Heckman v. Live Nation Entertainment: A Warning Shot for Mass Arbitration Protocols That Fail to Preserve Bilateral Arbitration

January 22, 2025

Types : Alerts

The introduction of mass arbitration—where numerous consumers (sometimes hundreds of thousands) file similar individual claims in arbitration—has prompted many companies to modify their arbitration clauses to help manage the unique challenges and costs that this new procedural device poses. The Ninth Circuit’s recent opinion in Heckman v. Live Nation Entertainment, Inc., 120 F.4th 670 (9th Cir. 2024) provides a warning to these companies: Mass arbitration provisions must still preserve each consumer’s right to bilateral arbitration; otherwise, the entire arbitration clause itself and its class-action waiver may be unenforceable. Indeed, it might pull the arbitration agreement out of the Federal Arbitration Act’s protection altogether.

The Heckman saga began with an update to Ticketmaster’s terms of service on its website. Some provisions remained the same—like Ticketmaster’s delegation clause, which obliged consumers to “resolve all disputes arising out of or relating to the interpretation, applicability, enforceability, or formation of this Agreement” with an arbitrator. Heckman, 120 F.4th at 681. But the revision now required consumers to resolve all disputes arising out of ticket purchases (past and future) through a recently founded arbitration service provider, New Era ADR. The new terms incorporated New Era’s Mass Arbitration Rules, which New Era could apply as soon as it had received 5 cases involving common issues of law or fact. Ticketmaster conditioned the continued use of its services, which included simply browsing its website, on accepting the updated terms.

Ticketmaster moved to compel arbitration after four consumer-plaintiffs brought a putative class action asserting antitrust claims. The district court denied the motion, concluding that both Ticketmaster’s delegation clause and its arbitration clause were procedurally unconscionable “to an extreme degree” and substantively unconscionable to a substantial degree and therefore unenforceable under California law. Id. at 680.

The Ninth Circuit affirmed. On substantive unconscionability, the Court closely examined—and took aim at—Ticketmaster’s arbitration clause and New Era’s mass arbitration rules. Id. at 683-87. It found three features1 particularly problematic:

  • The Mass Arbitration rules set up a restrictive bellwether structure for resolving common issues within a set—or “batch”—of related claims. Only three cases from each batch of consumer disputes would serve as bellwethers. Yet the arbitrator’s decisions in these cases became “precedent” on all common issues in the other cases already in, or later added to, the batch (which could total hundreds of thousands of cases). The remaining consumers had no knowledge of these bellwether cases, no right to participate in them, nor any chance to timely remove themselves from the batch. That violated the non-participating consumers’ basic due process rights as articulated in Hansberry v. Lee, 311 U.S. 32, 40–43 (1940).
  • New Era also imposed extreme limits on discovery, briefing and the evidentiary record. For example, there was no right to discovery; the evidentiary record and initial briefing on all issues was limited to ten documents; and closing briefs were limited to five pages. That was insufficient to vindicate the rights of any single claimant, let alone the individuals not involved in the bellwether cases.
  • Ticketmaster’s terms permitted appeal only when relief was awarded. It offered no similar appellate right when the arbitrator denied injunctive relief. That unduly disadvantaged consumers, who were almost always the parties seeking an injunction and thus had no right to appeal when they lost.

The Ninth Circuit also agreed with the district court that Ticketmaster’s update was procedurally unconscionable. Id at 682-83. It held Ticketmaster’s retroactive change to the scope and procedure of arbitration, to which consumers assented by merely browsing Ticketmaster’s website, constituted unfair surprise. That effectively coerced many consumers who purchased tickets before the change to agree to the updated terms for disputes about those tickets, because they needed to visit the website just to download them. The Court also held that the change itself was “affirmatively misleading,” because its terms required individual arbitrations, but New Era’s Mass Arbitration Rules—and its batching system—did not establish that. Id. at 683.

After this in-depth analysis, the Court concluded this procedural and substantive unconscionability was “fatal to the delegation clause.”  Id. at 687. The Court then held that the same reasons that rendered the delegation clause unconscionable also made the entire agreement unconscionable. Id. at 688.

That provided a sufficient basis for the Court to affirm the district court. But the Court decided to take things a step further, offering an alternate, independent, and more sweeping ground to support its conclusion. It held the Federal Arbitration Act (“FAA”) “does not apply to and protect” Ticketmaster’s arbitration clause (and the New Era rules it incorporated) because its batching procedures did not properly set up bilateral arbitration between consumers and Ticketmaster. Id. at 689-90. That meant the FAA did not preempt the California state law from banning class action waivers like this one. 

This revived a holding from the California Supreme Court, Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005), which held class action waivers in consumer contracts with arbitration clauses are unconscionable.2 The United States Supreme Court had overruled Discover Bank over a decade ago, finding that it violated the goals of—and was thus preempted by—the FAA because it unduly impinged upon parties’ rights to agree to bilateral arbitration. See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 343 (2011).  

