Windsor Auctions, Inc. et al v. Ebay, Inc. et al
UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION
WINDSOR AUCTIONS, INC.,
a Florida corporation, and
JEWELRY AUCTIONS, INC.,
a Florida corporation
eBAY, INC., A Delaware corporation,
LIVE AUCTIONEERS, LLC A New York Limited Liabilty Company, Matthew Ledwith, an individual and John Ralston, an individual,
Plaintiffs, WINSOR AUCTIONS, INC., a Florida corporation, and JEWELRY
AUCTIONS, INC., a Florida corporation (collectively "Plaintiffs"), hereby fie this Complaint
against Defendants, eBA Y, INC., LIVE AUCTIONEERS, LLC, MATTHEW LEDWITH, and
JOHN RALSTON (collectively "Defendants"), and state as follows:
This is an action for damages in excess of $75,000 exclusive of costs, interest, and
1. Plaintiff Windsor Auctions, Inc. ("Windsor") is a Florida corporation with its
principal place of
business located at 113 Flagship Drive, Lutz, FL 33549.
2. Plaintiff Jewelry Auctions, Inc. ("Jewelry Auctions"), is a Florida corporation
having its principal place of
business at 113 Flagship Drive, Lutz, FL 33549.
3. The Chief Financial Offcer of both Windsor and Jewelry Auctions is Mr. Paul
Fischer, who resides in Pasco County, Florida. Both Windsor and Jewelry Auctions conduct
business in Florida.
4. Defendant eBay, Inc. ("eBay"), is a Delaware corporation with its principal place
of business at 2145 Hamilton Avenue, San Jose, CA 95125. According to the corporation's
quarterly report fied with the Securities and Exchange Commission on February 29,2008, eBay
earned over $7.6 bilion in net revenues in 2007 and has more than 233 milion registered users,
including users residing in the State of
5. Defendant Live Auctioneers, LLC ("Live Auctioneers"), is a New York Limited
Liabilty Company with its principal place of business located at 220 1ih Avenue 2nd Floor,
Building 23, New York, NY 10001.
6. Defendant Matthew Ledwith ("Ledwith") is the former Director of eBay Live
Auctions, a division or department of eBay, and held that position at all times material to the
allegations contained herein. He is an individual domiciled in the state of California.
7. Defendant John Ralston ("Ralston") is, and at all times material hereto was, the
Chief Executive Officer of Live Auctioneers and is an individual domiciled in the state of New
JURISDICTION AND VENUE
8. This Court has subject matter jurisdiction over this dispute pursuant to 28 U.S.C.
section 1332 because the amount in controversy exceeds $75,000, exclusive of interest and costs,
and the controversy arises between citizens of different states.
9. Venue is proper in this Court pursuant to section 28 U.S.C. section 1391(a)(2)
because a substantial part of the events or omissions giving rise to the claim occurred in this
10. This Court has personal jurisdiction over Defendant eBay pursuant to the Florida
Long Arm Statute, section 48.i 93( 1), Florida Statutes, because a substantial part of the events
giving rise to this litigation occurred in Florida. Specifically, eBay made written
communications into this State and eBay is transacting business in this state by: (a) providing
Internet sellers, including Plaintiffs, access to its website(s) and; (b) sellng goods and/or services
to residents of the State of Florida. The Florida Long Arm Statute further applies because eBay
committed tortious acts in the State of Florida.
11. This Court has personal jurisdiction over Defendant Live Auctioneers under the
Florida Long Arm Statute, section 48.193(1), Florida Statutes, because Live Auctioneers is
"operating, conducting, engaging in, or carrying on a business venture in this state" and is
committing "tortious act( s) within this state." A substantial part of the events giving rise to this
litigation occured in Florida. Specifically, Live Auctioneers is transacting business in the State
of Florida by: (a) providing Internet sellers such as Plaintiffs access to its website(s) and; (b)
sellng goods and/or services to residents of the State of Florida. The Florida Long Arm Statute
further applies because Live Auctioneers committed tortious acts in the State of
12. This Court has personal jurisdiction over Defendants Ledwith and Ralston under
the Florida Long Arm Statute, section 48.193(1), Florida Statutes, because each of these
Defendants actively participated in committing "tortious act( s) within this state" while
"operating, conducting, engaging in, or carrying on a business venture in this state" and a
substantial part of the events giving rise to this litigation occurred in Florida.
13. eBay owns and operates the largest on-line marketplace in the world through its
website located at ww.ebay.com.
14. In September of 2000, eBay launched Live Auctions, an auction marketplace
whereby sellers can conduct economic transactions with potential buyers in a manner which
allows anyone connected to the internet to electronically place bids in auctions that are allegedly
occuring on the floors of auction houses in competition with live bidders. These live auctions
were at all times material hereto and are currently facilitated through eBay's website located at
ww.ebayliveauctions.com ("eBay Live Auctions").
15. The eBay Live Auctions have been successful, in part, with consumers because
they purport to establish fair competition between internet bidders who place their bids through
eBay Live Auctions with just a click of the mouse on their computer and "floor bidders" who are
supposedly physically present at the site of the auction. eBay defines floor bidders on its website
as "(b)idders participating offine in an auction."
