The ‘Next Battle’ Against Ticket Resellers: New York Yankees Strike Out in Ticketing Case
By Carla Varriale
The Supreme Court, Bronx County recently issued a preliminary injunction and blocked the New York Yankees Partnership (“NYY”) from reclaiming tickets purchased by plaintiffs, who were Maryland-based ticket brokers. Citing the “illegal war that New York sports teams have been waging against ticket resellers” and “false propaganda that ticket resellers are evil and the cause of inflated prices,”[1] in ASC Ticket Co. v. New York Yankees Partnership, plaintiffs successfully argued that NYY caused irreparable harm to them and to the ticket buying public. The case was subsequently resolved and is subject to a confidentiality agreement, according to plaintiffs’ attorney.
In November of 2017, plaintiffs purchased 52 season tickets (the “Season Tickets”) from NYY for the sum of $440,885.00. In February of 2018, three months after plaintiffs purchased the Season Tickets and after they had received a confirmation of their purchase, NYY advised plaintiffs that the Season Tickets had been “released.” NYY further advised plaintiffs that its analytics team had determined that plaintiffs’ buying behavior did not fit unspecified NYY criteria. No further explanation was provided. Plaintiffs claimed that one day later, NYY reimbursed them for the purchase price of the Season Tickets (without interest, despite the fact that NYY held the purchase sum for approximately three months). Plaintiffs immediately wrote to NYY and advised NYY that releasing the Season Tickets violated New York law. Plaintiffs demanded that the Season Tickets not be resold. NYY never responded. Plaintiffs commenced an action against NYY and promptly sought an injunction.[2]
Plaintiffs argued that NYY rescinded the Season Tickets because of plaintiffs’ intention to resell them. Plaintiffs further alleged that NYY intended to keep the tickets and charge artificially inflated prices, to the detriment of plaintiffs and the ticket-buying public. Employing a mixed metaphor, plaintiffs contended that NYY attempted to make an “end run” around the ACAL provisions prohibiting the operator of a place of entertainment from restricting the resale of tickets. The Supreme Court, Bronx County apparently agreed.
The ACAL And The Regulation of The Sale (and Resale) Of Tickets to Sports and Entertainment Events In New York
In 2007, New York’s legislature repealed longstanding anti-scalping laws in order to foster a free market that was more beneficial to the ticket-buying public. As a result, Article 25 of the ACAL prohibits venue operators, such as NYY, from “restricting by any means the resale of any tickets included in a subscription or season ticket package as a condition of purchase or as a condition to retain such tickets for the duration of the subscription or season ticket package agreement, or as a condition to retain any contractually agreed upon rights to purchase future subscription or season ticket packages that are otherwise conferred in the subscription or season ticket agreement.” See ACAL §25.30(1)(a).
In pertinent part, ACAL §25.30(1) confirms that a ticket is a license that is subject to terms and conditions specified by the venue operator. Under New York law, a ticket for admission to a place of public amusement or entertainment is a license and it is revocable by the owner or operator of the venue. See Aaron v. Ward, 203 N.Y. 351, 96 N.E. 736 (1911).
ACAL §25.03 defines “entertainment” broadly: it includes all forms of entertainment including, but not limited to, theatrical or operatic performances, concerts, motion pictures, all kinds of entertainment at fair grounds, amusement parks and all types of athletic competitions including football, basketball, baseball, boxing, tennis, hockey, and any other sport, and all forms of diversion, recreation or show. “Operator” is also defined broadly and means any person who owns, operator controls a place of entertainment or who promotes or produces amusement. “Place of entertainment” means any privately or publicly owned and operated entertainment facility such as a theatre, stadium, arena, racetrack, museum, amusement park, or other place where performances, concerts, exhibits, athletic games or contests are held for which an entry fee is charged. See ACAL §25.03.
ACAL §25.30 (1)(b) prohibits the denial of access to a ticket holder who possesses a resold subscription or season ticket to a performance based solely on the ground that such ticket has been resold.
ACAL§25.30 (2) provides that an operator is not prohibited from maintaining and enforcing conduct or behavior at or in connection with their venue and that an operator of a place of entertainment is not prohibited from revoking or restricting season tickets for reasons relating to venue policies and to the extent the operator may deem necessary for the protection of the safety of patrons or to address fraud or misconduct.
ACAL §25.33 provides a private right of action for a person who has been injured because of a violation of the ACAL and empowers him or her to seek injunctive relief and monetary damages (i.e. his or her actual damages or fifty dollars, whichever is greater). The court is empowered to award reasonable attorney’s fees to a prevailing plaintiff.
