Photo Credit: Claire Anderson
The 9th U.S. Circuit Court has upheld a lower court ruling that denied Live Nation and Ticketmaster’s claim that customer antitrust complaints should be resolved through arbitration—based on the terms of service when purchasing tickets.
The 2023 ruling in Heckman v. Live Nation Entertainment ruled that Live Nation cannot enforce contract provisions that require ticket buyers to arbitrate their claims instead of suing them in federal court. The appeals panel called the arbitration rules unfair to consumers, while being overtly beneficial to the defendants (Live Nation/Ticketmaster).
U.S. District Judge George H. Wu called the forced arbitration clause “procedurally unconscionable” last year in his ruling after Ticketmaster changed its chosen arbitrator to New Era. He also called into question the ability to mass arbitrate cases grouped together, saying it would severely limit the Plaintiff’s ability to prove their cases in court.
“It is plain that it would be impossible for Plaintiffs to present their claims on equal footing to Live Nation,” 9th Circuit Judge William Fletcher writes in his decision. “Forced to accept terms that can be changed without notice, a Plaintiff then must arbitrate under New Era’s opaque and unfair rules.”
Both Judge Morgan Christen and Judge Lawrence VanDyke agreed with that ruling, stating that the Federal Arbitration Act does not apply to “mass arbitration contemplated by Live Nation’s agreements.” Live Nation says it disagrees with the 9th Circuit ruling, arguing that the change of arbitrator was not “unfair, unexpected, or otherwise unconscionable.”
“We hold that the delegation clause of the arbitration agreement, and the arbitration agreement as a whole, are unconscionable and unenforceable under California law. We hold further that the application of California’s unconscionability law to the facts of this case is not preempted by the Federal Arbitration Act (“FAA”). Finally, we hold, as an alternate and independent ground, that the FAA does not preempt California’s prohibition of class action waivers contained in contracts of adhesion in large-scale small-stakes consumer cases,” the decision reads.
The district court observed that Live Nation “provided nearly all of New Era’s revenue during its first year” and that there “appears to be a remarkable degree of coordination between [Live Nation counsel] and New Era in terms of their interpretation and the evolution of New Era’s Rules.” Finding these facts to be concerning, the district court noted that this could “certainly create an inference of bias.”
“It seems to me that the circumstances in this case create more than merely an inference of bias—they create a strong and inescapable perception of bias,” the judge writes in his decision. “A dispute resolution procedure is not an arbitration unless there is a third-party decision maker. And a third-party decision maker “whose interests are so allied with those of the party” is “for all practical purposes, subject to the same disabilities which prevent the party himself from serving.”
“Not only is the line between Live Nation and New Era blurry, but more than that, this agreement would require a New Era arbitrator to decide the question of whether their employer’s invention—developed with the help of the party in front of them—is a failure. If the answer to that question is yes, goodbye New Era and the arbitrator’s job as an arbitrator—with any arbitration provider, forever.”
See the full judgment here.