[00:00:03] Speaker 03: We're back on record for the final argument of the week, actually. [00:00:06] Speaker 03: 23-55770, Heckman versus Live Nation and Ticketmaster. [00:00:14] Speaker 03: We're ready to hear your argument. [00:00:17] Speaker 03: I'm just going to be rustling papers here for just a minute to get set up. [00:00:31] Speaker 03: OK, I'm all set. [00:00:32] Speaker 01: Morning, Your Honors. [00:00:32] Speaker 01: May I please the court? [00:00:34] Speaker 01: Roman Martinez for Live Nation. [00:00:35] Speaker 01: I'd like to reserve three minutes for rebuttal with your permission. [00:00:39] Speaker 01: Sure. [00:00:39] Speaker 01: Your Honors, plaintiffs in Live Nation have always agreed to arbitrate any disputes that arise between them. [00:00:45] Speaker 01: Plaintiffs are now asking you to nullify that agreement and force Live Nation into court. [00:00:50] Speaker 01: You should reject that for two overarching reasons. [00:00:53] Speaker 01: Number one, the agreement to arbitrate here was not unconscionable. [00:00:56] Speaker 01: And number two, any problem with New Era is easily fixed by following the contract and sending the case to fair claims or to a mutually agreed arbitrator. [00:01:06] Speaker 01: That's what the parties agreed. [00:01:08] Speaker 01: Live Nation switched to New Era here for a legitimate and valid reason. [00:01:13] Speaker 03: But that's my problem with your first argument. [00:01:17] Speaker 03: You had one deal. [00:01:19] Speaker 03: You've changed the deal. [00:01:20] Speaker 03: And if this one doesn't work out, you want to revert to the original. [00:01:23] Speaker 01: Oh, no, I'm sorry, Your Honor. [00:01:24] Speaker 01: That's not quite our argument. [00:01:26] Speaker 01: We think that the new deal, the deal that was agreed to, that all the parties read and agreed to after July 2021, that new revised agreement itself says that if New Era cannot do the arbitration, then the claim, the cases are arbitrated by fair claims. [00:01:42] Speaker 01: And if fair claims can't do it, then you go to a mutually agreed arbitrator. [00:01:46] Speaker 01: The old agreement said it goes to jams. [00:01:48] Speaker 01: So that's our other backup argument. [00:01:50] Speaker 01: But I think, given that the parties agree, the basic structure of this agreement was, number one, we want to arbitrate any claims, and then here's the three different options for who arbitrates. [00:02:01] Speaker 03: OK, so I think we're miscommunicating. [00:02:04] Speaker 03: It's not going to matter very much, because we've read your briefs, and maybe I should just get out of your way. [00:02:08] Speaker 03: But I do want to have one preliminary question. [00:02:10] Speaker 03: So there's the new era agreement, and then that has been amended. [00:02:14] Speaker 03: But we're just talking about the original new era agreement, right? [00:02:17] Speaker 01: Yes, I think that's right, although we do think that the amendments which were made as New Era explained to clarify what the original rules had always meant, we think those can bear on the meaning of the original rules, but we think that what's before you is the original set of rules. [00:02:31] Speaker 01: And so I think just to kind of re-emphasize the point, we think that if we're right as to New Era, then there's nothing unconscionable here, and we should just go right to New Era. [00:02:41] Speaker 01: But even if we're wrong as to New Era, there's a severability type analysis that you can do, [00:02:46] Speaker 01: And the contract itself points the way to fair claims, not to go back to jams, which was the pre-July 2021, but rather fair claims. [00:02:54] Speaker 01: We think that's the best approach. [00:02:56] Speaker 03: I appreciate that. [00:02:57] Speaker 03: I think we're miscommunicating, but it's probably not worth our, the minute we spent on that. [00:03:01] Speaker 01: So go right ahead. [00:03:01] Speaker 01: Let me just jump right in, because I do think the heart of the dispute, and maybe the hardest issue for us, possibly for the other side, too, is really, what do those rules mean? [00:03:10] Speaker 01: What do they do, and especially with respect to the issue? [00:03:13] Speaker 01: of precedent. [00:03:14] Speaker 01: And I think there are two sort of sub-issues there. [00:03:17] Speaker 01: Number one, is precedent binding and mandatory, which is what the other side says? [00:03:22] Speaker 01: We think that New Era's rules are not binding and mandatory, and we think Judge Wu agreed with us on that. [00:03:28] Speaker 01: And then secondly, even if we're right that the rules are not binding and mandatory, do they nonetheless give the arbitrator too much discretion as to make them unconscionable? [00:03:38] Speaker 01: And that's where Judge Wu disagreed with us. [00:03:40] Speaker 01: He said, [00:03:41] Speaker 01: Look, if you're right that the rules are not mandatory, you can't give this much discretion to the arbitrator, and that's the unconscionability problem. [00:03:49] Speaker 01: And so let me say a word about each of those two points. [00:03:51] Speaker 01: With respect to why the rules are not mandatory, I think that there's some ambiguity in these rules, which is probably inevitable given that they were written, they hadn't yet been applied. [00:04:01] Speaker 01: And inevitably, if you're writing some rules and you haven't had a chance to have them liquidated by practice, there are going to be some things that aren't perfectly clear. [00:04:09] Speaker 01: But we think the rules are clear enough and show, and in particular, I would refer to the court to rule 2y sub 1. [00:04:17] Speaker 01: I think there, it's very clear or clear enough that the precedent rule has to be applied in a discretionary way. [00:04:24] Speaker 01: It says that the arbitrator may apply precedent. [00:04:27] Speaker 01: And then I think that's reinforced by the later rules, Rule 6b, 3, 5a and b, which says that precedent is applied as determined by the arbitrator. [00:04:37] Speaker 01: This is kind of classic discretionary language. [00:04:40] Speaker 01: We think that's why Judge Wu agreed with us that the rules governing precedent are not mandatory, they're not binding. [00:04:48] Speaker 01: Now Judge Wu ended up disagreeing with us on the second point. [00:04:51] Speaker 01: even if the application of precedent is discretionary, that's still a problem because you're giving too much power to the arbitrator. [00:04:58] Speaker 01: And presumably, what he thought was that the arbitrator would just have free reign to abuse its discretion that had been granted by new era's rules. [00:05:06] Speaker 01: But we think that analysis is just squarely in conflict with this court's law and with the FAA and with California law, which say that when an arbitrator is given discretion, courts need to assume [00:05:18] Speaker 01: that the arbitrator is going to operate in a reasonable manner in conformity with law. [00:05:23] Speaker 01: And that's a direct quote from the Poublan case from 2017, which was itself citing and embracing the rule set forth by the California courts in the Dotson case. [00:05:33] Speaker 01: So point number one, precedent is not mandatory and binding. [00:05:37] Speaker 01: And therefore, there's no problem. [00:05:39] Speaker 01: And point number two, there's no problem with too much discretion, because we have to assume, especially at this stage, [00:05:44] Speaker 01: that the arbitrator is not going to abuse its discretion. [00:05:48] Speaker 01: And I think if you end up agreeing with us on those two points, really the rest of the case becomes much easier because I think the other objections that have been raised on both substantive unconscionability and procedural unconscionability just don't hold water. [00:06:02] Speaker 01: I'm happy to talk about any of the, there are a lot of these different provisions, [00:06:05] Speaker 01: But we think their arguments on those other points are just far weaker. [00:06:09] Speaker 01: For example, the limited appeal right. [00:06:12] Speaker 01: The other side points out that the terms of use say that you can appeal denials of the grant of injunctive relief, but not the denial of injunctive relief. [00:06:20] Speaker 02: That sounds inherently wrong. [00:06:23] Speaker 02: I mean, one side gets to appeal, the other side doesn't. [00:06:25] Speaker 01: Well, the California Supreme Court addressed this in Sanchez and said that that was not unconscionable, but more importantly, Your Honor, it just doesn't have any bearing whatsoever on the delegation clause, which under the Supreme Court's decision in rent-a-center is the proper unit of analysis here. [00:06:40] Speaker 01: We have to look at the delegation clause, and no one's asking for or getting an injunction when you're just trying to figure out whether the agreement to arbitrate is enforceable. [00:06:49] Speaker 01: No one gets an injunction on that. [00:06:51] Speaker 03: Well, wait a minute. [00:06:51] Speaker 03: Can we back up about the Rent a Center and the Delegation Clause? [00:06:55] Speaker 03: Because I've looked at this carefully. [00:06:58] Speaker 03: You are right. [00:07:00] Speaker 03: It's not perfectly clear. [00:07:01] Speaker 03: And many provisions seem to me to be circular and problematic. [00:07:05] Speaker 