From Tasini To The Winklevi: Greed, Retroactively Breaking Deals And Feeling Entitled To What's Not Yours

from the sad dept

Jack Shafer at Slate does a nice job tying together the common thread in two recent stories: the Winklevoss twins losing in their attempt to back out of a previous settlement with Facebook and arguing that they are owed much more than the $170 million they’ve received despite their lack of work on Facebook itself… and Jonathan Tasini’s almost universally mocked lawsuit against the Huffington Post for not paying him for articles he agreed to write for free (yes, you read that right). In both cases, these are situations where those who didn’t actually build successful businesses totally overvalue some potentially tiny contribution they might have made, see that someone else did succeed and did make a ton of money… and they go back on a previous deal to demand more money they don’t deserve:

What’s Winklevossian about Tasini’s suit is his timing. Just as the twins were happy with their settlement until they realized that the money pot had grown, Tasini helped himself to the HuffPo platform, no questions asked, until he saw a Brinks truck arrive with the AOL cash.

Elsewhere, Shafer notes that “we’re becoming a nation of Winklevosses who file legal motion after legal motion every time a pot of money is spotted.” Becoming? I’d argue that’s been happening for quite some time. Over the years we’ve covered how nearly every super successful book or movie has someone jump out of the woodwork to claim that the idea was “copied.”

Unpacking this deeper, I’d argue there are two key issues here. First, is that many people significantly overvalue an idea or a bit of content, assuming that it’s worth much more than the structure or process around it. And, second, we’ve built a legal system in which all too often it pays for losers to litigate against those who succeed. There’s a sense of entitlement that people feel towards anyone who succeeds, and people simply fail to recognize that they would never react the same way in the other direction. As I’ve pointed out before, if the writers, like Tasini, who are complaining or suing had received (for example) a job assignment due to their work on the Huffington Post, would they have given Arianna a cut of their earnings?

Unfortunately, our legal system often makes this kind of situation rewarding for the people who sue. It’s often cheaper to settle such cases rather than let them go on, and that can be quite damaging to those who succeed. The basis of free market competition and innovation is that you reward the successes, not the failures. But all too often, our legal system is allowing the latter to happen.

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Comments on “From Tasini To The Winklevi: Greed, Retroactively Breaking Deals And Feeling Entitled To What's Not Yours”

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27 Comments
Howard the Duck (profile) says:

That goes for all "entitlements"

Those pesky wealthy. The ones making $50,000/year saving their money and investing to the point of having $600,000 in assets, (not cash), cannot pass it all to their children when they die. The death tax (estate tax), and many other progressive taxes that are meant for the ultra rich, also affect the middle class, or anyone that tries to build a nest egg. Next time you hear about a new or reinstated tax on the rich, be sure to ask them to define “rich”. Sorry for the off-topic comment.

Howard the Duck (profile) says:

Re: Re: That goes for all "entitlements"

I guess that means it will always be $5,000,000 then? That’s bullshit. It has been less, and it will be less again. Probably by next year. Why should there be any estate tax at all? How many times should we have to pay taxes on our income? Will it effect the middle class? Yes, it will. Those filthy rich bastards.

WysiWyg (profile) says:

Re: Re: Re: That goes for all "entitlements"

So basically they have changed it in a way that should suit you? They have made it so that it doesn’t affect the middle class.

And you are complaining why? Your main “argument” seems to be that they can lower that “bar” again, but if they removed the tax altogether it would never ever come back again?

Is it REALLY that much harder to add a new tax than to change one?

And 55%? Wow, we should all be so lucky. Last number I heard about here in Sweden was closer to 75%.

John Doe says:

It is easier to compete in the courts rather than the market

Unfortunately, today it is far easier to compete in the courts than in the market place. Especially if you can get a jury to hear your case. I have never seen a study, if one even exists, but I bet juries are far more generous than judges. Though it seems even judges are generous these days.

DataShade (profile) says:

Becoming? I’d argue that’s been happening for quite some time. Over the years we’ve covered how nearly every super successful book or movie has someone jump out of the woodwork to claim that the idea was “copied.”

Flipside that for a second: if you were The Little Guy and someone rides-a-helicopter-to-work famous made a book/movie/whatever that was similar enough to yours: could you publish afterwards without getting sued by the publisher? Even if it’s not a copy, even if they didn’t steal it, even if the little guy can take the idea and execute it in a new and novel way, how many industries out there have legacy players who wouldn’t sue the upstart?

IANAL so I don’t know how much different the filing costs are for a declaration of summary judgement vs. that of a plain old lawsuit, but if the projected costs of the two are similar, why not go shoot for the moon?

