Carreon seeks temporary restraining order in Carreon v. Inman, proposed settlement

This evening, Charles Carreon filed for a temporary restraining order, asking a Federal court to order IndieGoGo not to transfer the raised money to Inman or the charities themselves.  Here are the documents, courtesy of RECAP:  Carreon’s declaration and exhibits, the memorandum of points and authorities, and the proposed order.

UPDATE: Indiegogo responds.  Their opposition, with declaration of Indiegogo’s counsel (with an earlier copy of Carreon’s application here) and declaration by Indiegogo’s CEO.  More below — and Ken at Popehat’s update analyzing Indiegogo’s response is much more coherently brutal than mine.

UPDATE: Inman and the EFF file their response! Covered in a follow-up post here.

UPDATE (July 2, 2012): Court files order suggesting it is inclined to dismiss Carreon’s TRO application as moot.  The Court requested that Inman provide proof that the two remaining checks have been turned over to the charities, which would mean that Carreon’s TRO would accomplish nothing and should be dismissed.  More at Popehat.

More: the anonymous author of satirical website Charles-Carreon.com has filed a lawsuit against Carreon seeking declaratory relief.  Now, Carreon faces the formidable Paul Alan Levy of Public Citizen. Again, Popehat has the details.

Initially, a few things jump out at me.

First, Carreon made at least one erroneous statement of fact in his declaration (a document, if you’re unfamiliar, which is signed under penalty of perjury).  The most glaring is that he states:

Based on what I saw on page one of Exhibit B, I understood that if I clicked to contribute, Indiegogo would give $5 to ACS and $5 to NWF. [...] With the expectation that I would be making a tax-deductible donation to two widely respected, trustworthy charities dedicated to the elimination of cancer the protection of wildlife, respectively, I donated $10 to the Bear Love campaign, and received the receipt attached as Exhibit C.

That’s plainly belied by the exhibit, which demonstrates that he made the donation at 9:23PM the night before he filed the lawsuit, which alleged that people would be deceived into thinking their entire donations were going to the charities. He implies (at a minimum) that he thought it was all going to the charities and that his donation would be tax-deductible.  It’s highly unlikely that Carreon had not already written the 22-page complaint (again, filed the very next day) noting that “[t]he Indiegogo contract provides that it will keep 9% of the Charitable Fund and pay the remainder to Inman.”  Plainly, his motivation in donating lies bare: to get standing to sue Inman and Indiegogo.  Any pretense that he was unaware that Indiegogo would deduct a slight service fee is laughable.  In fairness to Carreon, the initial complaint did not allege that contributors would be deprived of a tax deduction, as that was added in the amended complaint.

Note also that the paltry $10 Carreon gave to the campaign is about 2.8% of the fee he paid to file the lawsuit over his $10.

Second, Carreon proposed to settle the dispute with IndieGoGo.  He includes among his exhibits a proposal to letter to IndieGoGo, which includes, in part:

Plaintiff is willing to resolve this entire matter by stipulation that will accomplish the stated purposes of the Bear Love campaign as defined by Mr. Inman, except as follows:

•  No portion of the Charitable Fund shall be disbursed to Mr. Inman.
•  The entire Charitable Fund will be disbursed 50/50 to ACS and NWF.

Third, I am attempting to work with ACS and NWF to assure that all of the 14,406 Bear Love campaign donors will receive receipts for their tax-deductible donations, which they of course would not receive if the money were disbursed to Mr. Inman. As I explained, based upon my non-specialist knowledge of tax law, if Mr. Inman were to receive the Charitable Fund and donate the funds to ACS and NWF, Mr. Inman, rather than the Bear Love campaign donors, would receive the tax deduction, a form of unjust enrichment that would inure to his benefit and to their detriment.

 

Fourth, if the matter can be resolved by stipulation, Plaintiff will waive: (a) his argument that Indiegogo is not entitled to receive the $8,800.56, i.e., four percent (4%) of the Charitable Fund because it is not a registered charitable fundraiser, as alleged in ¶ 60 of the FAC; (b) his prayer for relief seeking an injunction to restrain Indiegogo to “halt all ongoing campaigns on the Indiegogo site currently operating in violation of California law and hold all funds in charitable trust until Indiegogo registers with the California Attorney General as a charitable fundraiser and in all other ways complies with California law regulating charitable fundraising;” and, (c) his claim for an attorney’s fee as a public attorney general.

This, I think, demonstrates the motivation behind the suit: keep Inman from taking a photograph with the money and humiliating Carreon further.  [Edited to add:] The settlement would come at the expense of what Carreon professes to be his true motive: preventing a portion of donors’ funds from being diverted to IndieGoGo as part of their fee.  Furthermore, I think it shows that Carreon is feeling some weakness about the lawsuit and is looking for a graceful way to exit, at least with regard to the claims against the charitable fundraisers.  Except Inman.

Further, the paranoia continues, as Carreon says in his declaration that he wondered whether Inman was intending to divert some of the contributions to organizations affiliated with him.  Inman had suggested that he might pick two other charities to add to the list, after the fundraiser had unexpectedly raised far more than the  $20,000 initially sought:

At that point I thought: “This is a bait and switch campaign.” Bear Love campaign donors didn’t simply designate Inman to receive and disburse donations according to his liking. We had donated to two charities — ACS and NWF – and no others. Thus, I further asked myself: “I wonder who those other two charities are that he is talking about? Perhaps they are affiliated with Inman?”

 

Carreon makes a more direct suggestion that Inman has malicious motives — that Inman will embezzle some of the proceeds — in the Points and Authorities:

The intended beneficiaries of the fund, ACS and NWF, clearly will benefit from receiving the money without using Inman as an unneeded intermediary, avoiding the risk that he may attempt to extract an unlawful post-hoc fundraising fee.

