The lawsuit defeats itself

[skeptical]

It occured to me a couple days ago that the arguments in the EzExpo lawsuit work to almost contradict each other. Let me illustrate:

You say EzExpo is a Lottery. As I covered in a previous thread, according to California law a lottery must have ALL THREE of the following attributes:

- A valuable prize
- Consideration (You have pay for a ticket to enter)
- Element of Chance

It has been contested over and over again that Ez is not a lottery because the entry to the list is free. No consideration means no lotto. I won't rehash this here, you've all heard it.

So the next argument that I often hear is that the "Free Gift" idea is flawed because a "Gift" must be of SECONDARY value to the product. This is why you can buy 10 subs and get 1 sub free. 1 sub is of secondary value to 10. The argument is that EBooks are worthless and the ebooks are SECONDARY to the free entry in the matrix. Thus making this an illegal contest.

HOWEVER, a primary tenent of this lawsuit is that you PROBABLY WON'T CYCLE. This lawsuit plays "ELEMENT OF CHANCE" like a theme song.

If you PROBABLY WONT CYCLE, then how much is that "Free Entry" actually worth? Honestly, ask yourself this: What is an entry to an Ez list worth to you? To most of you, probably nothing. If it's truly worth nothing, how is this prize of a free entry to a list SECONDARY in value to an Ebook? Granted, the EBooks truly don't have much value but you'd be hard pressed to say that an EZ entry is worth more then an ebook. This is what your lawsuit is all about, about an entry on the list being worthless since most people wont win. See the contradiction?

[MatrixWatch]

Originally posted by skeptical
HOWEVER, a primary tenent of this lawsuit is that you PROBABLY WON'T CYCLE. This lawsuit plays "ELEMENT OF CHANCE" like a theme song.

I'll start with this statement you made, because while I respect the time you took to think about and post this argument, I believe it is soley based on this notion, which is flawed. The idea that people probably won't cycle is not a primary tenet of the lawsuit. The fact that the matrix sites require a person to buy the ebooks to be entered onto the [matrix] prize list is. The reason the element of chance is brought up is because the only other alternative the site owners have is to guarantee a prize 100%. However, they cannot do this because it would be fraud to say, "We guarantee you your prize WHEN you cycle", and they would fall into the category that they seek to avoid (pyramid/ponzi classification). You see, the basis is that the customers of matrix sites enter these lists because of the "chance" that they might cycle. The whole drive of a matrix site (testimonials, fancy pictures, etc.) is to encourage new customers into thinking that they can receive these prizes too.


If you PROBABLY WONT CYCLE, then how much is that "Free Entry" actually worth? Honestly, ask yourself this: What is an entry to an Ez list worth to you? To most of you, probably nothing. If it's truly worth nothing, how is this prize of a free entry to a list SECONDARY in value to an Ebook? Granted, the EBooks truly don't have much value but you'd be hard pressed to say that an EZ entry is worth more then an ebook. This is what your lawsuit is all about, about an entry on the list being worthless since most people wont win. See the contradiction?

The free entry is not worth any more than a lottery ticket (cost of paper). You are correct that the entry in the matrix list is probably worth nothing, however it was the consideration that led many people to buy five to ten spots on one matrix. When someone dumps two or three grand into a matrix list, I'd say that they did so because they believed there was a good possibility that there would be a return on investment.

I see the contradiction you point out, and I understand where you are coming from. The fact is however, that no matter how valuable those matrix entries really are, the entry enables a person to have a shot at the 50" plasma TV, or whatever else the list is for. Because of that chance, the matrix site is at risk of violating many state laws concerning illegal lotteries, since they require a customer to buy their ebooks, kitchen knives, etc. That is the major issue in this lawsuit,

Skeptical, I am glad you have returned and you are always welcome here. I was wondering where you had gone and I hope that things are going well at your job.

[matrixfriendly]

Originally posted by watchdog
The reason the element of chance is brought up is because the only other alternative the site owners have is to guarantee a prize 100%. However, they cannot do this because it would be fraud to say, "We guarantee you your prize WHEN you cycle", and they would fall into the category that they seek to avoid (pyramid/ponzi classification).

