Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDCal: Consumer Failed to State Claims Against StubHub for Violation of California Ticket Seller Statute, Unfair Competition Law, or False Advertising Law, (Jan 14, 2013)

By Peter Reap, J.D., LLM

Celina Z. Porras, a consumer who purchased tickets to a National Football League game through StubHub, Inc.’s website and was removed by security during the event and told her tickets were invalid, failed to adequately state claims for violation of California’s Ticket Seller Statute, Unfair Competition Law, or False Advertising Law, the federal district court in San Francisco has decided (Porras v. StubHub, Inc., January 11, 2013, Chesney, M.). Porras’s First Amended Complaint (FAC) was dismissed in its entirety without further leave to amend.

Background

StubHub is an online marketplace for the resale and purchase of tickets to sporting events, concerts, theater shows, and other live entertainment events. In 2011, Porras purchased two tickets to a football game between the San Francisco 49ers and the Pittsburgh Steelers through StubHub’s website.

Porras initially was granted entrance to the stadium, but was removed by security “approximately half-way” through the event and told her tickets were invalid. After the event, Porras complained to StubHub, and received a refund of $594.95, constituting the ticket price and all service and delivery fees.

Porras filed suit against StubHub, but her complaint was dismissed, with leave to file an amended complaint, in an order of the court dated September 4, 2012. Porras has filed her FAC, on behalf of two putative classes, asserting largely the same claims as her initial complaint.

In her FAC, Porras alleged that StubHub “makes numerous conspicuous misrepresentations and ‘guarantees’ to consumers on its website that tickets sold will be ‘authentic’ and ‘valid for entry,’ when, in fact, [StubHub] delivers tickets that are not authentic or valid.” Additionally, Porras alleges, “[StubHub] misleads consumers to believe that payment of the Service Fee assures that tickets sold through its website will be authentic and valid for entry, when in reality, it does not.” Porras further alleges that StubHub’s “FanProtect Guarantee,” as described on StubHub’s website, is misleading because it implies that all tickets purchased on StubHub will be valid for entry.

California’s Ticket Seller Statute

California’s ticket seller statute makes it “unlawful for a ticket seller to represent that he or she can deliver or cause to be delivered a ticket at a specific price or within a specific price range and to fail to deliver within a reasonable time or a contracted time the tickets at or below the price stated.” Cal. Bus. & Prof. Code § 22502.2. By its prior order, the court found that StubHub was not a ticket seller under the statute, noting “Porras’s allegations show that StubHub is a virtual marketplace allowing users to purchase tickets from anonymous third parties.”

Porras alleged in her FAC that StubHub was “[u]nlike a true marketplace like a shopping mall or flea market or other forum, because StubHub charges end customers for the goods (tickets) and separately secures a vendor to transfer the goods, and after which StubHub takes a ‘commission’ (or simply extra money).” Additionally, citing § 22502.1(b), Porras alleged, “StubHub contract[s] with the original ticket holders that if StubHub makes a sale then these original ticket holders will agree to deliver the tickets to buyers such as [Porras].”

To the extent that Porras’ newly added allegations contained a factual description of the transactions at issue, the facts were not new and had been considered by the court in its prior order, the court observed. Further, to the extent Porras sought to characterize those transactions as “charging end customers of the goods” and “sale[s],” the allegations were inconsistent with the factual allegations in the FAC and the documents on which Porras relied. In particular, in her FAC, Porras again alleged she purchased her tickets “through StubHub” and that, at the time she purchased her tickets, StubHub’s website stated: “you’re buying tickets from other fans.”

Porras failed to cure the deficiencies identified by the court in its prior order, and, consequently, the allegations were insufficient to show that StubHub was a ticket seller under California’s ticket seller statute, the court determined.

California’s Unfair Competition Law

California’s Unfair Competition Law (“UCL”) prohibits business acts or practices that are “unlawful, unfair, or fraudulent.” The court addressed separately each prong of the UCL.

Unlawful Practice. Porras alleged that StubHub’s conduct was “unlawful” because it violated California’s ticket seller statute. As discussed above, Porras did not allege facts sufficient to plead a violation of California’s ticket seller statute, nor did Porras allege facts demonstrating any other violation available to be “borrowed” by the UCL.

Unfair Practice. An act or practice was “unfair” under the UCL when it was immoral, unethical, oppressive, unscrupulous, or substantially injurious, according to the court. In her FAC, Porras’s allegation that StubHub’s conduct was “unfair” was based on the same facts she alleged in her initial complaint. In its prior order, the Court held such allegations failed to state a claim under the UCL’s “unfair” prong, noting the disclosures on StubHub’s website made clear that the tickets purchased might not be valid for entry and that Porras had received a full refund.

Porras’s newly added allegation comparing StubHub’s Service Fee to the practices of various types of businesses that failed to provide promised goods or services, such as a car insurer that advertised and sold a policy that did not provide the advertised coverage, constituted no more than a legal argument, which was insufficient to state a claim, the court held.

Fraudulent Practice. To state a claim under the “fraudulent” prong of the UCL, Porras must allege facts showing that reasonable members of the public were likely to be deceived, the court stated. In her FAC, Porras again alleged that StubHub misled consumers by using the terms “guarantee,” “100% confidence,” “authentic,” and “valid.” In its prior order, the court held, “[c]ontrary to Porras’s contention, StubHub’s FanProtect Guarantee, as disclosed on its website, made clear what StubHub guarantees.”

Porras’s only new allegations in support of the claim constituted no more than legal conclusions, the court ruled. For example, she alleged that StubHub’s conduct of affirmatively misrepresenting the validity and authenticity of event tickets was likely calculated by StubHub to deceive a reasonable consumer, who was not required or expected to look beyond these misleading representations. Consequently, Porras failed to state a claim under the UCL’s “fraudulent” prong.

California’s False Advertising Law

Under California’s False Advertising Law (“FAL”), it is unlawful for an individual or entity to make any “untrue or misleading” statement to induce the public to purchase goods or services. The FAL prohibits statements made in such a way that it was probable that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.

In her FAC, Porras again alleged that StubHub violated the FAL by making “false and misrepresentative advertisements” that were “part of a scheme to mislead StubHub customers” and that it “actively concealed the true facts and the likelihood of purchasing invalid tickets.” In its prior order, the court found “[g]iven StubHub’s express acknowledgment that the tickets might be invalid, available for purchasers to review on StubHub’s website, StubHub’s statements cannot be deemed ‘untrue or misleading.’”

The case is No. C 12-1225 MMC.

Peter M. Hart (Law Offices of Peter M. Hart) for Celina Z. Porras. Liani Kotcher (Weil Gotshal and Manges LLP) for StubHub, Inc.

Cases: StateUnfairTradePractices Advertising CaliforniaNews