Sports Leagues Courting Trouble Without COVID-19 Refunds

By Zachary Zagger
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Law360 (April 13, 2020, 8:26 PM EDT) -- Major sports leagues are holding out hope they will be able to make up games postponed because of the coronavirus pandemic, but attorneys say their reluctance to offer full ticket refunds could invite lawsuits from fans and scrutiny from lawmakers.

The pandemic has put a hold on live sporting events, with the NBA and NHL stopping play as they neared the end of their regular seasons last month and MLB halting in the middle of spring training and postponing the start of its season. All three leagues have said they plan to return in some form later this year as soon as it is safe to do so.

But with the spread of the virus continuing, leagues could see their seasons compressed and disrupted, with games either canceled, held far from their original locations or played without fans in attendance. That means some ticket holders will be demanding their money back, creating legal risks for leagues, individual teams and ticketing companies if they refuse, attorneys say.

"If you pay money for a product or service and you are not provided that product or service, I would certainly think you have a right to a refund under any contract theory," said Brian Gudmundson, a sports litigator with Zimmerman Reed LLP. "In various contexts, the professional sporting world likes to call tickets licenses that can be revoked at any time for any reason, but I don't think that extends to canceling tickets without a refund."

Already, several lawsuits have been filed by consumers who say they are entitled to their money back for cancellations or business closures due to the coronavirus pandemic, citing both contract and consumer protection laws.

The online ticket marketplace StubHub is facing a proposed class action over its policy of giving buyers of  tickets for now-canceled events a credit of 120% of their purchase price toward a new purchase within the next 12 months, rather than a refund.

StubHub said the cancellation of more than 23,000 events in the U.S. alone has left it unable to issue refunds. However, the consumers argue that with the rapid spread of COVID-19 and no vaccine or cure, it's unclear when or even if many events will go forward. Many consumers are also out of work because of the pandemic and need the cash now, they say.

While the StubHub case and similar suits could face hurdles such as arbitration clauses or other provisions that could block refunds, attorneys say the unprecedented nature of the pandemic means it's unclear how courts will handle such claims.

"I don't think you can look at black-letter law as it is or the contract as it is and think you know everything about the way coronavirus law is going to go," Gudmundson said. "There is a lot more that is going to be said, so it would behoove everyone to do the right thing, particularly if there are government programs made available to make some of these companies whole."

Sports leagues are still hoping to make up as many games as possible. The NHL is leaving ticket refund policies up to individual teams, while MLB is treating games like rainouts and telling fans to hold on to their tickets.

An NBA spokesperson did not immediately respond to a request for comment on the league's approach. The NFL, for its part, has been preparing to start on time in September.

Meanwhile, lawmakers are calling into question ticketing policies that offer future credits instead of refunds. U.S. House Energy and Commerce Committee Chairman Frank Pallone Jr., D-N.J., said the panel — which held a hearing in February on transparency in the live-event ticket market — has reached out to ticketing companies regarding their policies related to the pandemic.

"Many Americans are currently facing economic hardship due to COVID-19, and consumers should not be stuck with company credits that they may have to wait many months to use if they use them at all," Pallone said in a statement. "Full refunds, including all ancillary fees, should be issued so fans can spend or save their money as they need during this time of national crisis."

Sports and entertainment attorney Aaron Swerdlow of Weinberg Gonser LLP said he would not be surprised if leagues take a "liberal" approach to handing out refunds even if games are rescheduled. Teams will need to stay in fans' good graces so they will continue renewing season tickets and buying single-game tickets moving forward, he said.

"For small and midmarket teams, especially, their season ticket holders are essential to their bottom line, so keeping that renewal rate strong is going to be paramount," Swerdlow said.

Attorneys say leagues and teams would be wise to work with fans to avoid further scrutiny if games are eventually canceled or moved to locations far from a team's home venue.

"There are loyalty and brand issues," said Irwin Raij, co-chair of the sports law practice at O'Melveny & Myers LLP. "The sports industry is always under a microscope. It is more than just what is legally correct."

--Editing by Breda Lund and Jill Coffey.

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