16. At all times material hereto, eBay promoted itself as the world's marketplace and
represented on its website that it was offering "a level playing field, encouraging open, honest,
and accountable transactions, and creating economic opportunities for everyone." See
http://pages.ebay.com/aboutebay/trustandsafety.html (last visited September 8, 2008). Plaintiffs
relied upon this representation in pursuing a relationship with eBay Live Auctions as a
marketplace for Plaintiffs' goods.
17. Prior to approximately 2002, prospective sellers in eBay Live Auctions registered
directly with eBay and their auctions were administered directly by eBay.
18. Subsequent to approximately 2002, Defendant eBay and Defendant Live
Auctioneers established a partnership and joint venture wherein Live Auctioneers would bring
auction catalogs and the sellers of those catalogs to the eBay Live Auctions website and would
administer auctions on behalf of those customers. In addition, Live Auctioneers offered
technology, services and "back end" accounting to those sellers. eBay and Live Auctioneers
acted upon and conducted their partnership under that agreement from 2002 forward. Further, on
information and belief, this agreement between eBay and Live Auctioneers was formally
memorialized sometime in 2004.
19. At all times material hereto, Live Auctioneers sole business was to assist eBay, in
partnership with and as part of their joint venture, in administering live auctions and in attracting
live auction sellers for eBay Live Auctions.
20. Live Auctioneers also warranted and represented that the marketplace it provided
to its customers, including Plaintiffs, was a fair forum in which to conduct business.
21. On information and belief, the category of jewelry sales is and was at all times
material hereto one of the most popular among eBay bidders and generated the most revenue for
eBay sellers, for Live Auctioneers, and for eBay Live Auctions.
22. Plaintiffs, Windsor and Jewelry Auctions were at all times material hereto sellers
of jewelry and had an international reputation as purveyors of fine quality jewelry and, prior to
its involvement with eBay and Live Auctioneers, Windsor had enjoyed financial success,
including conducting auctions on an exclusive ocean liner.
23. On or about July of2005, Plaintiff
Windsor sent email correspondence to eBay in
an attempt to register with eBay Live Auctions as a seller of jewelry in order to sell jewelry
through eBay's Live Auctions platform.
24. Despite having never contacted Defendant Live Auctioneers, the response to
Plaintiffs' inquiry to eBay came from eBay's partner, Live Auctioneers. In that response,
Plaintiffs were informed that eBay was no longer accepting direct customers as sellers on the
Live Auction platform. Live Auctioneers representėd, however, that because of its partnership
with eBay, an association with Live Auctioneers constituted the same arrangement as being a
direct customer of eBay. There were to be no additional fees, access to potential bidders would
be exactly the same with access to the full complement of Internet functions, and Plaintiffs'
catalogs would be listed on eBay Live Auctions and displayed in eBay general search result
listings in the same way that those sellers who, prior to the partnership between eBay and Live
Auctioneers, had associated directly with eBay. Such representations were made with the full
knowledge of and with the consent and acquiescence of eBay.
25. At that time Plaintiffs were never given the option to associate as direct customers
of eBay and were specifically informed that such an option was simply no longer available.
26. Plaintiffs were told by Live Auctioneers' representatives that Live Auctioneers
technology offered the exact same functionality and services as eBay Live Auctions, including
streamlined accounting features, and that Live Auctioneers warranted, were part of and were
committed to following eBay's promise to provide a fair and safe environment in which to
conduct commerce between buyers and sellers.
27. Plaintiffs accepted eBay's and Live Auctioneers' representations and reasonably
relied upon them and, accordingly, entered into agreements to use the Live Auction platform
with eBay and Live Auctioneers.!
i Plaintiffs have not attached these Agreements to this Complaint because they bring no cause of action based upon
these Agreements. Windsor and Jewelry Auctions are affiiated companies who have the same offcers, directors and shareholders. Windsor commenced business with Live Auctioneers and eBay in mid 2005. Jewelry Auctions did not commence business with Defendants until January of2007.
28. Starting in mid-2005, Windsor commenced sellng jewelry through its
relationship with Live Auctioneers and eBay Live Auctions on eBay's Live Auctions website,
ww.ebayliveauctions.com. From mid 2005 through 2006, sales for Windsor through eBay's
Live Auctions website exceeded $1.4 milion.
29. On information and belief, Live Auctioneers had more than six hundred (600)
customers who used its interface, as Live Auctions sellers, to access eBay Live Auctions
website. eBay maintained a considerably smaller number of direct customers who had entered
agreements with eBay prior to eBay's partnership and
joint venture with Live Auctioneers.
30. During the course of their business relationship Plaintiffs paid eBay and Live
Auctioneers a fee of $1,500 for each "bundle" of five auction events, or $300 per auction, plus
five percent (5%) of each sale. Such fees were split equally between eBay and Live Auctioneers.
