Heckman v. Live Nation Entm't, Inc.

686 F.Supp.3d 939

Skot HECKMAN, et al. v. LIVE NATION ENTERTAINMENT, INC., et al.

Case No. CV 22-0047-GW-GJSx

United States District Court, C.D. California

Filed August 10, 2023

Adam B. Wolfson, Frederick A. Lorig, Kevin Y. Teruya, William R. Sears, Quinn Emanuel Urquhart and Sullivan LLP, Los Angeles, CA, Albert Pak, Pro Hac Vice, Warren D. Postman, Keller Postman LLC, Washington, DC, Ethan Henry Ames, Keller Postman LLC, Chicago, IL, for Skot Heckman, et al.

Timothy L. O'Mara, Alicia R. Jovais, Andrew Michael Gass, Daniel M. Wall, Kirsten M. Ferguson, Robin L. Gushman, Sadik Harry Huseny, Latham and Watkins LLP, San Francisco, CA, for Live Nation Entertainment, Inc., et al.

PROCEEDINGS: IN CHAMBERS - FINAL RULING ON DEFENDANTS' MOTION TO COMPEL ARBITRATION [30]

GEORGE H. WU, UNITED STATES DISTRICT JUDGE

Attached hereto is the Court's Final Ruling on Defendants' Motion to Compel Arbitration. The Court DENIES the Motion.

Final Ruling on Defendants' Motion to Compel Arbitration¹

I. Introduction²

Plaintiffs Skot Heckman, Luis Ponce, Jeanene Popp, and Jacob Roberts ("Plaintiffs") brought this putative class action against Defendants Live Nation Entertainment, Inc. ("Live Nation") and Ticketmaster LLC ("Ticketmaster") (collectively, "Defendants") alleging various anticompetitive practices in violation of the Sherman Act. See generally Compl. Plaintiffs claim that they suffered damages from paying "supracompetitive fees on primary and secondary ticket purchases from Ticketmaster's online platforms." Compl. ¶ 6. On March 8, 2022, Defendants moved to compel arbitration, arguing that this case is virtually identical to another case against Live Nation and Ticketmaster which this Court had previously sent to arbitration. See Oberstein v. Live Nation Ent., Inc., No. 2:20-cv-03888-GW-(GJSx), 2021 WL 4772885 (C.D. Cal. Sept. 20, 2021), aff'd, 60 F.4th 505 (9th Cir. 2023). Among the apparent differences between this case and the Oberstein case is that in July 2021, after the Oberstein complaint was filed, Defendants updated their terms of use ("TOU") to select a new arbitration provider with new arbitration procedures. Compl. ¶ 1; see TOU, ECF No. 31-30, at 10-13 of 15.³ Whereas the TOU at issue in Obsterstein designated JAMS, the updated TOU selected New Era ADR ("New Era"). See Compl. ¶¶ 1-5. Unlike JAMS, New Era offers standardized procedures for administering mass arbitrations, which Defendants assert "facilitates the arbitration of mass individual consumer claims efficiently and fairly, and thereby promotes arbitration."⁴ Mot. at 2. Plaintiffs, on the other hand, believe New Era's mass arbitration procedures require "consumers to engage in a novel and one-sided process that is tailored to disadvantage consumers." Compl. ¶ 5. According to Plaintiffs, Defendants' selection of New Era in the TOU "skews the odds so egregiously in Defendants' favor through its defense-biased provisions" that the arbitration agreement is rendered unconscionable. Id.

Before filing an opposition to Defendants' Motion, Plaintiffs sought discovery related to the validity, unconscionability, and severability of the dispute-resolution provisions in the TOU. See ECF No. 34 at 3. On June 9, 2022, the Court granted Plaintiffs' request and allowed the parties to conduct limited discovery as to those issues. See ECF No. 50. The parties completed such discovery on January 27, 2023. Plaintiffs filed their Opposition to Defendants' Motion on March 22, 2023, and Defendants filed a Reply on April 18, 2023. In advance of the May 1, 2023 hearing on the Motion, the Court issued a Tentative Ruling, which posed a number of questions for the parties to discuss at oral argument and reserved decision on the Motion pending additional argument. See ECF No. 160. Following oral argument, the Court requested and the parties submitted supplemental briefing. See id.; note 2, supra. The Court held a second hearing on Defendants' Motion on July 13, 2023. See ECF No. 182. An additional round of supplemental briefing followed. See note 2, supra.