But the Heckman Court found the Court’s rationale in Concepcion did not apply here. In so doing, the Court identified a threshold inquiry to FAA preemption: is the “arbitration agreement under consideration [ ] one that shares the attributes of bilateral arbitration as understood in 1925[?]” Id.  Ticketmaster’s arbitration clause (by incorporating New Era’s mass arbitration rules) did not do so. What it set up instead was “aggregative arbitration.” Id. at 690. Indeed, the Court considered New Era’s deficient protocol “a method of dispute resolution . . . ‘unworthy even of the name of arbitration.’” Id. at 690 (citation omitted). Accordingly, Concepcion simply did not apply.

This point was emphasized by Judge VanDyke, who concurred in the judgment but would have resolved the case solely on the grounds that the FAA “just does not apply to the type of mass ‘arbitration’” in Ticketmaster’s arbitration agreement. Id. at 690 (concurring, J., VanDyke). As he explained, New Era’s protocols “fundamentally differ[ed] from the core attributes of bilateral arbitration envisioned by the FAA,” leaving him with “no doubt that New Era’s system of collective arbitration is not what Congress set out to protect in the FAA” and was thus operating outside of the protections of the FAA. Id. at 692.

Finding no FAA preemption, the Court asserted its decision was governed by Discover Bank, thus reviving its rule that class action waivers are unenforceable as to Ticketmaster.

To be sure, Heckman’s analysis focused on New Era’s unique history and the restrictive procedures set up by its Mass Arbitration Rules. The court went out of its way to disparage New Era’s Rules, dismissing them as “borderline unintelligible.” Id. at 683. It also highlighted the fact that the Rules appeared to have been designed with input from Ticketmaster’s counsel, and implied that Ticketmaster “turned to” New Era and its unduly advantageous Mass Arbitration Rules because it faced the threat of mass arbitration. Id. at 677.

Nevertheless, the opinion still raises warning flags for other companies with mass arbitration provisions:

  • First, Heckman invites courts to closely examine the mass arbitration rules that arbitration providers put in place—even to enforce a delegation clause. Companies must therefore also closely examine the rules and procedural protections furnished by arbitration providers to ensure consumers are receiving adequate protections.
  • Second, Heckman reminds companies to mind the process by which they implement changes to their arbitration clauses and to make sure they receive proper assent from their customers regarding those changes.
  • Third, and perhaps most importantly, Heckman revives the Discover Bank rule and similar state laws prohibiting class action waivers in consumer contracts where a court concludes that a mass arbitration provision creates “aggregative arbitrations.” Although the opinion clarified that its holding was limited to New Era’s rules and the due process issues those Rules created, the Court did not specifically clarify what “aggregative arbitration” means—or how mass arbitration protocols can preserve bilateral arbitration and avoid that label.

This creates troubling uncertainty. Mass arbitration provisions, whether in arbitration clauses or in arbitration rules, inherently facilitate, manage, and organize the administration of possibly hundreds of thousands of individual arbitrations. That does not transform mass arbitrations into class proceedings, but it may involve some degree of “aggregation.” It remains to be seen how the line between acceptable or unacceptable mass arbitration terms will be drawn (or whether they will be further drawn at all).

In the meantime, companies must analyze their mass arbitration provisions to make sure they adequately protect individual consumers’ rights to bilateral proceedings. This starts by, at the very least, avoiding New Era’s errors. Companies must also develop strong defenses against future challenges to their mass arbitration provisions arguing that they create aggregative arbitration.

Montgomery McCracken will continue following the impact of Heckman as it develops. If you have any questions regarding the evolving landscape of permissible mass or class-wide arbitration protocols in the Ninth Circuit, please contact Robert Day or Brenna Turner of Montgomery McCracken’s Appellate Group.


1 The Court also took issue with New Era’s rules governing the selection of arbitrators, but on more technical grounds. Although New Era’s rules purported to give plaintiffs an equal say in the selection through a “rank and strike process,” they also quietly granted New Era “sole discretion” to replace an arbitrator “upon what New Era ADR deem[ed] a legitimate request or concern [] or upon unforeseeable circumstances.” Id. at 678. This contradicted the California Arbitration Act, as Ticketmaster conceded. Id. Ticketmaster argued that this was irrelevant because Federal Arbitration Act preempted that law. But the Court disagreed. Id.

2 The Discover Bank rule is constrained by three preconditions: the waivers must be (1) executed in contracts of adhesion, (2) involving predictably small amounts of damages, (3) when it can be alleged the party with superior bargaining power has carried out a scheme to cheat large numbers of consumers out of individually small sums of money.  Discover Bank, 113 P.3d at 1110.  The Supreme Court has found these conditions are “toothless” and easily satisfied in virtually all arbitration agreements.  See Concepcion, 563 U.S.at 348-50. 

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