Accordingly, eBay received twice the revenue on Live Auction sales and on posted catalogs
sales made by sellers who remained direct customers of eBay since there was no split of fees
with Live Auctioneers for those customers.
31. Plaintiffs held more than 600 separate auctions through Live Auctioneers from the
initiation of its relationship up until the time Plaintiffs sellng privileges were terminated by
32. For a live auction on eBay, the seller may upload a live action catalog containing
up to 2,000 lots onto the eBay Live Auctions website. Each auction can be scheduled to last
between three to twelve hours. Because auctions of items from different sellers are flowing
through eBay search results listings at the same time, each lot is displayed within general eBay
search results for a limited period of time to the milions of potential buyers registered as "users"
33. In the Live Auction format the items to be sold are displayed within the search
results pages, under the appropriate categories, in eBay's general search results listings.
34. The prospective purchaser then recognizes that the item is noted as a live auction
by the display ofa "paddle" next to the lot. If
the eBay user desires to register and/or enter a live
auction in progress, the eBay user follows the prompts to register for Live Auctions and then
35. Not only is this the most common method of gaining traffic (and ultimately
bidders and actual buyers), but it is also the most cost-effective method, in that the inclusion in
eBay's general search results is a large part of the value of the initial auction fee paid to eBay
since eBay's website receives milions of "hits" every day from its eighty four milion
(84,000,000) active users.
36. The number of potential buyers who view eBay's search results listings declines
the farther down the eBay search results pages the buyer moves. For example, many more
prospective buyers examine the objects for sale on the first few pages of eBay's search results
listings than on the tenth and subsequent pages. Accordingly, the closer to the front of the eBay
search results listings that a seller can market its items the greater chance for a successful sale.
37. A fair marketplace, therefore, as is guaranteed and warranted by eBay and Live
Auctioneers, cannot involve a system which gives advantages to certain sellers over others and
cannot allow one seller to dominate the beginning pages of the eBay search results listings
through any advantages or systems not made available to every other seller.
38. From the very beginning of Plaintiffs' involvement with the eBay Live Auction
system, there appeared to be a fundamental flaw in the manner in which items placed for bid in
Live Auctions were displayed in the eBay search results listings. The flaw in question made the
default ending time for all individual lots in the Live Auction the ending time for the entire
auction catalog and the eBay search results listed lots chronologically based on the end time for a
seller's auction. As a result, while the lots might be seen a day before the actual auction, one may have to go through pages and pages of eBay search results listings before ever finding a
particular lot being auctioned.
39. As time went by Plaintiffs noticed that the items they were offering for sale were
many pages back from the first page of the eBay search results listings and that those beginning
pages were consistently dominated by one of Plaintiffs' competitors (and his multiple
companies) who was a direct customer of eBay.
40. Plaintiffs saw that the problem became proportionally worse starting in late 2006
as this same competitor increased the number of auctions being held on behalf of his companies
and starting in late 2006 Plaintiffs sales dropped dramatically.
41. Between 2006 and increasingly throughout 2007, Windsor and Jewelry Auctions
complained to various persons at eBay and Live Auctioneers, including but not limited to
Ledwith and Ralston, about buyer complaints related to the lack of coordination between the end
times of auction items and the end times of auction events which resulted in buyers returning to
bid on an item which was no longer available and about the abilty of one competitor to dominate
the first pages of the general search results.
42. Live Auctioneers and eBay, II response to Plaintiffs' complaints, instructed
Plaintiffs that the solution to the problems was to hold more auctions at, of course, greater
expense to Plaintiffs. Plaintiffs relied upon these representations and increased the number of
auctions they were holding and thus paid additional fees to eBay and Live Auctioneers.
43. Plaintiffs continued to complain to eBay and Live Auctioneers personnel relating
to the lack of coordination between the end times of auctions and the end time of auction events
because Plaintiffs sales remained significantly lower and their items continued to be buried many
pages down the eBay search results listings. In response, Plaintiffs were informed by eBay
personnel that eBay Live Auctions were "dynamic" and that the end times on lots displaying
within eBay search results listings were "moving targets". eBay personnel told the Plaintiffs that
there was "no fix" and "nothing on the roadmap" in the future to correct the problem, if such a
problem even existed. These statements were not true and were known to eBay and Live
Auctioneers not be true at the time they were made. In fact, Defendants knew that a problem
existed, knew that there was a fix to the problem but did not share this information with Plaintiffs
and deliberately concealed their knowledge.
44. Commencing sometime in late 2006, Plaintiffs realized that instead of enjoying
increased projected sales, their domestic and international sales and revenues plummeted
dramatically, while the sales of a direct eBay competitor in the live auction jewelry category did
not/seem affected. Relying on the representations of Defendants, Plaintiffs, increased the
number of their weekly auctions and the number of pieces in each auction event from 800 pieces
per event to the maximum allowable by eBay of nearly 2,000 lots per auction. All of
were costly and unsuccessful for the Plaintiffs.
