Washington State Files First-Ever Lawsuit Over Failed Kickstarter

[Albino Boo]

An LLC's corporate veil can be lifted not just for the false and unfair practices through the product's creation, but for the company's organization itself.

Even if he made an attempt to produce the cards, any court can acknowledge the reality that Polchlepek's private properties were used interchargivly with corporate property, that he was the only shareholder, and generally that there is no de facto difference between Polchlepek personally trying to make the cards, or calling himself an LLC, in which case the latter's protections can be nullified.

An LLC can only protect you if you actually go out of your way to formally organize it as a company, which a one-man project is very unlikely to properly do.

You still have to prove intent, bad accountancy practice is not sufficient on its own. A director is entitled to draw down company money at any time, you have to prove that those drawings were illegitimate and unreasonable. If Polchlopek didn't pay himself a salary, it's not unreasonable that he drew on company funds, as a dividend, to pay for his living costs. In fact there are distinct tax advantages to do so. The question for the court decide is what is reasonable drawings and what was the intent.

 

[Alterego-X]

The question for the court decide is what is reasonable drawings and what was the intent.

Lifting the corporate veil is one of the most vague "I know it when I see it" aspects of contract law, in spite of having a bunch of theoretical examples, in practice it boils down to the judge subjectively deciding that the LLC looks a lot like a façade, an alter ego that a person built specifically to avoid liability, rather than in good faith as a way to organize corporate dealings.

The fact that here in this thread the LLC itself only brought up as Polchlepek's shield, makes it very suspicious that it was the former case, and any judge would have the authority to declare so based on informal clues, just as we did (only more professionally and with more detail) rather than trying to fit it to certain requirements.

 

[Karadalis]

I have a feeling that if this becomes standard practice for failed kickstarters, the number of ones people make are going to drop like a rock since just going on the site you can see that most are clearly scams or impossible to deliver promises.

Theres a difference between failing and fraud.

If lightning strikes the office building and burns it to the ground including all the work you have done for the kickstarter no ones gonna sue you.

If you take the 25k $ and disapear from the face of earth you bet people are gonna ask what happened to their money.

A normal kickstarter project has nothing to fear under the current laws, all they have to do is keep their backers up to date. Its the frauds that now have to fear that they are gonna be dragged to court.

And if they make impossible promises its not exactly the backers fault now is it? The backer doesnt know whats "impossible" and what is not. If you cant fulfill a contract do not offer said contract. The only ones to blame here are kickstarter projects that put to much on their plate.

Also if i read correctly this is about backers not receiving anything, the guy had several ways out of this situation including giving the money back, showing that he indeed had made an effort or you know.. simply delivering what he promised the backers.

To place the risk of a kickstarter project solely in the hands of the backers makes it way to easy to abuse the system just like this guy aparantly did. Kickstarter should place the risk both at the project owner and the backers.. and this is exactly what happens here.

 

[rasta111]

I really don't understand this crowd funding stuff... I mean usually you just buy a product, so what happens here, where's the profit? Isn't this just stuff like this waiting to happen?

I know I can't be the first one to say something like that but still. I guess it's like paying for a product that doesn't really exist yet in advance and hoping you aren't being scammed. Sounds very screwy to me, I can think of far better ways to spend money anyway. Anything that doesn't involve such an anonymous risk and everything, I mean this is the internet and just about anyone can create a project right, so where's the guarantee there's any real person involved in any enterprise and not like, you know, skynet or something...? Like say this story perhaps.

... You get the idea anyway. I'm sure there are ways to make it work but surely the whole idea of using a method like this to fund a product is to avoid having to answer to backers like a company has to answer to shareholders.

 

[gmaverick019_v1legacy]

I have a feeling that if this becomes standard practice for failed kickstarters, the number of ones people make are going to drop like a rock since just going on the site you can see that most are clearly scams or impossible to deliver promises.

In that case, I'm inclined to say "good." Less time wasted.

People who make a legit effort and can't reach their goal is one thing. People who take the money and run and such need to be punished.

agreed. this is basic business law here, acting in good faith here is something this asshole didn't do, this lawsuit will hopefully get people what they were promised and/or their money back.

At the same time, those terms of service may also provide an element of defense, as they note [https://www.kickstarter.com/terms-of-use?ref=footer] that estimated delivery dates are "not a promise to fulfill by that date" and further requiring only that people who launch Kickstarters "agree to make a good faith attempt to fulfill each reward by its Estimated Delivery Date." It's one thing if Polchlepek just made off with the money but if he can claim, and demonstrate, that he did in fact make a legitimate effort to create and distribute the cards, he may have a valid defense.

