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Finkelman v. National Football League

United States Court of Appeals, Third Circuit

December 15, 2017

JOSH FINKELMAN, on behalf of himself and the Putative class, Appellant

          Argued July 12, 2017

         On Appeal from the United States District Court for the District of New Jersey (D.C. No. 3-14-cv-00096) District Judge: Honorable Peter G. Sheridan

          Greg M. Kohn, Esq. Bruce H. Nagel, Esq. [ARGUED] Nagel Rice Counsel for Appellant

          Karen A. Confoy, Esq. Fox Rothschild, William Feldman, Esq. Jonathan D. Pressment, Esq. [ARGUED] Haynes & Boone Counsel for Appellees

          Before: SMITH, Chief Judge, FUENTES, Circuit Judge, and STARK, [*] Chief District Judge


          FUENTES, Circuit Judge.

         Plaintiff Josh Finkelman had the once-in-a-lifetime opportunity to buy tickets to Super Bowl XLVIII held in his home state of New Jersey in February 2014. However, the National Football League ("NFL") withheld almost all of these tickets-99%-from the general public for league insiders, offering the remaining 1% to lucky winners of a lottery that all could enter. To get his tickets, Finkelman turned to the secondary market, purchasing two tickets with a face value of $800 each for $2000 each. One month before the Super Bowl, he filed suit, alleging that the NFL's ticket distribution violated New Jersey law. Specifically, Finkelman claims that the NFL's withholding of more than 5% of the available tickets for the Super Bowl violated the New Jersey Ticket Law. He has now had two opportunities before our Court to show that he has Article III standing to pursue this claim. In our first decision on this subject, we found that he did not. He has since added claims about how the NFL's secondary ticket market functioned and how the NFL's actions raised ticket prices on the secondary market. The District Court found that these additional allegations remained insufficient to allege Finkelman's standing. We disagree. Based on the plausible economic facts pleaded in Finkelman's amended complaint, we conclude that Finkelman has standing and we therefore have subject matter jurisdiction over this case. We defer action on the merits of this appeal pending decision by the Supreme Court of New Jersey on the pending petition for certification of questions of state law.

         I. Background

         On February 2, 2014, Super Bowl XLVIII was held in New Jersey, at MetLife Stadium in East Rutherford. Finkelman alleges that the NFL has a policy of withholding almost all Super Bowl tickets-99%-from the general public. Of these 99%, he alleges that 75% of the withheld tickets are split among NFL teams, with 5% going to the host team, 17.5% going to each team playing in the Super Bowl, and 35% going to the remaining NFL teams. The remaining 25% of tickets are withheld for companies, broadcast networks, media sponsors, the host committee, and other "league insiders." The 1% of tickets for public purchase are sold through a lottery system. In order to acquire a ticket in the lottery, a person has to enter by the deadline, be selected as a winner, and choose to actually purchase a ticket.

         Finkelman alleges that he purchased two tickets on the secondary market. Although these tickets had a face value of $800 each, he purchased them for $2, 000 per ticket. He did not enter the lottery to seek to win the 1% of tickets offered at face value to lucky members of the public.

         In January 2014, Plaintiff Finkelman filed a putative class action in the District of New Jersey against the NFL and various affiliated entities, alleging that the Defendants violated New Jersey's Ticket Law, N.J. Stat. Ann. § 56:8-35.1, by withholding more than 5% of tickets to the Super Bowl.[1] This law, part of New Jersey's Consumer Fraud Act ("CFA"), [2]reads:

It shall be an unlawful practice for a person, who has access to tickets to an event prior to the tickets' release for sale to the general public, to withhold those tickets from sale to the general public in an amount exceeding 5% of all available seating for the event.

         II. Procedural History

         A. First District Court Decision

         In the first round of this case, Defendants moved to dismiss Finkelman's first amended complaint under Rule 12(b)(6) and the District Court granted the motion.[3] Without addressing Article III standing, the District Court reasoned that Defendants never "withheld" tickets within the meaning of the Ticket Law because they did not keep tickets in their custody. Instead, they "allocated" 100% of all available tickets by giving 99% of them to NFL teams and other League insiders and holding a lottery to sell the remaining 1% of tickets. The District Court also concluded that Finkelman failed to plead causation under the CFA because he never entered the ticket lottery.

