McLeod v. Valve Corp.

2016 WL 5792695 (2016)

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McLeod v. Valve Corp.

United States District Court for the Western District of Washington
2016 WL 5792695 (2016)

Facts

Valve Corporation (defendant) produced an online video game called Counter Strike Global Offensive (CSGO). Valve also ran the Steam online marketplace for CSGO players. Through Steam, players could purchase CSGO Skins (skins), which were virtual weapons that could be used while playing CSGO. Players could also use skins as collateral for bets placed on skins-gambling websites. On the gambling websites, all wagered skins were put into a large pool and awarded to a randomly chosen winner. The winner could then sell the acquired skins, converting them into cash. Michael McLeod and others who had purchased skins or were parents or guardians of minors who had purchased skins (collectively, the purchasers) (plaintiffs) filed a class-action complaint in federal district court against Valve, skin-gambling service CSGO Lotto, Inc., and Trevor Martin (defendants). The purchasers asserted that Valve had allowed illegal online gambling through the Steam platform and that Valve knew that rigged third-party gambling sites were taking money from Valve’s teenage customers. In support of their rigging claim, the purchasers asserted that Martin had a YouTube channel that showed him winning large amounts of money by gambling skins on CSGO Lotto, without disclosing that he was a partial owner of CSGO Lotto. The purchasers alleged state-law claims for gambling violations and fraud, plus a federal Racketeer Influenced and Corrupt Organizations Act (RICO) claim. CSGO Lotto and Martin moved to dismiss, asserting that the purchasers had not alleged an injury to their business or property, as required for RICO standing. The purchasers responded that their state-law gambling and fraud allegations were sufficient to establish a RICO injury. The purchasers also asserted that the court could exercise supplemental jurisdiction over the state-law claims and that jurisdiction over the state-law claims was appropriate under the Class Action Fairness Act (CAFA), which allows federal courts to exercise jurisdiction over class actions with 100 or more plaintiffs when the amount in controversy exceeds $5 million and minimal diversity requirements are satisfied. The purchasers’ complaint had not alleged a specific amount in controversy, but they argued that as a matter of common sense, damages would exceed $5 million given CSGO’s popularity and the fact that Valve had made $567 million from CSGO in the previous year.

Rule of Law

Issue

Holding and Reasoning (Coughenour, J.)

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