In ASC Ticket Co., the ticket broker plaintiffs successfully invoked ACAL §25.30 (1)(a) and its legislative history (which stated the intention of the ACAL was to accommodate the resale of all types of tickets, including single performance, subscription and season tickets, in a free and open marketplace) and argued that NYY’s decision to revoke the Season Tickets was “ill-advised, clearly wrong, and in violation of [the ACAL].” Plaintiffs argued that NYY’s putative violation of the ACAL mandated injunctive relief and the court agreed, thereby enjoining the NYY’s efforts to reclaim the Season Tickets.
While acknowledging the dearth of case law interpreting the scope of ACAL §25.30 (1)(a), plaintiffs distinguished NYY’s revocation of the Season Tickets from other per-person ticket limits that have been utilized by sports and entertainment venues, such as Madison Square Garden (“MSG”).[3]
In Smile for Kids, for example, although a per person ticket limit did not violate the ACAL, MSG could not discriminate against season ticket holders in an arbitrary, unreasonable, or capricious manner. Plaintiffs purchased tickets from MSG or patrons who wanted to resell their tickets. Plaintiffs’ clients were individuals and the general public via a platform like StubHub.com. Plaintiffs also developed a cloud platform which enabled ticket holders to list and sell their tickets to the general public. Plaintiffs resold tickets for a profit and received fees for transactions completed on its cloud service. Plaintiffs allegedly controlled more than 700 seats at MSG, or nearly 31,000 tickets for Knicks and Rangers games.
However, Smile for Kids, is distinguishable from ASC Ticket Co. because MSG alerted prospective purchasers of the ticket limit policy prior to their ticket purchase. Furthermore, MSG distributed its 2016-2017 Knicks Season Ticket Subscription Agreement (the “Subscription Agreement”) to plaintiffs and other subscribers affected by the policy via email. The Subscription Agreement stated that customers will be limited to purchasing four (4) tickets per game; its terms did not attempt to limit the resale of those tickets. In addition, MSG reserved the right to strictly enforce its ticket limit policy by limiting new season subscriptions or revoking subscriptions that violated its policy.
In Smile for Kids, the Supreme Court, New York County analyzed ACAL §25.30 (1) (a) and noted that as an operator of a place of entertainment is prohibited from restricting the resale of tickets. However, the Smile for Kids court drew a distinction between MSG’s policy of restricting the number of tickets that a customer may purchase. The court observed that the ACAL does not govern the issuance of season tickets. The court also held that it was consistent with public policy for MSG to limit the limit the number of season tickets that any single customer may purchase. However, the court noted MSG was not permitted to arbitrarily, capriciously, and unreasonably determine that different individual season ticket holders should be treated differently or treating certain season ticket holders differently if they chose to do business with plaintiffs or who accepted ticket financing from plaintiffs.
That’s The Ticket: Some Takeaways from ASC Ticket Co. and Smile for Kids
The letter and spirit of Article 25 of the ACAL foster a free market for the sale or resale of tickets to a variety of sports and entertainment venues. The legislative history is unmistakable: it prohibits venues from restricting the ability to resell tickets, including single performance, subscription, and season tickets in a free and open marketplace.
Given the broad definition of “entertainment” and “operator” set forth in the ACAL, sports and entertainment venues (including amusement parks and movie theaters, all of which fall within the purview of Article 25 of the ACAL), should take note of the ASC Ticket Co. and Smile for Kids cases. This is particularly true because the ACAL permits injunctive relief and the recovery of reasonable attorney’s fees to the prevailing party.
While §25.30 (2) provides that an operator is not prohibited from maintaining and enforcing conduct or behavior at or in connection with a venue. An operator of a place of entertainment is also not prohibited from revoking or restricting season tickets for reasons relating to venue policies and to the extent the operator may deem necessary for the protection of the safety of patrons or to address fraud or misconduct. However, venue owners and operators should take care not to use that portion of the ACAL as cover for a violation of the ACAL’s free market mandate with respect to the resale of tickets. Absent a genuine and demonstrable concern about the protection of the safety of patrons or to address fraud or misconduct, venue owners and operators should be cautious about revoking or restricting season tickets or tickets for admission in general. In other words, a venue owner or operator cannot exercise its discretion with respect to a ticket/license in violation of statutory protections, including ACAL §25.30 (1)(a).
