The sports ticketing industry is in the midst of a major overhaul as teams begin to exclusively use electronic tickets and refuse to offer paper tickets. As is the case with many technological advancements, the rise of electronic ticketing faces legal backlash. Last week, two Minnesota Timberwolves’ season ticket holders filed a proposed class action against the team for changing from paper tickets to the electronic Flash Seats ticketing system during the 2015-16 season.
Under the Timberwolves’ Flash Seats platform, in order for a ticket holder to enter the arena, they must: (1) create an account; (2) download the Flash Seats app on their smartphone; and, (3) present the electronic ticket on their smartphone at the gate. If a ticket holder does not have a smartphone, they can create an online Flash Seats account and then use a photo id at the gate.
The Timberwolves are one of the first NBA teams to move exclusively to electronic tickets. Teams in all sports leagues are pushing electronic tickets in order to find out more about who is walking through their turnstile. Learning their customers’ age, purchasing habits, and contact information leads to more targeted and successful marketing efforts. Implementing an electronic ticketing system also allows teams to save on printing, combat counterfeit sales, and control the secondary ticketing market.
So far, many fans are not buying it. Back in December, one Timberwolves fan wrote an op-ed in the Minneapolis StarTribue titled ‘Bah, Humbug!’ to the Timberwolves’ new ticket policy, declaring:
“I bought these tickets. The Timberwolves shouldn’t care what I do with them after they’ve collected my money. I have been a season-ticket holder for five years, and in each of the previous years I have used my tickets as my contribution in my office gift swap and in my family’s “Christmas dice game.” I love seeing people’s eyes light up when they open the envelope and see two hard paper, high-gloss Timberwolves tickets.”
This lawsuit is the first time that the fans and teams will face off in court and, while this case will only directly impact the Timberwolves, the implications could be wide ranging.
Who is Involved?
Plaintiffs include one corporation, GLS Companies (which is a St. Paul based marketing company), and one individual, James Mattson (it is unclear which James Mattson this is but he may be one of two who are part of this Morgan Stanley Group). Each Plaintiff owns 2015-16 season tickets. GLS paid $32,000 for its tickets and Mattson paid $21,000 for his tickets. Plaintiffs also seek to certify a class action representing “All persons or entities in the United States, who, from 2015 to the present purchased Minnesota Timberwolves tickets from Defendant that were subjected to the Flash Seats platform.”
The only Defendant is the Minnesota Timberwolves. The Timberwolves allegedly sold 595,652 tickets and earned more than $22 million in revenue during the 2014-15 season.
Flash Seats, founded by Cleveland Cavaliers’ owner Dan Gilbert, although not a party to the lawsuit, is the vendor the Timberwolves used to move to electronic tickets. Flash Seats also handles tickets for the Cavs, Denver Nuggets, Houston Rockets, and Utah Jazz as well as a number of other professional teams in other sports.
What the Lawsuit Alleges
Plaintiffs allege that the Timberwolves change to electronic tickets – which took place after the season ticket holders agreed to purchase tickets – violates their rights in the following ways:
- If a ticket holder wants to sell his or her tickets, Flash Seats charges a fee to either the ticket seller, the ticket buyer, or both. The Timberwolves receive 15% of this fee. Tickets can only be transferred through the Flash Seats website.
- The Timberwolves require that ticket sellers resell their tickets at mandatory minimum prices. The minimum price, based on percentage of face vale, varies from game-to-game but is usually 75 percent or more of face value – “despite the fact the market dictates that tickets to see a team having the Timberwolves’ record should be priced much lower.” According to the lawsuit, this drastically impacts ticket holder’s ability to transfer tickets and, at times, prevents them from being able to resell tickets.
The Plaintiffs advance three distinct legal theories, all of which assert that ticket holders are suffering economic harm as a result of the Timberwolves implementing their new ticketing policy.
First, Plaintiffs claim that the Timberwolves breached the contract the parties agreed to when Plaintiffs purchased season tickets by supplying tickets that “did not provide the qualities and attributes that were reasonably expected and bargained for.” Plaintiffs claim that they signed a “form” memorializing the parties’ contract and that form said nothing about the new ticketing policy. This form (and any other agreement between the parties) is not attached to the complaint so we do not know whether the agreement afforded the Timberwolves any latitude to change the ticketing system.
Next, Plaintiffs bring three claims under Minnesota’s consumer fraud and deceptive trade practices statutes. The essence of these claims is that, by implementing the ticketing system after the initial agreement, the Timberwolves defrauded and/or deceived ticket holders. Finally, Plaintiffs assert an antitrust violation, claiming that the Flash Seats ticketing system creates an unlawful monopoly by restricting the resale of tickets in the secondary market.
Timberwolves’ Legal Options
[pullquote align=”right” cite=”” link=”” color=”” class=”” size=””]The big showdown in this case will likely revolve around whether or not Plaintiffs are able to certify a class action.[/pullquote]
In Minnesota, Defendants have only 20 days to respond to the Complaint after service (although the parties can agree to extend this deadline). Here, the exact service date is unknown but the Complaint was filed with the court on March 3rd meaning that it was likely served that day or shortly thereafter. Thus, the Timberwolves have a tight turnaround to either (a) file an answer (admitting or denying each allegation) or (b) ask the court to dismiss all or part of the lawsuit.
The big showdown in this case will likely revolve around whether or not Plaintiffs are able to certify a class action. If they fail to do so, Plaintiffs damages will be minimal – just a fraction of the price of the two Plaintiffs season ticket plans. However, if a class is certified, the potential damages figure could grow exponentially and include a significant portion of the Timberwolves’ $22 Million in ticket sales plus attorneys fees.
Another thing to keep in mind is that the Timberwolves may have an indemnification agreement with Flash Seats, which means that Flash Seats has agreed to bear the monetary costs tied to any litigation over the ticketing system. If this is the case – and keep in mind that this lawsuit is just as important (if not more) to Flash Seats as it is the Timberwolves – Flash Seats may have a hand in guiding the legal strategy.
No doubt that other professional teams will be paying close attention to this lawsuit. If the Plaintiffs are able to certify a class – drastically increasing their chances of obtaining a favorable judgment or (more likely) settlement – this could be a major hit to the push for offering exclusively electronic tickets and potentially lead to other similar lawsuits against other teams.
It is more likely, however, that electronic tickets are here for good. This lawsuit (and potentially others) will instead provide a roadmap of how to design and implement a system that is legally viable moving forward. For example, if the court finds that the Timberwolves restrictions on the secondary market breached the parties contract because no notice was given, similar ticketing policies are likely to not be implemented midseason and would include explicit notice in the season ticket offering. No matter the outcome, this will be a fascinating case study that will impact the way we come and go from games and events in the future.