A federal district court in California issued a series of orders to dismiss claims in a putative class action by Major League Baseball ticket purchasers against ticket sellers, sports teams, and the league. Although the dismissals were based on various grounds, they provide helpful guidance with regard to reimbursements to consumers for coronavirus (COVID-19)-related cancellations and other restrictions on business activity.
As discussed in our recent coverage of the surge of consumer class actions filed based on issues arising from the COVID-19 pandemic, plaintiffs have filed reimbursement actions against entertainment venues, ticketing agencies, sports teams, and other companies for failing to offer full or adequate refunds for COVID-19-related cancellations. In one such case, a court recently issued a trio of rulings dismissing putative class claims alleging failures to refund amounts to purchasers of Major League Baseball tickets.
Recently, Judge Dale Fischer of the US District Court for the Central District of California entered three orders that largely granted the motions to dismiss of various defendants, including Major League Baseball (MLB), all 30 baseball teams that comprise the MLB association (Team Defendants), and authorized ticket resellers including Ticketmaster, Live Nation, StubHub, and various affiliates of the resale companies (Ticket Merchants). Although the dismissals were predicated on different grounds relating to the myriad defendant groups, Judge Fischer’s orders taken together will be instructive for defendants across all sectors sued for their failure to reimburse consumers for COVID-19-related cancellations and other restrictions on business activity.
On April 20, 2020, a group of plaintiffs who purchased tickets for 2020 regular season MLB games commenced a putative class action against MLB, its teams, and authorized resellers of MLB tickets. The suit came on the heels of the MLB’s March 2020 announcement postponing the season in the midst of the COVID-19 pandemic. The ticket purchasers initially were informed that refunds would not be issued per an alleged MLB directive. Plaintiffs sued under the California consumer protection laws and asserting other causes of action. They alleged that the refund policy damaged them financially and constituted money unlawfully withheld. Plaintiffs further alleged that, although MLB had yet to cancel any games formally, it was virtually impossible that a season would be played with in-person spectators. Finally, plaintiffs alleged that defendants misrepresented ticketholders’ ability to attend 2020 regular season games in person and otherwise misrepresented games as “postponed” even though defendants knew the games would not be played (or played with fans).
ORDER GRANTING TICKET MERCHANTS’ MOTION TO DISMISS
The Ticket Merchants moved to dismiss all claims asserted against them by the plaintiffs who did not purchase tickets from the Ticket Merchants, arguing that the non-purchasing plaintiffs failed to allege that they suffered an injury fairly traceable to the Ticket Merchants’ conduct. (In separate orders, the court previously compelled the plaintiffs who purchased tickets from the Ticket Merchants to arbitrate their claims against the Ticket Merchants.)
On September 14, 2020, Judge Fischer granted the Ticket Merchants’ motion to dismiss. The court held that, by asserting “everyone did everything”-type allegations, the plaintiffs failed to allege a conspiracy with particularity. The court further found that the non-purchasing plaintiffs’ conspiracy theory—that the postponement rather than cancellation of MLB games would not have worked absent agreement of all defendants—was not alleged in the complaint and was implausible on its face because the Ticket Merchants lacked the power to cancel MLB games. The court permitted the plaintiffs leave to amend.
FURTHER ORDERS GRANTING MOTIONS TO DISMISS FILED BY MLB AND CERTAIN TEAM DEFENDANTS
a. Motion to Dismiss of Out-of-State Clubs and Remaining Defendants
The court also granted the motion to dismiss filed by 25 MLB teams based outside of California, the Southern California baseball teams (including the Angels, Dodgers, and Padres), and the MLB Commissioner.
First, the claims against the non-California MLB clubs were dismissed for lack of personal jurisdiction without leave to amend because none of the games for which plaintiffs purchased tickets from these defendants were to be played in California, and plaintiffs’ alleged injury would have occurred even if none of the non-California clubs’ games were scheduled in California for the entire season. Consequently, plaintiffs’ claims did not “arise out of” forum-related activities.
Second, the claims against the remaining defendants were dismissed (with leave to amend) because plaintiffs did not plausibly allege that their injury was traceable to the Remaining Defendants and thus the plaintiffs lacked standing to assert those claims. Even though the teams and MLB work together in making scheduling decisions, plaintiffs did not sufficiently allege that the parties’ decisions were made to further a conspiracy. Plaintiffs’ conspiracy allegations were muddled and inconsistent. For instance, plaintiffs accused defendants of postponing (instead of cancelling) games to avoid issuing refunds, but plaintiffs’ motion to dismiss opposition instead argued that defendants conspired to cancel and reschedule games.
b. Motion to Dismiss of Bay Area Team Defendants
Judge Fischer also granted and denied in part the motion to dismiss specifically filed by the Oakland Athletics and San Francisco Giants. The court dismissed those claims (i) to the extent that they alleged that plaintiffs purchased their tickets before the alleged misrepresentations – because such statement could not have induced their purchases; (ii) because plaintiffs failed to identify a legislative policy that had been violated as required under California’s unfair competition laws; and (iii) because civil conspiracy and unjust enrichment claims are not independent causes of action. At the same time, the court held that, even though the six plaintiffs who purchased tickets directly from these teams had later received full credit or refunds, the refunds did not moot this dispute because plaintiffs’ additional demand for prejudgment interest saved their claims from mootness.
The court also granted the Oakland Athletics’ motion to compel arbitration of one of the ticket purchaser’s claims, but denied the San Francisco Giants’ motion to compel arbitration because the terms of service on its website were not clear and did not provide the plaintiff constructive notice of the team’s arbitration provision.
POSSIBLE IMPLICATIONS FOR OTHER CANCELLATION/REFUND ACTIONS
These significant decisions provide helpful guidance with regard to reimbursements to consumers for COVID-19-related cancellations and other restrictions on business activity. For example:
- Companies should consider revising the terms and conditions governing future ticket sales to preempt suits for cancellations and other issues arising from the impact of COVID-19 on events. For instance, terms and conditions can be updated so that ticket purchasers agree in advance to a particular refund plan in the event of delay or cancellation. Purchasers also may be asked to agree in advance to a lottery system if attendance is capped because of government or other restrictions, including changes in seat assignments due to physical distancing requirements.
- Companies considering refunds may want to evaluate whether it is necessary to offer other concessions, like interest, in order to ward off potential claims. If a suit has already been filed, defendants may also want to consider what steps, if any, could be taken under the applicable law to moot the claims of the named plaintiffs (including the full amount of relief that would have to be provided), and how that would impact class certification issues.
- Courts may scrutinize closely allegations against ticket resellers who lacked decisionmaking authority with respect to cancellation. This would be a critical development for resellers across all sectors, including resellers of games to sporting events, concerts, and other entertainment activities, and secondary sale companies such as booking sites in the travel/hospitality industry.
- Companies sued for violations of consumer protection laws in refund class actions should evaluate whether plaintiffs have failed to sufficiently plead each of the required elements of these claims. Here, the court employed a strict interpretation of California consumer law claims to highlight the flaws in plaintiffs’ claims, analyzing in detail how plaintiffs failed to establish their reliance on alleged misrepresentations and to reference legislative policies with a close nexus to defendants’ misconduct—allegations which were necessary to maintain their claims.
- Companies should evaluate whether they have a lack of personal jurisdiction defense. These orders signal a potential willingness by at least one court to dispose of refund claims against out-of-state defendants based on a narrower framing of specific jurisdiction, and to dismiss an action if the activities that are the subject of the claim are not truly forum-related activities.