ASC Ticket Co. is a particularly instructive case because the proffered reasons for rescinding the Season Tickets sold to the ticket broker plaintiffs were unsupported and smacked of a pretext: nowhere in the NYY ticket materials or the Terms and Conditions were any ticket buying “criteria” or acceptable “buying behavior” disclosed or defined. Moreover, plaintiffs successfully seized upon the fact that these terms were undefined and that their purchase of the Season Tickets did not violate any written policy, term, or condition of purchase. Moreover, putting aside the lack of initial notice to potential ticket purchasers regarding the phantom criteria for scrutinizing ticket purchases, the fact that NYY waited months before advising plaintiffs that their Season Tickets were being released was problematic.
In contrast, Smile for Kids did not involve the resale of tickets, but the purchase of tickets and MSG demonstrated that it alerted ticket purchasers of its new ticket limit policy prior to their purchase. In fact, the new policy was part of MSG’s season ticket agreement and it was in place at the time of the actual purchase of the subject tickets. Smile for Kids established that in order for a venue’s ticket purchase limit to be enforceable, and not in violation of the ACAL, the ticket purchase limit must be applied uniformly across all prospective purchasers, i.e., the policy could not treat tickets being sold to ticket brokers differently. The takeaway from these cases is that simply taking tickets away from resellers, particularly if based on a precarious policy, is what the ACAL prohibits and will only invite litigation.
Carla Varriale, Esq. is a Partner at Havkins, Rosenfeld, Ritzert and Varriale, LLP who focuses her practice on advising and defending sports, entertainment and recreation venues. She can be reached at: carla.varriale@hrrvlaw.com or 646-747-5115.
[1]Plaintiffs alleged that the sports teams themselves have sought to monopolize ticket sales and to create price floors in order to prop up the value of a ticket. Plaintiffs gave an example of NYY’s venerable “Legends” seats, which they claimed can be purchased on the open market for significantly less than their $1,000 face value, which was “abhorrent” to NYY and to the detriment of NYY’s efforts to market those seats as “exclusive” seating.
[2] Plaintiffs alleged three causes of action in their Complaint and sought reasonable attorneys’ fees, as permitted under Article 25 of New York’s Arts and Cultural Affairs Law (the “ACAL”). Plaintiffs sought injunctive relief for alleged violations of ACAL §25.30 (1)(a) based on New York’s prohibition on restricting the resale of tickets as a condition of its purchase, and breach of contract based on NYY’s putative Order Confirmations for each of the Season Tickets before NYY rescinded plaintiffs’ order for the Season Tickets. Plaintiffs’ Complaint noted at Paragraph 41 that the Terms and Conditions that plaintiffs agreed to when purchasing the Season Tickets did not permit NYY to revoke the Season Tickets based on unspecified “buying behavior.” Plaintiffs also claimed , at Paragraph 45, NYY’s “criteria” concerning plaintiffs’ alleged “buying behavior” was nothing more than a guise for an illegal policy of targeting and taking inventory away from ticket resellers. Plaintiffs alleged, at Paragraphs 46 through 49, that NYY’s actions harmed plaintiffs (who could not fulfill orders for tickets, thereby harming their business and reputation in a manner that could not be remedied by money damages alone) as well as the ticket-buying public. Given the undisputed public interests implicated, plaintiffs contended that they required injunctive relief.
[3] In Smile for Kids, Inc. v. Madison Square Garden Co., 52 Misc.3d 629, 32 N.Y.S.3d 866 (N.Y. Slip Op. 26164) (Ticket brokers successfully brought action seeking injunctive relief and alleging that venue’s policy limiting the number of tickets individual season ticket holder could purchase violated the ACAL) ticket broker plaintiffs filed a complaint alleging that MSG’s policy violated ACAL §25.30 (1). Plaintiffs sued after MSG notified them that MSG intended to enforce its policy of limiting each individual season ticket holder to a maximum of eight (8) tickets per year: MSG elaborated that no single customer was able to purchase, manage, or control more than eight (8) season tickets (directly or indirectly) for 2016-2017. MSG’s ostensible purpose was to ensure that a greater number of fans would have access to Knicks and Rangers games and to address the long waiting list for season tickets .Plaintiffs also moved for a preliminary injunction enjoining and restraining MSG from re-distributing their season tickets, and compelling it to renew the ticket subscriptions. The ticket broker plaintiffs in Smile for Kids and ASC were represented by the same law firm.