Contract law doesn't work that way. If you sign an agreement according to which you "agree to make a good faith attempt to fulfill each reward by its Estimated Delivery Date", AND in another point of the same agreement, you agree to be "required to fulfill all rewards or refund any backer whose reward you do not or cannot fulfill.", then the stronger claim trumps the weaker.

If in a contract you agree to build a tower "at least 200m tall" and in another part of the agreement it has to be "no less than 300 meters tall", then you owe someone a 300 meter tall tover.

ah it looks like someone put it in much better words than I can, kudos to explaining it in this way.

 

[Mr.Mattress]

I really don't understand this crowd funding stuff... I mean usually you just buy a product, so what happens here, where's the profit? Isn't this just stuff like this waiting to happen?

Crowdfunding works like this: A guy wants to make something, but either has no funds or limited funds and he cannot accomplish what he wants. So he decides to ask people on the Internet if they would like to help him fund the Project, so that it can be made available to the Public. On KS and other Crowdfunding Sites, they also give you rewards for Funding the Project (Though these rewards Very) if it's successfully funded. When it is successfully funded, then the person is suppose to make the product he intended to make. Nothing else, just the Product.

OT: I support this Lawsuit, it'll help get rid of Fraudulent Crowdfunding projects. Of course, if this Card Company actually has a legitimate reason as to why they couldn't finish the project or tell people about it, then I hope the Court goes easy on them.

 

[rasta111]

Crowdfunding works like this: A guy wants to make something, but either has no funds or limited funds and he cannot accomplish what he wants. So he decides to ask people on the Internet if they would like to help him fund the Project, so that it can be made available to the Public. On KS and other Crowdfunding Sites, they also give you rewards for Funding the Project (Though these rewards Very) if it's successfully funded. When it is successfully funded, then the person is suppose to make the product he intended to make. Nothing else, just the Product.

So what you're telling me is they go on this site that let's them fund their scheme and make a profit on it while offering what I'm guessing is petty rewards, perhaps coupled with a feeling of satisfaction if the product is successfully funded and then successfully produced... Yeah it still sounds pretty screwy to me but thanks for explaining it to me so nicely.

 

[Alfador_VII]

I approve of this lawsuit (for once), and I hope the precedent is set for other Kickstarters and crowdfunding in general.

There's been too many scams on these sites, or even just totally unrealistic projects that could never each their goal, it's about time some of them are brought to book.

 

[Deathfish15]

Crowdfunding works like this: A guy wants to make something, but either has no funds or limited funds and he cannot accomplish what he wants. So he decides to ask people on the Internet if they would like to help him fund the Project, so that it can be made available to the Public. On KS and other Crowdfunding Sites, they also give you rewards for Funding the Project (Though these rewards Very) if it's successfully funded. When it is successfully funded, then the person is suppose to make the product he intended to make. Nothing else, just the Product.

So what you're telling me is they go on this site that let's them fund their scheme and make a profit on it while offering what I'm guessing is petty rewards, perhaps coupled with a feeling of satisfaction if the product is successfully funded and then successfully produced... Yeah it still sounds pretty screwy to me but thanks for explaining it to me so nicely.

Actually, it's how the Oculus Rift got funded and got to where it is today. Without the crowd-funding, the product would just be a feeble dream of someone. So in quite a few cases they're great for making crazy garage projects all the more real; however there are quite a few times -as the article provided- when it's nothing more than a scam.

 

[rasta111]

Actually, it's how the Oculus Rift got funded and got to where it is today. Without the crowd-funding, the product would just be a feeble dream of someone. So in quite a few cases they're great for making crazy garage projects all the more real; however there are quite a few times -as the article provided- when it's nothing more than a scam.

Funny you should mention that as I've just been dealing with these issues people seem to have with fantasy vs reality and recognising where said line is but I sense we're veering wildly off-topic now so... Allow me to finish with one word on said subject, 'facebook'.

 

[The_Great_Galendo]

If there was ever a kickstarter lawsuit, i would have expected something more substantial than simple playing cards.

Not necessarily. The very ease of producing playing cards should in theory make the lawsuit as much of a slam dunk as any lawsuit of this sort can be. They could maybe go after something more ambitious, but it would probably be harder to show a lack of good faith.

 

[Vrach]

It's also valid to wonder if this lawsuit could have a chilling effect on crowdfunding in the long term, especially if it succeeds. Crowdfunding is often necessary precisely because projects are viewed by conventional sources of funding as too risky or too niche to succeed, and if creators are faced with the possibility of legal action over failed efforts, some of them may opt not to pursue interesting but challenging ideas.

