LiveUniverse fails to pay for advertising

[Andrew]

Article:

http://www.badmovies.org/sideshows/articles/liveuniverse_fails_to_pay.html

As you may have noticed, Badmovies.org is the effort of one person. The site is funded by the advertising and affiliate movie sales. Unfortunately, I am owed an outstanding balance of $853.00 by an prior advertiser. That advertiser is the Peerflix Media Network. The last payment received was from 16 July 2008. The Peerflix Media Network was purchased by LiveUniverse on or before 11 August 2008. Though a payment was due on 15 August, I continued running their advertisements until 5 September 2008. By that time it had become obvious that there was a serious problem, and LiveUniverse was not being candid with those it owed payments.

LiveUniverse was founded by MySpace founder Brad Greenspan.

I know of at least three other websites that were a part of the Peerflix Media Network that have not been paid since July 2008. To the best of my knowledge, only one Peerflix Media Network publisher, a blogger named Eric Snider, has been paid. That was after months of delay (he was paid on or about 18 November), and only after he created a website to specifically publicize the shameful behavior of LiveUniverse. Oh, and when LiveUniverse offered to pay the outstanding bill, which Mr. Snider was rightfully owed, they attempted to include a nondisclosure agreement. Bravo to him for refusing.

Attempts to contact LiveUniverse by phone have been unsuccessful. Their corporate voicemail is perpertually full and unable to accept new messages. I emailed LiveUniverse and sent a invoice via certified mail to their corporate offices on 2 October 2008. I have received no reply as of 22 November 2008. My accounting contact who carried over from the Peerflix Media Network cannot provide any time frame or plan to resolve LiveUniverse's failure to pay its debt.

Pursuing this deadbeat company is not an easy task. My final option is Justice of the Peach Court. While the Peerflix Media Network contract does not contain any sections that stipulate where arbitration or legal filings must be resolved, LiveUniverse dissolved its Delaware incorporation some years ago. I can assert jurisdiction through the Delaware State Department, but that requires additional fees and the possibility that the State Department might return an answer that the case must be pursued in LiveUniverse's state of incorporation: California. Badmovies.org is a sole proprietorship and I am a Delaware resident, and Delaware Internet users definitely use websites owned by LiveUniverse, but asserting jurisdiction is not cut and dried.

LiveUniverse also owns Revver. As of 22 November 2008, Revver publishers have not been paid in months. LiveUniverse actually purchased the Peerflix Media Network at a time when it owed payments to Revver publishers. Also, The Movie Blog was purchased by the Peerflix Media Network, and I would assume it is now owned by LiveUniverse. At the end of September 2008 The Movie Blog was offline for several days. One of The Movie Blog writers stated on his personal blog that the site was offline because the web hosting bill had not been paid.

Links to stories and articles detailing LiveUniverse's not paying its bills and publishers:

Eric Snider's Blog

Flick Filosopher

ValleyWag

Doug Nagy's Blog

Revver Forums

[Ash]

That's messed up.
Sounds like LiveUniverse put all of their eggs into one basket and then dropped it.

Why on earth would a company buy out another company while still owing money to another?
Bad business decisions abound here.  Seems like the left hand of LiveUniverse doesn't know what the right is doing.  And if it does, then they deserve to be put out of business.
Fortunately, most companies are decent.  But there are those that need to be put out of their misery.  One of my ultimate long-term goals is to go into business for myself and I couldn't even begin to imagine running my business in the unscrupulous ways some businesses do.

Never underestimate the power of Google when it comes to researching companies beforehand.

Here's to your eventual triumph over this company.  
Maybe Rev. Powell could represent you.  

You have my support Andrew.  You're on a mission and I hope you recover every cent they owe you.
They'll rue the day they messed with Badmovies.org!

[Menard]

Why on earth would a company buy out another company while still owing money to another?

Because they want the company and have no intention of paying its debt.

If the company's outstanding debt was primarily with webmasters, or at least that's the portion of the debt they are not paying on, it is going to be difficult for those webmasters to collect as, other than small claims court in a locality where the business has residence, it is going to be difficult to collect as many of those webmasters are not going to have the resources to collect on this or outstanding enough of a bill to interest representation.

Mr. Snider has used a tool to fight the company that has not been available before, though certainly risky in its own right; this is word of mouth via the internet. A webmaster who can promote a site and draw traffic can be a thorn in the side to a company, and regardless of intent, the company may be willing, as in the aforementioned case, to pay off the webmaster with the interest of shutting him up.