45. Specifically, during the time that the Plaintiffs' sales were dramatically reduced,
Plaintiffs noticed that there was a corresponding substantial increase in the sales of one of their
competitors, George Molayem ("Molayem"). Molayem operates a variety of businesses,
including but not limited to Hilstreet Jewelers, Paramount Auctions, Jewelry Overstock
Auctions and Wjoutlet, all of
which conduct live auctions as a direct customer of eBay.
46. Molayem's competitive advantage was as a result of him manipulating the end
times of his auctions by use of a fuction located on eBay's Live Auction Catalog Management
Set-Up Page which wil be referenced to herein as the "Schedule Duration function." The result
of this manipulation was that his companies' products dominated the forefront of eBay general search results listings, which are the most frequently visited pages of eBay.com by prospective
purchasers. Defendants knew of this manipulation and concealed their knowledge from
Plaintiffs and other live auction sellers.
47. Prior to the time that Plaintiffs Windsor and Jewelry Auctions entered the
marketplace as live auction sellers, Molayem was approved by eBay as a live auction seller for
the same services that Plaintiffs were told in 2005 that they would receive from eBay Live
Auctions through its partner of Live Auctioneers. Unlike Plaintiffs Windsor and Jewelry
Auctions, Molayem was not directed to or required to use Live Auctioneers, or Live Auctioneers
catalog management set-up page template, when he entered the live auction platform.
48. When Plaintiffs Windsor and Jewelry Auctions noticed the dramatic drop in their
sales as described above, they contacted eBay and Live Auctioneers personnel on numerous
occasions in order to receive an explanation as to why Molayem was able to keep his sales items
so prominently listed at the front of eBay's search results listings pages, while their own similar
listings were buried many pages behind Molayem's listings. eBay representatives denied that
they knew how Molayem was accomplishing this feat. This was not true.
49. Finally, when it became clear that there was no explanation forthcoming from
eBay or Live Auctioneers, and on or about late October 2007, Plaintiffs asked Molayem directly.
They were surrised when Molayem told them he had manipulated the Schedule Duration
function, contained in eBay Live Auctions' Catalog Management Set-Up Page. When Molayem
- 11 -
manipulated the Schedule Duration function on the Catalog Management Set-Up Page, with
eBay's knowledge and acquiescence, it allowed him to upload auction lots on a staggered end
time basis. By manipulating the Schedule Duration function Molayem was able to place his
sales items at the front of eBay's search results listings pages on an hourly basis, so that his items
would always appear on the first few pages of the sales listings search results on the eBay
50. After consulting with Molayem and in comparing eBay's interface with that of
Live Auctioneers interface, it was clear that the distinct difference, while similar in appearance,
was that the Schedule Duration was deactivated only on the Live Auctioneers interface after a
Live Auction seller selected the initial duration of their auction during the catalog set-up process.
This did not occur in the direct eBay interface.
51. Upon visiting Molayem on October 29, 2007, Plaintiffs were informed by
Molayem that, at all material times, he had been allowed by eBay to manipulate the Schedule
Duration to his advantage.
52. The eBay Catalog Management Set-Up Page is a page used by direct eBay live
auction sellers to set up their initial catalogs. The live auction sellers insert the title of their
catalog, a description of the auction event and select an eBay category in which their
merchandise wil appear within eBay search results pages and then select the duration of their
auction. The live auction seller may select a period of time of three to twelve hours in which to
complete the live auction event. Molayem (and at least one other seller in the jewelry category)
manipulated the Schedule Duration function with eBay's knowledge and acquiescence.
53. Molayem had been manipulating the system since at least 2005, creating auctions
with staggered end times occurring one minute apart. This manipulation was known to eBay and
- 12 -
to Live Auctioneers prior to Plaintiffs becoming a seller on eBay Live Auctions, but the
availabilty of the Schedule Duration function and the knowledge of how to use it to competitive
advantage was concealed from Plaintiffs.
54. The problems became exacerbated and more prevalent and noticeable as
Molayem increased the number of auctions that he held each day. By the end of 2006, Molayem
was controllng so much of eBay's search results listings in the jewelry category that Plaintiffs'
auction items hardly ever appeared on the top twenty pages of eBay search results and their total
number of sales declined dramatically.
55. When Plaintiffs relayed the content of their conversation with Molayem and
explained how Molayem was manipulating eBay search results listings to eBay personnel on
October 29, 2007, they were told that there was no difference between eBay's Catalog
Management Set-Up Page functionality and that of Live Auctioneers. These statements were not
true and Defendants knew it at the time they made those representations.
56. Plaintiffs and all other Live Auctioneers' sellers were never informed that there
was a difference in functionality between eBay's Catalog Management Set-Up Page and that of
Live Auctioneers Catalog Management Set-Up Page. Plaintiffs did not learn the truth
concerning the difference in fuctionality until Plaintiff s representatives learned the truth
directly from Molayem.
57. Such a difference between these two pages provided Molayem and his entities an
unfair advantage over all other live auction jewelry sellers who entered the eBay Live Auctions
website through eBay's partner Live Auctioneers.
