Last year, Patreon kicked comedian Owen Benjamin off the platform because they didn't enjoy his comedy. The company claimed that his comedy violated their terms involving "hate speech." In response to the termination of his account, Benjamin encouraged his fans to sue Patreon for violating the contract between the site and its users, which promises that content, which is paid for, will be available for those who paid.
These suits would create a logjam for Patreon because the company's terms of service allowed for each suit to be litigated individually under California's JAMS arbitration scheme. In addition, Patreon would be required to pay the cost of arbitration upfront for each individual case. In some cases, the fees could be a few thousand dollars, while others could cost tens of thousands of dollars. As a result, Patreon changed its terms of service to say,
You may not bring a claim against us for suspending or terminating another person's account, and you agree you will not bring such a claim. If you try to bring such a claim, you are responsible for the damages caused, including attorneys fees and costs.
While changing policy is a normal process, the way Patreon did it was not. Rather than letting affected users know that a change was coming and giving them a chance to read the changes before they took place, Patreon made the change publicly and then claimed that by using the site, you had accepted the new terms. That meant that people were theoretically under the new terms and could then not participate in the suit under the rules that existed when the violation took place, simply because they had gone back to the site.
Last month, a judge ruled against Patreon, agreeing that the move was not acceptable. The judge said that the change of Terms of Service was tantamount to changing the rules in the middle of the game. The result was revealed this week, and it is going to create a huge problem for Patreon. In fact, the legal fees as a result of this collection of suits is likely to reach as high as $20 million this year alone.
Over the last year, the company has lost market share, care of both its policies against content that the management team doens't like, as well as a huge group of competitors. Because of this, a $20 million legal bill is going to cause additional issues to the brand. The ruling also opens Patreon up to additional suits from the fans of other creators who have been bounced from the platform.