Companies do absorb other business with debt, even huge debt. They are more interested in what the company means to them and realizing the futility of debt collection, as many will sell off the debt for pennies on the dollar to a company which buys enough debt that way to turn a profit even with a low completion percentage, means a substantial portion of that debt will probably end up not being paid as enough will not necessarily go after them if the debt is not enough to justify the expenses and trouble.

For those in the gaming community, TSR absorbed SPI while it was heavily indebted. Of course, they, as usual for Gygax and the Bloom brothers, did it in a backhanded and backstabbing way. TSR provided a loan for the ailing SPI in a last ditch effort to pull themselves back up. Despite customary practice of allowing a certain timeframe for calling in a debt, TSR, though legal, called in the debt in the minimum amount of time possible. SPI could not possibly pay on the debt, especially since the timing was not foreseen, and being that the collateral for the debt was the company, TSR took them over.

TSR defaulted on every debt the company owed. Of course, they were in a different situation being that they gained the company as a collection of a debt, at least they claimed, and refused to honor any debts; including subscriptions to the magazines they took over.

That's essentially a white knight tactic in business, or at least appearing to be a white knight; where one business, a larger business, appears to be helping a company in troubled times while the intention is a takeover.

In a certain poetic justice, what they ended up with was a white elephant of sorts. The remains of SPI have been spread out since being bought and sold and split up between different companies. They didn't quite yet count on the backlash from the gaming community with many refusing to buy any SPI titles they published.




I don't know any of the legalities involved, or if they mean that much in the face of expenses involved when collecting debt.

[Ash]

That's essentially a white knight tactic in business, or at least appearing to be a white knight; where one business, a larger business, appears to be helping a company in troubled times while the intention is a takeover.

But in this case it's the other way around.
A company that can't/won't pay its debts picking up a company that does pay its debts.
Peerflix seemed to be doing just fine.  Or were they?  I'd like to know why they sold to LU in the first place.
Snider has reported that he always received his payments from Peerflix on time.
But then LiveUniverse took over and THEY are the ones who aren't paying the debt.

I'd like to dig through the agreements/contracts between Peerflix and LiveUniverse to see if any of this was covered.
I'm sure it was...but to what degree?

[Captain Tars Tarkas]

Well, this sucks.  I've heard horror stories from other ad agencies that bailed and left people owed hundreds of dollars.  It is always a big mess.  Hopefully the article worries enough people something gets done.

[Rev. Powell]

Pursuing this deadbeat company is not an easy task.  My final option is small claims court.  While the Peerflix Media Network contract does not contain any sections that stipulate where arbitration or legal filings must be resolved, LiveUniverse dissolved its Delaware incorporation some years ago.  I can assert jurisdiction through the Delaware State Department, but that requires additional fees and the possibility that the State Department might return an answer that the case must be pursued in LiveUniverse's state of incorporation:  California.  Badmovies.org is a sole proprietorship and I am a Delaware resident, and Delaware Internet users definitely use websites owned by LiveUniverse, but asserting jurisdiction is not cut and dried.

An aside: It's extremely unusual (and in my opinion, sloppy) in this day and age for a corporation not to include a mandatory arbitration agreement in its contract.  That is usually a good thing for the consumer or smaller party to the contract if there's no mandatory arbitration agreement. 

Unfortunately I can't give Andrew legal advice since I'm not licensed to practice Delaware law.  I can make comments and point him towards some relevant info, though.

And I can advise him to talk to a Delaware attorney.  A simple letter from an attorney could result in a sudden unexpected check appearing in the mail.  The trick is finding someone who's willing to write the letter for free or for cheap. 

It looks like Delaware doesn't have an actual small claims court (unless one was created in the past month) but handles all claims up to $15,000 through Justice Court.  One interesting result of this is that you can bring an attorney into Justice Court, whereas you can't in most state small claims courts.

Delaware's long-arm statute (the statute that says when you can sue a defendant located out of state is located here, at section 3104.  Note that there are two section 3104's listed: one effective before Oct 7, 2008 and one after Oct 7.  Don't quote the wrong one!

Delaware Justice Court gives instructions for serving process on an out-of-state corporation here.  (I imagine you've already seen this, Andrew, but in case you haven't, here it is).

Even if you have proper jurisdiction, it may be difficult to convince a clerk to allow you to file.  This guy's experiences in trying to file in Washington against out of state spammers are interesting.

Then comes what may be the real hurdle: suppose you get jurisdiction, and then win or are granted a default judgement.  How are you going to collect?  You'll have to do more work to get a California court to honor the judgement.  Getting a lien put on their assets may well cost more than the money you're owed. 

