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The Law Blogger is a law-related blog that informs and discusses current matters of legal interest to readers of The Oakland Press and to consumers of legal services in the community. We hope readers will  find it entertaining but also informative. The Law Blogger does not, however, impart legal advice, as only attorneys are licensed to provide legal counsel.
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Tuesday, December 24, 2013

Minors Continue Challenging Facebook Credits in Federal Court

I've never been one to participate in the variety of silly game apps offered by Facebook; particularly the ones for which you must pay.  Most kids, on the other hand, are eager participants.

In Michigan, when a company contracts with a minor, that contract is voidable.  The Internet has taken voidable contracts with minors to another level with the emergence of digital currency.

A lawsuit filed against the mighty Facebook by a pair of minors has been grinding along out in Northern California for the past few years.  Here at the Law Blogger, we've been following developments in the case courtesy of Eric Goldman's Technology and Marketing Law Blog.

The minors filed suit against FB in federal court alleging a variety of claims stemming from their purchase of Facebook Credits; the minors used parental credit cards without authorization.  Facebook Credits are units of credit that are purchased in a user's local currency such as the dollar, pound, drachma, mark, or yen [no bit coins please] for use in say, the Ninja Saga game.

Facebook keeps bringing motions for summary judgment in the case, slowing stripping away some of the claims advanced in the lawsuit.

Last week, the federal judge dismissed the minors' claims for violation of California's unfair competition statute on the basis the minors' did not use their own money, so they did not have standing to make this claim.  Goldman is rightly troubled by the fact that no one seems to have standing to bring a claim under the state consumer protection statute; neither the minors nor their parents.

The court also granted Facebook's motion as to the federal Electronic Funds Transfer Act claims, ruling that the EFTA does not apply to FB because it is not a "financial institution" under the definition of the Act. Goldman characterizes this portion of the opinion as an "oddity" to the extent that Facebook Credits are a form of digital currency.

Arguably the most significant portion of the lawsuit  -the voidability of contracts with minors- survived FB's most recent procedural attack, so the case marches onward.  You can expect to see more of this type of litigation in the future as minors become increasingly active with the various forms of digital currency.

When discovery finally ends in this case, the presiding federal judge will likely be asked to decide yet another round of dispositive motions brought by both David and Goliath.  Stay tuned for those developments as the outcome could have a significant impact on both FB and how business with minors is conducted.

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