Duane Morris Takeaway: This week’s episode features Duane Morris partner Jerry Maatman and senior associates Michael Rosenblatt and Anna Sheridan with their analysis of a key ruling from the District of Maryland in a consumer protection class action finding the company’s arbitration unenforceable yet dismissing the lawsuit for failure to state a plausible claim for relief.
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Episode Transcript
Jerry Maatman: Hello, everyone, and thank you for being here again for the next episode of the Duane Morris Class Action Weekly Wire. I’m Jerry Maatman, a partner at Duane Morris, and welcome to Anna Sheridan and Mike Rosenblatt, who will be appearing on the podcast today. Thanks so much for both being here.
Anna Sheridan: Glad to be here, Jerry.
Mike Rosenblatt: Thanks for having me, Jerry.
Jerry: Today, we’re discussing a recent ruling out of the U.S. District Court for the District of Maryland involving Vivid Seats and allegations of so-called “drip pricing.” The case is Cheezum v. Vivid Seats, and it presents a very interesting combination of consumer protection law and arbitration issues. Anna, let’s start with the background. What is this lawsuit about?
Anna: The plaintiff, Laura Cheezum, alleged that Vivid Seats violated the Maryland Consumer Protection Act by advertising ticket prices that did not include mandatory fees, and then revealing the additional charges later in the purchasing process. According to the complaint, she selected two tickets advertised at $225 each, expecting to pay around $450 total. By the time she reached the final checkout screen, mandatory fees increased the purchase price to more than $600. She claimed that Vivid Seats used countdown timers and other pressure tactics during checkout and characterized the pricing model as “drip pricing.”
Mike: The lawsuit was filed after Maryland enacted a law targeting hidden ticket fees. The plaintiff sought to represent Maryland consumers who purchased tickets through the platform after the law took effect, arguing that Vivid Seats failed to disclose the full ticket price at the outset of the transaction.
Jerry: This sounds like a prototypical consumer fraud class action involving online pricing and disclosures, but as I read the opinion, it took a very interesting turn with respect to the issue of arbitration.
Mike: It certainly did. Vivid Seats, they first tried to compel arbitration based on its online terms of use. The company argued that when plaintiff completed her purchase, she agreed to those terms, which contained both an arbitration provision and a class action waiver.
Anna: The court, however, refused to enforce the arbitration agreement. Judge Matthew Maddox found that the agreement lacked consideration because Vivid Seats retained the unilateral right to modify its terms of use at any time without providing notice to customers. The terms stated that modifications became effective immediately, and that continued use of the website constituted acceptance. The court concluded that this allowed Vivid Seeds to change its obligations whenever it wanted, which rendered its promises illusory and made the arbitration provision unenforceable.
Jerry: That’s a very significant ruling by the federal court in Maryland. Kind of a trend we’re continuing to see as courts closely scrutinize online arbitration agreements, particularly where modification rights and provisions are drafted so broadly in favor of the manufacturer or of the company.
Mike: That’s exactly right. The court noted specifically that customers could only opt out after the changes had already been made, and there was no requirement that Vivid Seats provide advance notice. So, that was a critical flaw, and as a result, the motion to compel arbitration was denied.
Jerry: Despite defeating arbitration, nonetheless, the plaintiff ultimately didn’t win when it came to the decision with respect to the motion to dismiss. What happened there?
Anna: Well, the court held that the plaintiff had not adequately alleged reliance or injury under the Maryland Consumer Protection Act. To pursue a private claim under that statute, a consumer must show that a deceptive practice caused an actual loss. The court focused on the fact that the plaintiff admittedly saw the final ticket price, including all the fees, before completing the transaction, so she chose to proceed with the purchase, knowing all of those facts and that’s really the key takeaway from the merit portion of the decision. The court reasoned that because the plaintiff knew that the total price was what it was before she clicked “buy”, it cannot reasonably infer that she would have abandoned the purchase absent the alleged misrepresentations. So, the judge stated that the “only reasonable inference” was that she voluntarily completed the transaction with knowledge of the higher price and as a result, the court found that she failed to plausibly allege an identifiable loss caused by the alleged deceptive conduct. The complaint was dismissed without prejudice, meaning that she may seek leave to amend and attempt to cure the deficiencies.
Jerry: I thought it was interesting that this case also illustrates kind of the aggressive tactics and the innovative strategy of the plaintiff’s class action bar, insofar as in this particular case, the plaintiffs’ lawyer asked the court to certify a legal question to Maryland’s highest court regarding interpretation of the state’s anti-drip-pricing statute. What happened with respect to that request?
Mike: So, the court declined that request as well. The plaintiff argued that Maryland’s ticketing statute might provide an independent basis for relief. Judge Maddox concluded that the statutory framework was sufficiently clear, and that the Maryland Consumer Protection Act already provides the mechanism for consumers to pursue claims. So, he found no reason to believe the Maryland Supreme Court would interpret the statute as creating a separate private right of action.
Jerry: Let’s talk about what this means at a very high level for businesses both in Maryland and nationwide with respect to consumer fraud class actions.
Anna: Well, companies should pay very close attention to their arbitration agreements. The court’s arbitration analysis may prove just as important as its consumer protection analysis. Businesses that reserve broad rights to modify its online terms and conditions without advance notice risk having their arbitration provisions struck down as illusory. Companies should review modification clauses to ensure that they provide meaningful notice and preserve mutual obligations.
Mike: And companies should really note that while the plaintiff lost here, the court didn’t endorse drip pricing practices. So, the dismissal largely turned on pleading deficiencies related to reliance and injury. So, businesses should not assume that last minute disclosures of fees will defeat every consumer claim. States continue to enact disclosure requirements, and regulators remain focused on pricing transparency, and plaintiffs will likely continue testing these statutes in class litigation.
Anna: I also think the ruling highlights the importance of documenting consumer disclosures during online transactions. The court relied heavily on the fact that the plaintiff saw the total price before completing her purchase. Companies with clear checkout disclosures may be better positioned to challenge causation and reliance allegations at the fleeting stage.
Jerry: Those are all excellent points and takeaways because the decision certainly provides a helpful reminder that companies face risks in two different directions. On the one hand, arbitration agreements need to be scrutinized must be carefully drafted to remain enforceable under current interpretations of state and federal law. And on the other hand, transparent pricing practices and robust disclosures can provide a strong defense against consumer fraud allegations.
Mike: Right, and note that because the dismissal was without prejudice, this may not be the last chapter in the litigation.
Jerry: That’s for sure, and we’ll continue to monitor developments in this case and other consumer fraud cases nationwide. Well, that’s all for today’s episode. Anna and Mike, thanks so much for joining us, and thank you to our listeners.
Mike: Thanks for having me, Jerry, and thank you listeners.
Anna: Thank you everyone for listening.