58. On information and belief, senior personnel at eBay believed that if all eBay Live
Auctions sellers manipulated the Live Auction platform in the way Molayem did, then eBay Live
- 13 -
Auction listings would flood the forefront of eBay general search results listings, thus
dominating eBay listings placed by non-Live auction sellers. Of course, even though the Live
Auctions platform was extremely profitable for eBay, the non-Live Auction, traditional eBay
seller platform was even more lucrative. Thus, eBay did not want all of the Live Auction sellers
to be able to manipulate the Live Auction system to the detriment of regular eBay users and,
therefore, concealed its existence from Plaintiffs and other Live Auctioneers' sellers.
59. As a result, the abilty to manipulate the end times on Live Auction lots was
reserved for the small number of direct eBay Live Auctions customers only, such as Molayem
and at least one other, and was withheld from those sellers, such as Plaintiffs, who had been
instructed that it could only sell on eBay's Live Auctions platform through eBay's partner Live
60. On information and belief, Molayem's sales generated in excess of $500,000 in
2007 for eBay in fees and commissions and, accordingly, eBay allowed profits caused by
Molayem's manipulation of the system to overshadow its alleged and stated commitment to
provide a fair marketplace to and equality among all eBay Live Auction sellers including
61. When Plaintiffs contacted eBay about the search listing dominance of
companies, eBay concealed its knowledge of the problem and allowed the unfair marketplace to
62. Despite the complaints of Plaintiffs and eBay's knowledge of the unfair market
place and the advantages of Molayem and his companies gained through manipulation of the
Schedule Duration function, eBay continued to represent that its market was fair and continued
to accept the fees and commissions paid by Plaintiffs.
63. When Plaintiffs informed Live Auctioneers Chief Executive Officer Ralston of
the difference in functionality between eBay's interface and that of Live Auctioneers interface,
Live Auctioneers conducted "viabilty" tests on eBay Live Auctions at Plaintiffs' request by way
of manipulating the Schedule Duration function in the manner done by Molayem. This test was
performed by entering the "back-end" set-up page on eBay Live Auctions, which Plaintiffs and
other sellers had been specifically instructed not to access because changes to that page "would"
lead to accounting problems. These tests proved 100% successful and dramatically increased
Plaintiffs' sales and online audience attendance. Live Auctioneers then created a series of "test
auctions" on eBay Live Auctions to further confirm that in fact, the Schedule Duration function
operated as stated by the Plaintiffs.
64. Upon confirming that the Schedule Duration function dramatically increased both
sales and attendance on the eBay Live Auction platform, Live Auctioneers posted an
announcement to their customers on their website in which they stated Live Auctioneers and
eBay were jointly conducting "viability" tests and that if and when the option becomes available,
Live Auctioneers would inform their customers of the release of
65. On information and belief, Live Auctioneers never intended to make such an
announcement because they knew that general use of this Schedule Duration function would
flood (and dominate) the first few pages, in many sellng categories, of eBay's general search
66. Live Auctioneers never made such an announcement and to this day the system
continues to be manipulated by Molayem with the full knowledge and acquiescence of eBay and
Live Auctioneers. Accordingly, Live Auctioneers customers remain at a competitive
disadvantage even though both it and eBay stil represent that its market is fair.
- 15 -
67. Even after conducting viabilty tests, with eBay's full knowledge, Live
Auctioneers was unwiling either to make this function available to their own live auction sellers
or modify their Catalog Management Set-Up page to ensure that Plaintiffs and other Live
Auctioneers' sellers had access to the full functionality of eBay's interface. Had eBay and Live
Auctioneers told Plaintiffs about the Schedule Duration function, Plaintiffs would not have
experienced the drop in sales that it experienced, which led Plaintiffs to expand into different
markets as well as increase Plaintiffs' product offerings at considerable cost and increase its
catalog costs by way of holding daily auctions at considerable expense to Plaintiffs.
68. Had eBay followed its own rules and stopped Molayem from manipulating the
system and rendering the market fundamentally unfair, Plaintiffs would not have experienced the
drop in sales that they experienced, which led Plaintiffs to expand into different markets at
considerable cost and increase its catalog costs by way of holding daily auctions at considerable
expense to the Plaintiffs.
69. On information and belief eBay assisted Molayem in his understanding and use of
the Schedule Duration function so as to allow him to obtain the maximum benefit from its usage.
Then eBay secretly allowed Molayem to continue to manipulate the Schedule Duration function, while denying its existence when asked directly on many occasions by many live auction sellers,
including Plaintiffs, and preventing Plaintiffs from using it. eBay now openly condones such use
of the Schedule Duration fuction by Molayem.
70. eBay extended to Molayem a special privilege, which consisted of the use of the
Schedule Duration function. That same privilege was not extended to Plaintiffs. In fact, when
asked, Plaintiffs were told by eBay that no such function to coordinate the end times of auctions
and to maximize eBay search results listings visibilty during specific auction times existed, and
that the auction lot end times could not be changed to coordinate with the ending of the live
auction event. This was not true.
