Mediaboss Marketing

For as long as the internet has proliferated viral chain letters, fearmongering urban legends, too-good-to-be-true morality tales, scams from Nigerian princes, and false conspiracy theories, one website has done more than almost any other to stem the tide of misinformation: Snopes.com.

Launched in 1994, Snopes is the internets most thorough and reliable site dedicated to debunking hoaxes, myths, and fake news. Its so trustworthy that last year, when Facebook began enlisting fact-checking organizations to help it weed out fake news stories from its news feeds, Snopes was one of the five entities entrusted with the task, along with the Associated Press and other news outlets.

But now Snopess future is very much in doubt.

According to a short note posted to the Snopes website on July 24 (which links to a new website called Save Snopes), the site is in danger of shutting down completely, due to a complicated legal battle with an outside vendor. Snopess owners claim the vendor is essentially hold[ing] the Snopes.com web site hostage by refusing to relinquish control of the Snopes.com domain and denying them any access to advertising revenue.

Although we maintain editorial control (for now) ... we cannot modify the site, develop it, or most crucially place advertising on it. The vendor continues to insert their own ads and has been withholding the advertising revenue from us, the sites owners wrote. Our legal team is fighting hard for us, but, having been cut off from all revenue, we are facing the prospect of having no financial means to continue operating the site and paying our staff (not to mention covering our legal fees) in the meanwhile.

The legal fees in question relate to three different lawsuits with several complicated, overlapping factors, as well as some very tricky distinctions between individuals and companies.

The first lawsuit has been brought against Snopess parent company, Bardav, by the vendor a company called Proper Media, whose owners also have ownership stakes in Bardav. Proper Media is attempting to oust Snopes founder David Mikkelson from Bardav even though Mikkelson owns 50 percent of the company, due to what Proper Media alleges is grievous mismanagement.

The second lawsuit is a countersuit brought against Proper Media by Mikkelson (via Bardav) in an attempt to recoup advertising revenue from Snopes that Proper Media controls and that Bardav claims it is owed. More critically, the countersuit is an attempt to prevent Proper Media from continuing to exercise any further control over Snopes.com control that Mikkelson claims is based on Proper Medias attempt to combine its individual owners stakes in Bardav so that Proper Media can claim 50 percent ownership of the website.

In essence, both companies are trying to legally maneuver one another out of having any control over Snopes.

The third and final lawsuit concerns one of Proper Medias own former co-owners, a man who has essentially shifted his allegiance and may now hold the key to deciding who if anyone legally controls Snopes.

With these ongoing disputes awaiting resolution the competing motions will all be heard in court this Friday, August 4 Mikkelson has set up a GoFundMe campaign with a goal of raising $500,000 in an effort to ensure Snopess survival. The campaign has already been tremendously successful, with more than 23,000 supporters donating more than $665,000. But even with this infusion of cash, the websites future remains murky so murky, in fact, that Snopes might be facing a shutdown after more than two decades online.

Heres what we know about the conflict based on the claims made in each of the three public court filings:

Snopes was founded in 1994 by a husband-and-wife team, David and Barbara Mikkelson. The Mikkelsons eventually started a parent company for the site, which they named Bardav.

The Mikkelsons divorced in 2015, and David and Barbara each received 50 percent of the company. That same year, Bardav entered into a partnership with a tech startup called Proper Media. According to the Atlantic, the partnership agreement dictated that Proper Media whose CEO is Chris Richmond, founder of the beloved wiki TV Tropes would provide content and website development services as well as advertising sales and trafficking to Snopes.

The next year, in 2016, Barbara Mikkelson sold her half of Bardav to Proper Media, dividing it among Proper Medias five individual shareholders. (As the Atlantic explains, because Bardav was an S corporation, its shareholders had to be people and could not be other companies.) This left Richmond and company president Drew Schoentrup each with 20 percent ownership of Bardav, and Proper Medias three other shareholders evenly splitting the remaining 10 percent.

The result was that David Mikkelson suddenly shared ownership of Bardav with five other people, instead of just one. All five of those co-owners were also co-owners of Proper Media, and were, according to Proper Medias lawsuit, obligated to uphold their fiduciary duties to Proper Media while dealing with Bardav. The suit states that These fiduciary duties include duties of loyalty, care, and good faith, and any actions taken adversely to Proper Media are expressly prohibited.

Its not terribly clear whether the conflict between Proper Media and Bardav developed before or after Barbara Mikkelsons sale of her half of Bardav. The Atlantic reports that in February of this year, when the San Diego Union-Tribune visited the Proper Media office to write a story about Snopes, tensions were high; the Proper Media staff apparently felt the 2015 development agreement between Bardav and Proper Media had saved Snopes from technical obscurity, while the Snopes staff felt worried that the co-owners didnt understand what Snopes was, and that they only wanted to juice its revenues, so they could sell it.

Shortly after the Union-Tribune article was published, a falling-out occurred between one of the co-owners of both companies, Vincent Green, and his four fellow co-owners at Proper Media. Green had been working with Mikkelson on the Snopes website since Proper Media first became involved with Bardav in 2015. Proper Medias lawsuit against Bardav, filed in May, alleges that in February 2017, Mikkelson conspired with Green to block Proper Medias access to the personnel, accounts, tools, and data necessary to manage Snopes.

A few weeks later, in March, Mikkelson officially canceled Bardavs 2015 contract with Proper Media. Or rather, he tried to but Proper Media is disputing whether he had the right to do so (more on that below).

And in April, after allegedly spending the previous two months essentially working for Mikkelson instead of Proper Media, Green formally resigned from Proper Media and went to work formally for Bardav a move that left his ownership stakes in both companies up in the air.

