Court Declines to Dismiss or Transfer Lawsuit Over @OMGFacts Twitter Account — Deck v. Spartz, Inc.

[Post by Venkat Balasubramani]

Deck v. Spartz, Inc., 11-Cv-1123 (E.D. CA.; Sept. 27, 2011)

I posted about the lawsuit involving the @OMGFacts Twitter account some time ago. (“Thoughts on the Lawsuit Over the @OMGFacts Twitter Account.”) The account was created by Adorian Deck, who at the time was a minor. Deck signed an agreement with Spartz to commercialize the brand, and the parties ended up in a dispute over the agreement and who could control the “@OMGFacts” brand. As the court notes, Deck had an “OMG-moment,” and decided to bail out on the agreement. He sued in California to disaffirm the agreement and Spartz, an Indiana corporation, moved to dismiss or transfer the case to Indiana. The court denies Spartz’s motion and allows Deck to proceed.

Personal jurisdiction: Spartz’s argument that it is not properly subject to personal jurisdiction in California does not go very far with the court. At the time the parties entered into the agreement, Spartz knew that Deck was a California resident, and the court finds this dispositive. It does not matter that the parties conducted their negotiations over the internet:

It is immaterial that the primary method of communication between the parties was electronic and that Adorian Deck’s performance was to occur online. The Internet is not a place, and Adorian Deck was to complete his performance in California, his place of residence. The fact that he was to send the resulting materials to [Spartz] via the Internet does not change the nature of the parties’ relationship.

Nothing too earthshattering there. Spartz also pointed to the forum selection clause in the agreement that required disputes to be resolved in Indiana. The court says that if Deck is entitled to disaffirm the agreement (and the court finds that he is), the forum selection clause goes out the window.

Disaffirmance: With respect to the disaffirmance issue, Spartz argued that Deck was trying to have it both ways: on the one hand, Deck was trying to disaffirm the agreement and on the other hand he was suing for breach. The court disagrees and says that dispute is over the remedies Deck is entitled to if he gets to disaffirm the agreement. Spartz also argued that Deck could not disaffirm unless he returned the consideration he received under the agreement, but the court says that there is case law support for the proposition that disaffirmation before the minor reaches the age of majority does not require the return of consideration, and the current version of the statute (Section 6710) “no longer requires restoration of consideration for any disaffirmed contract.” Deck filed the lawsuit when he was still a minor and this reflects a clear intent to disaffirm the agreement. The fact that he did not restore any consideration he received is immaterial.

Trademark claims: Deck brought common law trademark claims against Spartz, and Spartz’s principal defense was that the contract is still valid and Deck thus cannot claim unauthorized use. The court says that since Deck is entitled to disaffirm the agreement and expressed an intent to do so and because Deck revoked any permission granted to Spartz to use the mark, Deck states a valid claim for infringement.

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Ouch. This is a rough result for Spartz. It’s going to have to continue to litigate the dispute in California. The court pretty much nukes the agreement, and this does not put Spartz in a great position in the dispute. It looks like control over the @OMGFacts brand will revert to Deck, and the parties will probably resolve this dispute in short order.

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