Back in November 2006, the New England Patriots went on the offense and filed a lawsuit against StubHub Inc., one of the largest online ticket resellers, claiming that the company encourages fans to violate Massachusetts' anti-scalping laws and the team's prohibition against reselling tickets. The lawsuit, filed in Suffolk Superior Court, also named as defendants two local residents and 50 "John Does," who allegedly resold their season tickets on StubHub.com.
After a long, drawn out period of discovery, StubHub moved for partial summary judgment, arguing, among other things, that under Section 230 of the Communications Decency Act it shouldn't be held responsible for the actions of its users. In what appears to be a troubling expansion of the Ninth Circuit's holding in Fair Housing of Council of San Fernando Valley v. Roommates.com, 521 F.3d 1157 (9th Cir. 2008), Superior Court Justice Ralph Gants threw the flag and held that StubHub was not entitled to immunity. NPS LLC v. StubHub, Inc., 2009 WL 995483 (Mass.Super. Jan. 26, 2009).
Through its website, StubHub allows people to buy and sell tickets to sporting, concert, theater, and other events. Sellers can choose whether to sell their tickets at a fixed price, via a minimum price auction, or via a declining price auction, in which the seller sets a price that decreases each day. Pursuant to its user agreement, StubHub receives a 25% commission for each sale: 15% of the selling price from the seller, and 10% added to the total sales price due from the buyer. StubHub also provides reduced fees and special privileges to certain "Large Sellers," who "take a large interest in tickets spanning over multiple events and genres."
The Patriots claim that StubHub tortiously interfered with the team's relationship with its fans by intentionally inducing or encouraging ticket holders to transfer their tickets in violation of their season ticket licenses and Massachusetts' anti-scalping laws, which prohibit, inter alia, selling tickets for more than $2 over the face value plus service charges. In response, StubHub argued in its motion that it isn't responsible for what it's users do because it does not sell tickets itself, but simply provides an online forum for others to sell tickets.
StubHub also argued that it should be treated no differently from the newspaper "want-ads," an analogy that Justice Gants was quick to reject (in both the offline and online context):
There are, however, at least two fundamental differences between StubHub's website and the "want-ads" in the classified pages of a newspaper or comparable website. First, the newspaper generally charges a fixed price for the advertisement; its price is not dependent on the amount of the sale. See Chicago Lawyers' Comm. for Civil Rights Under Law, Inc. v. Craigslist, 519 F.3d 666, 671-672 (7th Cir. 2008). Second, newspapers do not affirmatively seek to increase the price charged in the classified ad, especially when doing so may constitute a violation of law. In Craigslist, the Seventh Circuit, rejecting a claim that craigslist helped to violate the anti-discrimination laws in the Fair Housing Act, noted that nothing in the service provided by craigslist encouraged those posting listings for rental or sale properties to add discriminatory preferences in violation of the Act. Id. at 671.
NPS, at *12.
Addressing whether StubHub could assert immunity under Section 230, Justice Gants concluded that "StubHub is an interactive computer service, that sellers who post their tickets on StubHub are information content providers within the meaning of § 230, and that StubHub does not lose the immunity provided by the CDA if it simply knew that its sellers were potentially in violation of G.L. c. 140, § 185A or § 185D." NPS, at *12. There is nothing very controversial about these findings, which track what other courts have found with regard to StubHub and other online auctions/marketplaces. See, e.g., Fehrs v. StubHub, Inc., No. 0801-00515 (Ore. Cir. Ct Sept. 9, 2008).
But it's at this point that Justice Gants begins to sprint away from the line of cases interpreting Section 230. Citing the Ninth Circuit's decision in Fair Housing of Council of San Fernando Valley v. Roommates.com, Justice Gants wrote that Section 230 immunity does not apply to interactive computer service providers who are found to have "contribute[d] materially to the alleged illegality of the conduct." NPS, at *13 (quoting Roommates, 521 F.3d at 1167-68).
As anyone who has been reading this blog knows, we've been carefully watching to see how courts interpret the Ninth Circuit's holding in Roommates, in which the court held that Roommates.com was not immune from claims under the Fair Housing Act and related state laws because it "created or developed" the answer choices that those seeking to use the service had to fill out. For example, all prospective users had to choose from a drop-down menu to indicate whether they were willing to live with “straight or gay males,” only “straight males, only “gay males,” or “no males” and had to make comparable selections pertaining to females. In its decision rejecting immunity under Section 230, the Ninth Circuit reasoned that by requiring members to answer these questions, Roommates.com was materially contributing to the discriminatory statements.
There doesn't appear to be any evidence that StubHub requires its users to set a price higher than the face value of their tickets, nor is it clear from Justice Gants' opinion what specific evidence he found sufficient to conclude that StubHub had materially contributed to the unlawful conduct. Instead, Justice Gants refers back to an earlier part of his opinion:
Here, as discussed earlier, there is evidence in the record that StubHub materially contributed to the illegal “ticket scalping” of its sellers. In effect, the same evidence of knowing participation in illegal “ticket scalping” that is sufficient, if proven, to establish improper means is also sufficient to place StubHub outside the immunity provided by the CDA.
So what is the evidence of "knowing participation in illegal ticket scalping" that Justice Gants is referring to? It appears to be based on the following:
- StubHub's pricing structure "meant that it profited from any violation of the anti-scalping laws, since its revenue increased in direct proportion to the price of the ticket sold."
- StubHub did "not require the seller (or even ask the seller) the face value of the ticket . . . . The absence of such information permits illegal ticket scalping to occur through the StubHub website and prevents any policing of the website to prohibit such scalping."
- StubHub "affirmatively encouraged LargeSellers in the LargeSeller's Handbook to 'check the website from time to time for underpriced tickets or exclusive listings that may not be seen elsewhere,' and still encourages LargeSellers to buy these underpriced tickets by waiving for them the fee due from all other ticket buyers-10 percent of the sales price." "[B]y encouraging LargeSellers to buy these tickets, is essentially encouraging LargeSellers to resell these tickets at higher prices, from which StubHub will enjoy a higher commission."
In summary, StubHub profited as ticket prices increased; it didn't require users to disclose what they paid for their tickets, thus making it harder to police its site; and it encouraged its best clients to buy low and sell high. Isn't this the way most online auction sites work? Surely "knowing participation" isn't coterminous with "materially contributing" to unlawful activity.
Unfortunately, Justice Gants' cursory discussion of Section 230 (it takes up a mere 3 paragraphs in a 12 page decision) raises more questions than it answers. Does he believe that profiting indirectly from unlawful activity invariably places a website outside of Section 230's protection? Could a site that brings in money from advertising lose its immunity if it encourages salacious content in order to boost page views? Let's hope that other courts are more careful and precise when faced with these questions.
Update: A similar take on the case from attorney Lee Gesmer, via MassLawBlog.com.