You may be wondering why Vincent Greens seemingly tiny 3.33 percent share in Bardav matters, but in fact it matters a great deal.

This is because the Bardav and Proper Media are warring over whether, when the five Proper Media co-owners bought ownership in Bardav, they did so as individual shareholders or as representatives of Proper Media. If Green is an individual shareholder, he could take his meager slice of the Bardav pie and join it with Mikkelsons 50 percent stake, effectively giving Mikkelson the controlling interest in the company.

But now that Green has left the company, if Proper Medias co-owners are obligated to represent Proper Media in its dispute with Bardav because they acquired their Bardav shares while doing business as Proper Media, Proper Media may have the right to reclaim Greens share, allowing the company to retain its collective 50 percent ownership of Bardav.

Essentially, Proper Media believes it owns a full 50 percent stake in Bardav (and thus a 50 percent stake in Snopes.com), despite Greens departure. But Bardav believes that Mikkelsons 50 percent stake, combined with Greens 3.33 percent, gives Mikkelson the controlling interest in the company.

Which means the question of ownership is essentially a he-said, she-said issue that the courts must decide. As things currently stand, without a court ruling, Mikkelson/Bardav will have to keep paying Snopess staffing and operation costs while Proper Media controls the sites ad revenue. (And some have speculated that Proper Media might ultimately try to sell its stake in Snopes for a profit, with little care for potential buyers intentions thus further endangering Snopess mission and future.)

In order for Proper Media to win its lawsuit against Bardav, it must successfully argue that Vincent Greens 3.33 percent share in Bardav is still part of the Proper Media collective now that Green has quit working for Proper.

Conversely, in order for Bardav to win its lawsuit against Proper Media, it must successfully argue that the shares Barbara Mikkelson sold to Proper Media were sold to its co-owners as individuals, according to the terms of the original sale contract.

Both lawsuits are asking for the court to clarify and confirm the details of the original transfer of Bardav shares to Proper Media via Proper Medias five co-owners. (That contract, though available to the court, cant be made public for reasons of confidentiality.)

As part of Bardavs suit against Proper Media, David Mikkelson is claiming that Proper Media is wrongfully withholding money owed to Bardav, refusing to pay Bardav any advertising revenue or to let him have complete control of Snopes.com, even though he canceled Bardavs contract with Proper Media. Hes currently seeking an injunction against Proper Media that would force the company to turn over to Bardav all advertising revenue accrued from Snopes since April, and relinquish its hold on the Snopes.com domain.

Proper Media, for its part, is disputing the validity of Bardavs contract cancellation by claiming that its president, Schoentrup, is on Bardavs board of directors, and thus should have been consulted before the contract was canceled. Proper Media is further seeking damages against Bardav for what it alleges is Mikkelsons gross financial, technical, and corporate mismanagement.

In Bardavs lawsuit, Mikkelson accuses Schoentrup of essentially pretending to be a director on a nonexistent board of directors. The implication is that Bardavs board of two people evaporated when Barbara sold her half of the company.

But both companies appear to have had Mikkelson and Schoentrup sign, as directors, an amendment to Bardavs nonexistent bylaws. In Proper Medias lawsuit, Schoentrup argues that this document is proof that hes on Bardavs board, while Bardav argues that such an amendment, even if the company had bylaws to amend, would have been invalid anyway due to the language of the original sale contract between Barbara Mikkelson and Proper Media/its five co-owners.

Clearly, theres quite a bit of messiness here (to say nothing of a snake eating its own tail). Stacey Lantagne, a law professor at the University of Mississippi who writes for the Contracts Prof law blog, told Vox that this type of situation usually arises from building a business without clear documentation in place. Lantagne pointed out that while normally the details of a companys governance are outlined in its corporate bylaws, according to Proper Medias suit, Bardav doesnt appear to have ever had bylaws.

The conflict over the question of who is on Bardavs board of directors is a perfect example of the type of confusion that can result.

This seems like the type of complex mess that can often result when transactions involve close personal relationships, like significant others, and the chain of events is less than fully documented, Lantagne said, pointing to Barbara and David Mikkelsons apparent failure to establish bylaws when they first formed Bardav. As these warring allegations prove, executing all the documents you can to memorialize your organizational structure can help eliminate ambiguity going forward.

According to the San Diego Union-Tribune, Proper Media is arguing that Mikkelson is unfit to serve as a director of Bardav and wants to effectively oust him from his own company. But Lantagne told Vox that since Proper Media wont be able to command more than a 50 percent share of Bardav, such an outcome doesnt seem likely.

It seems like Proper Media can't gain a controlling interest [in Bardav], she told Vox. At best, it can get to 50 percent and one board member, which could deadlock corporate decision-making.

But no matter what the court decides, Snopess editors in addition to Mikkelson, the site employs a staff of 15 people are reportedly fearful of what Proper Medias continued involvement in Snopes could mean for the website, and unconvinced that Proper Media fully understands Snopess unique and increasingly vital function on the internet.

When reached by email, a Snopes representative pointed to a press release issued July 25 by the law firm representing Baldav. "We've argued in court that the public will be harmed if Snopes.com is forced to shut down, attorney Paul Tyrell said in the release. The outpouring of support in response to the GoFundMe campaign makes it undeniable that the survival of Snopes.com is a matter of public interest." Representatives for Proper Media did not respond to a request for comment.

But the sites operating costs are reportedly as high as $100,00 per month. Without advertising revenue to help pay staffers and conduct site maintenance, readers generosity can only go so far.

Proper Media and Bardavs respective lawsuits will be heard in court on August 4. Until then, Snopess fate, like so many of the urban legends the website has set out to debunk over the years, remains in dispute.

Read this article:
Snopes, the internet's foremost fact-checking website, may die in a messy legal battle - Vox