The owners of Ticketmaster can't use a so-called "mass arbitration" clause in their user agreement to pull the plug on a class action lawsuit accusing Ticketmaster of illegally leveraging its market share to gain a virtual monopoly over the primary market for tickets for concerts, sporting events and other live entertainment, a federal appeals court has ruled.
In the decision, a three-judge panel of the U.S. Ninth Circuit Court of Appeals agreed with a Los Angeles federal judge that the "novel" arbitration process set up by Ticketmaster owner, Live Nation, is "unconscionable" under California state law and also cannot be saved by federal law set up to promote arbitration as a way of freeing up courts through the U.S. from the ever rising tide of lawsuits.
In the ruling, the judges said businesses, like Live Nation, cannot use new "mass arbitration" rules established through claims mediation and arbitration group, New Era ADR, to short circuit efforts by trial lawyers to bury them under a blizzard of nearly identical claims in arbitration, in lieu of class action lawsuits because federal arbitration law was established with individual arbitration claims in mind.
"Arbitration, as understood by Congress when it enacted the FAA (Federal Arbitration Act), was designed to be a fair and efficient alternative to bilateral judicial proceedings," the appellate panel wrote. "It may not be too much to say that this method of dispute resolution contemplated by New Era's Rules is 'unworthy even of the name of arbitration.'
"It is certainly beyond dispute that it is not arbitration as envisioned by the FAA in 1925."
The decision was authored by Ninth Circuit Judge William A. Fletcher. Judges Morgan Christen and Lawrence VanDyke concurred in the ruling.
The decision clears the way for a class action lawsuit to move forward against Live Nation, accusing it of violating federal antitrust laws to allegedly allow Ticketmaster to monopolize the ticket selling market and overcharge consumers with high, allegedly excessive ticketing fees.
The litigation landed in L.A. federal court in 2022, in a complaint filed by attorneys with the firms of Quinn Emanuel Urquhart & Sullivan, of Los Angeles, and Keller Lenkner, of Washington, D.C.
Plaintiffs named in the class action include Skot Heckman, of San Bruno; Luis Ponce, of Coral Springs, Florida; Jeanene Popp, of Clayton, Ohio; and Jacob Roberts, of Fort Lauderdale, Florida.
At the time the lawsuit was filed, the plaintiffs acknowledged their action faced a significant hurdle. Specifically, they noted Ticketmaster's user agreement included an arbitration clause that would appear to bar Ticketmaster users from suing over allegedly excessive fees or any other matter in court.
Rather, the clause required such disputes to go to arbitration.
However, rather than traditional arbitration proceedings, in which Live Nation would respond to claims raised by individual users, the arbitration rules would require claimants to submit their claim to New Era, which would then determine if the claims present unique claims, or are essentially the same as other claims.
If New Era determines the claims are similar enough to at least four other claims, the arbitration company would consolidate claims into batches, to be handled collectively.
The judges noted the process was established in part in response to the recent rise of so-called "mass arbitration."
Plaintiffs' lawyers have mobilized the tactic in response to court rulings, including a recent landmark U.S. Supreme Court decision, granting companies greater leeway in enforcing clauses in user agreements requiring customers and others to bring claims through arbitration, rather than as class action lawsuits.
In the "mass arbitration" process, plaintiffs' lawyers enlist potentially thousands of individual claimants, or more, to filed nearly identical claims in arbitration. Companies have said such tactics can slam them with potentially hundreds of millions of dollars in arbitration fees and other costs before the cases are even heard.
Companies have said such tactics are designed to still achieve the same result desired in a class action: an allegedly massive settlement payout from the company targeted by the avalanche of claims.
In the case against Live Nation, the appellate judges said the process established by New Era to address such concerns goes too far, essentially creating a situation in which companies subject to claims are able to avoid the pitfalls of class action lawsuits in court, while claiming for themselves the benefits of still being able to handle large groups of similar claims together.
They further noted Live Nation's arbitration clause also goes too far in other respects, including delegating solely to the New Era arbitrator to determine if the arbitration clause is enforceable; requiring claimants to abide by the decisions of arbitrators hearing similar, so-called "bellwether" claims included in their particular "batches;" limiting the ability of claimants subject to those bellwether decisions to determine if their cases truly are similar; and limiting the ability of claimants to appeal decisions that go against them.
In Los Angeles federal court, U.S. District Judge George Wu sided with the plaintiffs, saying such terms were "unconscionable" under California law and unenforceable under the FAA.
The appellate judges agreed.
"It is clear that Congress did not have class-wide arbitration in mind when it passed the FAA," Judge Fletcher wrote in the opinion.
Live Nation could yet petition the U.S. Supreme Court to review the decision.
Plaintiffs were represented before the Ninth Circuit by attorneys Warren D. Postman, Albert Y. Pak, Noah Heinz and Ethan H. Ames, of Keller Postman; and Kevin Teruya, Adam Wolfson and William R. Sears, of Quinn Emanuel.
Live Nation was represented by attorneys Roman Martinez, Uriel Hinberg, Sadik H. Huseny, Timothy L. O'Mara, Andrew M. Gass, Alicia R. Jovais, Robin L. Gushman and Nicholas Rosellini, of the firm of Latham & Watkins, of Washington, D.C., San Francisco and Austin, Texas.