The Ninth Circuit Appeals Court in the US has considered ongoing efforts by Live Nation to force a lawsuit accusing it of anticompetitive behaviour to arbitration.
A lower court blocked those efforts mainly because the live giant changed its chosen arbitrator to a company called New Era. Earlier in the dispute the processes employed by New Era were dubbed “Kafkaesque”, and it turns out the appeal judges have some similar criticisms.
According to Law360, the judges variously referred to New Era’s arbitration rules as “circular and problematic”, “crazy”, “cockamamie” and “just nuts”, none of which is exactly a ringing endorsement. And possibly suggests Live Nation should have stuck with its former arbitrator of choice, JAMS.
Live Nation and its Ticketmaster division have a long history of seeking to force legal disputes initiated by ticket-buyers to be settled via private arbitration. Under Ticketmaster’s terms, agreed to by any ticket-buyer, any disputes must be taken to arbitration first. As a result, its attempts to go to arbitration - rather than court - are usually successful.
In theory, the arbitration approach should be simpler, cheaper and more efficient for both parties than filing a lawsuit in court. Another attraction - and perhaps of particular significance for Live Nation - is that arbitration happens in private whereas litigation is fought out in public.
That’s especially important when customers accuse Live Nation of anticompetitive conduct, because the market dominance of the live giant is of great interest to regulators and lawmakers in the US at the moment.
This particular ticket-buyer-led lawsuit, which accuses Live Nation of breaching competition law, would probably have been forced to arbitration had it not been for Live Nation switching its chosen arbitrator from the long-established JAMS to New Era.
Live Nation argues that New Era is better set up for disputes that involve multiple customers, which is often the case with its ticketing business. However, the ticket-buyers involved in this lawsuit said Live Nation picked New Era because its processes favour the live music company.
Last year judge George H Wu declined to force arbitration, saying that the change in arbitrator resulted in an “unfair surprise” for the ticket-buyers and made forcing arbitration “procedurally unconscionable”. It’s that decision that Live Nation wants the Ninth Circuit to overturn. But given last week’s hearing, that’s looking unlikely.
The judges raised issues with various rules employed by New Era. That included the rule that allows the arbitrator to decide whether any one question is ‘arbitrable’, meaning it is capable of being settled by arbitration. It’s “just crazy” to ask the arbitrator to rule on ‘arbitrability’, one of the judges said, because that’s an obvious conflict of interest.
After calling the New Era process “a really cockamamie way to set up a system”, another judge asked Live Nation’s lawyer who came up with the rules. The lawyer said it was probably the founders of the arbitration company. That didn’t seem to placate anybody.
The judges are yet to make a final decision. If this case does end up in court, it will be running in tandem with the US government’s own lawsuit accusing Live Nation and Ticketmaster of exploiting their market dominance in an anticompetitive way.