11 injunction would simply require Defendants to litigate the jurisdictional issues once here, instead of 72

12 times before JAMS, and having won, resume their arbitrations. Defendants also argue they will be

13 harmed by any delay in arbitration proceedings resulting from a temporary injunction. Opp. at 14.

14 They will not: the logistics of Defendants’ 72 individual proceedings guarantee it will be years before

15 Defendants’ claims are resolved on the merits. Mot. Sec. III.D. A temporary injunction will cause no

16 harm to a strategy designed to stretch out for years, maximizing costs. Further, eight arbitration

17 claimants (those represented by attorney Richard Sprague), including seven Defendants, have now

18 stipulated to postpone any activity in their individual arbitrations pending this Court’s ruling on

19 Patreon’s Mot. Layton Decl. ¶ 3. Likewise, several arbitrators in other matters have stayed activity

20 pending this Court’s PI decision. Id. ¶ 4. Defendants cannot claim that delay is prejudicial while at

21 the same time stipulating to stay those same proceedings.

22 III. CONCLUSION

23 The Court should maintain the status quo while it resolves Patreon’s request for declaratory relief,

24 by enjoining Defendants from proceeding with their individual arbitrations.

28
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PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION
1

2
Dated: July 6, 2020 THE NORTON LAW FIRM PC
3

4
By:
5 Fred Norton
Attorneys for Plaintiff
6 PATREON, INC.
7

9
10

28
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PLAINTIFF PATREON, INC.’S REPLY IN SUPPORT OF REQUEST FOR PRELIMINARY INJUNCTION

Case Info

Judge

Samuel K. Feng Track Judge’s New Case

Case No.

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Document Filed Date

July 06, 2020

Case Filing Date

June 02, 2020

County

Parties

AYURE, PAUL MICHAEL Defendant
BALL, WILLIAM A. Defendant
BARNEY, JACOB Defendant
BECK, MATTHEW Defendant
BENDER, ANDREW Defendant
BENOIT, STEVEN Defendant
BENTON, DYLAN Defendant
BRIERLY, THOMAS E. Defendant
BUHK, STEVEN WAYNE Defendant
CESARO, CHRISTIAN Defendant
CLARK, TYLER Defendant
COLT, SHANNON Defendant
CONKLIN, MICHELLE Defendant
CONKLIN, PHILIP Defendant
DAHL, BRIAN Defendant
DANESI, CHRISTOPHER L. Defendant
DECOSTA, RYAN Defendant
DIEBOLD, PETER Defendant
DONLEY, CHRISTINE Defendant
DREW, ROYSTER Defendant
DUGGER, CHERYL Defendant
EGGEN, ANDREW Defendant
FABBRI, NICHOLAS WILLIAM Defendant
FILIPPINI, BLAKE Defendant
GARLAND, GARRETT J. Defendant
GAVERICK, DAVID Defendant
GEBHARDT, GRETCHEN VON Defendant
GILES, IMOGEN Defendant
GIOTTONINI, JOSEPH BRANDON Defendant
HAASE, MARTII Defendant
HAND, DOUGLAS Defendant
HARSHA, SAMUEL Defendant
HARVEY, MATTHEW Defendant
HETRICK, MELISSA Defendant
HILL, CHRISTOPHER Defendant
HILL, SAMUAL Defendant
HINKER, MARCIE Defendant
HISER, KATHRYN Defendant
HOLLISTER, MICHAEL Defendant
HOWARD, CLAY Defendant
JOHNSON, WILLIAM LAMAR Defendant
JUPIO, ANDREW Defendant
KANIAN, RICH MICHAEL BADISH Defendant
KILMAN, RJ Defendant
KING, JEREMIAH Defendant
KOZEL JR., STEVEN E. Defendant
LAWSON, JEFFERSON Defendant
LAWSON, JILL A. Defendant
LOOMIS, RUSSELL W. Defendant
MACKAMAN, JASON Defendant
MAGANA, ABEL Defendant
MAY, LUKE Defendant
MCALEESE-LOCKE, CAITLIN Defendant
MOREY, NATHAN Defendant
NORTON, FRED Attorney for the Plaintiff
NOVAK, JASON Defendant
PATREON, INC. Plaintiff
PLAXTON, ANDREW JOSEPH Defendant
PYRICH, JAMES A. Defendant
RAGON, ROXANNE Defendant
RAMSEY, CORY Defendant
RANDAZZA, MARC J. Attorney for the Defendant
REDMOND, JOSEPH Defendant
RESLOCK, LEE Defendant
ROBINSON, CHERYL Defendant
ROYSTER, DREW Defendant
SHUMAKER, SAMANTHA Defendant
SWOGER, WILLIAM J. Defendant
WEBBER, RYAN Defendant
WELLER JR., MARK Defendant
WINSTON, SKY Defendant
YODER, MATTHEW B. Defendant
YORK, BRIAN SCOTT Defendant
ZINTSMASTER-HOWELL, JAMES Defendant
Alex Shepard Attorneys for Defendants
William Norton Attorneys for Plaintiffs
Tyler Layton Attorneys for Plaintiffs
Nathan Walker Attorneys for Plaintiffs
Gabrielle Hann Attorney
Richard Sprague Attorney
Matthew Volkmann Attorney
William VonHoffmann Attorney

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Request,Application: PATREON, INC. VS. PAUL MICHAEL AYURE ET AL

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