The ‘Heckman’ ruling is disappointing, and it also underscores the misconceptions surrounding arbitration, even among federal appellate court judges.
By Rich Lee, Collin Williams, Michelle Tyler, & Shane Mulrooney | November 4, 2024 | Originally Published on Law.com
The Ninth Circuit recently delivered a disappointing and flawed ruling on a motion to compel arbitration in Heckman v. Live Nation. Since New Era was not a party in this case, we stayed silent and trusted the court to see through the numerous mischaracterizations made about our platform by Heckman’s lawyers. The court made inferences, conclusions, and findings without ever asking to hear from us. As a result, the ruling is fraught with innumerable falsehoods and inaccuracies, and we’re clearing up a few of the many areas the court got wrong.
To summarize the decision: The Ninth Circuit upheld a District Court ruling that Live Nation and Ticketmaster cannot compel arbitration in this lawsuit. In its analysis of the motion to compel arbitration, the Ninth Circuit found both procedural and substantive unconscionability in LiveNation and Ticketmaster’s terms of use. Its finding of substantive unconscionability was based on the Court’s misunderstanding of New Era’s mass arbitration rules and procedures.
The irony of this case is that it’s a great example of why we created New Era ADR. It’s been almost three years since the initial filing in January 2022, and the case has not moved beyond this procedural step. How can we say that our justice system works when parties have to wait years for a resolution on a case’s merits, whether in the courtroom or via legacy arbitration providers?
Before New Era, the only paths for people and organizations involved in legal disputes were the lose-lose choice of (a) spending years and countless dollars navigating the friction and gamesmanship that was inherent in all disputes or (b) walking away from legitimate claims and arguments just to avoid the expense and headache.
This dichotomy is outrageous when the reality is that extensive processes are unnecessary for most legal disputes, and the parties themselves almost always prefer not to be entangled in them. Yet, we recognize that we can’t change an industry for the better for everyone involved without ruffling the feathers of the small faction of lawyers who profit from the existing games and friction and clamor to maintain this status quo.
The ‘Heckman’ Decision Is Fundamentally Flawed
It’s important to highlight that the only aspect of New Era being questioned in this case is our mass arbitration-specific rules. None of our core bilateral arbitration rules are in question. When the district court issued its ruling in 2023, we took that judge’s confusion to heart and, within days, updated our rules, procedures, and platform to provide more clarity. Notably, he did not attack our rules; he merely expressed confusion. So we clarified it. As a result, the criticisms in the Ninth Circuit opinion are moot and have been for some time, including:
They said: New Era’s “stated mission” is to be a “critical prophylactic measure for client’s mass arbitration risk.”
Our response: This is simply false. The Ninth Circuit parroted arguments directly from plaintiffs’ counsel with a vested financial self-interest in keeping the case in court or a legacy arbitration forum. Yes, we handle mass claims (and were the first forum to create a solution for them), but we launched New Era as an improved forum for bilateral arbitrations. Anyone can see this from the press and podcasts we did when we launched in 2021; you’ll not find any mention of mass arbitrations or mass claims.
This said, we’ve also been clear that New Era’s solution for mass arbitrations disincentivizes the financial gamesmanship where the sole strategy is leveraging filing fees to force settlements regardless of a case’s merits. The court completely overlooks that our mass arbitration solution provides the fastest path of any forum for plaintiffs (and their lawyers) to achieve a winning arbitration award on the merits. The key here is “on the merits.” Shouldn’t that be what we expect of any dispute resolution forum—eliminate games and focus on the merits?
They said: It is undisputed that New Era and defendants’ attorneys have shown a “remarkable degree of coordination” in devising a set of procedures to be followed when large numbers of similar consumer claims are brought in arbitration.
Our response: Contrary to the Ninth Circuit’s assertion, the district court specifically found that “[T]he plaintiffs tried to besmirch New Era, and they haven’t succeeded in doing that. [The court is] not casting New Era as some sort of whorish mediation; it’s not. [Plaintiffs] haven’t succeeded in showing that.”
