By Stephanie Scamman & Jeff Birren
NFL fans can be wildly enthusiastic about their teams, and the lawyers who represent those fans can be equally keen on filing class action lawsuits against those same teams. So it was recently for the New York Jets. The team was sued by James T. Gengo, one of their Personal Seat License (“PSLs”) holders. In January 2018 the Jets changed their ticket sales policy and began selling season tickets in sections that did not also require the purchase of a PSL. Gengo objected to this change.
Gengo responded by suing the Jets in U. S. Court in New Jersey. He alleged that this policy violated the covenant of good faith and fair dealing, the New Jersey Consumer Fraud Act (“CFA”) and a violation of the New Jersey Truth-In-Consumer Contract, Warranty and Notice Act. It should go without saying that it was filed as a class action case. That case went nowhere, fast, as the District Court the District Court granted the motion to dismiss in August 2018 (James T. Gengo v. Jets Stadium Development, LLC & the New York Jets LLC, United States District Court, District of New Jersey, Civil Case No. 18-8011 (SRC), 8-30-18 (“Gengo v. New York Jets”)). Even prior to that defeat Gengo had withdrawn his last claim (Id. at 6, fn 2). With attorney’s fees on the line, Gengo appealed to the Third Circuit. That court yawned.
On August 29, 2019 the Circuit issued its opinion. It affirmed in a “NOT PRECEDENTIAL” opinion that needed only three pages (James T. Gengo v. Jets Stadium Development LLC, New York Jets LLC, United States Court of Appeals of the Third Circuit, Case. No. 18-3103, (“Gengo”). The courts can now focus on disputes that matter.
The Facts
For decades the New York Giants and New York Jets played at the first Meadowlands Stadium, which was later deemed obsolete by the then-current NFL standards. So the teams set out to build a new stadium better designed to capture revenue streams that did not exist when the older stadium was built. Consequently, the Jets and Giants jointly developed the new stadium in the Meadowlands that opened in 2010. The clubs also created the New Meadowlands Stadium Company, LLC to own and operates the stadium (Gengo v. New York Jets at 2). The Jets Stadium Development Company owns and operates the Jets’ interest in the stadium (Id.).
One of those newer revenue streams was PSLs. In 2010 the Jets announced that in order to purchase season tickets in the 200 level section of the stadium, fans had to purchase PSLs that in turn “provides fans with the guaranteed right to purchase season tickets for specific seats in exchange for a fee, which was $4,0000 per seat in 2010” (Id.). Gengo purchased two end-zone season tickets in the 200-level (Id.).
The PSL Agreement includes a two-page seat confirmation and a three-page contract. The District Court spent two pages discussing various terms included in the contract (Id. at 3-4). Most importantly for the subsequent lawsuit, the District Court noted that the PSL “Agreement does not refer to Plaintiff receiving any ‘exclusive rights,’ nor does it refer to limitations, covenants, or representations about the manner in which Defendants may sell season tickets for other seats in the Stadium” (Id. at 3).
The Agreement also includes an integration clause and the website’s “FAQ” section states that materials found there “is for informational purposes only” and that the actual terms and conditions for each PSL purchased “shall be set forth in the Personal Seat License Agreement…that each purchaser must read and accept to obtain a PSL” (Id. at 4).
In 2018 the Jets announced that PSLs would no longer be required in order to purchase season tickets in the 200-level of the stadium (Id. at 2). One assumes that attendance had fallen off after two-straight 5-11 seasons.
In his lawsuit, Gengo “alleges that he purchased the PSL ‘based on Defendants’ representations, express and/or implied, that doing so would give [him] an exclusive right, namely, the purchase season tickets for the 200-level seats’” (Id. at 6). The Jets’ decision to sell such seats without the PSL requirement “”rendered the PSLs entirely or substantially worthless” (Id.). This act further violated the “PSL Agreement’s implied covenant of good faith and fair dealing and was a violation of the New Jersey Consumer Fraud Act” (Id.).
