Coy v. Lilith Games Co., Ltd.

Background

Keith Coy, James Moran, and Casey Meigs sued Lilith Games Co. Ltd. and Shanghai Lilith Network Technology Co., Ltd. over alleged deceptive practices involving the mobile game Rise of Kingdoms. They sued on behalf of themselves and a proposed nationwide class of players.

The plaintiffs alleged that they spent approximately $8,000 to $15,000 each on in-game bundles and “gems” used to play loot-box games, including Card King, the Garden of Infinity, and the Wheel of Fortune. They alleged that Lilith misrepresented the chances of receiving valuable items, secretly sponsored some players, and failed to enforce its terms of service against account sharing. Their claims invoked the California Consumer Legal Remedies Act, California’s Unfair Competition Law, California’s law concerning contests and sweepstakes, California’s False Advertising Law, and the implied covenant of good faith and fair dealing.

Legal standards

Lilith moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim supported by plausible factual allegations. Lilith also challenged the plaintiffs’ standing under Rule 12(b)(1), which concerns the court’s authority to hear a dispute.

Because some allegations involved fraud, the court also applied Rule 9(b), which requires fraud to be described with particularity, including the who, what, when, where, and how of the alleged misconduct.

Court’s analysis

The court found the first amended complaint “long on speculation and short on plausible facts.” The complaint acknowledged that Lilith did not post odds for the games, so the court concluded that Lilith could not have affirmatively misrepresented posted odds. The court also found that third-party Facebook and YouTube videos asserting that the games were fixed did not provide a plausible factual basis for inferring that Lilith rigged or cheated in the games.

The court rejected the argument that the appearance of a 12-spoke wheel or six-sided dice itself plausibly communicated equal winning chances. The court said the displayed divisions did not establish that each outcome had an equal probability, particularly because some prizes were more valuable and rare than others.

The court also found the allegations about sponsored accounts insufficient. The complaint alleged that Coy lost to a more powerful account and speculated that the account was sponsored. Although the complaint indicated that Lilith appeared to have apologized for sponsored accounts, it did not plausibly allege that the plaintiffs made purchasing or other decisions because they believed no sponsored accounts existed, or that the alleged sponsorship caused them monetary harm.

Regarding account sharing, the game’s terms prohibited it but stated that Lilith “may” suspend accounts in its discretion. The court found it implausible to assume that Lilith could police every instance of account sharing and found no factual allegation that Lilith failed to enforce the rule as a general practice.

Ruling

The court dismissed the claims under the California Consumer Legal Remedies Act, California’s Unfair Competition Law, California’s law concerning contests and sweepstakes, and the False Advertising Law under Rule 12(b)(6). The court did not decide the standing challenge at that time. It also declined to dismiss the first amended complaint under the Communications Decency Act because the alleged deception by Lilith was not a basis for dismissal under that statute.

The court granted the plaintiffs one final opportunity to amend. It ordered that a second amended complaint could be filed by August 23, 2022, and stated that failure to meet the deadline would result in dismissal with prejudice under Rule 41(b).