03: So I'm going to talk to you about the front end of the flow chart before reaching the precedent that you started with. [00:07:12] Speaker 03: But on this point that you just raised, the threshold issue, the Delegation Clause, [00:07:18] Speaker 03: I think has to be packed into the 10-page brief, right? [00:07:20] Speaker 03: That's at 2ER175. [00:07:22] Speaker 03: All the issues have to be in one [00:07:24] Speaker 01: No, I just don't think it's right that it's a 10-page brief, and so I would refer— Well, wait a minute. [00:07:28] Speaker 03: The first question, forgive me for interrupting, but the antecedent question is, it's one brief, right? [00:07:32] Speaker 03: They have to put their argument regarding the delegation in the same brief. [00:07:37] Speaker 01: I think it would be in the initial submission, the initial uploads of initial arguments and evidence, which is 250 pages that you get to do that. [00:07:45] Speaker 03: I'm talking about their argument, not their exhibits. [00:07:47] Speaker 03: I'm talking about their argument. [00:07:48] Speaker 03: The only other vehicle I see is a messaging app. [00:07:50] Speaker 01: I agree with you, Your Honor. [00:07:52] Speaker 01: I think the 250 page limit, 10 files, 250 page limits applies to the initial [00:07:57] Speaker 01: uh... arguments and you can see that i think you say two hundred and fifty pages and you say that in your face so i think i'm missing something because there's the briefs and then there's that uploading their basically their evidence can i walk you through it just to show you how i get there yes okay so i'm looking at page one eighty nine of the excerpts of record was you have to do it a little differently is it is it to you are one eighty nine to you are one eighty nine okay okay and there were looking at rule six a sub seven [00:08:25] Speaker 01: And it says, parties upload their documents. [00:08:28] Speaker 03: Parties upload supporting documents limited to the lesser of 10 files or 25 total pages. [00:08:32] Speaker 01: Right. [00:08:32] Speaker 01: But if you look two points above that, that was point three. [00:08:35] Speaker 01: Point one says, both claimants and respondents upload the relevant documents and their initial arguments. [00:08:42] Speaker ?: Yeah. [00:08:42] Speaker 01: So documents and arguments, then you go to the point that you just read that the uploads, the uploads of the documents and the arguments are limited to the lesser of 10 total files, 25 total pages for each file. [00:08:54] Speaker 01: So 10 times 25, that's 250 pages. [00:08:56] Speaker 01: That covers both your evidence and your initial arguments. [00:08:59] Speaker 01: So I think 250 pages to make your initial arguments about arbitrability is more than enough. [00:09:03] Speaker 03: How can your brief be? [00:09:06] Speaker 03: How can the brief be? [00:09:07] Speaker 01: The brief can be, you can, [00:09:09] Speaker 03: You could submit no evidence in just a brief of 250 pages? [00:09:12] Speaker 01: Yes, under these rules you can. [00:09:14] Speaker 01: It says initial arguments and then it says 250 pages. [00:09:17] Speaker 01: That's exactly what it says. [00:09:19] Speaker 03: As long as you're willing to have no evidence. [00:09:20] Speaker 01: Right, but that's why, but Your Honor, just to be clear, of course, in most cases, you would submit a much shorter brief and have more evidence. [00:09:27] Speaker 01: And if you needed more space, you would just look at provision, Subprovision 7-4, which says that the neutral has discretion to allow evidence in excess of the stated limits as necessary to ensure a fundamentally fair practice. [00:09:38] Speaker 01: So say that you want to submit a 50-page brief with your arguments. [00:09:42] Speaker 02: You know, that's a really cockamamie way to set up a system where you don't have a page limit on briefs and then a separate thing addressing documents. [00:09:52] Speaker 02: Who wrote that? [00:09:53] Speaker 01: Well, New Era came up with these rules and I think what they thought... I asked you who wrote that, who did? [00:09:57] Speaker 01: New Era, the company wrote that. [00:10:00] Speaker 01: And so they came up with the rules and they decided for whatever... Was it a lawyer who wrote that? [00:10:05] Speaker 01: I think that evidence shows that the founders of New Era collaborated in writing the rules and some of them were large. [00:10:11] Speaker 02: Because if you're trying to tell me as a practitioner or somebody coming into this, here's how long your brief can be, here's how many exhibits you can have, here are the page limits for your brief, here's the page limits. [00:10:24] Speaker 02: This is drafting malpractice. [00:10:27] Speaker 01: Your Honor, fair enough. [00:10:29] Speaker 01: I think there are some ambiguities here that had to be clarified over time, and the companies tried to clarify them. [00:10:34] Speaker 02: I mean, it's just nuts. [00:10:35] Speaker 01: I don't think it's nuts to say that you have 250 pages as a kind of baseline default rule to submit your evidence and make your arguments about enforceability. [00:10:43] Speaker 01: I don't think that's nuts. [00:10:43] Speaker 01: I think if you and I were drafting it, I think we would make it a little bit clearer. [00:10:47] Speaker 01: There we go. [00:10:48] Speaker 01: We would have a separate limit for the briefs. [00:10:51] Speaker 01: We'd have a separate limit for the evidence. [00:10:53] Speaker 01: Maybe we'd do it differently, but that doesn't mean that the way they did it is unconscionable. [00:10:56] Speaker 02: Anybody who practices law would be accustomed to here's your briefing limit, here's your exhibit limit, instead of mushing them together this way. [00:11:05] Speaker 01: Fair enough, Your Honor. [00:11:06] Speaker 01: I agree with you on that. [00:11:07] Speaker 01: But I don't think that the act of mushing them together is unconscionable, because once you've mushed them together, you still get 250 pages to make your arguments and submit evidence. [00:11:15] Speaker 03: Can I take you back to the top of my flow chart, OK? [00:11:19] Speaker 03: 2 AR 177, because I've really looked at this and tried to figure it out, and I know my colleagues have too. [00:11:23] Speaker 03: And there's this batching, right? [00:11:24] Speaker 03: It says claims presenting combinations are batched into mass arbitration by the parties selected neutral or by the new era neutral, right? [00:11:33] Speaker 03: One or the other? [00:11:34] Speaker 01: I'm sorry, can you repeat that one more time? [00:11:37] Speaker 03: You bet. [00:11:37] Speaker 03: It's 2 AR 177, claims presenting common. [00:11:39] Speaker 03: Your day is going to get better a little later. [00:11:42] Speaker 03: I see the look on your face, but I really am trying to understand this here. [00:11:46] Speaker 03: Claims presenting common issues are batched into mass arbitration by the parties selected neutral or by a new era neutral. [00:11:53] Speaker 03: Then there's another provision at 2ER-191. [00:11:57] Speaker 03: It doesn't say that it comes second, but it's farther into the agreement. [00:12:02] Speaker 03: Parties participate in the rank and strike process to choose a neutral. [00:12:06] Speaker 03: Then it says the plaintiff's lawyers must reach a consensus to participate in the rank and strike process. [00:12:13] Speaker 03: To the extent we're talking about lawyers, plural, and consensus, which implies plural, [00:12:19] Speaker 03: the batching has to have already happened, because it's the batching that indicates who's at the table, right? [00:12:26] Speaker 01: I think the batching that you're talking about is when the new era is initially, you know, it gets like 10,000 filings from one law firm or a couple law firms working together, and it says, we're going to put these into mass arbitration, and then it says, okay, we're going to pick the bellwether, we're going to resolve the bellwether cases first, we've got to pick a neutral, and then it does the rank and strike process whereby [00:12:45] Speaker 01: each side, the plaintiff's firm that brought the mass arbitration on one side, and then the defendant on the other, does their rank and strike, and then you choose an agreed arbitrator. [00:12:54] Speaker 03: I understand all that. [00:12:55] Speaker 01: Okay. [00:12:56] Speaker 03: Here's my question. [00:12:57] Speaker 03: We'll start again. [00:12:59] Speaker 03: It says 2ER 177, claims presenting common issues are batched. [00:13:03] Speaker 03: I'm paraphrasing, right? [00:13:04] Speaker 03: Right. [00:13:05] Speaker 03: And that process is either the party's selected neutral [00:13:09] Speaker 03: right, or by new errors neutral. [00:13:12] Speaker 03: So it's either one of those. [00:13:13] Speaker 03: But I think it's always going to be new errors neutral. [00:13:15] Speaker 03: I think it has to be because of this other provision at 2 ARR 191. [00:13:19] Speaker 03: And this is an invitation, truly, honestly, for you to tell me what I'm missing. [00:13:23] Speaker 03: This says the parties participate in the rank and strike process that you just described to choose a neutral. [00:13:28] Speaker 01: Right. [00:13:28] Speaker 01: I think that's- Fine. [00:13:29] Speaker 03: We're not there yet, counsel. [00:13:31] Speaker 