Ticketmaster Antitrust Suit Hinges on Arbitration Forum Discovery

Ticket-buyers suing Ticketmaster and its parent Live Nation Entertainment Inc. for alleged market monopolization are zeroing in on the companies’ ties to an arbitration startup that promises to handle their consumer claims more efficiently.

The plaintiffs of the proposed antitrust class action won a court order last week to conduct discovery on whether the companies and their counsel Latham & Watkins have conflicting ties to New Era ADR, the defendants’ new arbitration service provider. New Era aims to streamline mass arbitration for its corporate clients by arbitrating a few representative “bellwether” cases and applying the outcome to others.

Live Nation and Ticketmaster require their customers to go through arbitration to handle complaints. And the companies may have financial ties that would hinder New Era’s impartiality and affect the drafting process of its rules and procedures, the plaintiffs said. They also want to probe New Era’s financial backing, pointing to its possible connections to Live Nation.

“If a court allows discovery and concludes the arbitration company had some sort of improper influence from the defendant, that will put companies on notice,” said F. Paul Bland, executive director of the legal advocacy organization Public Justice.

The outcome of the case and discovery will test the viability of companies’ new strategy in dealing with mass arbitration. If Live Nation’s deal with New Era is deemed proper, it would support the emergence of a relatively new type of arbitrator that promises to streamline the adjudicating process for companies dealing with thousands of small claims.

A finding that the deal is improper could mean the current, more typical model of mass arbitration—in which a company often has to deal with thousands of claims individually—still has legs, in a win for plaintiffs’ lawyers.

“If Plaintiffs’ allegations about the conduct between New ERA and the Defendants are substantiated by the requested discovery, then there could very likely be a viable issue as to unconscionability,” wrote Judge George H. Wu of the US District Court for the Central District of California, in granting the plaintiffs’ discovery motion.

New Era, Live Nation, Ticketmaster, and Latham & Watkins attorneys didn’t respond to emailed requests for comment. But the companies have said in court filings that “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.”

‘Friendly Forum’

Earlier this year, a group of ticket-buyers brought a proposed class action against Ticketmaster and Live Nation, alleging the companies violated the Sherman Act by using its market dominance to artificially boost prices.

Two arbitration forums — American Arbitration Association, known as AAA, and JAMS — dominate the market for handling arbitration claims.

But Live Nation and Ticketmaster instead turned to a startup forum, New Era, to handle consumers’ claims that are sent to arbitration.

In New Era’s arbitration protocols, both parties select a neutral arbiter, who works with them to choose three bellwether cases when facing mass arbitration, the defendants said in filings.

The outcomes of the three cases are then used to help determine all the other cases that fall under “Common Issues of Law and Fact,” according to the protocols available on New Era’s website.

In serving its corporate clients’ arbitration needs, New Era receives retainer fees, the plaintiffs said. That arrangement helps to create a “friendly forum” for companies, according to the plaintiffs’ court filings.

“An undisclosed number of New Era’s arbitrators financially benefit from Defendants’ patronage, as they apparently maintain a ‘stake in New Era from their service as advisors to [the] company,’” the plaintiffs alleged in court filings.

“Discovery is necessary to reveal whether, in light of this, New Era can truly act as an unbiased arbitral forum for Defendants, which appear to have been intimately involved in New Era’s founding and growth,” they wrote.

Live Nation and Ticketmaster have said in filings that the plaintiffs are exaggerating the impact of the change in arbitrator. Ticketmaster designated New Era as its arbitration resolution forum in July 2021 after the forum’s April launch rather than stay with JAMS.

“The various ‘reasons’ Plaintiffs offer for the requested discovery amount to nothing more than objective mischaracterizations of New Era’s rules and procedures, and vague accusations and innuendo—made on the ‘information and belief’ of Plaintiffs’ own counsel—that there must be something troubling about New Era,” the defendants wrote in filings.

“Mischaracterizations and sheer speculation about an arbitration provider are not a free ticket to discovery,” Live Nation and Ticketmaster said

Changing Industry

Live Nation’s case reflects broader changes unfolding in arbitration. Companies are rethinking their responses as plaintiffs lawyers perfect their strategy of mass arbitration and file hundreds or thousands of individual claims on behalf of their clients.

When faced by a wave of approximately 75,000 pending arbitration claims, Amazon dropped its arbitration clause completely. But some other companies have turned away from established forums in search of those more likely to give them protection, said Maria Glover, a Georgetown Law professor who studies mass arbitration.

New Era is one of the new entrants to challenge established forums. Another forum, CPR, faced controversy when discovery in a lawsuit on behalf of DoorDash drivers found that lawyers for the food-delivery company had coordinated with CPR to help draw up a protocol that could counter mass arbitration. A class of drivers was still compelled to arbitration at CPR.

“I don’t know what they’ll will find [in discovery], but it’s really important they’re given the opportunity to ask questions under oath and pursue it,” Bland said.

The case is Skot Heckman et al v. Live Nation Entertainment, Inc. et al, C.D. Cal., no. 2:22-cv-00047, 6/9/22.