Column: Ticketmaster customers attack ‘Kafkaesque’ mass arbitration rules

The United States Chamber of Commerce building is seen in Washington, D.C., U.S.
The United States Chamber of Commerce building is seen in Washington, D.C., U.S., May 10, 2021. REUTERS/Andrew Kelly

March 20 (Reuters) - (The opinions expressed here are those of the author, a columnist for Reuters.)

In the midst of intensifying debate about how to assure a fair process when thousands of customers file simultaneous demands for arbitration, people who bought tickets through Ticketmaster LLC have accused the company of steering their antitrust claims to a new forum where the rules are unfairly skewed to favor defendants.

The U.S. Chamber of Commerce, as you may recall, is pushing for federal courts and arbitration providers to permit bellwether arbitration trials for defendants facing nearly identical claims by hundreds or thousands of employees or consumers.

In what I’ve described as an extremely provocative report issued last month, the Chamber argued that a bellwether arbitration process, akin to bellwether trials in multidistrict litigation, is a reasonable way to curb purported “abuses” by plaintiffs firms leveraging high per-case arbitration fees.

But Ticketmaster customers contend that it’s the bellwether process mandated by the company’s new arbitration provider, New Era ADR, that is abusive.

In a brief filed on Friday in Los Angeles federal court, ticket buyers alleged that in 2021, when the company realized it was about to be socked with an avalanche of arbitration demands by customers claiming monopolistic abuses, Ticketmaster and parent company Live Nation Entertainment Inc abruptly dropped their longtime arbitration forum, JAMS, in favor of New Era, a year-old arbitration provider that was founded, in part, to address the mass arbitration phenomenon.

Ticketmaster customers argued that the company’s switch to New Era was unfair as a matter of procedure, since Ticketmaster provided little notice of the unilateral change even though the company was already facing customer antitrust claims.

More substantively, the brief asserted that Ticketmaster ditched JAMS and turned to New Era to obtain a tactical advantage from New Era’s "Kafkaesque" rules for handling mass arbitration. (In a previous brief, claimants asserted that Ticketmaster and its counsel from Latham & Watkins actually had a hand in designing New Era’s rules.)

JAMS requires individual claims to be arbitrated individually. New Era, according to claimants’ lawyers from Keller Postman and Quinn Emanuel Urquhart & Sullivan, mandates a bellwether process in which a single arbitrator hears three cases on an expedited basis. After the arbitrator decides those three cases, the two sides are required to enter settlement talks. If they do not reach a global deal, the arbitrator’s rulings in the bellwether cases apply across all claimants’ cases.

But the expedited bellwether process does not give claimants a fair shake, according to the brief. New Era places severe restrictions on pleadings, which are limited to 10 pages, and briefs, which can only be about five pages, according to Keller Postman and Quinn Emanuel. Claimants are not entitled to discovery from defendants and can introduce no more than 10 documents as evidence. (New Era’s rules give individual arbitrators discretion to depart from the rules, the brief acknowledged, but claimants can’t rely on that prospect.)

These “absurd” limitations, the claimants’ brief said, make it nearly impossible for bellwether claimants to meet antitrust pleading standards in their individual cases – let alone to protect the interests of all of the other claimants, current and future, who will be bound by rulings from the bellwether proceedings.

Moreover, if the two sides fail to reach a global deal after the bellwether cases, according to the brief, all remaining cases are assigned to a single arbitrator. That “bottleneck,” argued Keller Postman and Quinn Emanuel, could leave claimants waiting for years, giving defendants a strong incentive to delay.

Hence "Kafkaesque": To prove that Ticketmaster is a monopoly that makes its own unfair rules, claimants allege, they are being forced into an unfair process in which the rules favor Ticketmaster.

The brief asked U.S. District Judge George Wu of Los Angeles to deny Ticketmaster’s motion to compel arbitration instead of allowing ticket buyers to litigate the class action complaint they filed in January 2022.

“The Live Nation arbitration agreement shows what happens when corporations who don’t like the process [provided by] neutral arbitration forums try to design their own proprietary process for litigating the claims of people they have injured,” said Warren Postman of Keller Postman by email. “The fox should not get to design the henhouse, and corporations should not be able to design their own private justice system.”

I reached out to Ticketmaster and its lead defense lawyer, Tim O’Mara of Latham & Watkins but did not hear back. New Era and its counsel from Kelley Drye & Warren also did not respond to my query. New Era is not a defendant in the case against Ticketmaster but has litigated to restrict discovery demands from Keller Postman and Quinn Emanuel.

Ticketmaster’s motion to compel arbitration, filed a year ago, anticipated (and refuted) many of the arguments in the just-filed brief by claimants. The company’s lawyers argued, for a start, that ticket purchasers received adequate notice of the switch to New Era, noting that Wu concluded in a nearly identical case against Ticketmaster that ticket buyers had assented to mandatory arbitration when they clicked on online button with a link to the company’s terms of use. (The 9th U.S. Circuit Court of Appeals affirmed that holding last month.)

Ticketmaster said that New Era’s bellwether procedures should be welcomed as a solution to a problem that old-line arbitration forums have refused to address. “New Era’s rules, procedures, and fee structure all facilitate the arbitration of mass numbers of individual consumer claims on the merits, efficiently and fairly,” Ticketmaster said.

Bellwether proceedings, Ticketmaster said, are a routinely used management tool that gives both sides a fair chance to argue issues that cut across many cases. The New Era rules, the company said, simply allow both sides to reach the merits of mass arbitration claims instead of forcing companies to settle to escape the weight of millions of dollars in arbitration fees.

The real reason that plaintiffs lawyers don’t like New Era’s bellwether rules, Ticketmaster argued, is because they get “outsized settlement leverage” from the “chaos” created by JAMS and American Arbitration Association fees.

“That preference has absolutely nothing to do with arbitrating claims on the merits,” Ticketmaster said. “If the concern was about facilitating the arbitration of mass claims — and reaching an efficient resolution on the merits — there would be no complaint about New Era whatsoever.”

Read more:

U.S. Chamber blames judges, arbitrators and lawyers for mass arbitration 'abuses'

Verizon appeal will be early test of corporate strategy to combat mass arbitration

Reporting By Alison Frankel; editing by Leigh Jones

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.