71. eBay's awareness of the Schedule Duration function, while denying its existence
to all who asked about its existence, created an unfair marketplace and a substantial competitive
advantage for Molayem and a distinct disadvantage for Plaintiffs specifically. Defendants' secret
acquiescence in Molayem's use of the Schedule Duration fuction destroyed any notion of fair
competition. In short, Molayem's abilty to display the lots in his various auction catalogs on a
staggered end time basis during a lengthy auction gave him the abilty to display his jewelry
pieces with much higher visibilty in eBay's search results listings.
72. In addition to knowing that Molayem was manipulating the platform to his own
and eBay's financial gain, and at the expense of a fair marketplace, eBay was also aware that
Molayem was violating eBay's terms and conditions and engaging in practices which made a
mockery of the concept that buyers were actually engaging in an auction at all, as that term is
73. In fact eBay and Live Auctioneers deliberately, through representations on their
websites, cultivated the image that Internet bidders were attending real auctions and competing
against "floor bidders." In truth, during Molayem's Live Auctions, bids which were recorded as
being a "floor bid" were actually made by Molayem's employees and were placed from a room
at Molayem's headquarters which is called the "click room."
74. What sets Molayem's auctions apart from many others was that his merchandise
was offered with bids commencing at just $1. Accordingly, whereas a reputable seller might
show a floor bid as a bid against or near reserve, such a practice has no bearing on the practices
- 17 -
of Molayem, which were solely designed to provide the impression that other bidders were
interested in bidding upon the item and thereby driving the price up artificially.
75. eBay and Live Auctioneers knew that Molayem was engaging in shil bidding.
Shil bidding, which is intended to artificially escalate price without regard to any reserve,
violated eBay terms and conditions and eBay knew that the existence of such practices rendered
the Live Auction marketplace anything but a fair and safe environment.
76. eBay and Live Auctioneers also continued to turn a blind eye to other anti-
competitive practices of Molayem, included but not limited to, linking to off-eBay web sites
(including an Affliate Program in which Affiliates were paid commissions by Molayem for
operating as auctioneers from their homes) and shipping items which were not those that had been bid on and were in fact of a much lesser quality. eBay knew that Molayem was
misidentifying his items, valuing them at more than ten times their actual worth and certifying
the quality of his jewels through a supposedly independent company, known as Allstate
Certificate Advantage, which was actually owned and operated by Molayem. Accordingly,
Molayem's items dominated eBay search results pages and appeared to be high quality and were
being sold for an initial bid of just $1. Although Molayem accepted the return of many items
from unsatisfied buyers, he retained a 15% buyer's premium and profited from disproportionate
shipping charges and a 10% restocking fee.
77. eBay knew exactly what Molayem was doing and continued to allow him to
dominate its pages and engage in practices which made a mockery of any concept of fairness and
open competition. Because of Molayem's practices he generated massive fees and commissions
- 18 -
78. Because of the money made for eBay by Molayem, eBay allowed his practices to
continue despite the fact that they violated eBay's own rules and policies, helped him to
manipulate the Schedule Duration function and hid the existence of such manipulation from
Plaintiffs during the tenure of
Plaintiffs' relationship with Defendants.
79. On information and belief, eBay only entered into its partnership and joint venture
with Live Auctioneers, thereby surrendering half of its profits, in order to reserve the Schedule
Duration function for its direct eBay Live Auctions customers. By having the majority of Live
Auction sellers use the platform provided by Live Auctioneers, eBay avoided the potential
having its general search listing results flooded with eBay Live Auctions listings.
COUNT ONE: FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT AGAINST EBAY. LIVE AUCTIONEERS. MATT LEDWITH AND JOHN RALSTON
80. Plaintiffs hereby incorporate paragraphs 1-79 as if fully set forth herein.
81. This is an action for damages in excess of the jurisdictional
limits of this Court
brought pursuant to the Florida Deceptive and Unfair Trade Practices Act, sections 501.201 et
seq., Florida Statutes (the "Florida Act").
82. Plaintiffs are consumers within the meaning of the Florida Act.
83. The business relationship between Plaintiffs and Defendants, eBay and Live
Auctioneers, as described herein, constitutes the conduct of trade or commerce within the
meaning of the Florida Act.
84. Defendants, eBay and Live Auctioneers, severally and jointly through their
partnership, and Defendants Ledwith and Ralston, engaged in unfair methods of competition and
unfair or deceptive acts and practices in the conduct of their trade or commerce with Plaintiffs,
within the meaning of the Florida Act, as set forth herein. Defendants Ledwith and Ralston
actively participated in eBay and Live Auctioneers' unfair and deceptive trade practices.
- 19 -
85. From a time commencing prior to Plaintiffs entering a relationship with eBay and
Live Auctioneers and continually throughout the tenure of that relationship, eBay and Live Auctioneers, severally and jointly through their partnership, as well as Ledwith and Ralston,
actively engaged in unfair and deceptive trade practices within the meaning of the Florida Act by
guaranteeing and warranting to consumers generally, and to Plaintiffs specifically, that the Live
Auctions platform was a safe and fair marketplace. Defendants knew at all material times that
these representations were false in that, among other reasons, direct customers of eBay enjoyed a
distinct and significant competitive advantage not available to consumers such as Plaintiffs who
were required to access the Live Auctions platform through Live Auctioneers.
