StubHub Gets Section 230 Immunity from Anti-Scalping Laws Because Users Set Prices–Hill v. StubHub

By Eric Goldman

Hill v. StubHub, Inc., 2012 WL 696223 (N.C. App. Ct. March 6, 2012). My blog post on the trial court ruling against StubHub in this case. Earlier blog post on the motion to dismiss ruling.

This long-running case (4.5 years so far) is just one of many arising out of the Hannah Montana concert tour of 2007, which unexpectedly turned into a watershed Cyberlaw moment. The tour has spawned substantial legislative and litigation activity, including the notorious RMG v. Ticketmaster case, and several of the cases have reached bad legal results as populist judges have felt sorry for the tweeners and their parents gouged by high ticket prices due to the extraordinary demand.

One of the bad Hannah Montana rulings came in this case. Last year, the trial judge denied StubHub’s Section 230 immunity in an rogue opinion. The appellate court correctly reverses that ruling and holds that “Defendant is entitled to immunity from any liability arising from the ticket price established by Mr. Holohan” and orders the trial court to grant summary judgment to StubHub. The result is a great Section 230 win, and the supporting opinion is mostly good too.

The court sets the context for its opinion:

According to our research, there have been approximately 300 reported decisions addressing immunity claims advanced under 47 U.S.C. § 230 in the lower federal and state courts. All but a handful of these decisions find that the website is entitled to immunity from liability.

Unfortunately, the judge didn’t appear to see David Ardia’s article, which would have sped up the research and empirically challenged their last sentence. Nevertheless, the court’s assessment rightly treats plaintiff wins as exceptional and perhaps aberrational, so there better be a good reason why the immunity doesn’t apply. Reinforcing this point, the court says later “The reported decisions construing the immunity provisions of 47 U.S.C. § 230 have rejected a number of efforts to expand the range of factual situations in which a website is deprived of the immunity from liability provided by that statutory provision.”

This case turned on who the court thought was the ticket “seller.” The trial court treated StubHub as the real seller due to the various tools StubHub provides to facilitate matching, in which case users are effectively StubHub’s suppliers just like the pretext report generators in the Accusearch case.

The appellate court saw it differently. The opinion treats StubHub as a venue for buyer-seller matching and the users as the real sellers. This styling of StubHub as a venue, not the seller, also disposes of the plaintiffs’ related claim that StubHub overcharged the maximum service fee that a “seller” or its agent can charge (a law that North Carolina has since amended to exclude StubHub). Once the court conceptualized StubHub as a venue, the Section 230 immunity follows naturally. No one questions that the StubHub sellers set the final price for the tickets they have, which makes the price, as a data item, third party “content” to StubHub.

After canvassing a number of the plaintiff Section 230 wins, the court synthesizes a new legal standard for what constitutes content development:

to “materially contribute” to the creation of unlawful material, a website must effectively control the content posted by those third parties or take other actions which essentially ensure the creation of unlawful material

The latter standard, “essentially ensure the creation of unlawful material,” is a trivial variation of the Roommates.com standard that foreclosed the Section 230 immunity if you “design your website to require users to input illegal content.”

However, the former standard, “effectively control the content” of third parties, is a non-sequitur. The apparent support for that standard is the court’s discussion of Jones v. thedirty, which the court said predicated liability “upon the website’s decision to affirmatively adopt or ensure the presentation of unlawful material.” The court should have said that the Jones case was a mistake; but even if the court doesn’t believe Jones is wrong, saying liability can attach when a website “effectively controls” third party content isn’t supported by Jones or by the law generally. Websites get Section 230 immunity because they exercise editorial control over third party content, so what “control” is the court contemplating that isn’t subsumed in the permissible editorial control? Further, the court’s additional standard was unnecessary because the court never applies this looser standard to the facts at issue. In an opinion clearly designed to take the wind out of the plaintiffs’ sails, the opinion’s sloppy articulation of the legal standard is an stiff ocean breeze. Sigh.

In refuting the trial court’s analysis, the court provides a more useful recap:

the prevailing tendency among decisions construing the relevant statutory language is to hold that the immunity provided by 47 U.S.C. § 230 is (1) not defeated by evidence tending to show that the website had notice of the unlawful posting; (2) not affected by the fact that a website attempts to earn a profit; and (3) not subject to any liability on the basis of “reasonable foreseeability” or “willful blindness” analysis. Thus, the fact that Defendant may have been on notice that its website could be used to make unlawful sales and that certain of Defendant’s practices may have provided incentives for the overpricing of certain tickets does not support a decision

stripping Defendant of its immunity under 47 U.S.C. § 230.

All true. In particular, I can’t recall another opinion expressly discussing a “willful blindness” challenge to Section 230 immunity.

The court also criticizes the trial court’s review of the entire website in determining Section 230′s applicability, even considering features that were not used by the litigants. The court says it’s inappropriate to do this kind of holistic review of features that weren’t implicated by the case’s facts:

the appellate cases addressing immunity claims arising under 47 U.S.C. § 230 have analyzed the specific content alleged to be unlawful rather than examining the entire website on a more generic basis

Finally, the court goes out of its way to knock the NPS v. StubHub denial of Section 230 immunity:

Aside from the fact that the evidentiary and procedural context present in NPS is substantially different from that before the Court in this case, we simply do not find the reasoning employed by NPS persuasive, believe that it is inconsistent with the decisions concluding that knowledge of unlawful content does not strip a website of the immunity from liability granted under 47 U.S.C. § 230, and decline to follow it in deciding the present case.

Because of its limitations, I’d love to see the NPS precedent relegated to the dustbin. Since that ruling, we’ve had several good Section 230 rulings in ticket cases, including this one and the Milgram v. Orbitz case. As the favorable precedent continue to mount, I hope lawsuits against ticket resale venues will wane.