The Jets’ Motion To Dismiss
In response to Gengo’s complaint, the Jets filed a motion to dismiss, pursuant to Federal Civil Procedure Rule 12(b)(6), asserting Gengo’s complaint lacked subject matter jurisdiction because he failed to state a claim upon which relief can be granted (Id. at 1). In Federal Court, Gengo’s allegations cannot be merely “unadorned, the-defendant-unlawfully-harmed-me accusation[s]” (Id. at 5). The “mere possibility of misconduct” on its face is not sufficient to make a claim for relief (Id.).
Unfortunately for Gengo, the District Court agreed. In its ruling, the Court undermined Gengo’s position by describing him as someone who did not expect to “lose money in the future resale market of the PSL” (Id. at 11). The Court noted that the “Agreement does not refer to Plaintiff receiving any ‘exclusive rights,’ nor does it refer to limitations, covenants, or representations about the manner in which Defendants may sell season tickets for other seats in the Stadium” (Id. at 3).
The Court further noted that the PSL Agreement “features numerous disclaimers regarding the future value and sale of the PSL” (Id.). These disclaimers specifically included statements that “Licensee is not acquiring this PSL as an investment and has no expectation of profit as the licensee of this PSL” and, “Licensee is acquiring this PSL for its own use and not with a view to the distribution or resale of this PSL, or any tickets acquired pursuant to this PSL” (Id.). It also included the statement that the licensee “acknowledges” that the Jets had “not represented and does not guarantee that there is or will ever be a market for the resale of this PSL” (Id.).
The Court stated that the Agreement “clearly defines its scope: in exchange for paying the licensing fee, the PSL grants Plaintiff the ‘right and obligation to purchase admission tickets for the Seats of all pre-season and regular season home games of the Jets scheduled to be played at the Stadium’” (Id. at 9). In that regard, Gengo “received the “reasonably expected fruits under the contract” (Id.).
The Court was convinced that the Jets’ “interpretation accords with the clear provisions of the PSL, whereas Plaintiff seeks judicial disregard of the unambiguous contractual language” (Id. at 11). The agreement’s implied covenant of good faith is not broken “because enforcement of the contract” caused Gengo financial hardship (Id.).
The Court found that Gengo “has failed to plead a valid claim under the CFA for three separate and independent reasons” (Id. at 12). First, Gengo provided no factual allegations in support of his assertion that the Jets misrepresented the terms, and that those terms induced him to purchase the PSLs (Id. at 13). “Without any particularized factual allegations suggesting that [Defendant] intended to deceive consumers,” the Jets’ alleged misrepresentation, “does not ‘stand outside the norm of reasonable business practices’ or victimize the average consumer’ in any way” (Id.).
Second, the Jets have not violated the “clear and unambiguous terms” of the contract (Id.). The Jets’ “ticket sales policy in other sections of the stadium does not impair, impede, or in any way implicate—in past, present, or future NFL seasons—the license [Gengo] holds for his two seats” (Id.). Thus, the Jets cannot be liable for breach of contract.
Finally, the timing of the Jets’ PSL policy change for season ticket seats eludes any essence of misconduct because it does not satisfy an unlawful practice under the CFA. “To constitute a CFA violation, the misrepresentation must be made at the time of or prior to formation of the contract to induce the creation of the contract” (Id. at 14). This policy change occurred after Gengo and the Jets signed their agreement, thus, Gengo continues to fail at proving the Jets violated the CFA (Id.). Based on Gengo’s inability to plead “a valid claim for relief for either breach of the implied covenant of good faith and fair dealing or for violation of the [CFA],” the District Court granted the Jets’ motion to dismiss (Id. at 7).
Gengo Appeals
Gengo appealed the District Court’s dismissal order, but the Third Circuit Court was just as unforgiving. The case was argued to the Circuit on April 2, 2019 and the Circuit issued its decision on August 29, 2019. The opinion is barely over three pages of text and at the top it is labeled: “NOT PRECEDENTIAL.”