Matt (profile) says:

Re: Re:

There is a substantial benefit in many cases to being the plaintiff. That is one big reason that declaratory judgment exists – so that a party who believes it will get sued by another if it acts in some way can get a prior determination from the Court that it has done nothing wrong before the other side can file.

I agree with you – while Mike is right that litigation in the US has become stupid and encourages frivolous lawsuits because they may get rewarded regardless of merit, the problem in the particular example he gives is not that the little guy is sue-happy, but rather that the underlying substantive law of copyright is ridiculous. Put differently, that lawsuit is not frivolous because the law is broken.

Matt (profile) says:

Re: Very simple to fix.

We do this in Alaska. It does not work as advertised for several reasons.

First, impecunious plaintiffs (and defendants) will not be made to pay because you cannot bleed a stone. So fee-shifting rules do not discourage the very poor from filing.

Second, filthy-stinking rich plaintiffs (and defendants) do not care that they will be made to pay, because they typically value that amount of money less than they value winning the lawsuit (either because the suit is inevitably worth more, or because the outcome of the suit will effect their ability to operate in the manner they like). If you sue Disney for simple copyright infringement of a single work and fight it tooth and nail, you will likely spend around $2mm or less, potentially substantially less. The potential verdict could be two or more orders of magnitude higher. The value to Disney of grinding you down or winning outright is well worth the risk of having to pay $2mm. Likewise the other direction – if Disney can protect a $1b property by suing an upstart and spending a ton of money, it is well worth the risk of having to pay The Little Guy’s paltry legal bill. Attorney fee awards do little to discourage frivolous lawsuits by the very wealthy.

Take those two together, and you have a relatively small sector of the economy that is actually affected by fee-shifts (at least in terms of their willingness to file frivolous actions). Where it has a much bigger effect is in determining the value of a settlement. And there, it has a _very_ big effect.

Of course, fee shifting has other effects (all positive, in my view). Most importantly, they make the person who turned out to have been wrong bear the expense of litigation, if they have the ability to do so. In my opinion, the fee-shifting provisions should be expanded so that litigants must post a bond sufficient to cover the other side’s anticipated reasonable legal bills in order appear. In addition, defendants who are successful in a case should be awarded some portion, say 20%, of the damages claimed by the plaintiff in the complaint, and plaintiffs should be limited to an award no larger than what appears in their complaint. Such a bonding requirement would virtually eliminate frivolous lawsuits except by the very wealthy, but should not deter cases that appear strong because plaintiff’s lawyers and litigation bonding companies should be willing to put up bond for such cases. The requirement would only pinch the tough cases in the middle that look 50/50.

Anonymous Coward says:

“If we adjusted the rules so that the loser of the suit was responsible for attorney feescourt costs, nonsense lawsuits would calm down overnight, as only cases that the plaintiff believed they were on solid footing would be pursued.”

Actually it would mean that anybody poor could have their ideas stolen with impunity, because they would not be able to afford to lose.

Truly frivilous lawsuits are one thing. Simply losing the case is different.

Anonymous Coward says:

This principle extends beyond lawsuits. It is very hard to separate out the economics behind a situation when there is a dominating perception of who holds the power and who is powerless. A really easy example is that when a company fires someone who has worked at the company for 20 years, we feel outraged at the company. But if instead that same person had decided to move on to a better opportunity after 20 years, are we outraged at the employee?

Allan Masri (profile) says:

HuffPost

All the comments about the HuffPost class action case seem off the mark. Some consider there was a contract that promised nothing in return for stories. That’s not exactly true. The contract promised exposure in a “free” journal of news and opinion.

Peter Friedman considers there is no case for unjust enrichment, but that’s not what this case is actually about. The claim is for deceptive business practices under NY State law. Plaintiffs argue that HuffPost lied to them about the exposure (which kept on decreasing as more writers were hired) and the “free” nature of the website.

“Free” is an important word in consumer law, since a business cannot advertise something as “free” and then demand payment for it. While HuffPost asked for articles, they also asked for publicity through social networking groups. Thus, they actually required payment (user lists) for something they had advertised as free.

The “creativity” of the lawsuit lies in its use of consumer protection laws to protect writers from online websites that offer “payment” and then refuse to deliver. Plaintiff alleges that HuffPost solicited his assistance (not just his articles) to help build a “free” website and then turned the website into a business venture that benefitted only the owners. Under consumer law, this could be considered a “bait and switch” marketing tactic, which is also illegal under New York Law. New York law also permits consumers to sue businesses who have violated this law.

Any contract the writers may have with HuffPost cannot be enforced if it was secured by deceptive business practices (malum prohitibum). Once the court rules that there was a deception practiced by the business, the unjust enrichment charge does not need to be proven, contrary to what Friedman alleges. Any enrichment gained by deception is unlawful per se.

Anyone who continues to write for AOL on the same terms is an idiot, of course.

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