The Twitter followers lawsuit and future legal implications

January 3, 2012

Twitter dollarWith all of the talk about the power of networking through social media, it was probably only a matter of time until someone sued over it.

That lawsuit, filed last July, is the first to claim Twitter followers as having discernable economic value, and the court’s ruling will likely have extensive future implications for social media law.

The facts of the case involve Noah Kravitz, an employee of PhoneDog, an “interactive mobile news and reviews web resource,” that provides information and reviews of mobile carriers.

Kravitz worked as a product reviewer and video blogger for PhoneDog since April 2006, and, as part of his employment, created and used a Twitter account (@PhoneDog_Noah) that had gained around 17,000 followers.

Kravitz quit in October 2010, and changed the Twitter account’s handle to @noahkravitz, and continues to use the account (whether Kravitz did this in response to PhoneDog’s request to relinquish the account is in dispute).

Here is where the lawsuit comes in.

PhoneDog sued Kravitz, claiming misappropriation of trade secrets, intentional and negligent interference with prospective economic advantage, and conversion.

Most of the activity in court so far has been dealing with Kravitz’s summary judgment motions, claiming that the court doesn’t have subject matter jurisdiction and that PhoneDog has failed to state a claim under Federal Civil Procedure Rule 12(b)(6).

The court issued a ruling on these motions on November 8, 2011, and it offers quite a bit of insight into how the court may view the entire issue.

First, on the matter of subject matter jurisdiction (requiring diversity and at least $75,000 in damages), the court denied Kravitz’s motion.

The issue here came down to the question of damages.

PhoneDog claims that the industry price for each Twitter follower is $2.50 per month, making the account with 17,000 followers worth $340,000 since it was used for eight months.

Kravitz claims that there is no real basis for such valuation and further asserts that PhoneDog hasn’t presented any evidence showing any actual losses from his taking the Twitter account.

The court couldn’t figure out what the damages were, if any, from the evidence presented, and dismissed Kravitz’s motion without prejudice (so he could bring it again later at summary judgment).

This is a short-term win for PhoneDog, but it could potentially signal a loss later if PhoneDog fails to produce additional evidence demonstrating actual damages.

On the other hand, the court seems to agree that PhoneDog owns the Twitter account that Kravitz is now using, since the court found that PhoneDog had alleged that it owned the account sufficiently enough to defeat Kravitz’s motion to dismiss the conversion claim.

In addition, the court denied Kravitz’s motion to dismiss the trade secret misappropriations claim, finding that PhoneDog sufficiently alleged that the Twitter password was a trade secret.

While it may seem likely that the court will agree with PhoneDog on the issue of account ownership, the court doesn’t quite agree with it about the interference with prospective economic advantage (this just means interference with a business relationship).

The court dismissed both of these claims with leave to amend (PhoneDog is allowed to, and subsequently did, amend its complaint in light of the court’s ruling).

The basis of the dismissal was the court finding that a Twitter follower is not in an economic relationship with the owner of the Twitter account, at least not independently of other economic arrangements.

Thus, a Twitter account’s followers are not “clients.”

This point is quite significant.

Although there still may be some economic value attached to having Twitter followers (the court has yet to determine this point), following someone on Twitter is not an economic transaction in itself.

None of these findings are final, of course, until the court issues a final ruling (or the appellate court, if the case is appealed, does so).

Nevertheless, these rulings certainly give some indication as to how the court views the issue.

With the hearing on Kravitz’s motion to dismiss PhoneDog’s amended complaint scheduled for January 26, we will get even more insight into the court’s view when another ruling is issued.

How the case progresses is being widely monitored, and for good reason.

Judges in similar future cases, most being uncomfortable with the new technology that social media represents, will likely defer to the findings in this case.

Consequently, this case’s result will likely serve as the template for social media law in this area in the future.