03: And the question is, the parties' lawyers, plural, [00:13:35] Speaker 03: must reach a consensus to participate in the rank and strike process. [00:13:39] Speaker 03: So my point is reading these together, it seems like the first provision is this is an empty promise. [00:13:45] Speaker 03: The lawyers, the batching process is what determines who the lawyers are that are at the table. [00:13:50] Speaker 01: I think the batching process is what, I think what that other provision is getting at is that the decision to put the cases in the first place into the mass arbitration. [00:13:58] Speaker 03: Yes. [00:13:58] Speaker 01: That's done by New Era based on its understanding when a lot of cases are filed that look identical. [00:14:04] Speaker 03: It doesn't say it's done by New Era counsel. [00:14:05] Speaker 03: It says either by the parties selected neutral or by New Era. [00:14:09] Speaker 03: And what I'm pointing out is, since we're talking about clarity and consumability and is this fair, it seems to me making a promise here that it cannot deliver. [00:14:18] Speaker 01: I think- It just contradicts itself. [00:14:22] Speaker 01: I think if you concluded that these provisions as a whole were ultimately unconscionable, I think we should shift to the second part of the argument. [00:14:29] Speaker 03: Well, I'm not done. [00:14:29] Speaker 01: Okay. [00:14:31] Speaker 03: Please. [00:14:31] Speaker 03: I really want to make sure that I've got this right. [00:14:36] Speaker 03: Do you see a way for the parties to participate in selecting their neutral? [00:14:40] Speaker 01: Yes. [00:14:41] Speaker 03: Okay, I'm waiting. [00:14:42] Speaker 01: So I think there's a rank-and-strike process by which, when they're figuring out who the neutral is going to be, each party gets to eliminate one of the options that New Year has given them, and then they get to rank the others. [00:14:53] Speaker 03: So each party, to say that each party is at the table and the plaintiff's lawyers have to vote, basically, in the rank-and-strike process by consensus, those lawyers are selected. [00:15:02] Speaker 03: That subset of lawyers is a function of [00:15:04] Speaker 03: what got batched together, what issues are at stake. [00:15:07] Speaker 01: Right, but the ones that got batched together are going to be when the cases are all involving the same claims and are brought by the same lawyers. [00:15:13] Speaker 03: Which new era has determined, is my point. [00:15:15] Speaker 03: The top of the decision tree, that's new era, and it's got to be only new era. [00:15:19] Speaker 01: It is new era, although later parties have an option to explain why their cases don't. [00:15:23] Speaker 03: OK, hold on. [00:15:23] Speaker 03: We're almost there. [00:15:24] Speaker 03: Thank you. [00:15:26] Speaker 03: The batching decision is not appealable, right? [00:15:29] Speaker 01: That's right. [00:15:29] Speaker 03: OK. [00:15:30] Speaker 01: Can I caveat that? [00:15:32] Speaker 03: You bet. [00:15:33] Speaker 01: The initial batching decision isn't appealable. [00:15:35] Speaker 01: But if a party believes that they have a case that shouldn't be in the mass arbitration, because their case doesn't raise common issues of law and fact, then later they have the option, after the Bellwether cases are resolved, to say, take us out of the arbitration. [00:15:47] Speaker 03: Right. [00:15:48] Speaker 03: And thank you for that. [00:15:49] Speaker 03: And don't worry, we're going to give you more time, because I'm taking so much of it. [00:15:52] Speaker 03: But this is a related problem. [00:15:55] Speaker 03: I'm just trying to follow the flow chart. [00:15:58] Speaker 03: They do have that option. [00:15:59] Speaker 03: It says that they do. [00:16:01] Speaker 03: But the decision's not appealable. [00:16:04] Speaker 03: And it's critical, right? [00:16:06] Speaker 03: Because there is an option for precedent to be invoked. [00:16:09] Speaker 03: And I'm trying to figure out how any of that would work in real life, because the process is confidential. [00:16:16] Speaker 03: So let me try to- So how would anybody know what went into that decision? [00:16:19] Speaker 00: So the whole theory here- Excuse me. [00:16:20] Speaker 00: Sorry. [00:16:22] Speaker 03: It was a bit of a rhetorical question. [00:16:23] Speaker 03: It wasn't a very good one. [00:16:24] Speaker 03: So I give you a chance to answer both parts of it. [00:16:27] Speaker 03: It's a confidential process at the top of the decision tree that batches the issues which is critical. [00:16:32] Speaker 03: And it's confidential as to their team, but never to the defendants. [00:16:37] Speaker 03: The defendants will know what issues and facts went into those briefs and those earlier precedents. [00:16:42] Speaker 03: So now get out of your way. [00:16:44] Speaker 01: All of the parties to the mass arbitration, all the cases that have been batched in together will know what the precedents are. [00:16:49] Speaker 03: All the cases have been batched in together. [00:16:52] Speaker 01: that are put together into the mass arbitration. [00:16:54] Speaker 01: Yes. [00:16:54] Speaker 03: And those are the only- And New Air is going to make that batching decision unilaterally. [00:16:58] Speaker 01: It's going to make it unilaterally on the front end, but then it's going to give the parties the ability to persuade the arbitrator that their case should not be part of the mass arbitration. [00:17:06] Speaker 01: But just to go to your- Can I answer your notice question? [00:17:08] Speaker 01: Yes. [00:17:09] Speaker 01: Because I think it's important. [00:17:10] Speaker 01: No party on either side is ever going to be in a situation where they're not going to have notice of the precedents that may be applied to their case. [00:17:19] Speaker 01: Why not? [00:17:19] Speaker 01: Because the whole theory of this is that the precedent only applies within the mass arbitration. [00:17:23] Speaker 01: So once the bellwethers are decided, then the next step in the process is that there's a mediation conference where all of the individual claimants who were not part of the bellwether cases [00:17:33] Speaker 01: The whole point of the bellwethers is to kind of demonstrate how these cases might get resolved. [00:17:37] Speaker 01: So all of them get to see how the bellwethers came out, and then they get to decide to participate in a settlement or not. [00:17:42] Speaker 01: If they don't want to settle, then they can make an argument to the arbitrators that their cases are different from the bellwether cases, or that they want to make new arguments or put forward new evidence. [00:17:52] Speaker 01: And if they do that, then under New Era's view, the precedent is not binding, then they will have the opportunity to make those arguments in their own name to the arbitrator. [00:18:00] Speaker 01: And so they will have both notice and an opportunity to distinguish themselves or take them out of the realm of precedent. [00:18:06] Speaker 03: I don't think so. [00:18:06] Speaker 03: I don't see where that comes in into this flowchart. [00:18:10] Speaker 03: The process is confidential. [00:18:12] Speaker 03: At the back end, after the bellwethers, there's no, you're shaking your head no, but there's no provision for them to even have a hearing after that. [00:18:18] Speaker 01: No, that's not right, Your Honor. [00:18:19] Speaker 03: And relatedly? [00:18:21] Speaker 03: Well, there's no requirement that there be a hearing. [00:18:24] Speaker 01: There's an opportunity expressly set out in the rules, and this is at 2X sub 3 and 6B3 4D, that after the hearing, after the initial case, you have to... Is that the bill with her? [00:18:37] Speaker 01: After the hearing in the Bellwether cases, parties have an opportunity to explain why their cases are different and shouldn't be such. [00:18:44] Speaker 03: Well, that's the problem. [00:18:46] Speaker 03: When you say the parties will have that opportunity, that's what we're getting at. [00:18:49] Speaker 03: So a new claim, right? [00:18:52] Speaker 01: Like a later filed claim? [00:18:53] Speaker 03: Uh-huh. [00:18:55] Speaker 03: Won't have an opportunity because in any other place in life where a lawyer is trying to explain why precedent shouldn't apply, the lawyer has an opportunity to know what facts and arguments remain. [00:19:03] Speaker 01: So, Your Honor, if the new claim is put into the mass arbitration, then the whole theory of this is that they would see the result of the Bellwether case. [00:19:10] Speaker 03: I'm talking about new claims. [00:19:12] Speaker 01: If a new claim is filed and it's put into the mass arbitration. [00:19:16] Speaker 01: If it's not put into the master arbitration, then precedent is not going to apply. [00:19:19] Speaker 01: So no one's going to be bound by anything, even persuasively. [00:19:23] Speaker 01: If it is put in, then you're going to have an opportunity to say, our case doesn't raise common issues of law and fact, because we have different evidence. [00:19:29] Speaker 01: We have different witnesses. [00:19:30] Speaker 01: We have different experts. [00:19:31] Speaker 01: We have different legal arguments. [00:19:32] Speaker 01: We want to be treated differently from the Bellwether cases. [00:19:35] Speaker 01: So