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This article was published on October 5, 2010 Faces Class Action Lawsuit Inquiry Faces Class Action Lawsuit Inquiry
Jeff Cormier
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Jeff Cormier

Jeff Cormier, a graduate of SMU and the TW School of Law, is the co-founder of C4 Universe, LLC. Desire to know more? Jeff Cormier, a graduate of SMU and the TW School of Law, is the co-founder of C4 Universe, LLC. Desire to know more?, founded in 2007 by Jason Calcanis, bills itself as a “knowledge sharing service.”  The site features questions asked and answered with users receiving “Mahalo Dollars” (which can be exchanged for U.S. dollars) as a token gift for providing a good answer.

Through the incentive system, the site has users provide opinions on certain topics, in addition to responding to open-ended items like “Best WordPress themes that look like websites, as opposed to blogs,” and more.

Apparently though, some of these users are none too pleased with changes in the site’s Terms of Service, resulting in a law firm being retained to investigate a possible class action lawsuit against

Green Welling, LLP, is currently looking into claims that a change in the terms and conditions regarding payment and ad revenue sharing negatively impacted  page managers and others contributing to the site.

The basis for a potential class action lawsuit centers on the following changes to the Terms of Service made in June:

The important piece to note is the change in ownership of content.  Prior to the changes, contributors to owned their content.  Following the changes, any content written or submitted to Mahalo became the intellectual property of Mahalo once it was exchanged for “Mahalo Dollars.”  What this means is content one once owned by the writer/contributor, has now become the property of Mahalo.

As one can imagine, there was outrage from users with little in the way of a proper response from Calcanis, evidenced here.

We reached out to the law firm conducting the inquiry and received the following response from one of its representatives:

“I am currently in the process of gathering as much factual information as I can and conducting legal research so that we may file a comprehensive and accurate Complaint, which will instigate the lawsuit.  A former Mahalo writer has agreed to act as a “class representative” or the “named Plaintiff” in the lawsuit, and if we are successful in getting a class certified, Mahalo writers (who added content prior to the TOS changes) will automatically become members of the lawsuit and will not need to do anything to “join” the action.”

From the evidence regarding the changes to the Terms of Service and with a former Mahalo writer willing to act as the class representative, the remaining prerequisites of Rule 23 of the Federal Rules of Civil Procedure need to be satisfied in order for a potential lawsuit to move forward.  The requirements are as follows:

One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

  1. the class is so numerous that joinder of all members is impracticable,
  2. there are questions of law or fact common to the class,
  3. the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
  4. the representative parties will fairly and adequately protect the interests of the class.

Points 1 and 2 appear to be satisfied, with the investigation by Green Welling, LLP centering on ensuring the final 2 points are fulfilled, which at present, seem like a foregone conclusion.

Are you a writer or contributor affected by the changes in the Terms of Service?  What are your thoughts on the class action lawsuit inquiry?