This could possibly be true if the site closed, but realistically the site could remain open and the lists become stagnent. Although the lists have become stagnent they still are abiding by the guarantee that they made. When you cycle you will get your prize. They do not have to guarantee a specific amount of time. So as long as the site is open for business this would not constitute fraud.


Originally posted by watchdog
I see the contradiction you point out, and I understand where you are coming from. The fact is however, that no matter how valuable those matrix entries really are, the entry enables a person to have a shot at the 50" plasma TV, or whatever else the list is for. Because of that chance, the matrix site is at risk of violating many state laws concerning illegal lotteries, since they require a customer to buy their ebooks, kitchen knives, etc. That is the major issue in this lawsuit,

Also again I would have to disagree. As long as the site is open there is no chance that you might receive a (example:50" Plasma TV). The reason being is for the guarantee that the site has placed on it. When you cycle you will receive a 50" Plasma TV. There is no possibility of chance rather a matter of time. It is a guarantee. Now I am not going to say that a matrix site will go on for eternity, so now you say it will be fraud again, correct? Well my theory is that the site does not have to go on for eternity, but rather til the demise of the owner then all points are invalid. So as long as the site remains open it cannot possibly be fraud or a game of chance, it is a fact.

[skeptical]

Watchdog,


The idea that people probably won't cycle is not a primary tenet of the lawsuit.

But it is... the biggest claim in your suit is the illegal lottery. You need to prove Chance, Consideration and Valuable Payout to prove it's a lottery. I think chance and valuable payout are givens, consideration is the only aspect that can be debated and I think a very strong argument can be made by Ez that there is no consideration paid.

The point, however, is this argument and the "Free gifts must not be of secondary value" argument are mutually exclusive. If you run with one you cannot use the other without losing credibility. If you illegal lottery argument gets rejected because it's determined that this is a free gift, you cannot then say it's an illegal free gift because doing so would fly in the face of your lottery argument. Either one could be argued but you can't use them both.

As a bystander, I'd call this lawsuit right now at 60% your favor 40% theirs. There is considerable sway here, mostly dependent on the judge that hears the case and how talented of an attorney Ez can find. With the right talent behind the defendants table I see the odds easily flipped and with a liberal judge that is business friendly I see Ez with a 65-70% chance.

Your entire case lies with your ability to prove consideration. It's going to be interesting.


I lurk a lot but only post when I have something novel to add.

Shane

[matrixfriendly]

Very well stated!

[hurley9192]

but if you pay $150 for a set of ebooks, and you can get an ebook for free on the internet, then you've essentially paid consideration for the spot in the list. Especially if you've paid in tons of money for the same set of ebooks over and over again.

You have good points though.

[skeptical]

but if you pay $150 for a set of ebooks, and you can get an ebook for free on the internet, then you've essentially paid consideration for the spot in the list. Especially if you've paid in tons of money for the same set of ebooks over and over again.

That's true. If I had to guess at the Achilles heel of a matrix site it would be the "product" they're trying to "sell." They choose zero cost (thus zero value) products so they can split their income between their pocket and their list and not have to actually purchase inventory. If they would turn down the greed slightly and develop or purchase a product with real value then this argument would be dried up.

But

I'm a firm believer in a free market system where the fair market value of a product is decided by the consumers and not the businessmen or a court. If the consumers say the F.M.V of an ebook is $150.00 then I don't believe a court can say otherwise. Don't get me wrong, I understand a matrix customer buys for the prize and not the product, but a customers motivations can not be the responsibility of the owner. This argument, of course, assumes that the site and its owner are not misleading, but unfortunately most of them are.

I just read the other thread in this "forum." wow... talking to some of these people (on either side of the argument) is sort of like putting your head in a bucket and ramming it against the wall.

[concerned]

Skeptical

I think that you are ALMOST right about the consideration idea. Here is the ONLY way that you would be correct.