The Circuit stated that for Gengo to successfully argue the Jets’ actions breached the implied covenant of good faith and fair dealing of the PSL agreement, he had to provide evidence that the Jets’ denied Gengo “the benefit of the bargain originally intended by the parties” (Gengo at 3). However, Gengo failed to provide any evidence that the Jets denied him at any point his right to buy the tickets for seats 3 and 4 in Section 245a Row 5 of the Mezzanine Endzone A area (Id.). The fact the Jets are now selling “adjacent seats to members of the general public does not implicate Gengo’s rights and certainly does not strip him of the benefit for which he bargained” (Id. at 3).
Gengo further argued that opening these seats to the general public made his PSLs “valueless” and “unsellable”, ultimately putting him out $8,000.00” ($4,000.00 per PSL) (Id.). The Third Circuit Court pointedly deflated this argument because again it is not Gengo’s contracted seats that are for sale to the general public; his claim “at most smacks of a bad deal, not bad faith” (Id.).
To prove the Jets’ acts violated the CFA, Gengo had to prove the Jets’ conduct was unlawful, and that the unlawful conduct caused him ascertainable loss (Gengo v. New York Jets at 11). Unlawful conduct “regardless of the type of unlawful practice alleged, [must have the] capacity to mislead [as] the prime ingredient” (Gengo at 4). Gengo argued the Jets’ omission of exclusivity and ticket policies misled him to believe all other seats in his section would be sold using PSLs (Id.). While at the time this was likely, “simply changing the terms on which [the Jets] sell other seats” is not misleading (Id.). Gengo’s signed PSL agreement stated in clear language that the purpose or “prime ingredient” for the agreement was to give Gengo “the right to purchase season tickets for his selected seats” (Id.). Gengo could not prove ascertainable loss because he received exactly what he was promised: access to season tickets for his 200 level seats (Id. at 5). “By the plain language of the agreement, he has received, and continues to receive, what he was promised” (Id.).
Conclusion
PSL’s represent a lucrative treasure trove for team owners in constructing new stadiums or arenas. It works best when either the entire facility sells out using PSLs or when designated PSL sections sell out. However, the cost often creates conflicts with long-standing season ticket holders, many of who cannot afford the PSL price on top of the season ticket price. It also leads to bitter friction when fans such as Gengo, who purchased PSLs and season tickets, discover that fans seated near them or even right next to them did so without having to purchase the PSL. In such circumstances, the enmity that follows can lead to disenchantment, surrendering of seats, or litigation as happened here.
Yet as Gengo and his counsel discovered, that litigation may lead nowhere. It is telling that Gengo did not sue for breach of contract. That makes sense because the actual language of his PSL agreement did not support his claims. As the court pointed out, Gengo got what he paid for. Potential PSL holders everyone should take note of the decision and read potential PSL contracts and related materials carefully before signing their name to such an agreement.
Moreover, that his PSLs are now no longer “unsellable”is not a theory that would endear him to the federal bench. As the court pointed out, the PSL contract did “not represent and [did] not guarantee that there is or ever will be a market for the resale of this PSL.” Instead, Gengo agreed that he was acquiring the license “solely for the right to purchase tickets” for his selected seats” (Id. at 4).
Gengo now knows that he is bound by the actual terms of his contract, and not by what he hoped the transaction might lead to one day. Yet that knowledge comes at a price, as Gengo will now be liable for the Jets’ litigation costs, though the Jets may have lost a fan.
Stephanie Scamman was a two-sport collegiate athlete at Occidental College, where she received her B.A. in Economics, and is currently working full-time as Director of Research for a small finance company while attending Southwestern Law School as a second-year evening student.
Birren is the former general counsel of the Oakland Raiders and is an adjunct professor of law at Southwestern. He is a Senior Writer for Hackney Publications.
