120 F.4th 670
9th Cir.2024Background
- Plaintiffs purchased tickets for events promoted by Live Nation and sold through Ticketmaster, both dominant in their industries and merged entities.
- Plaintiffs filed a class action alleging anticompetitive practices violating the Sherman Act.
- The Ticketmaster website's Terms of Use require all disputes to be arbitrated under the procedures of New Era ADR, a new, closely coordinated arbitration company, using unconventional mass arbitration rules.
- Ticketmaster unilaterally amended its Terms to mandate arbitration under New Era, including for older purchases, and retroactively bound users—even those merely accessing the website.
- The district court denied defendants’ motion to compel arbitration, finding both the delegation clause and the whole arbitration agreement unconscionable under California law and not preempted by the FAA. The Ninth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the delegation clause is unconscionable | Clause is procedurally & substantively unconscionable, denying fair process | Delegation clause valid; challenges must go to arbitrator | Delegation clause is extremely unconscionable—unenforceable under California law |
| Whether the arbitration agreement as a whole is unconscionable | Agreement full of one-sided, harsh, and unfair provisions | Agreement valid; provides for fair and efficient dispute resolution | Entire arbitration agreement is unconscionable and unenforceable |
| Whether California unconscionability law is preempted by FAA | State contract principles are generally applicable, not anti-arbitration | FAA preempts application of California law to invalidate agreements | Application of California law here is not preempted by the FAA |
| Whether class action waiver is unconscionable under Discover Bank | Class waivers in contracts of adhesion for small consumer claims are unconscionable | FAA preempts Discover Bank; mass arbitration still protected | Discover Bank applies—class waiver is unenforceable for mass arbitration not covered by FAA |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (states cannot require class arbitration; FAA preempts state laws disfavoring arbitration)
- Epic Systems Corp. v. Lewis, 584 U.S. 497 (2018) (FAA protects individualized arbitration)
- Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (2010) (challenges to arbitration delegation clauses may be decided by courts)
- Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669 (Cal. 2000) (California unconscionability analysis for arbitration agreements)
- Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) (class action waivers in adhesion contracts can be unconscionable)
- Hansberry v. Lee, 311 U.S. 32 (1940) (due process requires notice/opportunity to be heard before binding absent parties)
- Douglas v. U.S. Dist. Ct. for the Cent. Dist. of Cal., 495 F.3d 1062 (9th Cir. 2007) (unilateral modification of online terms can be unenforceable)