86. Throughout the entire time of their business relationship with Plaintiffs as
described herein, eBay and Live Auctioneers, severally and jointly through their partnership, as
well as Ledwith and Ralston, engaged in further deceptive and unfair trade practices within the
meaning of the Florida Act including but not limited to the following:
a. creating a two-tier system of access to the Live Auctions platform which
allowed certain direct customers of eBay to manipulate the system to such
customers' competitive advantage while at the same time misrepresenting to
others consumers such as Plaintiffs that the Live Auctions platform was a fair
marketplace and that consumers dealing through Live Auctioneers were in the
same position and treated the same as direct customers of eBay;
b. creating a system which allowed certain direct customers of eBay access to
the Schedule Duration function for such customers' competitive advantage
while denying access to the same for Live Auctioneers customers, who were
required to use the Live Auctioneers' Catalog Management Set-Up Page;
c. providing guidance to Plaintiffs for the use of the Live Auctions platform
which would ensure that Plaintiffs would not gain knowledge of the existence
of the Schedule Duration fuction or learn how it could be used to ensure that
their auction lots would be prominently displayed alongside those of their
d. continually misrepresenting to Plaintiffs that no function like the Schedule
Duration function actually existed;
e. continually misrepresenting to Plaintiffs that eBay and Live Auctioneers had
no knowledge of
how Plaintiffs' competitors were able to place their listings
of merchandise to the front of eBay's general search results listings;
f. misrepresenting to Plaintiffs that the solution to the cause of
in sales, and the competitive advantage of
their competitor, was to hold more
g. misrepresenting to Plaintiffs that the problems causing Plaintiffs' decline in
sales would be remedied by Plaintiffs holding additional auctions;
h. offering Plaintiffs discounted pricing if
Plaintiffs would hold additional
auctions even though both Defendants knew that such action by Plaintiffs
would not make Plaintiffs more competitive and would only increase the fees
paid to these Defendants;
1. refusing to stop manipulation of
the Live Auctions platform by Plaintiffs'
competitor even though such manipulation could be stopped by eBay and Live
- 21 -
J. Plaintiffs' access to eBay Live Auctions was terminated by Defendants as a
direct result of
Plaintiffs' repeated insistence that the Live Auctions platform
be a safe and fair marketplace and, once Plaintiffs learned the truth concerning Molayem's sanctioned manipulation, Plaintiffs' insistence that access to the
Schedule Duration function be made available to all sellers.
87. Ledwith is the former Director of eBay Live Auctions, and at all times material
herein, Ledwith supervised all customers of eBay Live Auctions and its partner, Live
Auctioneers, including Plaintiffs.
88. Under Ledwith's supervision and direction, eBay entered into partnership with
Live Auctioneers, requiring all future users of eBay to contract with a third party to enter the
Live Auction system.
89. Ledwith on numerous occasions represented to Plaintiffs that there was no
difference between being a direct customer of eBay and being a customer of eBay through Live
Auctioneers and represented that the marketplace was fair and safe. Ledwith knew these
representations were not true at the time he made them. By making such representations,
Ledwith actively participated in Defendant eBay's and Live Auctioneers' deceptive and unfair
trade practices within the meaning of the Florida Act. In addition, by virtue of his position with
eBay as Director of Live Auctions, Ledwith possessed the authority to control the unfair and
deceptive trade practices detailed herein.
90. By creating this two-tiered system of eBay Live Auction customers, Ledwith
engaged in deceptive practices within the meaning of the Florida Act by representing to all new
and futue customers that eBay would continue to provide a fair and safe marketplace, even
though he had structured the system in a way that was inherently unfair and which ensured that
equity between users did not exist.
91. Ledwith further violated the Florida Act by continually and on numerous
occasions misrepresenting to Plaintiffs that he had no knowledge of how Plaintiffs' competitor
was manipulating the system and by continually denying the existence of the Schedule Duration
92. At all times material hereto, Ralston was Chief Executive Offcer of Live
Auctioneers, and in that capacity, possessed the authority to control all aspects of
with eBay and all actions of Live Auctioneers employees in their dealings with eBay and
93. At all times material hereto, Ralston had knowledge of the Schedule Duration
function and its manipulation by direct customers of eBay.
94. Ralston directly and actively participated II the unfair and deceptive trade
practices detailed herein by:
a. failng to disclose accurately to Plaintiffs and other Live Auctioneers
customers the existence and use of th~ Schedule Duration function;
b. posting deceptive statements on the Live Auctioneers website concerning the
use of the Schedule Duration fuction;
c. authorizing Live Auctioneers employees to offer special pricing to Plaintiffs
to induce them to hold additional auctions as part of a continual pattern of
deceptive acts intended to hide the actual competitive advantage being given
to direct customers of eBay;
- 23 -
d. failng to take any action to prohibit manipulation of the Schedule Duration
function by eBay's direct customers or making such use of the Schedule
Duration function available to all Live Auctioneers customers;
e. failng to adequately direct and supervise Live Auctioneers employees in
order to ensure that the deceptive and unfair trade practices detailed herein did
not occur, even though Ralston knew such practices were occurring; and
f. directing the termination of Plaintiffs' access to eBay Live Auctions as a
direct result of Plaintiffs' repeated insistence that the Live Auctions platform
be a safe and fair marketplace and, after Plaintiffs learned the truth concerning Molayem's sanctioned manipulation, Plaintiffs' insistence that access to the
Schedule Duration function be made available to all sellers.
