Trusting Strangers: Dispute Resolution in the Crowd
Anjanette Raymond & Abbey Stemler, Trusting Strangers: Dispute Resolution in the Crowd, 16 CARDOZO J. CONFLICT RES. 357 (2015).
Posted: 22 Jul 2014 Last revised: 23 Feb 2020
Date Written: July 21, 2014
This all changed in April of 2014, when the state of Washington became the first to pursue a project creator for a failed project delivery through consumer protection laws. The suit against Altius Management, the Tennessee based company behind the Asylum Playing Cards Kickstarter campaign, alleges that Altius collected over $25,000 backer dollars and delivered nothing. And while one might assume the damages under consumer protection laws would be minimal, they are in fact more significant with the Seattle Times highlighting: “The suit seeks restitution of the cash, as well as fines up to $2,000 per backer for violations of the Consumer Protection Act, meaning the total could top $1.6 million.” And Asylum Cards are not the only failed project, for example Seth Quest failed at creating an iPad stand known as the Hanfree, and entrepreneurs Evan Lindquist and Brent Burroff failed to deliver a prototype of sunglasses that would record HD video. Yet, Kickstarter hides the number of failed projects and does not facilitate any recourse procedures when campaigns fail. Individual backers are left with no other remedy besides suing for breach of contract in local courts.
How can a technology based company expect donors to continue to grow when no recourse mechanism has been put in place should their trust be misplaced? Most shocking for such a robust technology savvy company, that takes five percent of the funding, is the intentionally blind ignorance of the well-supported series of commentaries which demonstrate that low value disputes in the online world are rarely pursued as the cost of pursuing an action in a brick and mortar court far outweighs the loss suffered. From a consumer protection standpoint, should the government allow entrepreneurs to use and potentially abuse crowdfunding without any real consequence? Certainly not. However, with such low value claims, helping consumers pursue remedies against negligent or fraudulent entrepreneurs can be costly and time consuming in brick and mortar courts.
This paper will examine the growth of crowdfunding and the various crowdfunding portals currently in existence. The paper will survey any and all dispute resolution mechanisms in place and will consider the effectiveness of each. Most importantly, this paper will suggest that the growth of successful online dispute resolution platforms, often designed specifically to manage low value claims in an online environment, can and should be used by crowdfunding platforms to assist in the recovery of donor loss.
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