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Timberwolves Sued Over Exclusive Deal with Flash Seats

The Wolves were served with a lawsuit last week claiming that their deal to use Flash Seats as their exclusive ticket handling system is a breach of contract and in violation of several state consumer protection statutes. Let's take a look.

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The Timberwolves have been sued in Minnesota state court by two named plaintiffs on behalf of a class they define as all purchasers of Minnesota Timberwolves tickets from 2015 to the present who have been required to use the Flash Seats platform in order to access their tickets.

The Wolves are the first team in the NBA to go to an exclusively electronic ticketing system, something they introduced this season. There are no longer paper tickets available for Timberwolves games, rather everything is handled through the Flash Seats app.  I have seen many complaints on Twitter that this system makes it much harder to transfer tickets, and speculation that the particularly empty Target Center is at least partly due to the Flash Seats system.

Having read the complaint, I thought it worthwhile to break down the claims the plaintiffs are making.

Plaintiffs' (two season ticket holders) primary complaints are that:

a) They were not informed of changes to the ticketing system prior to buying their tickets,

b) That the system causes them economic harm because of difficulty in reselling tickets on the secondary market, which include fees charged by the Wolves to both the buyer and seller for secondary sales,

c) That the harm has been exacerbated by a mid-season change that now sees the Wolves unilaterally setting a minimum price for secondary sales (that is programmed into the FlashSeats system) instead of letting the market set the price, which makes resale more difficult.

Based on these assertions, plaintiffs claim breach of contract, violations of several state consumer protection statutes, as well as anti-trust violations.  We'll get to the specifics of these claims a bit below.

First, some comments on the nature of litigation.

This will take a while, and we are unlikely to see any resolution until well after 2016-17 season tickets have been sold at the earliest. It's extraordinarily unlikely that this case ever gets to trial--actual trials in civil litigation are quite rare. Rather, if the suit survives through enough steps, a settlement is much more likely.

The Wolves have 30 days to file an answer to the complaint, at which time the motions will start. One of the key early(ish) aspects of this litigation will be whether it in fact gets certified as a class action.  Defendants almost always argue vigorously against class certification, because in cases like this, a denial of class certification pretty much kills the litigation, or at least radically minimizes the likely damages.

Class actions are useful tools in cases where there are many potential plaintiffs who have suffered the same or similar alleged harm but where the economic harm to any individual plaintiff is not enough to make individual litigation worthwhile.

Whether a suit qualifies for class action status is a matter of civil procedure and varies from state to state, but generally follow the guidelines of the Federal Rules. Specific requirements include numerosity: that the class is big enough that joinder of the class members as named plaitiffs in impracticable; Commonality: that questions of law or fact are common to all members of the class; Typicality: that the claims of the class representatives (the named plaintiffs) are typical of the class; And adequacy: that the class representatives will fairly and adequately represent the interests of the class.

There are further requirements but this isn't Civil Procedure class so we'll leave it there for now.

Whether this suit gets certified as a class action will be an early turning point. If it doesn't, as I said above, it pretty much kills the litigation. If it does (and if I had to guess I think it will), it's an early point at which settlement negotiations may start. With class certification, the Wolves will be looking down the barrel at potentially significant damages, and may choose at that point to try to negotiate a settlement, which would likely include both money damages as well as an agreement to change the ticketing procedures that are at issue.

Enough Civil Procedure.

The plaintiffs assert six claims in their complaint. The first four are Breach of Contract and three claims of violations of specific related Minnesota statutes designed to protect consumers from unfair trade practices.  The fifth is a state anti-trust claim we'll deal with separately.  The sixth is an unjust enrichment claim that is more or less just an add-on that we'll ignore.

The Breach claim and statutory consumer protection claims revolve around the Wolves selling tickets in a new way without informing consumers before hand.  The argument is that the Wolves did not provide what the consumer reasonably thought she was bargaining for when she purchased her tickets, and further that she has suffered economic harm as a result. The economic harm, as discussed above, is the expense and difficulty of reselling the tickets or otherwise transferring them that is a result of the exclusivity of the Flash Seats system.

Further harm was incurred (the plaintiffs argue) when the Wolves started establishing game by game resale minimum pricing that is often 75%-90% of face value, making any resale of tickets more difficult, since many potential buyers are unwilling to pay such prices to see the Wolves. (There are a few choice barbs about the Wolves on court suckitude in the complaint that are sort of fun).

The Anti-Trust claim asserts that the Wolves are attempting to create an illegal monopoly by controlling both the primary and secondary market for Wolves tickets. Specifically, the Wolves are denying primary ticket purchasers the right to dispose of their tickets via an "unfettered" market, and that the Wolves are applying non-competitive restrictions on the resale of tickets in violation of Minnesota statute.

That's more or less the story as it currently stands. I have no idea how hard the Wolves will go to bat for Flash Seats, largely because I don't know how much money they are making or expect to make by using this system as opposed to any other (including reverting back to paper tickets at consumer request).  Clearly if and when there is a robust secondary market for tickets, a system like FlashSeats will benefit the Wolves  due to the fees they can charge via the system for secondary sales, allowing them to profit both from the primary ticket sale and any secondary sales.

As things currently stand (mostly empty), the system is probably not helping the Wolves bottom line to the extent that it's keeping people from walking in the door. Bodies in the arena have value above and beyond actual ticket sales, since actual people do things like buy your expensive beer and the like.

How long litigation drags on is usually a factor of how motivated both sides are.  If the plaintiffs are successful in getting the suit certified as a class action, they (and their lawyers) will have the motivation.  How motivated the Wolves will be to defend their current ticketing policies I couldn't say. If they are, this thing could drag out a long time.