Carreon’s implication that Inman intended to somehow profit off of the fundraiser isn’t substantiated.

Carreon also claims that Inman is deliberately misleading his readers into thinking that Inman and Carreon had compromised on the issue of how the charitable money should be distributed.  Inman wrote on his blog (emphasis added):

Previously I stated that because the amount raised was so much larger than expected I was going to divide the money into four charities instead of two, but unfortunately Carreon’s lawsuit claims that I’m holding an ‘illicit fundraiser’ and not donating money where I said I would. To avoid further litigation with him, I decided to split the money between the original two charities.”

Carreon, meanwhile, complains that this statement falsely implies that a compromise had been reached or otherwise “forced upon” Inman by Carreon.  That’s simply not true: Inman does not imply that an agreement has been reached and his decision to split the money between the original two charities was a direct result of Carreon’s lawsuit.

Lastly, Carreon responds to Inman’s criticism that a temporary restraining order would slow down the distribution of the money to the charities, arguing:

However, the only thing that will slow down the process of getting the money to NWF and ACS is allowing Indiegogo to send the check to Inman, so he can cash it and pose for his
photograph alongside a stack of U.S. currency[.]

Which is likely to slow down distribution of the funds the longest: a restraining order preventing IndieGoGo from allocating the money “to any other person or entity” until after a trial, or Inman taking a picture next to a stack of cash and sending two checks to the NWF and ACS?

Wrap your head around that.

[Edited to add:]  For that matter, which is more likely to disrupt the intentions of the donors: the money being directly allocated to the charities after being tied up for months or years in litigation, or Inman taking a photo and sending the money to the charities?  A substantial amount of the donations were given during the time that Inman was suggesting that he might add two other unidentified charities, indicating that donors were interested in funding Inman’s kiss-off, with the guarantee that their money would go to some worthy (if unknown) cause.

UPDATE: Indiegogo responds. Their opposition is here.

Indiegogo points out what was on their website all along: the money was already transferred by dayCarreon filed his TRO application.  What’s more is that Indiegogo says Carreon knew that before he filed it — because they told him.  Granted, Carreon’s TRO seeks to restrain the money no matter where it is, but — at most — Indiegogo only retains the service fee they take as part of the contract:

Indiegogo’s share of that money is $8,800.96, and Carreon’s donation was $10.

But here’s the kicker: the charities already have the money.  At least — the money that was contributed by credit card.  Inman had already requested that Indiegogo cut checks to the NWF and American Cancer Society.  So they did.  In other words, there’s nothing left to restrain — except, of course, the taking of the picture, and perhaps whatever money Inman received via Paypal, unless that’s already been turned over to the charities, too.

And what about the picture? Indiegogo doesn’t tip its hand as to what’s happening with that. We’ll have to wait for Inman’s lawyers to weigh in.  My own pure speculation is that Inman may have negotiated with the charities to give them the money first, then take a picture with it.  Or take a picture with the Paypal money alone.  But we’ll have to wait to see.

That essentially decimates most of Carreon’s claims.  The money’s already been turned over to the charities, which was Carreon’s purported goal.  Further, Carreon’s own exhibits reveal that he’s willing to drop his complaints about whatever money Indiegogo collected, or whether Indiegogo was was properly registered with the state of California.  All that’s left, then, are Carreon’s complaints that Inman wasn’t properly registered, his invented “cyber-vandalism” tort, and his trademark claims against a Twitter imposter.

Indiegogo also slams Carreon’s claim that Inman will be unjustly enriched by a tax writeoff, calling it frivolous:

As for the tax write-off, Carreon’s assertions are pure speculation. They are unsupported by any citation to the tax code, any declaration of a competent tax professional, or anything else. On a motion for extraordinary relief on which Carreon bears the burden, they should be disregarded entirely. In any event, the contention that Inman would be unjustly enriched by a $200,000 tax deduction appears frivolous on its face. Any deduction Inman may have been able to take as a result of this campaign would be offset by at least an equivalent increase in income, thus leaving Inman at break-even or worse.

In other words, prepare for a Rule 11 motion for sanctions.

Indiegogo also questions whether Carreon has standing to assert claims on behalf of the other 14,000+ donors, noting that the case is not a class action.

Lastly, Indiegogo calls out Carreon’s TRO application as needless gamesmanship designed to attempt to secure an unfair advantage in the lawsuit (emphasis added):

Finally, the timing of Carreon’s application demonstrates that there is no irreparable harm here. Carreon’s complaint was filed over two weeks ago. At that point, both the end date of the BearLove campaign and the timeframe for disbursement of the money to Inman after the end date (within five business days) were known to Carreon. Indeed, Carreon’s original complaint cites the campaign end date and the same set of Indiegogo terms and conditions that contain the timeframe for disbursement. [...] Carreon could have applied for a TRO immediately. Instead, he waited to serve his papers until the middle of the period of time in which disbursement was to occur, presumably in an effort to manufacture an emergency. The Court should not countenance this gamesmanship.

Indiegogo concludes:

This case has little to do with preserving anything for a charitable purpose. Instead, it stems from a personal dispute between Carreon and Inman, and perhaps some ill-behaved readers of Inman’s “Oatmeal” website. Carreon is using that dispute to attempt to interfere with a charitable fundraiser that has raised over $200,000 for unquestionably good causes, in the process embroiling three innocent co-defendants – including two charities – in expensive litigation in federal court. The public interest cannot favor expending judicial resources to issue and enforce [an] injunction in a case like this.

More to come as I dig in further.  Whatever I find, I’m sure Ken at Popehat will find more and say it better.  In the meantime, please consider donating to another IndieGoGo fundraiser to raise funds for the Electronic Frontier Foundation, which is representing Inman, and Americans for the Arts.