I guess turning the debt over to a collections agency is a possibility, even before getting a judgment. 

Although this would take a lot of legwork by someone, there's also the possibility of a class action between all the webmasters who are owed money by LiveUniverse.

Making a lot of noise may be your best and cheapest route: it worked for the other guy.  Interestingly enough, this post is currently one of the top 10 results for a Google Search of LiveUniverse.  I imagine this is not the sort of publicity they're seeking.

You can all file complaints with the BBB and see what they can do for you.  I believe they offer some sort of mediation program when customers have grievances against a business, if LiveUniverse is a member of the BBB.

Just curious: you didn't say whether you received the receipt from the certified mail you sent.  I assume it was delivered and they just ignored the invoice.  You might try a second letter with stronger language, mentioning the various options your considering.

Good luck.     

[Andrew]

Thanks for the help Rev.  We do have a Justice of the Peace court here vice small claims.  I didn't realize that you could have an attorney in Justice of the Peace Court.  My biggest concern with taking this to court is that LiveUniverse might be on the verge of failing.  It seems to me that they are not paying their publishers so that they can pay for services that they need (hosting, payroll, etc).  They are burning bridges, certainly.  They received the first invoice.  I am going to follow it up with another, I'd been meaning to send one per month.  Also going to contact the CA Attorney General Office and Secretary of State.  What has been holding me up is time - I don't have any.  I leave the house before the sun comes up and get home long after it goes down, and I'm going like a madman the whole time.  We have dozens of different things going on at the unit.

The annoyance with having to assert jurisdiction is that filing goes from $32.50 to $82.50.  Since I believe that the company could fail in the immediate future, that could just be contributing to my loses.  I keep hoping that the Marine Corps will send me out to CA, and that is a possibility.

I would guess that Peerflix was going to go under soon when they were bought.  They had attempted to switch their business plan from a peer-to-peer DVD trading site to a media advertising network to become viable.  The first few months I thought that they were going to make it.  Right before the surprise sale the information they sent out had given me concern.

Still, the reason LiveUniverse is buying companies and then not paying the publishers is hard to fathom.  Perhaps they are doing what I said:  taking the income, not giving any to the publishers, and thereby maximizing their profits.  The only other guess I could have has to do with taxes, but I'm not certain about the laws and what they could write off by buying a company that burnt through far more capital than LiveUniverse paid.

The bottom line is that LiveUniverse is cheating quite a few people out of income they were promised, and acting in an irresponsible and despicable fashion.

[CheezeFlixz]

You're owed the money, take them to court in your home state, they fail to appear you get default judgment in you favor and you can file leans against their property.

I spend more time chasing money than a spend earning it, it gets old.

Have you sent them a registered letter from an attorney demanding the monies owed? Many times this is enough to get payment, equally you can't get blood out of a turnip.

Otherwise write it off your taxes as a business lose. Sometimes it's not worth chasing.

[Tim]

This is why all advertising should be prepaid BEFORE it runs.

[Andrew]

This is why all advertising should be prepaid BEFORE it runs.

That is very unusual in online advertising.  Most advertising is between Net-30 and Net-45 payments, meaning the earnings are paid 30 or 45 days after the invoice period (generally the end of the month). 

[Tim]

I agree with you in the case of affiliate and PPC style programs. Try running a classified ad in your local paper and you might find it to be different, though. You either prepay or you complete their credit check process (IF the amount of your spend is over a threshold). In this case, I'm 100% sure that the company that owes $800 did not complete BadMovies.org credit process.

Fraud and cheatery on the Internet is far too common. If anyone is surprised by the outcome of this particular case ... well, I'd be shocked.

I think if you're going to play in the affiliate and PPC world where prepayment is not standard, you should expect to get burned like this every so often. It's just the way it works.

[Andrew]

I think if you're going to play in the affiliate and PPC world where prepayment is not standard, you should expect to get burned like this every so often. It's just the way it works.

I am not "playing" in the affiliate and PPC world.  This is the standard advertising environment for independent websites.  It is how webmasters like myself afford the server fees and other costs involved.

While I understand that I might "get burned" every so often, by no means does that mean that it is acceptable for a company like LiveUniverse to act in this manner.

Believe me, this was a much worse problem during the dot-com crash.  Companies went under and websites that were owed advertising revenue had no chance of being paid.   In this case LiveUniverse bought Peerflix; my intent is to be paid what is owed, unless LiveUniverse goes under.

[Andrew]

This is the latest exchange between LiveUniverse and myself.  At this point I believe my efforts are best directed in identifying if any misconduct took place on the part of the companies or employees involved.  What I am owed is a lesser issue when compared to the fact that holding companies and their employees to account for misdeeds has been sorely lacking lately, and I think that the public at large is sick and tired of it.  I am.