95. The misrepresentations and other actions of
Defendants described herein
constitute unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of trade or commerce within the meaning of the Florida
96. Plaintiffs reasonably relied on the misrepresentations and other unfair and
deceptive trade practices of Defendants, as described herein, and as a direct and proximate result
thereof suffered damages in excess of $75,000.00.
WHEREFORE, Plaintiffs respectfully request this Court enter judgment in their favor
and against Defendants, jointly and severally, on Count One and award Plaintiffs their actual
damages together with prejudgment interest, and attorney's fees and court costs, as provided in
section 501.2105, Florida Statutes, and such additional relief as the Cour considers just and
COUNT TWO: NEGLIGENT MISREPRESENTATION IN PROVIDING GUIDANCE FOR USE OF THE LIVE AUCTIONS PLATFORM AGAINST EBA Y AND LIVE AUCTIONEERS
97. Plaintiffs hereby incorporate paragraphs 1-79 as if fully set forth herein.
98. This is an action for damages in excess of
this Court's jurisdictional
99. At all times material hereto, eBay and Live Auctioneers, severally
through their partnership, represented to prospective Live Auctions sellers, including Plaintiffs,
that the eBay marketplace was safe and fair and that the policies of these Defendants werč to
provide equal opportunity to all sellers using the Live Auctions platform.
100. eBay and Live Auctioneers represented that these rules and policies were for the
protection and safety of all eBay users, and eBay and Live Auctioneers undertook a duty to enforce these rules and policies for all eBay users, including Plaintiffs, so that the Live Auctions
marketplace would actually provide equal opportunity to all sellers.
101. eBay and Live Auctioneers further provided support staff to assist sellers such as
Plaintiffs in their use of the Live Auctions platform and such support staff provided guidance to
sellers, including Plaintiffs.
102. By making the above representations and providing a support staff, eBay and Live
Auctioneers undertook a duty to enforce its rules and policies and to provide guidance in a fair and accurate manner so that all sellers, including Plaintiffs, would have an equal opportunity in
the Live Auctions marketplace.
103. eBay and Live Auctioneers, severally and
jointly through their partnership,
breached their duty to Plaintiffs by, among other reasons, the following:
a. negligently supplying inaccurate information for Plaintiffs' guidance
regarding use of the Live Auctions platform in the setting of the auction
- 25 -
duration times and the availabilty and use of the Schedule Duration fuction
located on the eBay Catalog Management Set-Up page;
b. negligently misrepresenting to Plaintiffs that Plaintiffs' decrease in sales was
the result of
Plaintiffs' competitor holding additional auctions and that
Plaintiffs could remedy the problem by also holding more auctions; and
c. failng to exercise reasonable care or competence in communicating with
Plaintiffs as to how Plaintiffs could remedy the problem caused by incorrect
end times shown in the eBay general search result listings.
justifiably relied on eBay's and Live Auctioneers' guidance regarding
lots in eBay's general search
their difficulties with auction duration times and the placement of
result listings, the availabilty and use of the Schedule Duration function, and the recommended
remedy for the decrease in Plaintiffs' sales given eBay's and Live Auctioneers' superior
knowledge of the workings of
the Live Auctions platform and the representations eBay and Live
Auctioneers made regarding the safety and equality of the eBay marketplace.
105. Plaintiffs suffered damages as a direct and proximate result of
the breach of duty
by Defendants as outlined herein, in excess of$75,000.00.
WHEREFORE, Plaintiffs respectfully request this Court enter judgment in their favor
and against eBay and Live Auctioneers, jointly and severally, on Count Two in the amount of
Plaintiffs' damages, together with prejudgment interest, costs of this action, and such additional
relief as the Cour considers just and reasonable.
The Plaintiffs demand a trial by jury as to all issues so triable.
SAXON, GILMORE, CARRWAY,
P UL , ES .
Flori a Bar No.: 7
pquin(fsaxongilmore.com JOHN B. GIBBONS, ESQ. Florida Bar No.: 242901 jgibbons(fsaxongilmore.com 201 East Kennedy Boulevard, Suite 600 Tampa, Florida 33602
Phone: (813) 314-4500
Fax: (813) 314-4555
Counsel for Plaintiff
COMPLAINT against Ebay, Inc., Live Auctioneers, LLC, Matthew Ledwith, John Ralston with Jury Demand (Filing fee $ 350 receipt number T047567) filed by Windsor Auctions, Inc., Jewelry Auctions, Inc.. (Attachments: # 1