Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Live Nation files petition with Supreme Court related to arbitration agreement’s enforceability, (May 8, 2025)

By Seth Abrams, J.D., M.A.

Delegation was to an arbitration provider that had an arbitration procedure modeled on MDLs, not traditional bilateral arbitration.

Live Nation Entertainment, Inc. filed a petition for a writ of certiorari asking the Supreme Court to overturn a Ninth Circuit ruling affirming that the delegation clause of the Live Nation arbitration agreement was unconscionable. Live Nation argued to the Court that the Federal Arbitration Act (“FAA”) applies to all arbitration agreements, based on the FAA’s text. Also, it argued that California’s severability rules violate the FAA and the Supreme Court’s arbitration precedent (Live Nation Entertainment, Inc. v. Heckman, No. 23-55770 (U.S. Jan. 24, 2025)).

Background. Live Nation operates websites that sell tickets to entertainment events, including concerts and sporting events. The websites’ terms of use require arbitration of “Any Dispute, Claim, or Controversy” that relates to the terms of use, website use, or ticket purchases. The arbitration agreement also includes a class action waiver. According to Live Nation, plaintiffs’ counsel “pioneered a tactic designed to undermine arbitration and extract massive settlements for often meritless claims.” The firm starting in 2018, began “filing tens of thousands of essentially identical arbitration claims against individual defendants.” This “mass arbitration filing” can impose “astounding” costs on a defendant that “can spell financial catastrophe.” To deal with this problem, Live Nation designated New Era ADR as its first-choice arbitration provider, which had procedures in place—modeled on MDL litigation—for handling mass arbitration.

The consumers alleged that New Era’s procedures are not “arbitration” within the meaning of the FAA. The federal district court in Los Angeles found the switch to New Era “procedurally and substantively unconscionable under California law” and refused to compel arbitration.

The Ninth Circuit held that (1) “New Era’s “mass arbitration protocol,” including the application of precedent from bellwethers to other cases in the mass arbitration; (2) ‘procedural limitations’ applicable to both parties, including discovery limitations; (3) a ‘limited right of appeal’ for grants, but not denials, of injunctive relief; and (4) ‘arbitrator selection provisions’ deviating from the California Arbitration Act” all render the delegation clause substantively unconscionable. The majority then chose to declare the agreement unenforceable and allow the litigation to proceed in federal court. The majority also alternatively held that the FAA only protects bilateral arbitration. A concurrence by Judge Van Dyke would have based the decision solely on the alternative holding by the majority.

FAA applicability. The first question is whether the FAA requires courts to enforce “all arbitration agreements” and not just traditional, bilateral arrangements. The Ninth Circuit had held that the FAA “simply does not apply” to mass arbitration procedures that did not exist in 1925, when the FAA was passed. However, Live Nation argued the FAA’s text protects all arbitration agreements, not just some. It noted that this Ninth Circuit holding created a split with five other circuits. This comprised the first question presented to the Court by Live Nation—whether “the FAA protects all arbitration agreements... or only a subset of traditional, bilateral arbitration agreements that the FAA’s drafters specifically envisioned.”

California’s arbitration-specific severability test. The second question presented to the Court is whether “the FAA preempts California’s severability doctrine because it specifically targets and disproportionately invalidates arbitration agreements.” In 2015, the Court had granted review of this question; however, the parties in that case settled prior to oral argument. Live Nation argued that California’s severability rules violate the FAA and the Supreme Court’s arbitration precedent. It argued that “the FAA... guards against all efforts—both overt and covert—to treat arbitration agreements less favorably than other contracts.” It was argued that the Ninth Circuit improperly relied on California’s severability doctrine, which violates the FAA’s equal-treatment mandate.

Subsequent developments. In April 2025, the federal district court in Los Angeles granted in part and denied in part Live Nation’s motion to dismiss the antitrust class action. The court found antitrust standing by the plaintiffs and denied the motion regarding an unlawful agreement, without prejudice. It found that the alleged secondary ticketing market was plausible at this stage, and disagreed with defendants’ arguments that certain conduct was not anticompetitive as a matter of law.

The Case is No. 23-55770.

Attorneys: Roman Martinez (Latham & Watkins, LLP) for Live Nation Entertainment, Inc.

Companies: Live Nation Entertainment, Inc.

News: Antitrust