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Thursday, April 5, 2012

Court to HuffPo Writers: A Deal's a Deal

A group of unpaid bloggers brought a class action against AOL, the Huffington Post (HuffPo) and its founders, including the eponymous Arianna Huffington (pictured) in the Southern District of New York on the ground that HuffPo unjustly and deceptively denied the bloggers compensation for their submissions and promotion of that website’s content.  Last week, Judge Koeltl granted the defendants’ motion to dismiss the action, styled Tasini v. AOL, Inc.

Arianna_HuffingtonPlaintiffs are “professional or quasi professional” writers who contributed to HuffPo’s success.  It was/is a spectacularly successful enterprise, attracting 26 million unique visitors per month (even the ContractsProf Blog cannot rival those numbers).  HuffPo made clear from the start that, rather than monetary compensation, the writers/bloggers would get exposure—namely visibility, promotion, and distribution, for themselves and their work.  All went along swimmingly until 2011, when AOL bought HuffPo for $315 million.  The  bloggers then sued, claiming a violation of New Yorks General Business Law § 349 (deceptive business practices) and that HuffPo was unjustly enriched, and sought at least $105 million in compensatory damages. 

Judge Koeltl began by setting out New York’s law on unjust enrichment: Under New York law, a plaintiff must establish: “(1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution.”  Noting that the bloggers “entered into their transactions with the defendants with full knowledge of the facts and no expectation of compensation other than exposure,” Judge Koeltl concluded that “equity and good conscience counsel against retroactively altering the parties’ clear agreements.” He then dismissed both the unjust enrichment claim and the § 349 claim with prejudice.  

Some see an injustice in that the plaintiffs were committed to a certain sort of institution -- they may have seen HuffPo as a not-for-profit enterprise with a clear political mission -- and that institution was then swallowed by a soulless corporation associated with the noise an old-fashioned dial-up modem makes.  Plaintiffs did not make that argument, perhaps because they did not want to seem like starry-eyed idealists who never noticed that HuffPo is a full-service content aggregator that, according to Wikipedia "covers politics, business, entertainment, technology, popular media, life & style, culture, comedy, healthy living, women's interest, and local news."  Rather, as there was no question that HuffPo benefitted from the bloggers' contributions, the legal issue at the heart of the case is whether New York law ever supports a claim for restitution when there is no initial expectation of payment.     

Plaintiffs presented the court with a number of cases in which plaintiffs successfully brought restitution claims even without a clear initial expectation of payment.  The heart of the court's reasoning on this matter runs as follows:

At best, these cases stand for the proposition that plaintiffs who are unsure of whether they will be compensated if their services are not used may still sue if the services they render do ultimately benefit a defendant who then denies compensation. . . .   Stated in other terms, the plaintiffs in these cases expected compensation but the exact terms of the compensation were unclear. These cases therefore fail to support the plaintiffs’ argument that unjust enrichment does not require an expectation of compensation. Indeed, in this case, the plaintiffs expected only exposure rather than monetary compensation if their submissions were used, and those terms were clear from the outset.

In the court's view, this was a case in which the parties initial expectations were clear and the plaintiffs sought a "do over" when they learned that the price that AOL was willing to pay HuffPo for the privilege of access to the services that HuffPo writers were giving away. 

[JT and Christina Phillips]

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