LiveUniverse's latest:

Hi Andrew -

 Sorry, our lawyer was out last week. Here is the update I have been
 instructed to provide.:

 Our lawyers after continued discovery in regards to the Peerflix
 acquisition, our subsidiary (LiveVideo, Inc.) purchased only certain
 assets of Peerflix, Inc. and only assumed specific liabilities.

 This was dug into because we acquired the assets on July 28th, yet
 publishers were saying we were on the hook for July payments as well
 when we didn't even own Peerflix (and still don't own the PMN).
 However, the good news is that because the amount is relatively small,
 at this time, LiveVideo, Inc. is willing based on prompt resolution to
 compensate your site with 100% of the actual revenue that appears was
 generated. In this case, $433.02 was generated from the ads run on your
 sites and LiveVideo, Inc. is going to try to recover such revenue in
 turn over the few months, but is willing to burden the risk on
 collection and pay you that amount.

 This will also leave you free to go try to collect what you think is
 owed by PeerFlix, Inc. and its shareholders. We are not shareholders of
 PeerFlix, Inc. nor have any ongoing relationship with its shareholders
 or prior dealings/business before we purchased certain assets.
 Please let me know your thoughts. We are also happy to have our General
 Counsel get on the phone and go thru the terms of our acquisition of
 certain PeerFlix, Inc. assets and discuss your views on why you think
 your contract with PeerFlix, Inc.  is a LiveVideo, Inc. liability. We
 want to have a good relationship with publishers, but will likely be
 sending legal notices to any  publishers indicating that based on our
 legal review of the transaction (which we will provide to them) if they
 claim these liabilities are those of LiveVideo, Inc. then  they are
 posting online stories on this matter that are the equivalent of
 slander/defamation.


 Thanks,

 Ryan

My reply:

Mr. Timm,

   Please forward the details of the Peerflix acquisition by LiveUniverse.  I would like to take it by the local Staff Judge Advocate's office for review.  All of the available information is that Peerflix was purchased by LiveUniverse, and that was also the content of the email from Lauren Gillery that announced the change to members of the Peerflix Media Network.  As such, the news article and Lauren's emails are why publishers believe that LiveUniverse purchased Peerflix.  The only incorporation or LLC I can find concerning Peerflix Inc. is for the main company, which stopped functioning as a DVD trading service in April 2008 and moved solely to being a vertical ad network at that time.  Do you have information concerning the current operations of the remaining Peerflix company, what was not acquired by LiveUniverse?

   I understand that you probably cannot email the information about the acquisition, I will send another certified letter requesting such.  If there is a person other than yourself that such request should be addressed to, please let me know.  I will also forward the information I have to the Secretary of State offices  for California and Delaware, along with the Attorney's General and departments of taxation for those states.  Hopefully they can provide further information.  The last actual action that Lauren took was to collect W-9s from all publishers, ostensibly to provide to LiveUniverse.  With the information you have now provided, I am concerned about the reason the W-9s were finally solicited.

   Thank you for your time.

Andrew Borntreger

This was the email from Lauren Gillery on 11 August 2008:

Dear Peerflix Media Network Publisher,

I am writing to let you know that as of last week your Peerflix Media
Network relationship is now with Live Universe and no longer with
Peerflix. All future payments regarding the Peerflix Media Network will
be made to you from Live Universe.

Going forward I will remain your contact and you will still be able to
reach me at XXXXXXX. If you have any questions, please feel
free to contact me.

This was the email from Lauren Gillery on 19 August 2008:

Hello Publishers,

I am writing to let you know that due to the recent transition of the
Peerflix Media Network to Live Universe there will be a delay in mailing
out the payments for July ad revenue. In order to process your ad
network payments from July and moving forward Live Universe needs to
have a completed W9 on file for you/your company. I've gone ahead and
attached a W9 form.  Please complete and sign the form and then either
email it back to me or fax a copy to XXX-XXX-XXXX.

I am sorry for any inconvenience this may cause. Please feel free to
send me an email if you have any further questions.

This is the Techcrunch news story about Peerflix and LiveUniverse:

http://www.techcrunch.com/2008/09/05/liveuniverse-buys-another-loser-peerflix/

[Doggett]

Andrew, I couldn't understand any of that.
Man, your life's complicated.

[Andrew]

There is also this incredible blog post by John of the Movie Blog:

http://www.themovieblog.com/2008/12/an-update-on-the-status-of-the-movie-blog