Communications Decency Act Doesn't Insulate StubHub From Scalping Lawsuit

Today, the North Carolina Business Court ruled in Hill v. StubHub, Inc. that the Communications Decency Act didn't provide a defense to on-line ticket seller StubHub against claims that it had violated North Carolina's anti-scalping laws.

In his opinion, Judge Tennille allowed Plaintiffs to proceed on their unfair and deceptive practices claims against StubHub.  He dismissed, however, several other claims brought by the Hills, who were frustrated purchasers of Hannah Montana concert tickets for their eight year old daughter. 

According to the Amended Complaint, the Hills' daughter had  repeatedly told her parents that she had a "sincere and strong" wish to see this show.  Mrs. Hill tried buying tickets on-line when they went on sale, but they sold out in moments. The Hills, probably under unrelenting “sincere and strong” pressure from their daughter, bought four tickets to the concert on StubHub, at a price nearly $100 per ticket higher than the $56 face value of each ticket.

Then, the Hills sued, alleging that  StubHub, along with the unnamed John Doe defendants who actually owned the tickets, had violated North Carolina’s anti-scalping law. The Hills sought class certification, not just for those who had to purchase tickets via StubHub for the Hannah Montana show, but also for the purchasers of tickets to the “many concerts, sporting events and other events and at numerous venues throughout the State of North Carolina” for which tickets had been sold through StubHub. The Hills made multiple claims: (1) violation of North Carolina's anti-scalping statute (2) civil conspiracy, (3) tortious action in concert, (4) unfair and deceptive practices, and (5) punitive damages.

The first issue before the Court on StubHub's Motion to Dismiss was whether StubHub was immune from liability under the Communications Decency Act. The "seminal case," under that statute, according to Judge Tennille, is Zeran v. America Online, Inc., 129 F.3d 327 (4th Cir. 1997), where the Fourth Circuit held that the CDA “creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.”

The Business Court found, however, that it could not resolve the issue of immunity at the Motion to Dismiss stage, given the allegations that StubHub was not merely an interactive computer service or interactive service provider (an "ISP"), entitled to immunity, but also an "information content provider," (an "ICP") which could be liable for the creation or development of information provided through the internet. Judge Tennille held:

Plaintiffs have alleged that StubHub was an ICP as well as an ISP. There was no answer to the Court’s question at the hearing as to whether StubHub actually did or did not sell the tickets in question or if it sold its own tickets to the concert. There are allegations that StubHub controls the events for which these tickets are being offered. Plaintiffs alleged that StubHub only offers to sell tickets for hot acts, thereby guaranteeing high commissions and ticket re-sale prices above the statutory limit. While StubHub argues that the prices on the website reflect the market value for the tickets, there are allegations that the market value is created by StubHub either through its association with multi-ticket holders or through its own sales. There are also questions over the movement of the tickets and money through or by StubHub. These allegations amount to an allegation of control over the tickets and prices that is sufficient to defeat a motion to dismiss. See Hy Cite Corp. v. Badbusinessbureau.com, LLC, 418 F. Supp. 2d 1142, 1148–49 (D. Ariz. 2005) (finding that allegations that an ISP created the alleged wrongful content was enough to deny a motion to dismiss based on the ISP’s immunity under the CDA “at this stage of the case”).

The Court then turned to the substantive allegations of the Amended Complaint, finding first that there was no private cause of action under North Carolina's anti-scalping statute.  It therefore dismissed the scalping claim.  The Court also dismissed Plaintiffs' claim for "tortious action in concert," holding that such a claim could not be based upon a statute that did not provide for a private cause of action.  The claim for civil conspiracy was also dismissed, because the allegations were of a conspiracy to commit a crime.  The Court held that such allegations were therefore of a criminal conspiracy, not a civil conspiracy.  The Court dismissed Plaintiffs' claim for punitive damages because there was no remaining tort claim on which punitive damages could be based.

The Court did not dismiss, however, Plaintiffs' claim for unfair and deceptive practices.  It held, based on Kewaunee Scientific Corp. v. Pegram, 130 N.C. App. 576, 581, 503 S.E.2d 417, 420 (1998), that the violation of a criminal statute can form the basis for an unfair and deceptive practices claim.  As Judge Tennille put it:

In this case, Plaintiffs allege that StubHub has violated the [anti-scaping statute] which regulates the sale of tickets to consumers. Violation of a statute regulating business constitutes an unfair and deceptive trade practice. The activity being regulated undoubtedly falls within the broad definition of “commerce” under the UDTP. . . .  Plaintiffs have alleged that they were injured by StubHub’s actions. Plaintiffs have therefore alleged the elements of an UDTP claim.

My partners Jeff Oleynik and Charles Coble represent the Plaintiffs in this case.

The photo at the top is from Niall Kennedy's photostream on Flickr.  I modified it slightly.

Brief in Support of Motion to Dismiss

Brief in Opposition to Motion to Dismiss

Reply Brief in Support of Motion to Dismiss


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Technology & Marketing Law Blog - July 15, 2008 1:21 PM
By Eric Goldman Hill v. StubHub, 07 CVS 11310 (N.C. Superior Ct. July 14, 2008) [note: I believe this is...
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