Source: http://www.dpgatlaw.com/Articles/Player-Contracts-and-Unions-in-the-LCS.shtml
Timestamp: 2014-10-30 14:24:53
Document Index: 128512751

Matched Legal Cases: ['§16600', '§16600', '§3423', '§3423', '§3423', '§3423']

Player Contracts and Unions in the LCS | DPG At Law | Los Angeles, California
This is an article I wrote in December of 2013 but that, for various reasons, I never published. The news underlying it is well in the past now, but the interesting issues that news presented are not. It's not my intention to dreg up the problems associated with this again, only to engage in a fun thought experiment about how contracts and labor law work or may someday work in the world of professional competitive video gaming. I'm presenting the article as I originally wrote it, complete with "recentlys" with respect to the ancient and "coulds" with respect to the since-decided. Now, take a trip with me down memory lane into the forgotten mists of... several months ago...
A Contentious Contract Clause
Recently Ongamers revealed that Riot Games, maker of League of Legends (aka LoL) was requiring players in the League of Legends Championship Series (aka LCS) not to stream themselves playing certain other games (contract reproduced in relevant part here). This was later confirmed by RiotMagus, Riot's Director of eSports. A couple days and a public outcry later, RiotMagus announced a reverted policy that allowed LCS players to stream any game they want as long as they don't accept sponsorship from other game companies to promote other games. But in that couple days there was quite a bit of public discussion about the pre-update anti-streaming-other-games contracts. So let's talk about them!
Three legal issues jump out most to me here. First, could Riot really prohibit players from streaming certain games? Second, what could happen if a player decided to stream a banned game anyway? And third, can Riot even place restraints like this on players in the first place?
Let's talk quickly and generally about what's required for a contract to be legal and enforceable. There must be consent, which requires an offer and an acceptance of that offer. There must be consideration, that is, some benefit that the parties bargain for and that induces them to agree. All the parties to the contract must be capable of contracting, meaning they must be old enough, not mentally disabled, and so on. And lastly, the purpose of the contract can't be illegal or against public policy. Sorry, contracts with hitmen are not enforceable.
As far as I know, there's no reason to suspect that any of consent, consideration, or capacity were lacking. The players were doubtless made offers that they accepted, they get benefits in the form of money and e-fame, and they're smart people required to be at least 17 years old. The only question, then, is whether the purpose was legal and in line with public policy!
Lemme quote the court in Copeland v Baskin Robbins USA: "Persons are free to contract to do just about anything that is not illegal or immoral." Literally if the contract doesn't break an actual law or the policy of an actual law or require crazy things like marriage, then you're good.
But depending on how the no-streaming-other-games contract is viewed, it may in fact be against the law! Some commentators have suggested that the contract seems like a covenant not to compete. Covenants not to compete, also known as non-compete agreements, are contracts that prohibit one party from competing with the other, whether directly or while engaged with someone else.
In California, where Riot is located and where its deals are governed, contracts in which a party promises not to compete are mostly illegal under the Business and Professional Code §16600. The rule itself is about as short and easy as a statute gets: "Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." There's no narrow restraint or general reasonableness consideration. It applies to employees and to independent contractors alike engaged in any kind of lawful work. There are some exceptions, but they're only about selling and dissolving businesses, not anything that would be relevant here.
Could Riot's streaming restrictions be considered promises not to compete and therefore illegal in California? It's true that the anti-streaming-other-games provision prevents players from promoting games that compete with Riot's League of Legends. In fact, it also seems to prevent players from competing professionally in any other game, since playing professionally would almost certainly include playing on a stream. In that sense, it is a covenant not to compete.
But the author of that Forbes article is right when he says that competitive gaming and video game streaming are both so new that no court has yet decided whether a prohibition on streaming other games counts as a non-compete agreement. Without guidelines from a previous court case to help us, it's really hard to know if the contract violates Bus & P C §16600.
I'm not convinced about which side to take on this. But I feel like it'd be harder to argue that this is not a non-compete than that it is, and that makes me favor the idea that it is. I dunno, though. Lawyering in competitive gaming and new media is kinda nice. I mean hey, if you don't know the answer to something, no big deal, it's cool! Nobody does!
But meh, I'm just gonna pretend that the contract is good. I'd like to discuss about what happens if it's breached.
Let's say a player decides to breach the contract by streaming a prohibited game anyway. What kind of remedies would be available to Riot, the aggrieved party in this scenario, against such a naughty player?
Most cases of breach of contract can be settled with money damages, aka legal remedies. Damages are court ordered payments made by whoever broke the contract to whoever didn't. Sometimes, though, legal remedies don't quite cut it. In those cases, plaintiffs can instead seek what are known as equitable remedies. Equitable remedies come in different flavors, but the most common forms are injunctions, which either force or prevent some action by the breacher, and specific performance, where the naughty side is required to live up to whatever it was supposed to do under the contract in the first place.
Personal service contracts like the ones at issue here usually allow only for legal remedies; injunctions and specific performance aren't usually available, since courts tend not to want to tell people what to do with their bodies. But there is an exception, and it may apply here.
Under California Civil Code §3423(e), injunctions are allowed if the services "of a special, unique, unusual, extraordinary, or intellectual character, which gives it a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages" and if the contract is in writing and meets certain financial criteria, like being worth at least $9k for the first year, $12k for the second year, and $15k for the third through seventh years. Anyone whose services fit such a description can be prevented from performing for anyone other than the party they originally contracted with.
Now, it may not be realistic to expect Riot to pursue a lawsuit against a pro LoL player for streaming Fat Princess; a more likely scenario may be a mere dismissal from a team or from LCS play, depending on how the contract is written. But if it did, pursuing an injunction under §3423(e) might be a good course of action.
In the last season of the LCS, season 3, the rules required each team to distribute a minimum of at least $12,500 to each of its starting players per split, which is half of the total season. I'm not sure whether the rules will change in season 4, but even if they do it's unlikely that they'll be overly different. That means that an LCS player who's only around for one split will already qualify for the financial minimum listed for the first two years in §3423(e). If a court were to find that such a player had a written contract to provide a service of a special, unique, unusual, extraordinary, or intellectual character, then this law would apply.
So if a star LCS player were to stream a prohibited game, Riot could rely on §3423(e) to prohibit that player from continuing to do so. And, if it can show that the player's streaming hurt its finances or profits, it might still be able to get legal damages as well.
Restraints on Players
In defending the original contracts, RiotMagus justified his company's requirements in part by saying that Riot wants League of Legends to be a legitimate sport with a professional setting. Just as you wouldn't see an NFL player promoting the Arena Football League, he claims, you shouldn't see a League player promoting Dota2 either.
In point of fact, it's actually not uncommon to