whether you're in or outside. [00:19:37] Speaker 03: And if the arbitrate or the neutral disagrees with you? [00:19:41] Speaker 01: And if the neutral says, no, I've looked at your arguments. [00:19:44] Speaker 01: We don't think they're persuasive. [00:19:45] Speaker 01: I think your case is identical to the ones that I've already resolved. [00:19:48] Speaker 01: And that's the circumstance in which it could. [00:19:51] Speaker 03: Where does that argument get made? [00:19:54] Speaker 01: You make that argument after the bellwethers are resolved, after the mediation conference, when a party says, I don't want to resolve this by settlement, and I want to go forward on my remaining case. [00:20:05] Speaker 03: Where in the rules does it allow me to file a brief or hearing, a request to hearing? [00:20:13] Speaker 01: Rule 2X sub 3 and Rule 6B34D, both of them let the parties present arguments and evidence after the bellwether that their cases don't raise common issues of law and fact, which means under New Era's understanding of its rules that you can raise new arguments, new evidence, new legal theories, and at that point the arbitrator has to decide [00:20:37] Speaker 01: whether it thinks your arguments are persuasive enough to distinguish you from the decision in the Bellwether cases. [00:20:42] Speaker 01: But that is an intermediate step. [00:20:43] Speaker 01: I agree with you it could be spelled out more clearly, but it's definitely an intermediate step that lets you do that. [00:20:48] Speaker 01: Your Honor, can I, I take it there may be some concerns about New Year's rules not being totally clear. [00:20:53] Speaker 03: I think you're right. [00:20:54] Speaker 01: Can I pivot then? [00:20:56] Speaker 03: Not quite yet. [00:20:58] Speaker 03: Okay. [00:20:58] Speaker 03: I'd like to ask a question about, and then I'll try to get out of your way a little. [00:21:02] Speaker 03: I know I keep saying that. [00:21:04] Speaker 03: On 2 AR 153 is the Declaration of Live Relations Litigation Coordinator, paragraph seven. [00:21:09] Speaker 03: And this is a specific point, but again, I'm trying to figure out how this works. [00:21:12] Speaker 03: This tells us that Scott Heckman used a mobile device, mobile site to purchase tickets the day before the new rules were announced, right? [00:21:22] Speaker 03: So he's got a ticket in his account, and I'm envisioning a barcode. [00:21:26] Speaker 03: that he's going to access with his phone when he wants to go to the concert. [00:21:29] Speaker 03: Is that a fair assumption? [00:21:30] Speaker 01: I don't know the answer, but that sounds right to me from my experience. [00:21:34] Speaker 03: From all the concerts that you attend? [00:21:36] Speaker 03: Yes. [00:21:37] Speaker 03: Me too. [00:21:37] Speaker 03: I don't go to very many either. [00:21:38] Speaker 03: But I think that's right. [00:21:40] Speaker 03: And so I'm worried about what constitutes, under the terms of use, continued use of the site. [00:21:45] Speaker 03: Because if Mr. Heckman had a ticket in his [00:21:49] Speaker 03: account, it seems to me that in order to use it, he's got to go in there and access his account. [00:21:56] Speaker 03: Does that constitute- I don't think that's implicated- Would doing that constitute a continued use of the site? [00:22:03] Speaker 01: I don't think that's implicated in the case because I don't think that we're relying on continued use as a basis for binding Mr. Heckman or any of the other plaintiffs here. [00:22:11] Speaker 01: Our theory in this case is that they were bound because they [00:22:13] Speaker 01: that bought tickets after July 2021. [00:22:17] Speaker 01: And in order to buy those tickets in the first place, they had to check a box that certified that they had read the rules, including the new rules that said that New Era was going to conduct the arbitration. [00:22:27] Speaker 01: So this idea that we're relying on the continued use in some sense and that that's an important feature of the case, respectfully, I don't think it is because- It's very important to me because it's not presented in the briefing consistently. [00:22:38] Speaker 03: So some places it talks about, I think [00:22:41] Speaker 03: both briefs. [00:22:41] Speaker 03: I'm not pointing the finger at you. [00:22:43] Speaker 03: I don't know really if it means that I buy into these rules when I visit the site before I bought a ticket. [00:22:50] Speaker 01: I think that we would say that you buy into the rules under California law when you visit the site and when you check the box saying you've read and accepted the terms. [00:22:57] Speaker 03: Do I have to check that box in order to just browse or is that in order to or do I have to check that box in order to go into my account? [00:23:05] Speaker 01: I don't know if you have to check it just to go into your account, but you certainly have to do it when you buy a ticket. [00:23:11] Speaker 03: And then the third question is, I'm sure I have to do it when I buy a ticket. [00:23:14] Speaker 01: Right. [00:23:14] Speaker 01: And that's what all the plaintiffs here have done. [00:23:15] Speaker 03: Hence my question about Mr. Heckman. [00:23:17] Speaker 03: He already had a ticket in his account, sitting, waiting to use. [00:23:21] Speaker 03: And I think under this theory, he would have to check the box in order to use the ticket he already owned, but that's what I'm not sure of. [00:23:27] Speaker 01: I don't know either, but I think that it doesn't really matter because Mr. Heckman subsequently bought a ticket where he checked the box agreeing to the arbitration agreement that's currently at issue in front of you in this case. [00:23:37] Speaker 01: So we think that the whole question is very hypothetical and speculative about how this might apply to someone else who was just browsing. [00:23:44] Speaker 01: Here, all of the plaintiffs have expressly agreed to these particular terms of use by New Era. [00:23:50] Speaker 03: So we think that- I couldn't hear the last thing you said. [00:23:53] Speaker 03: That's okay. [00:23:54] Speaker 03: They've agreed to the terms of use by what? [00:23:56] Speaker 01: terms of use, which include arbitration by new era. [00:23:59] Speaker 01: So, you know, there's no unilateral modification issue in this case because the modification here was bilateral. [00:24:05] Speaker 01: We put it in writing. [00:24:06] Speaker 01: We gave it to them very clearly. [00:24:08] Speaker 01: We gave them the text that said new era. [00:24:10] Speaker 01: We gave them the hyperlink to the new era rules. [00:24:12] Speaker 01: They checked the box certifying that they had read this and agreed to it. [00:24:15] Speaker 03: The difficulty with that argument, and then I really will. [00:24:19] Speaker 03: wait and listen is that when you say they gave it to them very clearly, I've spent a week on this going through it and my notes are full of a flow chart with arrows going back and forth in circles. [00:24:32] Speaker 03: It's very hard to understand. [00:24:34] Speaker 01: So I think the clearest place is if you look at pages 111 to 114 of the second volume of the ER. [00:24:41] Speaker 01: And I think it has the pictures that show that say, [00:24:44] Speaker 01: that you have, you know, I'm looking at page 113, there's a diagram. [00:24:48] Speaker 01: It says, I have read and agreed to the current terms of use, and then you have to check it, and you have to click the box to place the order. [00:24:54] Speaker 02: And it's total fantasy land to think that they've actually read it and understood it. [00:24:58] Speaker 02: Your Honor, I think, I think that's... I'm just telling you the truth, and you know what to. [00:25:03] Speaker 01: I think that as a matter of law, the way that the law treats the situation is- You're talking law and I'm talking fact, but I understand the law. [00:25:09] Speaker 02: To actually think that they've read it, understood it, and agreed to it is fantasy. [00:25:17] Speaker 01: I think that as a matter of law, it's not fantasy. [00:25:20] Speaker 01: It's the way that the law, as you know, Your Honor, work both in this circuit and the Supreme Court. [00:25:24] Speaker 01: And the courts have repeatedly upheld these types of click-through arrangements. [00:25:27] Speaker 03: I think that's right. [00:25:28] Speaker 03: I'm going to give you that. [00:25:29] Speaker 03: I'm spotting you that, because I think that's clear. [00:25:31] Speaker 03: And I think Judge Fletcher, if I was baked into his point, but what I'm telling you is I'm assuming they did read it. [00:25:37] Speaker 03: I've read it. [00:25:39] Speaker 03: I find it enormously complicated. [00:25:41] Speaker 01: OK. [00:25:41] Speaker 03: I think the question is- And internally contradictory. [00:25:44] Speaker 01: I think the question on that is how much do they have to be aware of or how clear do the rules have to be? [00:25:49] Speaker 01: I think on the point that the delegation was shifting from jams to new era, it's 100% unambiguous. [00:25:56] Speaker 01: Anyone who just read the terms of use would have known that it was being done by new era. [00:26:01] Speaker 01: Then you get to the question of, well, were new era's rules ambiguous? [00:26:05] Speaker 01: You spotted me something. [00:26:07] Speaker 01: I'll spot