I wouldn't agree with you on that. The rules are clear - deliver on your goods or give the money back to the backers. You succeeded in your goal but still couldn't fulfill your part of the deal? No worries, go on and give the money back to the backers and there's no cause for a lawsuit.

Not being able to take people's money and not give anything back in return (when that was a part of the deal, crowdfunding is not charity) is not a bad thing or something that would discourage anyone who wants to do anything but rip people off. At best, you're arguing for supporting a business practice of high risk and absolute zero penalty (to the point of possibly even making money off a flawed/unrealistic idea that never sees the light of day) and that's not a good thing.

edit:
This is not a "possibility of legal action over failed efforts". This is "possibility of legal action over failed efforts where you took people's money for nothing". Crowdfunding isn't there to eliminate risk of failure of a business venture, it's there to provide an alternate source of funding where the consumers decide whether your product is worth making.

 

[michael87cn]

Considering lawyers and legal systems are corrupt to the core, I can see how this could scare off potential future of crowdfunding, so much so that it could become a dead system. No one wants to sued.

 

[Scorpid]

I have a feeling that if this becomes standard practice for failed kickstarters, the number of ones people make are going to drop like a rock since just going on the site you can see that most are clearly scams or impossible to deliver promises.

This isn't a failed Kickstarter, it met its funding goals. This is an old song though of legal protections of consumers vs distributers or creators or whatever you want to call them. I'm surprised it took this long for a case like this to go to court. I think pesonally that legal protection is good. It gives the projects creators a legal reason to make sure they can deliver on their project and not just say "eh let's just ball park the costs and see where we are a few months from now" also it gives backers more incentive to support projects since they know that they'd have some method of recourse beyond public shaming. I'll wait for the case of a backer intentionally sabotaging a project so he can sue a creator.

 

[NuclearKangaroo]

this might actually be for the best


there are many people that due to malice or inexperience dont deliver on their kickstarter promises, now with the threat of legal actions, people who are unsure of being able to deliver on their promises or who never intended to do it, will think things twice

 

[NuclearKangaroo]

Actually, it's how the Oculus Rift got funded and got to where it is today. Without the crowd-funding, the product would just be a feeble dream of someone. So in quite a few cases they're great for making crazy garage projects all the more real; however there are quite a few times -as the article provided- when it's nothing more than a scam.

Funny you should mention that as I've just been dealing with these issues people seem to have with fantasy vs reality and recognising where said line is but I sense we're veering wildly off-topic now so... Allow me to finish with one word on said subject, 'facebook'.

of course, fecebook literally destroyed the oculus, the coulus no longer exist, the oculus is no longer being developed, the dream is over


there also double fine's adventure game which got released, FTL, star citizen, xenonaunts, etc

 

[rasta111]

of course, fecebook literally destroyed the oculus, the coulus no longer exist, the oculus is no longer being developed, the dream is over


there also double fine's adventure game which got released, FTL, star citizen, xenonaunts, etc

Wow, I just said 'facebook' not one word for or against but way to jump to conclusions... I didn't say 'fecebook' either, seems fitting somehow though. I definitely didn't tell anyone what to spend their money on but please go on blindly trusting whatever you like, I didn't actually tell anyone not to do that either. The implication was clear enough I think. Just so we're clear I don't care what people want to spend their money on and I'm pretty sure stating an opinion is still allowed here on this internet forum.

 

[NuclearKangaroo]

of course, fecebook literally destroyed the oculus, the coulus no longer exist, the oculus is no longer being developed, the dream is over


there also double fine's adventure game which got released, FTL, star citizen, xenonaunts, etc

Wow, I just said 'facebook' not one word for or against but way to jump to conclusions... I didn't say 'fecebook' either, seems fitting somehow though. I definitely didn't tell anyone what to spend their money on but please go on blindly trusting whatever you like, I didn't actually tell anyone not to do that either. The implication was clear enough I think. Just so we're clear I don't care what people want to spend their money on and I'm pretty sure stating an opinion is still allowed here on this internet forum.

i simply saw you attacking kickstarter and trying to diss OR simply by bringing up the facebook acquisition, which to be honest almost seems to be about to be vindicated by history now that zenimax is trying to sue OR devs over something incredibly retarded and now that facebook owns the technology they have a fair fighting chance to deal with these kind of legal actions in the future

hell just the fact the OR is popular IS important, because it has helped to push foward VR, technology that hopefully wont end up being a gimmick like motion controls


so yeah, bringing facebook as a counter argument to all that is ridiculous in my opinion

 

[rasta111]

Assuming what I said was specifically about something someone else brought up that I actually said was going to lead me off-topic and to top it all off don't care about in the slightest, certainly when put next to the other things I said to anyone paying attention is more ridiculous... In my humble opinion.