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After discovering that users had been using the service to seek sexual partners, he launched Adult Friend Finder as a spin-off, followed later by other spin-offs dealing with different regions and niches.
The Federal Arbitration Act ("FAA") applies to arbitration agreements affecting interstate commerce.
As of January 17, 2010, Friend Finder Networks had a negative net worth equal to 8 million, million in cash on hand and 0 million in liabilities.
The company had also indicated that it lacked existing cash or cash from operations to repay a .5 million debt that was due July 31.
Defendant now moves to compel arbitration and dismiss the action based on the arbitration provision contained in the Terms.
When it applies, the FAA preempts state laws that conflict with its provisions or obstruct its objective to enforce valid arbitration agreements.
It has cautioned that, unless it can repay or restructure its obligation, it will face “a material deficiency in our short term liquidity.” With these shortfalls in mind, the company again announced an intention to make an initial public offering of stock, representing a 49% stake in the company, with plans to use the proceeds to pay down its debt and become listed on the New York Stock Exchange.