you one right back. [00:26:08] Speaker 01: I think that these rules could have been written a lot more clearly. [00:26:10] Speaker 01: We're not here to tell you that they couldn't have been done better. [00:26:13] Speaker 01: I think the question is whether the ambiguities there are unconscionable. [00:26:17] Speaker 01: And I would say no, because I think there's a general principle of contract law that when there are ambiguities, you try to resolve those ambiguities and construe those principles in a way that makes the contract lawful and effective. [00:26:28] Speaker 01: That's what the Poublanc case said. [00:26:30] Speaker 03: I'm going to interrupt you right there. [00:26:31] Speaker 03: Because I have a question about this batching. [00:26:34] Speaker 03: For me, it's very important that the funneling at the top of the decision tree is batching these, and then off to the racist until we get to the precedent. [00:26:42] Speaker 03: And that decision, I think, is really critical under this process. [00:26:44] Speaker 03: And at 2 AR 175 178, the promise is made that the litigants will have an opportunity to participate in that decision. [00:26:54] Speaker 03: And I cannot see in this, the rest of the flow chart, [00:26:58] Speaker 03: how that promise is fulfilled, and it seems to be that the other provision I read to you makes it pretty clear it can't be. [00:27:04] Speaker 01: So what do I do with that? [00:27:07] Speaker 01: Let me try one more time. [00:27:08] Speaker 01: And if I can't give you an answer that satisfies you, maybe I can talk about the back-up argument. [00:27:12] Speaker 03: I think your answer is going to be that at the back end, they'll have an opportunity. [00:27:14] Speaker 01: Exactly. [00:27:15] Speaker 03: But my question is different, sir. [00:27:17] Speaker 03: It's at the top end. [00:27:18] Speaker 03: It makes this representation. [00:27:19] Speaker 03: I'm assuming that I clicked and I read it, that I'm the one in a jillion person who did that in my hypothetical. [00:27:25] Speaker 03: And I was trying to understand it, and I understood that I was going to have an opportunity to have a say-so in the batching at the top of the flowchart. [00:27:33] Speaker 03: If I think that's wrong and contradicted, what do I do with that? [00:27:37] Speaker 01: I think if you think that a reasonable person reading this would have thought that they would have an opportunity at the top of the flowchart to unbatch themselves, then I think that the contract is unclear, and maybe it's unconscionable. [00:27:48] Speaker 03: Not to unbatch themselves, but to participate in the batching. [00:27:51] Speaker 01: Right. [00:27:51] Speaker 01: If you thought that the contract communicated that, I think that that would be misleading and surprising to the reader. [00:27:56] Speaker 01: And then I think we would go to our backup argument perhaps about severability. [00:28:00] Speaker 01: I just don't think that the contract actually would give the person the impression that at the front end, before the bellwethers are conducted, you have an opportunity to unbatch yourself. [00:28:09] Speaker 01: And I don't think it matters that it happens at the back end. [00:28:11] Speaker 03: Again, I'm not talking about unbatching. [00:28:13] Speaker 03: I'm talking about participating. [00:28:14] Speaker 03: My lawyer gets to participate in the decision to decide what gets batched. [00:28:18] Speaker 03: And I think under this provision, that's not correct. [00:28:20] Speaker 03: that only New Air is going to do that unilaterally. [00:28:25] Speaker 01: Again, Your Honor, if you think that that is what the contract promises and then it doesn't deliver because the rules are misleading, then I think we should talk about my severability argument. [00:28:34] Speaker 03: Okay. [00:28:35] Speaker 03: I would like to give my colleagues a chance to jump in here. [00:28:39] Speaker 03: Do you have additional questions, additional questions? [00:28:41] Speaker 05: No, I'd like to hear about severability. [00:28:43] Speaker 01: Go right ahead. [00:28:44] Speaker 01: Thank you, Your Honor. [00:28:45] Speaker 01: And I appreciate the hard questions. [00:28:47] Speaker 01: And as I said earlier, I concede that these rules could have been written more clearly. [00:28:51] Speaker 01: And I think, frankly, we all wish they had been written more clearly. [00:28:54] Speaker 01: It would make your job easier, and probably mine as well. [00:28:57] Speaker 01: I think with respect to severability, though, I think that part of the case is relatively straightforward. [00:29:02] Speaker 01: And I'd like to emphasize three points. [00:29:03] Speaker 01: Number one, the parties expressly contemplated that there was going to be a world in which New Era, with all the complicated, ambiguous rules that we've just been talking about, wouldn't be able to do the arbitration. [00:29:13] Speaker 01: and that the parties agreed in the contract that if that happened that the case would then be sent to fair claims number one or number two to a mutually agreed arbitrator. [00:29:22] Speaker 01: And here, no one has ever made an argument that fair claims has the problems that we've been talking about with New Year. [00:29:30] Speaker 01: And in fact, they don't. [00:29:31] Speaker 01: They don't have a precedent rule. [00:29:32] Speaker 01: The rules on discovery are much broader. [00:29:34] Speaker 01: The rules are clearer. [00:29:35] Speaker 01: And they give the arbitrator more expressed discretion to do things in the interest of justice. [00:29:41] Speaker 01: So no one has argued that the party's designation of fair claims as the backup arbitrator is unfair. [00:29:47] Speaker 01: Judge Wu below held that failure of the other side to challenge fair claims against us. [00:29:54] Speaker 01: They essentially had the opportunity, because we raised it three times in our motion to compel arbitration, in our reply brief, and in our supplemental brief. [00:30:01] Speaker 01: We said, hey, if New Year is not good enough, you should send it to fair claims. [00:30:05] Speaker 01: They had every opportunity to say, no, no, no, you can't send it to fair claims. [00:30:08] Speaker 01: Fair claims is bad and unfair and unconscionable for all these [00:30:11] Speaker 01: same reasons. [00:30:12] Speaker 01: They never did that. [00:30:13] Speaker 01: No complaint, no charge, no accusation has been made against fair claims here, including in this court when we made the same points in our brief. [00:30:20] Speaker 01: All of the core disputes that we've been talking about today, and I think the vast majority of what they're citing in their brief, all these problems are specific to New Era. [00:30:31] Speaker 01: So it just as a matter of common sense, not just the contract, but common sense. [00:30:34] Speaker 01: If the problem is New Era, then the solution is to take New Era out of the equation and follow the party's agreement and go to the backup arbitrator. [00:30:42] Speaker 03: We understand. [00:30:43] Speaker 03: You have doubled your time? [00:30:45] Speaker 03: Can I ask a follow-up to that? [00:30:46] Speaker 05: Yes, please. [00:30:47] Speaker 05: So I think we know your argument. [00:30:49] Speaker 05: We've all read your briefing, obviously. [00:30:50] Speaker 05: So we understand your argument there. [00:30:52] Speaker 05: A specific question I have is, let's assume, for the sake of argument, that I think that your new era's mass arbitration approach just doesn't fall under conception. [00:31:02] Speaker 05: So Discover Bank springs back into life. [00:31:07] Speaker 05: And so how does that affect your, this should go to fair claims argument specifically? [00:31:11] Speaker 05: if instead of the big, you know, procedural and substantive unconscionability, you just get to new errors thing is knocked out by Discover Bank. [00:31:22] Speaker 05: What happens then? [00:31:24] Speaker 05: Do you go to fair claims under your view? [00:31:26] Speaker 01: I think you would still go to fair claims because I think the Discover Bank question— I hope he's listening because I have that question for him. [00:31:31] Speaker 01: I think the Discover Bank question is a question that goes to the potential unconscionability of the arbitration agreement as a whole. [00:31:40] Speaker 05: It's just a shortcut to get to unconscionability without [00:31:42] Speaker 05: Right. [00:31:43] Speaker 01: And so I think that's the question that was delegated to the arbitrator. [00:31:47] Speaker 01: And so I think that's the question. [00:31:48] Speaker 05: But it does seem a little weird that you make a play to do something that California law says is unconscionable. [00:31:54] Speaker 05: The FAA doesn't cover it under this theory that I'm saying. [00:31:57] Speaker 05: The FAA doesn't preempt that. [00:32:01] Speaker 05: And then you get to have a backup that goes back into the old world. [00:32:05] Speaker 05: There's something about that that seems kind of [00:32:08] Speaker 01: Well, I think that the threshold question is, what is the delegation clause require? [00:32:13] Speaker 01: And is the delegation clause unconscionable? [00:32:15] Speaker 01: And I think the Discover Bank argument, which I'm happy to talk about on the merits, because I do think it's foreclosed by