Nooney v. StubHub, Inc.
2015 SD 102
S.D.2015Background
- In June 2014 John and Kimberly Nooney purchased concert tickets from StubHub; at the venue the tickets were invalid and they were denied entry.
- Nooney plaintiffs sued StubHub for breach of contract and fraudulent inducement, alleging reliance on StubHub’s "Fan Protect Guarantee.”
- StubHub moved to dismiss under SDCL 15-6-12(b)(5) and submitted an affidavit with exhibits including the Fan Protect Guarantee and user agreements.
- The circuit court granted the motion to dismiss after relying on the complaint and a summary of the Fan Protect Guarantee, concluding the guarantee provided alternative remedies (replacement tickets or refund) and plaintiffs failed to plead both remedies were denied.
- On appeal the Nooneys argued the court erred by considering the Guarantee without converting the motion to summary judgment and that their complaint adequately alleged breach and fraudulent inducement.
- The Supreme Court held the Guarantee was incorporated by reference in the complaint (so consideration on a dismissal motion was proper) and that the complaint did state claims because the Guarantee’s full text required StubHub first to attempt to locate replacement tickets before refunding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court could consider the Fan Protect Guarantee without converting to summary judgment | The Guarantee was referenced in and formed the basis of the complaint, so it was incorporated by reference and properly considered on a dismissal motion | Documents outside the pleadings require conversion to summary judgment | Court held the Guarantee was incorporated by reference in the complaint; considering it did not require conversion |
| Whether the complaint pleaded a breach of contract | Nooneys alleged StubHub failed to attempt to find replacement tickets as required by the Guarantee, causing damages | StubHub argued guarantee allowed either replacement or refund as alternatives and plaintiffs failed to allege both were denied | Court held complaint alleged sufficient facts: Guarantee’s text required attempt to find replacements first; failure to attempt could be breach |
| Whether the complaint pleaded fraudulent inducement | Plaintiffs alleged StubHub knew or recklessly made false representations in the Guarantee to induce purchase | StubHub contended guarantee language negated actionable misrepresentation or plaintiffs failed to allege required elements | Court held plaintiffs pleaded facts that, if proven, could support fraudulent inducement (knowledge/recklessness, inducement, damages) |
| Whether dismissal was proper based on court’s reliance on the Guarantee summary rather than the full text | Plaintiffs argued the court improperly relied on the summary language instead of the operative guarantee terms | StubHub relied on the summary characterization as reflecting the Guarantee’s effect | Court found the circuit court erred by relying on the summary; the full Guarantee required attempts to find replacements before refunding, supporting plaintiffs’ claims |
Key Cases Cited
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (court may consider documents incorporated by reference when deciding a motion to dismiss)
- Wells Fargo Bank, N.A. v. Fonder, 868 N.W.2d 409 (S.D. 2015) (standards for de novo review of dismissal)
- Gruhlke v. Sioux Empire Fed. Credit Union, Inc., 756 N.W.2d 399 (S.D. 2008) (complaint must plead circumstances supporting claim; not merely labels and conclusions)
- Sisney v. Best, 754 N.W.2d 804 (S.D. 2008) (pleading standard requires statement of occurrences and events)
- Gul v. Ctr. for Family Med., 762 N.W.2d 629 (S.D. 2009) (elements of breach of contract)
- Law Capital, Inc. v. Kettering, 836 N.W.2d 642 (S.D. 2013) (elements and standard for fraudulent inducement)
- Sander v. Geib, Elston, Frost Prof’l Ass’n, 506 N.W.2d 107 (S.D. 1993) (state courts may look to federal decisions for guidance in interpreting procedural rules)