Live Nation is really keen for an ongoing dispute with some Ticketmaster customers to go to arbitration rather than being fought out in court. The dispute in question includes allegations from ticket buyers that the company engaged in anticompetitive conduct, an issue that - in light of the DoJ investigation into the company - Ticketmaster is desperate to avoid being fought out in public.
The terms and conditions of Live Nation’s Ticketmaster in theory force aggrieved customers to take any complaints to arbitration rather than filing a lawsuit in court. Arbitration should be a simpler and cheaper process for both sides and, crucially for Live Nation, keeps things private.
However, the US Ninth Circuit Appeals Court recently declined to force arbitration in this case. That decision, Live Nation now says, was wrong and “threatens to block parties from adopting sensible measures to address the new phenomenon of mass arbitration filings”.
In a new filing this week, Live Nation urges the appeals court to reconsider the case. As it stands, says Live Nation, the ruling “creates massive uncertainty” over how the US Federal Arbitration Act deals with these so called mass arbitration filings and “the potential for confusion - and for disruption of settled contracts, procedures and expectations - strongly supports rehearing”.
Decisions by both a district court and the Ninth Circuit court to decline to force this particular dispute to arbitration hinge on the fact that Live Nation recently decided to change its arbitrator of choice from the long established JAMS to the upstart New Era. The rules applied by New Era, especially relating to mass arbitration filings, have been heavily criticised, with judges in the Ninth Circuit dubbing them “just crazy” and “a really cockamamie way to set up a system”.
The district court said New Era’s “mass arbitration protocol creates a process that poses a serious risk of being fundamentally unfair to claimants, and therefore evinces elements of substantive unconscionability”.
The Ninth Circuit agreed, adding that New Era’s Rules “provide to defendants many of the protections and advantages” of a class action lawsuit that is pursued through the courts, but most of the aggrieved customers get “none of its protections and advantages”.
Live Nation argues that it moved arbitration to New Era to deal with this recent trend of mass arbitration filings. This is where a large number of people - often organised by one law firm - file the same complaint against a company that insists on arbitration.
The company is then forced to pay their arbitrator a fee per claim, making a process for resolving disputes that is meant to be cheaper suddenly rather expensive.
In an article earlier this year on the rise of mass arbitration filings, lawyers at global law firm O'Melveny said that some attorneys are “increasingly embracing mass arbitration to pressure companies to settle for tens, even hundreds, of millions of dollars”.
“By simultaneously filing - or threatening to file - as many as hundreds of thousands of cookie-cutter, often unvetted arbitration demands”, the article goes on, lawyers representing aggrieved customers “are forcing companies to choose between paying exorbitant fees” before even assessing the merits of each claim “or acceding to massive settlement demands”.
The systems put in place by New Era are designed to deal with this trend by grouping those cookie-cutter claims. Live Nation explains how it works in its new filing. “When five or more cases raise common issues, three ‘bellwether cases’ are selected and arbitrated”. The results of those cases “provide a backdrop for mandatory, non-binding settlement discussions, and if no settlement is reached (or if individual claimants opt out), the arbitrator adjudicates the remaining cases”.
As far as Live Nation is concerned, this is a sensible solution to a challenge created by the recent trend of mass arbitration filings. But both the district court and the Ninth Circuit concluded that that system very much favours the defendant and disadvantages the aggrieved customers.
In its new legal filing requesting that the Ninth Circuit reconsider the case, Live Nation sets out various legal arguments relating to the Federal Arbitration Act, and apparent conflicts between that US-wide legislation and Californian law. Part of the Ninth Circuit's ruling, Live Nation says, “rested on aspects of the California Arbitration Act that expressly conflict with section five of the FAA”.
Live Nation also argues that, if the courts are unhappy with New Era’s systems, they should have forced the Ticketmaster customers’ dispute to a different arbitrator rather than blocking arbitration entirely. Indeed, Ticketmaster’s terms include a back up arbitrator called FairClaims.
It remains to be seen if those arguments are sufficient to persuade the Ninth Circuit to reconsider the case. Live Nation requests either a ‘rehearing’ or a ‘rehearing en banc’, the latter involving more judges.