Concepcion, I don't think that argument speaks to the delegation clause. [00:32:24] Speaker 01: it's just not part of the equation for this court. [00:32:26] Speaker 01: Now, maybe they'd have a good argument, and if there was someone who had the view that Discover Bank survives, and that was the arbitrator, then that's what we'll have to fight out in front of the arbitrator. [00:32:35] Speaker 03: Can I ask you about that argument? [00:32:36] Speaker 03: That's what we were trying to get to a minute ago, and we went off in a different direction. [00:32:42] Speaker 03: I appreciate Renter Center's ruling, it's very clear, and your brief stresses that we have to be just looking at the delegation clause. [00:32:49] Speaker 03: But this goes back to the flow chart, because it seems that [00:32:52] Speaker 03: You're trying to divorce those two things, but you've really required here that the parties put all of their arguments in one brief, right? [00:32:59] Speaker 03: And that brief is going to travel through this very same process. [00:33:03] Speaker 01: Right. [00:33:03] Speaker 01: I guess what I would say though is that the question for this court and for the district court below is still limited to whether the delegation clause is unconscionable. [00:33:11] Speaker 01: And I don't think that the Discover Bank argument means that the delegation clause specifically is unconscionable. [00:33:17] Speaker 03: Anything further? [00:33:18] Speaker 03: okay we're gonna hear from opposing council for planning purposes uh... uh... we took so much you took you so far over for planning purposes will put four minutes on the clock when you come back thank you thank you for your patience with our questions [00:33:34] Speaker 04: Good morning, Your Honors. [00:33:35] Speaker 04: May it please the Court? [00:33:35] Speaker 02: Put 30 minutes on the clock just to start? [00:33:39] Speaker 02: No. [00:33:41] Speaker 04: There's a lot there I'm very eager to address. [00:33:44] Speaker 04: If I could just start with three quick points, hopefully. [00:33:48] Speaker 04: I just remind the Court that New Era won a motion to compel before this same judge against the same opposing counsel on a virtually identical complaint that would have sent these cases to bilateral traditional arbitration jams. [00:34:02] Speaker 04: I think that shows two things. [00:34:04] Speaker 04: Despite insinuations in the briefing, the judge in this case was not hostile to arbitration. [00:34:10] Speaker 04: And second, Live Nation saw real tactical benefit to be gained from the New Era rules, so much so that they were willing to put at risk facing a major antitrust class action. [00:34:23] Speaker 04: So it shouldn't be surprising that there is real advantage to them. [00:34:26] Speaker 04: The second point, Live Nation's briefs [00:34:30] Speaker 04: I view as repeatedly invoking a vague sort of federal common law type overlay over the state law standard. [00:34:37] Speaker 04: And Morgan v. Sundance ends that. [00:34:39] Speaker 04: Poublan was before Morgan v. Sundance. [00:34:41] Speaker 04: They cited, I think, over 15 times in their briefs for this idea that they say you need to put a thumb on the scale when you're interpreting a state contract. [00:34:49] Speaker 04: Morgan v. Sundance ends that. [00:34:51] Speaker 04: This court noted it in Armstrong v. Michaels and the Voltage case, both very recently. [00:34:57] Speaker 04: Third. [00:34:58] Speaker 05: Can I try to bring you to where I think [00:35:00] Speaker 05: Yes. [00:35:00] Speaker 05: Assuming you get to unconscionable, and that's what my colleagues have said, but assuming you get to unconscionable, you know, whether you go the long, arduous procedural substantive or you just go straight to conception doesn't cover Discovery Bank. [00:35:19] Speaker 05: It felt like in your briefing that it was more, you have more limited treatment of a response to their, yeah, then you go to fair claims and if not the fair, and if you don't go to fair claims, we get jams back. [00:35:32] Speaker 05: And I'm curious as to your response to that and specifically if there's any difference if the way you get to unconscionability is through the conception discovery bank route or the longer route. [00:35:49] Speaker 04: Thank you, Your Honor. [00:35:50] Speaker 04: So two-part answer. [00:35:54] Speaker 04: We do not engage with fair claims, and we didn't below, because we think the California test for severability does not require us to. [00:36:01] Speaker 04: Without this federal overlay, which I can speak to, the California test is very clear. [00:36:07] Speaker 04: You're looking at [00:36:09] Speaker 04: Does the clause in question have repeated errors or unconscionable issues that cause the judge to believe this was intended by the more sophisticated party to stack the deck against the less sophisticated? [00:36:22] Speaker 04: If that's true, in the interest of justice, the court under California law can sever the entire thing. [00:36:28] Speaker 04: And when I say interest of justice, that's a general term, but there's a concrete practical policy point, which is if the rule were otherwise, [00:36:35] Speaker 04: defendants could stack from extremely crazily unconscionable to very unconscionable all the way down to maybe we can get this one by a set of procedures and say, your honor, give us the most advantage you could possibly give us before you just can't take it. [00:36:51] Speaker 04: And the cases repeatedly say that when the judge sees that, they can take the whole thing down. [00:36:56] Speaker 04: So that's our first point. [00:36:58] Speaker 04: On Discover Bank, that argument absolutely runs to the delegation clause because if [00:37:05] Speaker 04: You have to raise your arguments in a mass jointer proceeding, which Viking River Cruise says is absolutely not what the FAA was contemplating. [00:37:16] Speaker 04: You have to raise your threshold arguments there, too. [00:37:18] Speaker 04: And you get all these issues that are very complicated. [00:37:21] Speaker 04: Concepcion and Viking River explain this. [00:37:23] Speaker 04: When you start getting into group proceedings, you have due process rights. [00:37:26] Speaker 04: You have people who join later and do not have a right to participate. [00:37:30] Speaker 04: and it changes the entire nature of the proceeding. [00:37:34] Speaker 05: That all makes good sense to me, and your answer was very helpful to me. [00:37:36] Speaker 05: I want to springboard off of the last thing you just said. [00:37:41] Speaker 05: One thing that wasn't said by either side, and I think it's because it just feels like there's not really a doctrinal way to address this issue, but it occurs to me [00:37:51] Speaker 05: that there is a delegation clause here if you delegate the Discovery Bank slash Concepcion issue or all of this or the long unconscionability issue to the arbitrator. [00:38:04] Speaker 05: What you're asking is for a new era arbitrator right on the brink of new era's new era, super exciting moment, and you're asking this arbitrator to decide [00:38:18] Speaker 05: this supposed legal question, but really you're asking this arbitrator to decide whether New Era will continue to exist, the employer of this arbitrator. [00:38:27] Speaker 05: If this arbitrator decides that issue the wrong way, he just got himself out of a job, he just killed New Era, I'm guessing even Jams isn't going to be interested in hiring this arbitrator because he just killed—and that hasn't really discussed me, but that seems like a [00:38:44] Speaker 05: a little bit of an elephant in the room to me. [00:38:47] Speaker 05: I'm not a big fan of these due-processing type arguments and stuff, but it does seem like this is really asking somebody to decide something. [00:38:57] Speaker 05: It's just crazy to ask somebody. [00:39:00] Speaker 05: It's a conflict of interest, I guess. [00:39:03] Speaker 04: I absolutely agree with that and would add- It's doubly so when New Era, the employer, has in this hypothetical, would have been preceded by what they did in this case, which is coordinate ex parte with [00:39:20] Speaker 05: uh... live nation to to advocate or not on that question would be what doctrinally you didn't really emphasize that you emphasize things but doctrinally what do i do with that like to be do you just say well that's an exception to the fact that delegation you know when you have a clear delegation clause it goes out there is there is there an exception to the exception for when the question you're asking to be delegated is just [00:39:47] Speaker 05: too much of a conflict of interest? [00:39:49] Speaker 05: I don't know, is there? [00:39:51] Speaker 04: I think I understand the question. [00:39:52] Speaker 04: The way I would answer it is, as is often the case, these unconscionability arguments can be applied to the underlying issue or to the delegation clause. [00:40:00] Speaker 04: You've identified one that tends to run very directly to delegation because it's a conflict type unconscionability, substantive unconscionability ground that would be [00:40:13] Speaker 04: unique to the delegation clause. [00:40:15] Speaker 04: Sometimes there's ones unique to the underlying . [00:40:16] Speaker 04: . [00:40:16] Speaker 04: . [00:40:17] Speaker 05: You would be