Live Nation, Ticketmaster can't dodge antitrust suit, Ninth Circuit rules

SAN FRANCISCO (CN) — Ticketmaster and Live Nation Entertainment failed to sway the Ninth Circuit in their attempt to arbitrate customers’ claims that the companies violated the Sherman Act by engaging in anticompetitive practices.

In a ruling Monday, a three-judge panel found that the lower court properly denied the entertainment companies’ motion to compel arbitration, bringing the plaintiffs one step closer to getting class certification and potentially allowing hundreds more dissatisfied ticket customers to join their lawsuit.

The arbitration agreement the plaintiffs signed when they bought tickets had several issues that make it unenforceable under California law, the panel ruled. Among them are a mass arbitration protocol where precedents from other consumers’ cases were applied to other claimants; procedural limitations like a lack of discovery; and a limited right of appeal for customers.

In addition, the panel rejected the companies’ argument that the Federal Arbitration Act, which protects valid arbitration procedures, preempts California law.

“Simply labeling something as ‘arbitration’ does not automatically bring it within the ambit of the FAA’s protection,” U.S. Circuit Judge William Fletcher, a Bill Clinton appointee, wrote in the 34-page ruling.

Live Nation is the largest concert promoter for major entertainment venues in the United States and Ticketmaster is the largest primary ticket seller for live events at major concert venues in the United States. The companies merged in 2010.

Last year, four plaintiffs filed suit claiming the industry giants unfairly rigged their arbitration process, which is handled by the company New Era ADR, to protect themselves from lawsuits. In 2021, the companies quietly switched to an all-virtual, expedited arbitration process that severely limited the rights of customers, the customers say.

In a court filing, they likened the process to something out of a Kafka novel. “Consumers, with barely any notice of the new rules, simply by continuing to use the defendants’ websites, were subjected to a non-traditional, Kafkaesque arbitration procedure designed by Defendants to deter filing claims,” the plaintiffs wrote.

They further claim that New Era’s arbitration process stifles customers’ due process rights by restricting evidence, prohibiting discovery and allowing arbitrators to immediately rule on multiple customers’ claims without holding hearings.

The entertainment companies insist that New Era’s rules and procedures were completely enforceable and there was no possible result of the suit that would culminate in a federal class action.

“To say that plaintiffs’ counsel are wasting the court’s time is an understatement,” responded the defendants.

The court heard oral arguments in June.

In a concurring opinion on Monday, U.S. Circuit Judge Lawrence VanDyke commented further on the novel and unusual arbitration process used by New Era.

“Imagine, for example, an arbitration clause that required the parties to resolve their disputes through a vigorous, winner-take-all game of ping-pong. Would the label ‘arbitration’ be enough to bring that agreement under the FAA and protect such an ‘arbitration’ agreement from state laws deeming it unconscionable?” the Donald Trump appointee asked.

Attorney Warren Postman of Keller Postman, who represents the plaintiffs, said this is not new behavior for corporations, which have often forced individual arbitration on consumers to make it economically infeasible for law firms to pursue those claims. He expressed satisfaction with the ruling.

“The companies reacted by trying to impose novel group arbitration procedures, which they handcrafted to be slanted in their favor. The Ninth Circuit has now held that this workaround is likely to fail,” he told Courthouse News.

The panel also found that the way Ticketmaster bound users to its terms was extremely unconscionable, far above run-of-the-mill cases of contract adhesion.

Live Nation was also the target of a Justice Department antitrust lawsuit earlier this year. The department accuses the company of wielding monopolistic control as “gatekeeper for the delivery of nearly all live music in America today.”

Rounding out the unanimous panel was U.S. Circuit Judge Morgan Christen, a Barack Obama appointee.