Class Action Filed Against App Shut Down Six Months After Launch

Plaintiff Brandon Letize filed a class action complaint against defendant Ellation, LLC for fraud. Ellation is doing business as Crunchyroll and Rare Bits. The plaintiff claimed that defendants misled consumers “about whether, and how long, they could use the Digital Drops application or ‘app,’ and the digital stickers and other digital collectible items purchased by consumers via that that app (the ‘Products’).” Letize said as a result, plaintiff and class members purchased something they thought they could use indefinitely but had at most six months to use.

The app at issue, Digital Drops, “sold rare collectible digital anime stickers and other digital collectible items.” The products sold on the Digital Drops app “were touted by Defendants as ‘rare’ and ‘highly collectible’” items. Once a person purchased the digital stickers, they could be kept for a collection or traded with another user. “Like any other collectible, the rarer the digital sticker the more valuable…[Additionally,] the value of rare stickers would rise over time. Defendants prominently and frequently, touted these themes throughout the course of their marketing and advertising of Digital Drops digital collectibles.” The defendants also allegedly indicated that once a product was purchased, it “would be online indefinitely or, at least, for a reasonable length of time from the date of release.” However, in early February, defendants announced that on February 17, they would “shut down the servers running the Digital Drops app and that the Products would no longer be accessible by its owner.” Therefore, on February 18, six months after Digital Drops was launched, consumers including Letize “would no longer be able to use the Digital Drops app at all, and Defendants will have eliminated all of the collectible anime content purchased by consumers.”

The plaintiff claimed that Crunchyroll “leveraged its reputation and brand recognition to further entice consumers to purchase its purported highly collectible anime digital content, which consumers believed would be available to them forever like any other purchased product.” Further, defendants “assured potential consumers of collectible e-memorabilia through the Digital Drops app that they were dealing with a legitimate company and that their purchases would, in effect, be ‘safe’ and not subject to loss within a matter of months after purchase.”

Letize said in light of losing money on something that can no longer be accessed, that “[i]n an incredulous statement, Defendants attempt to assuage their consumers for their losses by equating the purchase of their Digital Drops ‘super rare’ and ‘valuable’ digital collectibles to the purchase of a movie ticket.” Effectively, stating that “your purchase provided you with an entertainment experience for a certain amount of time.”

The lawsuit alleged that the defendants violated California’s Consumers Legal Remedies Act, California’s False Advertising Law, and California’s Unfair Competition Law. The plaintiff has sought to certify a class action, to declare that defendants financially responsible to notify class members, declaratory judgment for defendants’ violations, injunctive relief, an award for costs and fees, pre- and post-judgment interest, and other relief as determined by the court.

The suit is filed in the Northern District of California. Letize is represented by Reese LLP.