Live Nation Antitrust Case Shows Peril of ‘Batched’ Arbitration

A Ninth Circuit ruling that denied Live Nation Entertainment Inc.'s bid to compel “batched” arbitration underscores the risks that corporate defendants face when pushing to resolve consumer antitrust disputes outside of court.

Live Nation’s requirement that aggregated or batched claims go through its arbitration panel—New Era ADR Inc.—was unfair to consumers who alleged the company inflated ticket prices, the US Court of Appeals for the Ninth Circuit ruled Oct. 28. New Era’s opaque rules overtly favored the concert promoter and ticketing company while failing to provide plaintiffs with advantages and protections of a class action proceeding, the court said.

Antitrust experts say defendant companies should reexamine their arbitration agreements in light of the Ninth Circuit ruling, especially if they limit plaintiffs’ ability to have a full and fair hearing on their individual circumstances. Live Nation now faces the prospect of significant damages from consumer plaintiffs who can pursue their class action in open court.

“It is going to have implications for any company that’s thinking about using batching provisions,” said Richard Frankel, law professor at Drexel University who studies arbitration proceedings. “The lawyer in me would say, ‘You’ve got to look at this opinion very carefully and make sure that if you are going to use batching, it doesn’t run into the same problems as this batch provision.’”

New Era’s mass arbitration procedure sought to group together nearly identical cases with common issues or facts and apply precedent from bellwether decisions to other claimants’ cases, which the Ninth Circuit singled out as particularly problematic.

Live Nation has since requested an en banc review of the panel’s ruling, which affirmed a lower court decision calling New Era’s arbitration rules “unconscionable.”

Live Nation and Ticketmaster, which merged in 2010, didn’t respond to a request for comment.

Rise of Mass Arbitration

The ruling raises questions about how companies with forced arbitration clauses and class action waivers should respond to mass arbitration claims.

Until recently, it was advantageous for defendants to pursue arbitration individually as a more efficient and private way of resolving claims, said William Reiss, a partner with Robins Kaplan LLP whose practice focuses on antitrust litigation. Supreme Court rulings have also been favorable to corporate defendants, holding that they can compel arbitration to circumvent class actions.

In recent years, plaintiffs’ attorneys have battered defendants with thousands of arbitration claims on behalf of individual clients, which the defense bar says is extremely costly to manage and pressures their clients to settle.

“A defendant has to pay a certain amount in filing fees for every arbitration that is filed against it,” Reiss said. “You just multiply however many arbitrations a plaintiffs’ lawyer brings by the fee, and it becomes prohibitively expensive.”

Batching Procedures

Some corporate defendants like Live Nation responded to the mass filings by using batching, in which cases are grouped and adjudicated sequentially. Decisions in those bellwether cases are precedential on common issues in the batched cases, as well as in cases that plaintiffs file later on.

But the batching technique has raised issues of adequate due process, said Maria Glover, civil procedure and civil justice professor at Georgetown Law.

“Defendants drafted contracts and fought in the Supreme Court to get arbitration defined as bilateral, and now they want to retract that generally and in individual cases,” Glover said. “Courts have to look at any sort of potentially binding result with a little bit of suspicion.”

The Ninth Circuit took issue with New Era’s batching procedure, along with its lack of adequate right to discovery and other procedural limitations.

“A batched plaintiff whose case is not a bellwether case has no notice of the bellwether cases and no opportunity to be heard in those cases,” the Ninth Circuit said. “Further, that plaintiff has no guarantee of adequate representation in those cases and has no right to opt out of the batched cases that will be bound by the results in the bellwether cases.”

The opinion also blasted Live Nation’s agreements as “dense, convoluted and internally contradictory” to the point of being “borderline unintelligible.” The majority opinion was by Judge William A. Fletcher, with a concurrence by Judge Lawrence VanDyke.

Corporate defendants now face a dilemma: They can choose the bilateral arbitration route to try to minimize class action exposure, or mimic Live Nation’s specific batch method but risk that a court finds the terms unfair, Reiss said. Although the Ninth Circuit deemed New Era’s arbitration rules unenforceable under California law, the court’s reasoning highlights potential obstacles for other defendants.

“It’s really a cost-benefit analysis for some of these corporate defendants,” Reiss said.

Abandoning Arbitration?

Companies may decide to end the practice of forcing disputes into arbitration, as Amazon.com Inc. did in 2021. More recently, video game company Valve Corp. dropped its mandatory clause in September from its Steam subscriber agreement, said Paul Bland, co-chair of the appeals and complex briefing department at Berger Montague.

“There may be some cases where companies are so worried that plaintiffs will be able to make the mass arbitration approach work that they will abandon it,” Bland said. “Their intention is just to litigate these cases in court.”

Live Nation and Ticketmaster are represented by Latham & Watkins LLP. The plaintiffs are represented by Keller Postman LLC and Quinn Emanuel Urquhart & Sullivan LLP.

The case is Heckman v. Live Nation Ent., 9th Cir., No. 23-55770, 10/28/24.