Kickstarter Fights Lawsuit After Pulling Plug on Book Project (Exclusive)

Ever wonder what sort of legal trouble would be in store for Kickstarter if the upstart platform decided to terminate service for a user in the midst of a big fundraising campaign? Wonder no longer because the subject is front-and-center in a pending court dispute.

The plaintiffs in the case are Kristin "M.K." Ducote and her husband and professional race car driver, Chapman Ducote. M.K. is the author of a book, entitled Naked Paddock, about life, love and drama in the world of professional motorsports. At the end of 2012, the Ducotes decided to use Kickstarter's platform to raise funds they say were needed to publish the book.

Because Chapman is a celebrity race car driver, says a lawsuit that later followed, the two were invited to appear on "Kourtney and Khloe Kardashian Hit Miami" (sic). The Ducotes hoped that the reality TV appearance timed to the launch of their Kickstarter project would bring great rewards. But in January, after Kickstarter approved the initial project, and five days after it launched on the site, Kickstarter allegedly hit the brakes.

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"The unexpected and unexplained actions by Kickstarter in suspending the Project on the website at the same time the Kardashian appearances were occurring on television was an unexpected and huge shock," said the lawsuit first filed in Florida state court in April. "It is almost as if Kickstarter decided to pull the plug at the exact moment they knew MK, Ducote and [their publisher] War Chest needed them the most."

Late last week, Kickstarter answered the lawsuit and explained why a judge should throw it out.

The Ducotes are suing for breach of contract, fraudulent inducement and unjust enrichment and are seeking more than $1 million in lost sales for the book. The complaint states that the suspension "caused damage to Plaintiffs' reputation by its implication to the tens of thousands of people that were marketed to view their Project, that their product, the novel Naked Paddock, was somehow fraudulent or nonexistent or unavailable."

The lawsuit is premised on the theory that Kickstarter holds itself out as a successful innovator in the field of crowd funding, with advertisements that state that $500 million has been pledged to more than 3 million people for over 35,000 projects. The plaintiffs say that Kickstarter represented to them, both in writing and orally, its experience, background and successes -- and that these were misrepresentations that the Ducotes relied upon when agreeing to Kicksarter's terms of use and putting the project up.

The dispute has now been removed to federal court in Florida, and Kickstarter wants it moved again to New York where a choice-of-forum clause in the terms of use states that disputes will be adjudicated.

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But Kickstarter also gives reasons why it believes the lawsuit fails.

First, the popular crowd-funding platform points to its terms of use, which state that "Kickstarter reserves the right to reject, cancel, interrupt, remove, or suspend a campaign at any time and for any reason."

The Ducotes accepted the terms of use, says Kickstarter, which allegedly "explicitly negate(s) Plaintiffs' breach of contract claim."

As for the allegation that Kickstarter fraudulently induced the Ducotes into signing up based on the advisement that it had the capability of providing a forum to raise funds, Kickstarter responds, "None of these supposed 'misrepresentations' are actionable. At best, the first set of statements constitutes inactionable expressions of future expectations and opinion based on past performance, which Plaintiffs do not allege with particularity to be false."

Kickstarter says that the fraudulent inducement claims are duplicative of the breach-of-contract ones and points to further language from its terms of use that state "Project Creators should not take any action in reliance on having their project posted," "The Company does not guarantee that any Content will be made available through the Service" and more.

Here's the entire lawsuit as well as Kickstarter's response.

As far as we know, this is just the second lawsuit that Kickstarter has faced over a specific project. The other dispute involved the allegation that a creator's project infringed upon some company's patent. Recently, the parties in that case requested a stay of the proceedings in an effort to resolve the dispute through settlement discussions. This latest dispute might be the first lawsuit testing a fundraising campaign gone bad.

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