If I call or email EZEXPO and tell them that I don't want to buy ebooks, but still want to be in the matrix for free, and they let me in, then everything would be OK. The problem is, that if I were to do that, they would laugh in my face and tell me that I would HAVE to buy the ebooks, or else I cannot get into the matrix. That is the problem. When COKE or MCDONALDS or any other large company does their prize giveaways, you should look at their advertising. You will see it printed that you can send a self addressed envalope to them, and they will send you a free entry WITHOUT A PURCHASE. On top of that, the free entry would have the same chance as the entry obtained by making a purchase. Also, the order in which I recieve my entry has NOTHING to do with my chances. In a matrix, if I buy 10 spots, and then you come in and buy 1 spot, I have an advantage where I COULD recieve the gift 10 times before you even have a chance to recieve yours.

[skeptical]

Concerned,

What you're describing is a sweepstakes. This is different then a Lottery AND a contest.

See, a matrix is sort of the hybrid of a "McDonalds Monoply Game" and a "Subway Sub Card" In the McDonalds sweepstakes you can get a free piece just by mailing them, just as you said. If you mail subway and say you want a free sticker for your card they will laugh at you, too.

I understand all the Subway, McDonalds, Haircut, Hooker analogies that are commonly used, and none of them fit a matrix perfectly but pieces of each do. A matrix is not a sweepstakes, it's made to reward a companies customers, much like a sub card.

People over use these analogies. A Pro-Matrix person says "It's just like McDonalds" and an Anti-Matrix person says "It's just like prostitution" and they're both wrong and they both go on ad infinitum about it. I understand that each person is just trying to find examples that prove their point but there are none to be had. Sure, this resembles a Ponzi scheme and justifiable homicide resembles a murder but they are two very different things.

Is this suit going to Summary Judgment?

[MatrixWatch]

Originally posted by skeptical
But it is... the biggest claim in your suit is the illegal lottery. You need to prove Chance, Consideration and Valuable Payout to prove it's a lottery. I think chance and valuable payout are givens, consideration is the only aspect that can be debated and I think a very strong argument can be made by Ez that there is no consideration paid.

I see your point, but I strongly disagree. You see, your point argument says that:

A. My side must prove consideration
B. Consideration must be determined by the value of the spot in the matrix.
C. My lawsuit undermines this by proving that the matrix spot is worthless.
---
Therefore I will likely lose this lawsuit

While I agree with point A, I disagree with points B and C, hence I also reject your conclusion.

While it seems like a reasonable argument, your logic is based upon information that you took out of context and misquoted to prove a point that is highly based upon your misinterpretation of California laws concerning what constitutes 'consideration' in an illegal lottery. When the legitimacy of the matrix and the subsequent value of an entry is addressed it is in the context of Business and Professions Code section 17204 which includes any "unlawful, unfair, or fraudulent business act or practice," "unfair, deceptive, untrue, or misleading advertising," and any act prohibited by Chapter 1 (page 3 EzExpo lawsuit). It is in this context that we prove EzExpo's matrix scheme is set up to fail, and that all of the people involved in the matrix will likely never receive their prize. It is never stated that all entries into the matrix are useless, in fact we admit that early entrants greatly benefit from the investment (and quote FTC estimates to prove it). What we needed to point out in that section of the lawsuit is how EzExpo's matrix scheme is not fair to all the participants and that it will eventually collapse under its own weight. We had to prove this so that we could then add how EzExpo's website is extreemely misleading with its guarantees, especially where EzExpo makes claims on how long it will take a person to cycle. All of this was brought up to justify our argument related to Business and Professions Code sections 17204-17500.

Now, the aspect of the lottery is brought up on page 9 of the lawsuit. A "lottery" is defined by Penal Code section 319 as "any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion or it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a lottery, raffle, or gift enterprise, or by whatever name the same may be known."

