Valve Alleges Law Firm and Litigation Funder are Attempting to ‘Extort a Settlement’
A common criticism of litigation funders' involvement in claims against large corporations is that funders are more concerned with generating ROI than with assisting the consumers being represented. A recent complaint filed by the world’s largest video games distributor bears a striking resemblance to this critique. An article in Reuters highlights an ongoing lawsuit filed by video game company Valve, alleging that a law firm and funder had planned to take advantage of the company’s users and ‘extort Valve for their own benefit’. The filing alleges that Zaiger, LLC ‘hatched a scheme’ with the litigation funder to ‘weaponize’ the Steam Subscriber Agreement (SSA), which Valve uses to resolve disputes with customers of its video game marketplace, Steam. The origins of Valve’s complaint lie in the allegation that Zaiger has planned to ‘to recruit 75,000 clients and then bring arbitrations on behalf of a subset (no more than 160) of those clients to drive a settlement on behalf of all 75,000 of its clients.’ The complaint goes on to illustrate how Zaiger’s plan would use the SSA’s arbitration clause, in which ‘Valve agrees to pay the fees and costs associated with arbitration’, to expose Valve to ‘potentially millions of dollars of arbitration fees alone.’ These allegations are based on a presentation that Zaiger gave to Black Diamond Capital Management, a company which Valve claims is the unnamed litigation funder. Valve’s complaint then highlights that Zaiger’s presentation planned to “offer a settlement slightly less than the [arbitration] charge—$2,900 per claim or so—attempting to induce a quick resolution.” They further argue that Zaiger made no reference to ‘Steam users’ concerns or interests’ and provided ‘no space in that lifecycle for investigating the legal issues involved or evaluating the facts of any particular Steam user’s situation.’ The filing asserts two causes of action: ‘tortious interference’ and ‘abuse of process’, arguing that ‘Zaiger and its funder are engaging in an egregious abuse of the litigation process.’ Going even further, Valve’s complaint makes the claim that ‘the point of all of Defendants’ actions against Valve is to improperly interfere in Valve’s valid contractual relationships with its customers and to use the arbitration system to extort a settlement from Valve.’ Jeffrey Zaiger, in response to Reuter’s request for comment, described Valve’s legal action as “meritless” and said that it was “a transparent attempt to intimidate my law firm into abandoning meritorious claims on behalf of our clients.”