How the Ninth Circuit found something contrary to the record and instead repeated mischaracterizations asserted by plaintiffs’ counsel that the district court judge specifically rejected is disturbing.
This said, we’ve also been clear that New Era’s solution for mass arbitrations disincentivizes the financial gamesmanship where the sole strategy is leveraging filing fees to force settlements regardless of a case’s merits. The court completely overlooks that our mass arbitration solution provides the fastest path of any forum for plaintiffs (and their lawyers) to achieve a winning arbitration award on the merits. The key here is “on the merits.” Shouldn’t that be what we expect of any dispute resolution forum—eliminate games and focus on the merits?
They said: “But a close reading of the Rules reveals that New Era, and only New Era, will unilaterally make a determination to ‘batch’ similar cases.”
Our response: New Era does not batch in mass arbitrations, full stop.There is no mention of “batching” in our rules and procedures.
To elaborate, “batching” is a term of art in mass arbitrations. It exists where “batches” of cases are consolidated, adjudicated, and disposed of as one case. One of the many issues with this process is that each batch is assigned to its own arbitrator, which raises the potential for disparate decisions between batches, even if the facts are substantively identical. Moreover, under the Concepcion case, batching also raises issues of due process as it arguably removes the individuality of cases in arbitration.
In contrast, New Era administratively groups cases based on (1) common issues of law and fact and (2) whether the same law firm or a coordinated group of firms brings the cases. New Era does not make substantive decisions based on facts or merits on the collective group of cases.Instead, from that group, bellwether cases are selected, precedent is created from bellwether results, and most importantly, not only does each and every claimant have an opportunity to argue that precedent shouldn’t apply to their case, but each case is further considered individually by an arbitrator to determine whether precedent should apply.
Follow this link for a more detailed FAQ with direct citations and quotes from our Rules and Procedures rebutting all of the procedural mischaracterizations in the Ninth Circuit opinion.
They said: Mass arbitration protocol is substantively unconscionable because it applies precedent to plaintiffs who are not present. Rules do not provide access to bellwether records for non-bellwether plaintiffs.
Our response: In 2023, we clarified that cases filed later that don’t contain common issues of law and fact or that are not filed by the same or coordinated group of law firms are considered separate from the mass arbitration and new. We also clarified how non-bellwether plaintiffs will always have notice of bellwether records.
They said: There are procedural limitations, such as a lack of discovery and restrictive page limitations.
Our response: It is clear in our rules that both parties in any New Era Arbitration have the same opportunity for discovery as a matter of rights they have in any other forum, and any page limitations may only be enacted and enforced by a neutral; there are no defaults in New Era’s Rules.
They said: There is a limited right of appeal.
Our response: New Era’s default rule is to not allow appeals of any kind unless there are appeal rights specified in parties’ pre-arbitration agreements. This approach is common across all ADR forums.
They said: The arbitrator selection provisions are improper.
Our response: The district court did not explain how New Era’s arbitrator selection provisions ran afoul of California law. Regardless, our rules are clear: The parties ultimately choose the arbitrator in compliance with applicable law related to selection, conflicts, and disqualification.
Removing Gamesmanship and Improving Efficiency Is Good for Everybody
The Heckman ruling is disappointing, and it also underscores the misconceptions surrounding arbitration, even among federal appellate court judges.
We built New Era to resolve individual disputes in 100 days on a fully virtual, easily accessible platform out of our fundamental belief that the overwhelming majority of legal disputes don’t need the long, drawn-out processes synonymous with legacy forums and that parties on all sides would benefit from a far more efficient approach.
Our platform’s accessibility and efficiency have already helped unrepresented individuals successfully file and resolve cases against large organizations. On the other hand, our numerous customers include many of the most well-regarded organizations in the country. All sides benefit.
We’re simply bringing sanity and pragmatism to parties that want to resolve their disputes on the merits—without the gamesmanship,expense, and acrimony that are common everywhere else. New Era is objectively better for both people and companies, and we’re grateful to so many individuals and organizations that have already chosen this path.