delegating the issue of whether or not this is a permissible . [00:40:20] Speaker 05: . [00:40:20] Speaker 05: . [00:40:20] Speaker 05: This really sort of . [00:40:22] Speaker 05: . [00:40:22] Speaker 05: . [00:40:22] Speaker 05: I mean, there's a reason we have the rock stars in here arguing this stuff, right? [00:40:26] Speaker 05: Because this is a huge issue that impacts a lot of people, and so you're delegating that one question to this one person where his or her decision will affect [00:40:38] Speaker 05: whether they continue to be employed, whether this continues to go forward. [00:40:41] Speaker 05: It's just really hard. [00:40:42] Speaker 05: I would not feel if I was the person on the non-life nation side of this that I was probably going to get a fair shake. [00:40:49] Speaker 04: There are a number of elements that are uniquely— On that issue. [00:40:52] Speaker 04: On the delegation clauses. [00:40:54] Speaker 03: On that issue, do we have case law addressing that issue? [00:40:57] Speaker 03: How have those arguments fared that an arbitrator's bulk of work comes from jams or elsewhere, so he or she would be— [00:41:04] Speaker 04: The general arguments about jams in AAA have not fared well. [00:41:08] Speaker 05: I thought so, too. [00:41:11] Speaker 05: Have we ever had cases where literally you are deciding whether or not the entity that you are working under is going to disappear, going to go away? [00:41:22] Speaker 04: No. [00:41:23] Speaker 04: I don't recall. [00:41:23] Speaker 05: Effectively, that's what they would be deciding here, right? [00:41:25] Speaker 05: If they were to decide that this is unconscionable mass arbitration, they would be killing New Era's whole business model. [00:41:32] Speaker 04: I appreciate the premise of the question that the new era's entire business model was sprung up to serve as a prophylactic to mass arbitrations. [00:41:41] Speaker 04: And I agree with that. [00:41:43] Speaker 04: Because this is so unique and novel, I'm not aware of a case like that. [00:41:48] Speaker 04: But I think from first principles, thinking about what an arbitrator is being asked to do, that's an additional ground. [00:41:54] Speaker 04: While we're on delegation, I'll also note the district court [00:42:01] Speaker 04: at the end of its opinion, ER 10, 11, and 29, went through and explained how each element that it was finding tied to the delegation clause. [00:42:09] Speaker 04: And under this court's decision in BLSCB Coinbase, they don't have to be separate from the underlying issues. [00:42:16] Speaker 04: It's fine if the same issues run to both. [00:42:19] Speaker 04: And on the point about the unilateral appeal, the district court addressed that in a footnote. [00:42:26] Speaker 04: Actually, there's two clauses in footnote 21, ER 29 to 30, [00:42:31] Speaker 04: And the court addresses injunctive relief and contract rescission, which I view as different, and says any injunctive relief awarded on the threshold issue of arbitrability would be subject to appeal, meaning it's subject to the delegation clause. [00:42:44] Speaker 04: And then in the parenthetical says, it's not entirely clear whether equitable relief, such as contract rescission, how that would be treated for appeal. [00:42:53] Speaker 04: The opening brief at 43 splices those together and reverses them and says that the district court conceded [00:43:01] Speaker 04: any injunctive, it's not possible any injunctive relief would be awarded on the threshold issue of arbitrability so I just wanted to clarify. [00:43:08] Speaker 04: The district court made quite clear that it can and this to me is entirely [00:43:14] Speaker 04: The California Legal Remedies Act, or sorry, Consumer Legal Remedies Act creates a cause of action for injunctive relief to challenge or to enjoin an unconscionable contract. [00:43:25] Speaker 04: And so if we were in this scenario, we would absolutely seek an injunction on threshold issues. [00:43:30] Speaker 03: We're very concerned about mutuality, our case law is, and we've talked about that vis-a-vis the injunctive relief provision and the right to appeal. [00:43:37] Speaker 03: Yes. [00:43:37] Speaker 03: But what about the confidentiality provisions in this case? [00:43:41] Speaker 04: Well, it's sort of, given the nature of what's going on here, structurally not mutual in that parties, there's strict confidentiality. [00:43:50] Speaker 03: Well, I'm trying to figure out whether it is or not. [00:43:53] Speaker 03: I posited that and what about, you know, it seems to me [00:43:55] Speaker 03: that there's a mutuality concern because the defendants are always going to know what arguments went into the briefs and so forth and what evidence there was. [00:44:04] Speaker 03: And my question to opposing counsel is why doesn't essentially that put plaintiffs, especially new ones, at a disadvantage because they're not in a very good position to distinguish themselves from precedent. [00:44:16] Speaker 03: But opposing counsel pushed back, and he thinks there would be an opportunity and that all cases batched together, I guess, even later added ones. [00:44:25] Speaker 03: would have access to those briefs and evidence. [00:44:28] Speaker 03: Is that right? [00:44:29] Speaker 04: Once they've missed out on a bunch in our stock, I think it is right. [00:44:34] Speaker 04: But to spell that out, I think that the confidentiality requirements would preclude counsel from telling later potential clients- What if I don't have a lawyer? [00:44:46] Speaker 04: the same. [00:44:47] Speaker 04: You wouldn't learn until you filed, or if it was a different law firm. [00:44:50] Speaker 04: And to clarify potential ambiguity, it's very clear from the rules that cases can be batched as mass arbitrations together, even if there are different firms involved, which happens. [00:45:02] Speaker 04: Mass arbitrations are often prompted by some high-profile violation, and there'll be a number of firms now who file them, some at different times. [00:45:10] Speaker 04: So it's very possible you'd have pro se litigants or [00:45:14] Speaker 04: litigants represented by different firms who would file later and in the extreme form come to find out their case is over. [00:45:22] Speaker 04: You've lost. [00:45:23] Speaker 04: You didn't get to make any arguments and precedent shall be applied. [00:45:27] Speaker 04: I'm happy to talk at some point about the textual analysis of precedent because I think it's pretty clearly [00:45:35] Speaker 04: applicable in a mass arbitration context. [00:45:38] Speaker 04: So my friend cited Rule 2Y. [00:45:42] Speaker 04: That's the general definition of precedent. [00:45:45] Speaker 04: Rule 6B36 is the specific rule. [00:45:49] Speaker 04: The general says precedent may be applied. [00:45:52] Speaker 04: The specific says shall. [00:45:53] Speaker 04: I think when you have that contrast... And that's not appealable. [00:45:57] Speaker 04: Well, it's appealable for Live Nation if they lose an injunction, but not for claimants. [00:46:05] Speaker 04: And if there's any ambiguity, you know, they cite this, these are all right after each other in Rule 6B.3.6. [00:46:15] Speaker 04: 3B.5 says they will be, and then there's this language that they will be applied [00:46:28] Speaker 04: as determined by the neutral. [00:46:30] Speaker 04: I read that as just saying the neutral's deciding which cases have common issues. [00:46:36] Speaker 04: But once the cases are grouped, you have to apply precedent. [00:46:39] Speaker 04: If there were any ambiguity, 6B36 [00:46:44] Speaker 04: sets out a process that says, the neutral will create a process for handling individual issues, but precedent will still apply to all common issues. [00:46:53] Speaker 04: So again, you've got this contrast. [00:46:55] Speaker 04: And structurally, there's no reason to screen out cases and say, OK, let's talk about, I've decided some big issues in this case. [00:47:02] Speaker 04: Come to me with the cases that you have individualized issues, and we can focus on them. [00:47:07] Speaker 04: And tell me the ones where there are no individualized issues. [00:47:09] Speaker 04: None of that makes any sense if you're going to say, but you get to litigate everything in all cases. [00:47:14] Speaker 04: I really think that this was intended to bind everybody. [00:47:19] Speaker 04: That makes sense if you think about the goal of how are we going to come up with a way to resolve all of this. [00:47:24] Speaker 04: And then when we started litigating, they realized, shoot, we didn't think this through. [00:47:28] Speaker 04: We've created a big due process problem. [00:47:30] Speaker 04: And they're running from the plain text of the rules. [00:47:35] Speaker 03: Your time has come to a close. [00:47:36] Speaker 03: For my part, it would be helpful to hear your strongest, concisely hear your strongest severability argument. [00:47:45] Speaker 03: Do you think there's problems with accountability? [00:47:49] Speaker 04: Yes. [00:47:50] Speaker 04: I understand in other contexts of the law this use a red pen intuition and you've got to stop where you can stop with the red pen. [00:47:56] Speaker 04: That's not what California law calls for. [00:48:00] Speaker 04: California law calls for really policy-laden analysis