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  • 3rd Circuit affirms dismissal of NFL season ticket class action

    Courts

    On August 29, the U.S. Court of Appeals for the 3rd Circuit affirmed the dismissal of a putative class action alleging that an NFL team’s season ticket sales practices had violated the implied covenant of good faith and fair dealing and the New Jersey Consumer Fraud Act (CFA). As previously covered by InfoBytes, the case was centered on the plaintiff’s purchase of a personal seat license (PSL) that “both allows and obligates” him to buy season tickets for particular seats at the team’s home games. The team later began selling seats in the same seating section without requiring PSLs, which the plaintiff alleged made his PSL “valueless” and “‘unsellable’ because defendants are currently giving away for free what cost him $8,000.” The district court dismissed the plaintiff’s claims with prejudice because the plaintiff had received the “reasonably expected fruits under the contract.” 

    On appeal, the 3rd Circuit agreed with the district court that the plaintiff had “received the fruits of his contract” because “[n]othing in the complaint suggests [the plaintiff] has lost the exclusive right to purchase season tickets for these seats” and the fact that the team “might now sell adjacent seats to members of the general public does not implicate [the plaintiff’s] rights and certainly does not strip him of the benefit for which he bargained.” Regarding the value of his PSA, the appellate court noted that when purchasing the PSL, the plaintiff represented that he was not acquiring it as an investment and had no expectation of profit. Finally, with regard to the CFA claim, the appellate court held that “simply changing the terms on which defendants sell other seats in the stadium is not misleading.”

    Courts Appellate Third Circuit Class Action State Issues Contracts

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  • District Court dismisses NFL season ticket class action because plaintiff received the “reasonably expected fruits under the contract”

    Courts

    On August 30, the U.S. District Court for the District of New Jersey dismissed with prejudice a putative class action alleging that an NFL team’s season ticket sales practices had violated the implied covenant of good faith and fair dealing and the New Jersey Consumer Fraud Act (CFA). The case was centered on the named plaintiff’s claim that the team made representations to him that his purchase of a personal seat license (PSL) would give him an exclusive right to purchase season tickets in a particular seating area in the team’s stadium. The plaintiff alleged that the team ran afoul of the CFA when, counter to its alleged representations, it opened up sales for season tickets in that area to people who had not purchased a personal seat license, thus rendering worthless the license plaintiff had purchased.

    The Court dismissed the plaintiff’s claims with prejudice because the plaintiff had received the “reasonably expected fruits under the contract.” The PSL agreement did not promise an exclusive right to purchase seats in a particular area of the team’s stadium, nor did it “purport to extend licensing or equity rights to [p]laintiff to control the ticketing policy for other” seats in that area. Rather, the PSL simply promised the plaintiff the right to purchase two seats in the area he chose, and that right had not been interfered with.

    Courts Class Action Fraud Contracts

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  • District Court dismisses breach of contract suit against Connecticut firm

    Courts

    On May 1, the U.S. District Court for the District of Connecticut dismissed a malpractice suit brought against a Connecticut-based law firm for allegedly inducing a Boston-based mortgage/mezzanine lender and its Delaware-based trustee (plaintiffs) to enter into a contract resulting in a loss of approximately $13 million. The lender alleged that it entered into a $12 million mezzanine loan agreement in 2012 with a company that owned commercial property located in Connecticut (borrower). The plaintiffs asserted that the firm acted as counsel to various entities associated with the borrower, and issued an opinion letter to the lender concerning agreements memorializing the loan transaction and establishing borrower’s interest in the loan collateral. When the borrower defaulted on the loan due to allegedly misrepresenting ownership percentages, the plaintiffs filed suit against the firm claiming, among other things, (i) breach of contract for rendering an opinion letter, which the firm and borrower intended the lender to rely upon as part of the transaction; (ii) breach of the covenant of good faith and fair dealing; and (iii) negligent misrepresentation.

    The firm, however, argued that the lender’s claims lacked standing because (i) it was never a client of the firm and the opinion letter was not a contract; (ii) “a third-party beneficiary of a written contract [between the borrower and the firm] cannot recover for a breach of implied covenant of good faith and fair dealing; and (iii) claims of negligent misrepresentation were barred by the statute of limitations.

    The court agreed with the firm and ruled that the opinion letter was not a contract that created a contractual obligation the firm could breach. Because the lender and related entities were “neither a party to a contract with [the firm] nor the intended third-party beneficiary of a contract between the borrower and [the firm] ... their breach of contract claim against [the firm] must be dismissed,” the judge stated. The court also dismissed the remaining allegations, stating the lender had not sufficiently alleged that it reasonably relied on the advice of the firm’s advice to make the loan to the borrower.

    Courts Lending Contracts

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  • Second Circuit Reverses Decision Concerning Online Contract Formation

    Courts

    On August 17, 2017, the Second Circuit Court of Appeals vacated and remanded a district court order denying a defendant's motion to compel arbitration where the plaintiff had accepted an arbitration agreement through a smart phone application. See Meyer v. Uber Technologies Inc., et al., 2017 WL 3526682, (2d Cir. 2017). There, the plaintiff had created an account with the defendant by entering personal and payment information into a mobile application. On the final account creation screen, the application presented a button marked “REGISTER,” below which was black text advising users that “[b]y creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.” The capitalized language was a hyperlink, which led to a copy of an agreement containing an arbitration clause. The trial court held that this notice was not “reasonably conspicuous” and, therefore, the plaintiff did not—unambiguously—manifest assent to the arbitration provision by registering an account. On appeal, the Second Circuit reversed, finding that a “reasonably prudent smartphone user” would have been on “reasonably conspicuous notice” of the terms and conditions of service and that the text beneath the registration button put the plaintiff on notice that clicking “REGISTER” meant acceptance of those terms—regardless of whether he actually reviewed them. Relevant to the court’s analysis were proximity of the hyperlink to the “REGISTER” button and the absence of clutter, which might have otherwise impaired the plaintiff’s ability to locate the hyperlink.

    Courts Second Circuit Appellate Arbitration Contracts

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