The operation of a lottery is a misdemeanor (Penal Code 320)- Allegedly the Matrix Sites

Aiding an abetting the operation of a lottery is also a misdemeanor (Penal Code 322)- Allegedly the Pay Companies

In this section of the lawsuit we state (on page 10):

Chance-
"It is pure chance as to how many persons will subsequently enter the matrix and therefore trigger the awarding of the prize"

Consideration-
"Under California law, what constitutes valuable consideration is to be determined from the standpoint of the persons who might win the prize, not from the standpoint of those who are conduction the event."

This is where you are mistaken in your view of consideration under California law.

The lawsuit goes on to say, "From their (the customer's) perspective, some or all of the money they paid was to participate in the chance to win the prize, not to obtain the e-books. Under California law, in establishing the elements of a lottery, the payment of valuable consideration need not be exclusively for the chance to win the prize. It is sufficient that the consideration is paid for something else, such as a product or service as well as the chance to win the prize.
This last sentence is there to show that the matrix sites cannot retort that the customer was buying e-books, not a spot in the matrix. Consideration under CA law includes both as one.

So we are not, as you said, "running with one, and still using the other" because we don't contradict at all. Furthermore, your whole argument is based on the presupposition that this case will be tried under the premise that consideration is something other than what California law defines it as.


And therefore, your statement...

The point, however, is this argument and the "Free gifts must not be of secondary value" argument are mutually exclusive.
...is false

[uwantme]

Originally posted by hurley9192
but if you pay $150 for a set of ebooks, and you can get an ebook for free on the internet, then you've essentially paid consideration for the spot in the list. Especially if you've paid in tons of money for the same set of ebooks over and over again.

You have good points though.

Now everyone knows I dont really approve of matrixes selling e-books, but in response to this: why do people pay $3000 for a laptop they can buy from ebay for $1500 or $500 for a ring they could get somewhere else on the interent for $20... You cant really say what drives the consumer. I have seen just as many people on the forums stating that they thought the e-book package was a great deal as I saw people saying they were worthless. I found that some of the e-books I had bought were interesting. Though I only paid $10 for them and not $150. But I still dont feel as if I have wasted my $10. So not everyone may be paying for the consideration of the spot on this list. But basically this is the same aurgument everyone has been debating for months now....

[uwantme]

Originally posted by skeptical
That's true. If I had to guess at the Achilles heel of a matrix site it would be the "product" they're trying to "sell." They choose zero cost (thus zero value) products so they can split their income between their pocket and their list and not have to actually purchase inventory. If they would turn down the greed slightly and develop or purchase a product with real value then this argument would be dried up.



Just to add on to this, there actually many matrix site who have already started selling other items. I know of sites that sell t-shirts, cds, pens, jewelry, and more!

I agree with what you have to say skeptical. The lawsuit is a little contradictory but most of that comes from the way it is written, I also dont really how sites can be illegal lotteries. I can understand how manybe a ponzi scheme but not really the lotterey aspect.... I guess this is off subject but it still has to do with the lawsuit:

Watchdog do you know if when you do finally go to court if there will be a trial by jury or is it just a judge deciding?

[hurley9192]

If there is a summary judgment, will you just print our forum and use that for both side's arguments?? :D

Might as well, would save the court a ton of time.

also, I want to be hired to calculate the damages. Send me an email. I can do both sides if I have the proper financial info and my ethics allows me to form a proper calculation, even if I don't agree with the concept. I end up doing a ton of defense work because they are usually the ones that have to come up with a calculation.

[Arzel]

This is a clarification on the Sweepstakes definition. It has been pointed out before, but it probably serves to state it again.

A sweepstakes is a type of lottery, according to my Webster's New World Dictionary that I just re-read.


sweep'stakes n., pl. -stakes' a lottery in which each participant puts up money in a common fund which is given as the prize to the winner or winners of a horse race or other contest.

[MatrixWatch]

Guys,

Please get back on track here. There are a few things happenining in this thread. What we are talking about skeptical's argument. Please start a new thread if you all want to talk about issues concerning sweepstakes, or how the lawsuit will be decided. Also, the best place to post such a thread would be in the "legal issues" thread.

I have posted a response and I would like to hear the retort.

[MatrixWatch]

I am reposting my response to Skeptical in case it was lost in the midst of the other posts.