to say, do we think this [00:48:08] Speaker 04: Arbitration provision and they do this outside of arbitration as well was laden with Enough terms that the intent here was really to for the stronger party to get one over on the weaker one and if so they lose the benefit of that of that all and There's no there's no federal preemption overlay to that That's the standard. [00:48:27] Speaker 04: I think the district court it's an abusive discretion standard was well within its discretion and say and it spelled it out here that it was really [00:48:34] Speaker 04: They easily could have done this differently. [00:48:35] Speaker 04: They didn't have to do this. [00:48:36] Speaker 04: And he read behind that after three hearings, three tentative rulings, really thoughtful discovery, put a lot of thought into this long opinion and was very careful and measured in it. [00:48:49] Speaker 04: He concluded that he thought [00:48:51] Speaker 04: They were trying to get away with something here, and it would be bad policy, which California law totally allows them to conclude, to give them the arbitration clause. [00:49:01] Speaker 04: If you have any further questions, I'm happy to go. [00:49:05] Speaker 03: Looks like we don't. [00:49:06] Speaker 05: I think goodness is going to give you 30 minutes. [00:49:13] Speaker 01: Thank you, Your Honors. [00:49:14] Speaker 01: I'd love to talk about Discover Bank and then about severability. [00:49:17] Speaker 01: First of all, with respect to the argument about Discover Bank, I think it's important to realize that the whole premise of the Discover Bank argument is that you have a situation in which it's not traditional bilateral arbitration. [00:49:30] Speaker 01: That's the whole theory. [00:49:31] Speaker 01: But if we're right about severability, [00:49:33] Speaker 01: then the case would go to either fair claims or to a mutually agreed arbitrator, in which case it would be traditional bilateral arbitration. [00:49:41] Speaker 01: So the Discover Bank argument doesn't work if the case is going to . [00:49:45] Speaker 05: . [00:49:45] Speaker 05: . [00:49:46] Speaker 05: If you just do the Discover Bank argument and stop before you get to the . [00:49:50] Speaker 05: . [00:49:50] Speaker 05: . [00:49:51] Speaker 05: as to the initial thing here, which is next January, whatever you want to call it, as long as you don't take that into account, then [00:50:00] Speaker 05: It's only when you, if you take into account the whole process and say, okay. [00:50:04] Speaker 01: Yeah, I think, our view would be it doesn't speak to the delegation clause, so you wouldn't do the Discover Bank first, but even if you did, you would solve the Discover Bank problem because of the severability analysis, because the severability would mean that it's going to. [00:50:16] Speaker 05: Depends on what order you're doing the, if you pull in, fast-tracking and jams, as part of your Discover Bank analysis, if you let it go to the backup, [00:50:27] Speaker 05: I see your point, but if you are just analyzing, first off, whether or not I think Concepcion covers the main thing here, and then you were to conclude it just doesn't, because I'm not saying that, but if we did conclude that, [00:50:44] Speaker 05: And then you go to the severability issue. [00:50:48] Speaker 05: If you divide it up that way, then it. [00:50:49] Speaker 01: But then you would go to the severability issue, and you would realize that the severing New Era would solve not just the problems about the complications in New Era's rules, but it would also solve the Discover Bank problem. [00:51:02] Speaker 05: But what about their point? [00:51:04] Speaker 05: has some validity that that sort of approach encourages companies to stack up, you know, this is what we really want, the one where we have trial by combat, and then absent that, we're going to I think that's unfair. [00:51:15] Speaker 01: And I think their approach would actually make it impossible for parties to respond to changes in how firms [00:51:21] Speaker 01: on both sides are arbitrating these cases. [00:51:24] Speaker 01: And we were responding to a very legitimate problem. [00:51:26] Speaker 01: It would. [00:51:27] Speaker 01: So we can't ossify the law of arbitration and sort of hold people and make it so that if you have a foot fault, if you have a bunch of ambiguous rules, and that's going to mean that we're not going to enforce any arbitration agreement. [00:51:39] Speaker 01: Instead, I think the better thing to do is try to construe the contract to be lawful. [00:51:43] Speaker 01: If the rules are too ambiguous, too unconscionable, then OK, then this provider doesn't work. [00:51:47] Speaker 01: But when the parties say there's a backup, then apply the backup. [00:51:50] Speaker 05: But the challenge is you've got two different policy things. [00:51:52] Speaker 05: You've got the FAA's policy that's pro-arbitration, Sundance is an unclear word, but you have a federal policy that's pro-arbitration, and then you've got essentially a California policy that says if you try any funny business of trying to- I don't think that's what California law says. [00:52:09] Speaker 05: Let's assume for a second though that that's California. [00:52:13] Speaker 05: I agree that that's, but if California has a policy that says you get one bite at the apple, and if you try to have an unconscionable one, you can't do backups, because that's not a crazy policy. [00:52:25] Speaker 05: It basically encourages companies to try to have it. [00:52:28] Speaker 01: Just to be clear, that is not what California law says. [00:52:31] Speaker 01: They haven't cited a single case that comes close to saying that. [00:52:33] Speaker 01: Pubon is the binding precedent from this court that interprets California law on this exact issue, and what it says is you have to look to whether the contract as a whole has a lawful object. [00:52:45] Speaker 01: a contract that mandates arbitration has the lawful object of mandating arbitration. [00:52:49] Speaker 01: And I think the most reasonable way to look at this agreement is that the most important thing was, we're going to send claims to arbitration. [00:52:56] Speaker 01: And then the party said, and here is a list of sort of in order of preference. [00:52:59] Speaker 01: First we go new era, then we go fair claims, then we go mutually agreed arbitrator. [00:53:04] Speaker 05: So I think that's very reasonable. [00:53:06] Speaker 05: You say we're going to send claims to arbitration. [00:53:11] Speaker 05: they had a fair point to say just because you call something arbitration doesn't mean it's the you know that that's a very broad term and you know if you if you you know to use an absurd hypothetical if you just call trial by conduct combat a form of arbitration and you say so that's our we're going to do trial by combat and we're going to mass arbitration and then we're going to do some you know the the problem with that is that that starts to feel like the an actual policy instead of the policy being to send something arbitration it's to avoid courts like that's a it's not a in other words [00:53:41] Speaker 05: It depends on what level we set when we say there's a policy to, you know, what the parties want to do is send something to arbitration. [00:53:51] Speaker 05: It depends on how we define arbitration. [00:53:54] Speaker 05: And if mass arbitration just isn't really the kind of arbitration that's reflected by, that the FAA is trying to protect at all. [00:54:02] Speaker 01: Can I answer this question and just give two case citations? [00:54:05] Speaker 01: I know I'm out of time because I wanted to respond to an earlier question that came up. [00:54:08] Speaker 01: So just with respect to this question, I think the mass arbitration concern goes out the window if New Era is not the arbitrator. [00:54:17] Speaker 01: And so here we have a contract that makes very clear that it contemplates that it still wants to do arbitration even if it's not mass arbitration. [00:54:24] Speaker 01: It's going to be normal arbitration with either fair claims or a mutually agreed arbitrator. [00:54:27] Speaker 01: And then with respect to the case citations, I think you all were asking a question about due process and whether, you know, how does the law deal with the situation where the arbitrator is being asked to adjudicate the validity of their own rules. [00:54:38] Speaker 01: I would just point the court to three California cases that are directly on point. [00:54:42] Speaker 01: First is the SandQuest case, 1 Cal 5th, 260 expressly addresses this scenario. [00:54:48] Speaker 01: Second is the Tiri case, T-I-R-I. [00:54:51] Speaker 01: 171 Cal Reporter 3rd at 635 addresses this scenario. [00:54:55] Speaker 01: And then finally, the Anderwood case, 221 Cal Reporter 3rd at 238 to 239. [00:55:01] Speaker 01: All these cases, as my friend Mr. Postman I think correctly conceded, all those cases say that that kind of concern is not a reason not to enforce an arbitration agreement. [00:55:10] Speaker 01: Thank you, Your Honors. [00:55:10] Speaker 03: Thank you. [00:55:11] Speaker 03: Thank you both for your excellent advocacy and briefing. [00:55:14] Speaker 03: We appreciate it very much. [00:55:15] Speaker 03: We'll take this case under advisement and stand in recess.