         B. First Decision of Our Court

         On appeal, we concluded that Finkelman did not establish Article III standing.[4] In doing so, we considered two theories Finkelman pleaded to prove standing. First, we considered whether Finkelman had standing because the NFL's ticket withholding prevented him from buying a ticket at face value. We found that he had not shown a causal connection between the NFL's actions and the injury framed in this way, because Finkelman failed to enter the lottery to buy face value tickets. So, any harm that Finkelman suffered was properly attributed not to the NFL, but rather to his own decision not to enter the ticket lottery. Thus, Finkelman failed to allege standing on this theory.[5]

         Second, we considered whether Finkelman had standing because the NFL's ticket withholding policy increased the cost of the tickets that he purchased on the secondary market. Under this theory, his damages would not be the difference between the ticket's face value and the price that he paid, but instead the difference between what he paid on the secondary market and what the tickets would have cost on the secondary market had the NFL not withheld tickets in alleged violation of the Ticket Law.

         However, we found that Finkelman had not pleaded specific enough allegations to demonstrate that the NFL's withholding actually did increase the price he paid for tickets on the secondary market. We noted the basic economic theory that limiting supply increases price. Thus, one could assume that the NFL's restriction on the availability of Super Bowl tickets to the public increased the price that Finkelman paid for his tickets. Unfortunately for Finkelman, this mere assumption was not enough to prove his standing. Under the scheme Finkelman pleaded, it was also possible that NFL insiders that had obtained non-public tickets were willing to resell to the public, so that supply was not artificially limited and the price inflated in the secondary market. Moreover, we posited that if some of those NFL insiders did not have to pay for their tickets originally, they might be willing to resell their tickets on the secondary market for less than a member of the public who paid face value would have done. So, the NFL's withholding could have even lowered ticket prices on the secondary market.

         We explained that to establish Article III standard based on this theory, under the familiar Twombly-Iqbal standard, [6]Finkelman needed to plead facts specific enough to allege that the NFL's ticket withholding caused the price he paid for tickets on the secondary market to rise. Because we could only speculate as to the effects the NFL withholding had on secondary ticket prices, the allegations were insufficient to establish Article III standing. We remanded to allow the District Court to exercise its discretion as to whether Finkelman should be granted leave to amend.[7]

         C. Second Amended Complaint

         The District Court granted Finkelman's motion to amend the complaint, [8] and Finkelman filed a Second Amended Complaint.[9] In it, Finkelman pursued only the second theory of standing, mapped out in our first opinion. To do so, Finkelman added facts alleged by Daniel Rascher, an economist who specializes in sports and ticketing on the workings of secondary ticket markets in events like the Super Bowl.[10] Rascher concludes that the NFL's withholding resulted in fewer tickets being available on the secondary market and higher prices for those tickets that were available. In support of this conclusion, he explains that under the NFL's current system, NFL insiders sell their tickets to a concentrated group of brokers, who in turn charge more for tickets on the secondary market. Without the NFL withholding, he posits that there would be more fan-to-fan direct sales of tickets, cutting out more brokers and allowing for lower prices. He explains that NFL insiders are more likely to use brokers to resell their tickets than fans would be, either because the insiders are not technically allowed to sell their tickets or because they seek to avoid unwanted publicity from the sales. Rascher also states that the NFL's initial withholding adds an additional layer in the supply chain (insider-to-broker sales), which results in higher prices for customers. He cites research by himself and other economists in support of these allegations.

         D. Second District Court Opinion

         Defendants again moved to dismiss, [11] and the District Court granted the motion.[12] The District Court found that Finkelman had not proved standing because he did not enter the NFL's ticket lottery and because the additional facts Finkelman alleged regarding causation were too conclusory. Furthermore, in the alternative, the District Court reasoned that even if Finkelman did have standing, Finkelman had not properly alleged a violation of the Ticket Law, reiterating its interpretation of the Ticket Law from its first decision.

         III. Jurisdiction and Standard of Review

         This is a diversity suit over which the District Court had jurisdiction pursuant to the Class Action Fairness Act.[13] This Court has jurisdiction over the final judgment of the District Court under 28 U.S.C. § 1291.

         The Court's review of a decision dismissing a complaint, as well as over questions of statutory ...

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