Does passing out pennies actually protect him from legal action? Or is that just an effect of human nature?
Technically it does protect him somewhat. Like any good scammer, he changed the terms of the contracts. You can see the new formula here:
https://bitcointalk.org/index.php?topic=418183.msg9743464#msg9743464A - B = C
Payouts "C" are now whatever PBMining wants them to be. Anyone who bought contracts after that change are screwed.