Clara Lacey
On October 28, the U.S. Court of Appeals for the Ninth Circuit in Heckman v. Live Nation Entertainment Inc. upheld a district court’s 2023 ruling that denied the company’s motion to compel arbitration pursuant to its subsidiary Ticketmaster’s online terms of use, which required customers to arbitrate their claims rather than sue in court.[1]
Plaintiffs in the putative consumer class action claimed that Live Nation and Ticketmaster engaged in anticompetitive conduct in the primary and secondary ticketing services market which has inflated ticket prices.[2] In a previous case with largely identical allegations, the District Court granted and the Ninth Circuit affirmed Ticketmaster and Live Nation’s motion to compel arbitration.[3] But while that motion was pending, the company updated its terms of use, selecting New Era ADR as its default arbitration provider and adopting its rules in a move that changed its protocol from individual to mass arbitration.[4] New Era is a fully virtual dispute resolution platform offering businesses subscription pricing options and standardized procedures for expedited mass arbitration, which has made it a popular choice for athletic organizations,[5] law firms, and other large businesses looking to avoid lengthy and costly litigation. Under its rules, a batch of five or more cases involving common issues of law or fact may be grouped together for mass arbitration.[6]
U.S. District Judge Wu found the dispute resolution clauses procedurally and substantively unconscionable.[7] The conclusion of procedural unconscionability focused on the factors of oppression and surprise, noting that Ticketmaster failed to notify customers of the change from individual to mass arbitration, the agreement gave them no opportunity to negotiate, and the companies’ dominance as the largest ticket service providers in America forced them to either accept the terms or refrain from purchasing tickets and browsing the websites altogether. In finding substantive unconscionability, the court criticized the Terms of Use and New Era Rules for the lack of right to discovery and procedural safeguards, the application of precedent inviting potential for unfairness, the selection of the arbitrator provisions, and the limited right to appeal. Holding that the agreement’s actual terms were overly harsh and one sided, the court declined to sever the unconscionable portions of the agreement.
The three-judge circuit court panel agreed that the delegation clause and the “borderline unintelligible” arbitral rules were unconscionable both procedurally and substantively and thus unenforceable as inconsistent with California law. It also held that the California Arbitration Act and application of the unconscionability law to the challenged arbitration agreement was not preempted by the Federal Arbitration Act: “It is clear Congress did not have class-wide arbitration in mind when it passed the FAA … 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.’”[8]
As more and more companies use forced arbitration to take lawsuits out of courts, this affirmation of the requirement for fairness in arbitration clauses calls to mind the public backlash to Disney’s motion to dismiss a wrongful death lawsuit based on the victim’s husband having agreed to an “infinite” arbitration clause.[9] The Ninth Circuit’s decision suggests an attitude towards higher judicial scrutiny of fairness and balance in arbitration agreements, emphasizing a need for mutuality in procedural and arbitral rights, notice of changes to agreements, and procedural safeguards protecting due process for individual disputes.
As for Live Nation, its problems will not end here. Without the shield of an enforceable arbitration agreement, it seems the plaintiffs are free to bring their antitrust case. This could also clear the path for the lawsuit initiated in 2022 against Live Nation by Taylor Swift fans who faced challenges buying tickets to Swift’s Eras Tour on Ticketmaster.[10] Artists themselves have expressed discontent with Ticketmaster-Live Nation. In an effort to combat bots and high prices, Maggie Rogers sold tickets in person and at reduced prices for her last two tours.[11]
In May 2024, the Department of Justice filed a civil antitrust suit against Live Nation and Ticketmaster for monopolization and unlawful anticompetitive conduct harming competition in the live entertainment industry.[12] One proposed remedy is the breakup of Live Nation and Ticketmaster, which could affect the future of live entertainment and sports industries and their relationships with consumers. Live Nation executives have said they are hopeful that the upcoming change in the political administration will be more favorable to the company and allow them to escape government intervention.[13]
[1] Heckman v. Live Nation Entertainment, Inc., 23-55770 (9th Cir. 2024).
[2] Id.