Originally posted by skeptical
But it is... the biggest claim in your suit is the illegal lottery. You need to prove Chance, Consideration and Valuable Payout to prove it's a lottery. I think chance and valuable payout are givens, consideration is the only aspect that can be debated and I think a very strong argument can be made by Ez that there is no consideration paid.

I see your point, but I strongly disagree. You see, your point argument says that:

A. My side must prove consideration
B. Consideration must be determined by the value of the spot in the matrix.
C. My lawsuit undermines this by proving that the matrix spot is worthless.
---
Therefore I will likely lose this lawsuit

While I agree with point A, I disagree with points B and C, hence I also reject your conclusion.

While it seems like a reasonable argument, your logic is based upon information that you took out of context and misquoted to prove a point that is highly based upon your misinterpretation of California laws concerning what constitutes 'consideration' in an illegal lottery. When the legitimacy of the matrix and the subsequent value of an entry is addressed it is in the context of Business and Professions Code section 17204 which includes any "unlawful, unfair, or fraudulent business act or practice," "unfair, deceptive, untrue, or misleading advertising," and any act prohibited by Chapter 1 (page 3 EzExpo lawsuit). It is in this context that we prove EzExpo's matrix scheme is set up to fail, and that all of the people involved in the matrix will likely never receive their prize. It is never stated that all entries into the matrix are useless, in fact we admit that early entrants greatly benefit from the investment (and quote FTC estimates to prove it). What we needed to point out in that section of the lawsuit is how EzExpo's matrix scheme is not fair to all the participants and that it will eventually collapse under its own weight. We had to prove this so that we could then add how EzExpo's website is extreemely misleading with its guarantees, especially where EzExpo makes claims on how long it will take a person to cycle. All of this was brought up to justify our argument related to Business and Professions Code sections 17204-17500.

Now, the aspect of the lottery is brought up on page 9 of the lawsuit. A "lottery" is defined by Penal Code section 319 as "any scheme for the disposal or distribution of property by chance, among persons who have paid or promised to pay any valuable consideration for the chance of obtaining such property or a portion or it, or for any share or any interest in such property, upon any agreement, understanding, or expectation that it is to be distributed or disposed of by lot or chance, whether called a lottery, raffle, or gift enterprise, or by whatever name the same may be known."

The operation of a lottery is a misdemeanor (Penal Code 320)- Allegedly the Matrix Sites

Aiding an abetting the operation of a lottery is also a misdemeanor (Penal Code 322)- Allegedly the Pay Companies

In this section of the lawsuit we state (on page 10):

Chance-
"It is pure chance as to how many persons will subsequently enter the matrix and therefore trigger the awarding of the prize"

Consideration-
"Under California law, what constitutes valuable consideration is to be determined from the standpoint of the persons who might win the prize, not from the standpoint of those who are conduction the event."

This is where you are mistaken in your view of consideration under California law.

The lawsuit goes on to say, "From their (the customer's) perspective, some or all of the money they paid was to participate in the chance to win the prize, not to obtain the e-books. Under California law, in establishing the elements of a lottery, the payment of valuable consideration need not be exclusively for the chance to win the prize. It is sufficient that the consideration is paid for something else, such as a product or service as well as the chance to win the prize.
This last sentence is there to show that the matrix sites cannot retort that the customer was buying e-books, not a spot in the matrix. Consideration under CA law includes both as one.

So we are not, as you said, "running with one, and still using the other" because we don't contradict at all. Furthermore, your whole argument is based on the presupposition that this case will be tried under the premise that consideration is something other than what California law defines it as.


And therefore, your statement...

The point, however, is this argument and the "Free gifts must not be of secondary value" argument are mutually exclusive.
...is false

[skeptical]

Watchdog,

I saw your very well written reply and look forward to obliterating it as soon as I find time this afternoon / evening :)

[MatrixWatch]

Well, if anyone else would like to ask any related questions on this point while skeptical waits a couple more MONTHS to respond, then feel free to do so. :rolleyes: