Tyler Waitt, former owner of Model Mayhem, files lawsuit against Internet Brands

I have just been informed that Donald Waitt, Tyler Waitt (former owners of Model Mayhem), and others filed a lawsuit against Internet Brands (NasdaqGS: INET) on April 22, 2010 in the California Central District court.

Update 1

Documents specific to this case has just been leaked to me. Stay tuned for very detailed information to follow after I get a chance to analyze it. For now, I can tell you that the amount of the suit is for $500,000 and the complaints are as follows:

  1. Breach of Contract
  2. Breach of the implied covenant of good faith and fair dealings
  3. Conversion
  4. Fraud and deceit
  5. Fraudulent inducement
  6. Accounting

Here are the original pdf documents. If you don’t want to down load them, they are viewable at the end of this post.

I thought this was kind of amusing. Model Mayhem has in the past used the TOS and rules in very creative ways to remove members they didn’t want around. But it’s almost been a month since Tyler sued Internet Brands and his account is still active. There used to be a rule that if you threaten to sue the site, you will be removed immediately. It’s a good thing they just went ahead and filed the lawsuit instead of just threatening. Now which MOD is going to remove Tyler?

Update 3 : Summary of complaint

After reviewing the complaint, here are some thoughts based on a laymen’s reading of the complaint.

  • May 13, 2008, Tyler and IB entered into an agreement to sell the assets of Model Mayhem  to Internet Brands. The agreement called for the sale of Modelmayhem.com and all related assets such as rights, domains, subdomains, and trademarks.
  • It’s unclear to me if there was a lump sum payment at the time of sale. I have to assume there was a sizable upfront payment. This complaint specifically addresses deferred payments as a bonus. The deferred agreement called for a payment of $800,000 if the average monthly pageviews for 2009 are at least 350 million. If the average of 350 million was not achieved but a minimum of 225 million pageview was achieved, a fraction of the $800,000 would be paid based on a type of prorated calculation.
  • Additionally, 10% of all net website membership dues in excess of $250,000 would also be paid. In other words, Internet Brands gets the first quarter million. After that, it’s split 90/10 with 10% going to Tyler and Donald.
  • It is claimed that both parties agreed to use Google Analytics pageviews as the tracking reports to determine payment.
  • 2009 pageview payment was due on February 15, 2010 and IB did not pay even after repeatedly promising to pay.
  • On November 10, 2009, Internet Brands provided a report showing Model Mayhem had averaged about 290 million pageviews.
  • After Donald Waitt and Tyler Waitt retained counsel, IB started to dispute the pageview numbers provided by Google Analytics.
  • On March 19, 2010, Internet Brands claimed they were not informed of a criminal investigation involving Model Mayhem when it was sold on May 13, 2008. If anyone has verifiable information about this criminal case they want to share, send me the information using the contact form.
  • Plaintiffs are claiming treble actual damage plus attorneys fees based on California Penal Code 496(c).
  • On March 19, 2010, Internet Brands claimed in writing that 65% of the website pageviews from 2009 as reported by Google Analytics were invalid. Internet Brands also claimed tens of millions of pageviews per month were not real pageviews.
  • On March 22, 2010, Internet Brands claimed in writing that 75% of the website pageviews from 2009 as reported by Google Analytics were not real pageviews.
  • Internet Brands further claimed their own research was only able to identify 246 million pageviews per month.
  • But plaintiffs claim Internet Brands’ representatives provided a sworn declaration on March 29, 2010 that Model Mayhem’s monthly average pageview were 290 million.
  • Plaintiffs further claim Internet Brands had no intention of making the deferred payments at the time of sale.