[3] Oberstein v. Live Nation Entertainment, Inc., 60 F.4th 505 (9th Cir. 2023).
[4] Heckman v. Live Nation Entertainment, Inc., 686 F.Supp.3d 939, 947 (C.D. Cal. 2023).
[5] See Media Press Release, The USOPC, Team USA’s Athletes’ Commission, NGBC and USADA Announce Transition to New Era ADR as Independent Arbitration Body, United States Olympic & Paralympic Committee (June 27, 2023, 11:45 AM), https://www.usopc.org/media/news/2023/june/27/the-usopc-team-usa-athletes-commission-ngbc-and-usada-announce-transition-to-new-era-adr-as-independent-arbitration-body [https://perma.cc/2N2N-334E][https://web.archive.org/web/20250117193636/https://www.usopc.org/media/news/2023/june/27/the-usopc-team-usa-athletes-commission-ngbc-and-usada-announce-transition-to-new-era-adr-as-independent-arbitration-body].
[6] Heckman, 23-55770 at 8.
[7] Heckman, 686 F.Supp.3d 939.
[8] Heckman, 23-55770 at 32-33.
[9] See Danielle Braff, Did you read the small print? ‘Infinite’ arbitration clauses are on the rise,” ABA Journal (September 6, 2024, 11:46 AM), https://www.abajournal.com/web/article/did-you-read-the-small-print-forced-arbitration-cases-are-on-the-rise [https://perma.cc/HC73-2Q9X][https://web.archive.org/web/20241113170928/https://www.abajournal.com/web/article/did-you-read-the-small-print-forced-arbitration-cases-are-on-the-rise]; Jessie Yeung and Jon Passantino, Disney reverses course on bid to block wrongful death lawsuit by widower who had Disney+, CNN (August 20, 2024, 9:14 PM), https://www.cnn.com/2024/08/19/business/disney-arbitration-wrongful-death-lawsuit-intl-hnk/index.html [https://perma.cc/667Y-VWXB] [https://web.archive.org/web/20241113171617/https://www.cnn.com/2024/08/19/business/disney-arbitration-wrongful-death-lawsuit-intl-hnk/index.html].
[10] See Angela Yang, The Justice Department wants to ‘break up Live Nation.” Taylor Swift fans are ready for it., NBC News (May 24, 2024, 11:20 AM), https://www.nbcnews.com/pop-culture/pop-culture-news/taylor-swift-fans-justice-deparment-live-nation-lawsuit-reaction-rcna153729 [https://perma.cc/PYM9-JAGE ] [https://web.archive.org/web/20241113172253/https://www.nbcnews.com/pop-culture/pop-culture-news/taylor-swift-fans-justice-deparment-live-nation-lawsuit-reaction-rcna153729].
[11] Maggie Rogers (@maggierogers) Instagram, https://www.instagram.com/p/C5oQRo8LY7F/ (Last visited November 13, 2024) [https://perma.cc/Z2XB-ZHRV][ https://web.archive.org/web/20241113172603/https://www.instagram.com/p/C5oQRo8LY7F/].
[12] See Sarah N. Lynch, David Shepardson, and Mike Scarcella, Live Nation ‘suffocates its competition,’ US says in monopoly lawsuit, Reuters (May 23, 2024 8:13 PM), https://www.reuters.com/world/us/us-sues-break-up-live-nation-ticketmaster-monopoly-2024-05-23/ [https://web.archive.org//web/20241113173007/https://www.reuters.com/world/us/us-sues-break-up-live-nation-ticketmaster-monopoly-2024-05-23/].
[13] See Caitlin Huston, Live Nation Execs Are “Hopeful” For Different Antitrust Approach Under Trump, The Hollywood Reporter (November 11, 2024 1:48 PM), https://www.hollywoodreporter.com/business/business-news/live-nation-revenue-q3-earnings-1236058692/ [https://perma.cc/L3VU-8Z83] [https://web.archive.org/web/20241113173154/https://www.hollywoodreporter.com/business/business-news/live-nation-revenue-q3-earnings-1236058692/].