EBAY / Windsor Lawsuit Barrels Ahead

Feb.20.09 | About: eBay Inc. (EBAY)

The Windsor Lawsuit against eBay (NASDAQ:EBAY) and Live Auctioneers is beginning to look like a road-map of sorts. Windsor Auctions filed a lawsuit against eBay in December 2007 alleging that eBay broke antitrust laws and various California laws. That lawsuit lumbered along at a snail's pace, as eBay filed numerous 12B6 Motions to Dismiss. Then one day, a new and improved version of the plaintiff's case was filed (along with another plaintiff) who alleged that they were also victims of eBay's willingness to allow a few preferred users on their eBay Live Auction platform to "game" the system to the tune of millions in revenues. As a side note, there are quite a lot of opinions posted online that Windsor's antitrust allegations were a long shot at best.

One slight problem with the addition of the new plaintiff. The newly added plaintiff was a registered Delaware corporation and as such, an "in your face" diversity issue arose and the action filed by Windsor had to be dismissed without prejudice against eBay.

Enter Tampa Bay based Saxon/Gilmore. Windsor and Jewelry Auctions (Florida corporations) decided to take the case into their own backyard by filing a new action against eBay and its partner (in the eBay Live Auction platform), Live Auctioneers, located in New York.

eBay, in its infinite wisdom (once again) filed another 12B6 motion to dismiss and Live Auctioneers followed suit. In eBay's original motion to dismiss they stated that Windsor was "obfuscating" by NOT suing Live Auctioneers, eBay's partner.

Windsor added Live Auctioneers, LLC (including their CTO John Ralston) to its action filed in Florida. As eBay had done in the past, they filed a 12B6 motion stating that Windsor's original suit filed in the Northern District of California (and assigned to Judge Whyte) had been dismissed.

Now for some factual information. The antitrust claim was dismissed by Judge Whyte, however, additional allegations within that action were not dismissed. The case was dismissed by the plaintiffs due to a "crystal clear" diversity issue involving the additional plaintiff. In other words, if the plaintiffs had NOT dismissed their action voluntarily, the case would have been dismissed (at some point) by either the judge or by eBay counsel when the diversity card was played.

Now comes the revolving door of attorneys. Windsor retains the services of Berliner Cohen located in San Jose, California. The diversity issue (staring down Berliner) gets by those at Berliner and a complaint is filed naming the additional plaintiff from Delaware. Windsor then engages Saxon/Gilmore of Tampa, Florida and a new complaint is filed including not only eBay and Live Auctioneers, but, individuals as well. While Bay does business (worldwide), the judge in Tampa, Florida was presented with motions that convinced the court to send all parties back to the Northern District of California. The Florida judge does NOT dismiss the case, he sends it back to California.

Windsor then files notification of a related case (the case filed by Balestriere/Lanza). The New York firm of Balestriere/Lanza are seeking class certification for their action against eBay, GoAntiques.com (.pdf), Neimans Jewelers and George Molayem (.pdf) (who operated Hot Jewelry Auctions and Paramount Auctions) on the eBay Live Auctions platform. The allegations? Shill bidding, (.pdf) among a litany of other claims. While the Balestriere/Lanza case was filed on behalf of the buyers on eBay Live Auctions, the Windsor/Jewelry Auctions action concerns the sellers who claim that eBay afforded an unfair competitive edge to Mr. Molayem. It appears as though the common denominator in both actions is Mr. Molayem and a platform that was anything but safe or fair. When the suits are placed side by side, Mr. Molayem's name (and his associated companies) are sprinkled throughout both actions like snow on Christmas Day. The judge presiding over the Balestriere/Lanza case is Judge Marilyn Patel who presided over the Napster (NAPS) case in early 2000.

Never the twain shall meet…

The old saying "East is East and West is West and never the twain shall meet" might be very apropos for the next part of this article.

When we last left eBay, Windsor Auctions, Jewelry Auctions and Live Auctioneers were sent back to the Northern District of California to duke it out. eBay filed a counter answer to Windsor's notification of related case (the case filed by Balestriere/Lanza) and eBay won another round.

The case was assigned to Magistrate Zimmerman (.pdf) and eBay filed their consent and agreed to Magistrate Zimmerman presiding over the Windsor/Jewelry Auctions action. However, Live Auctioneers filed a notice of declination of Magistrate Zimmerman and the case was then sent back into the pool.

After all was said and done, the case was assigned to none other than Judge Marilyn Patel who's presiding over the Balestriere/Lanza case (the case, which Windsor/Jewelry auctions attorneys filed notification of a similar case). eBay then filed notification with the court that Melina Patterson, one of the Cooley attorney's assigned to defend eBay against the Windsor/Jewelry Auctions action is no longer with Cooley and no longer represents eBay.

So, the Windsor/Jewelry Auctions case has been on a wild ride of sorts. The case began in San Jose, California (was dismissed by the plaintiffs) re-filed in Tampa, Florida (their home state) and was then sent back to California, where it's finally found a home in Judge Patel's court. The case was beginning to look like an orphan of sorts but the plaintiffs continued their quest in seeking their day in court.

In reviewing the notification of the related Balestriere/Lanza case (on the surface) there appears to be many similarities, one of which is Mr. George Molayem. Mr. Molayem operated under a number of eBay user-names, among them Hot Jewelry Auctions and Paramount Auctions. Windsor/Jewelry Auctions contends that Mr. Molayem used a tool which catapulted his jewelry listings to the front of regular eBay listings every hour on the hour, seven days a week (for a number of years). The placement of his listings at the front of eBay core listings, before other jewelry sellers (whether an eBay Live Auction or regular eBay seller), could have been detrimental to the "fair marketplace" claim eBay contends it operates.

In the end, it appears as though Windsor/Jewelry Auctions had father time on its side. Over the course of any legal action, things will change. Judges will retire, motions will be filed and of course, with more than one defendant in the case, it can become a crap-shoot in getting co-defendants on the same page. This case has turned into the classic David and Goliath mother of all eBay cases. While many may not fully understand what this case (and the Balestriere/Lanza case) represent, the plaintiffs (both buyers and sellers) know what's at stake.

Nonetheless. while the eBay Live Auctions platform was shut down by eBay on December 31, 2008, it's legacy lives on within the courts.

Disclosure: no positions