II. Background

This case is one of several consumer class actions alleging Ticketmaster and Live Nation engaged in anticompetitive conduct in the primary and secondary ticketing services market. One such case previously before this Court and asserting largely identical underlying allegations was Oberstein, filed on April 28, 2020. See Complaint, Van Iderstine v. Live Nation Ent., Inc., No. 2:20-cv-03888-GW-(GJSx) (C.D. Cal. Apr. 28, 2020), ECF No. 1; First Amended Complaint, Oberstein v. Live Nation Ent., Inc., No. 2:20-cv-03888-GW-(GJSx) (C.D. Cal. Jan. 1, 2021), ECF No. 81.⁵ On September 20, 2021, this Court granted Ticketmaster and Live Nation's motion to compel arbitration in Oberstein, finding that: (1) Ticketmaster and Live Nation's websites provided sufficient constructive notice of the terms of use, (2) the authority to decide whether the arbitration agreement was enforceable had been delegated to the arbitrator, and (3) that delegation clause was not itself unconscionable. See Oberstein, 2021 WL 4772885, at *6-9. The Court's decision was affirmed on appeal. Oberstein v. Live Nation Ent., Inc., 60 F.4th 505 (9th Cir. 2023).

On July 2, 2021, while Ticketmaster and Live Nation's motion to compel arbitration in Oberstein was pending, Defendants updated their TOU to select New Era as the default arbitration provider. See Compl. ¶ 1; TOU at 10-13. New Era was founded in 2020 and launched its alternative dispute resolution ("ADR") services in April 2021. See Compl. ¶ 2; Opp. Ex. C at 10:16-18, 11:3-5. New Era first reached out to Defendants' counsel Latham & Watkins ("Latham") to pitch its services on May 4, 2021. Opp. Ex. C at 86:2-88:2. At that time, New Era had not yet conducted any arbitrations and had not finalized its Rules governing mass arbitration procedures. Id. at 109:1-110:10. The parties herein disagree about the nature of the initial conversations between New Era and Latham and the extent to which Defendants and Latham had input on, or helped shape, New Era's Rules. However, on June 21, 2021, New Era executed a subscription agreement with Live Nation as its first subscriber, and later that same day, New Era published its ADR Rules. Id. at 145:6-147:10.

Plaintiffs allege that New Era was created with a decidedly pro-business mission: to help " 'businesses settle legal disputes' by creating rules that 'make[ ] sense for businesses' and that also benefit 'law firms, who are able to provide an improved client experience' to businesses 'and handle a higher volume of cases' that are filed by consumers." Compl. ¶ 2. To that end, New Era offers businesses faced with large numbers of arbitration claims two primary advantages over traditional arbitration providers. First, in addition to a standard pricing option whereby the company pays $9,500 and the consumer pays $500 per arbitration, New Era offers a subscription option whereby the company pays an annual subscription fee and the claimant pays a $300 filing fee. See New Era Rules ("Rules"), ECF No 30-4, Rules 1(a)(ii), 1(e)(i), 6(a)(iii)(1)(c); see also Def. Sec. Supp. Br. at 4 ("[T]he primary innovation was around filing fees - i.e., creating a model that generated enough revenue to be a viable business, without imposing multi-million-dollar upfront filing fees that forced parties to settle meritless claims."). Second, New Era includes procedures for administering mass individual consumer arbitrations presenting common issues of fact or law. See Rules 2(x), 6(b).

Plaintiffs principally take issue with this second aspect of New Era as an arbitral forum - the use of novel mass arbitration procedures to adjudicate consumer claims. As alleged in the Complaint:

When one of many aggrieved consumers files a dispute against Defendants with New Era ADR, the consumer has no choice but to submit to batched arbitration proceedings. On the one hand, the New Era agreement requires a consumer to bring claims "ONLY IN AN INDIVIDUAL CAPACITY" and bars "ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING." On the other hand, once multiple consumers file cases against Defendants, New Era ADR will group their cases together for any reason it deems appropriate, including the consumers' counsel of choice. The batched cases will then be assigned to a single decisionmaker, chosen under unfair procedures that abridge consumers' rights to select neutral decisionmakers and that later-filing consumers will not be able to participate in at all. That decisionmaker will then preside over the selection and litigation of a few bellwether cases, during which all other consumers will be forced to wait with no progress on their cases, and after which the outcome of those bellwether cases will be forced on all consumers. The New Era agreement thus requires consumers to engage in a novel and one-sided process that is tailored to disadvantage consumers.

Compl. ¶ 4.⁶

Following Defendants' alteration to the TOU in July 2021, each of the named Plaintiffs purchased tickets on Defendants' sites between four and eight separate times. See Mot. at 6-7. To make those purchases, Plaintiffs were first required to create, and then sign into, their accounts, whereupon they were notified: "By continuing past this page, you agree to the Terms of Use and understand that information will be used as described in our Privacy Policy." Id. at 6. Upon clicking the bolded "Terms of Use" text, users were redirected to the TOU. Id. A screenshot of the sign-in page is shown below:

Image materials not available for display.

Id.

To complete a ticket purchase, users were also required to check a box acknowledging that they had read and accept the current TOU. Id. An example of such notice is shown below:

Image materials not available for display.

Id.

In addition, on virtually every page on Defendants' websites (including the home page), users were notified: "By continuing past this page, you agree to our Terms of Use" (or some similar variation...