Heerwagen v. Clear Channel Communications

• Decision Date: 10 January 2006
• Docket Number: No. 04-0699-CV.,04-0699-CV.
• Parties: Malinda HEERWAGEN, individually and on behalf of a class of similarly situated individuals, Plaintiff-Appellant, v. CLEAR CHANNEL COMMUNICATIONS, Clear Channel Entertainment, Inc., Clear Channel Radio, Inc., and Clear Channel Broadcasting, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

435 F.3d 219

Malinda HEERWAGEN, individually and on behalf of a class of similarly situated individuals, Plaintiff-Appellant, v. CLEAR CHANNEL COMMUNICATIONS, Clear Channel Entertainment, Inc., Clear Channel Radio, Inc., and Clear Channel Broadcasting, Inc., Defendants-Appellees.

No. 04-0699-CV.

United States Court of Appeals, Second Circuit.

Argued November 3, 2004.

Decided January 10, 2006.

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Lee Squitieri, New York, New York (Maria J. Ciccia, Squitieri & Fearon, LLP, New York, New York; Kenneth A. Wexler, Jennifer Fountain Connolly, The Wexler Firm, LLP, Chicago, Illinois, of counsel), for Plaintiff-Appellant.

Jonathan M. Jacobson, Wilson Sonsini Goodrich & Rosati, New York, New York (Charles E. Biggio, Wilson Sonsini Goodrich & Rosati, New York, New York; Abid Qureshi, Jamie L. Berger, Akin Gump Strauss Hauer & Feld LLP, New York, New York; Dale A. Head, Richard A. Munisteri, Clear Channel Entertainment, Houston, Texas, of counsel), for Defendants-Appellees.

Before: CARDAMONE, McLAUGHLIN, and CABRANES, Circuit Judges.

CARDAMONE, Circuit Judge.

Plaintiff, a putative class representative, brought this civil antitrust action in the United States District Court for the Southern District of New York (Sprizzo, J.), charging violations of § 2 of the Sherman Act against defendants Clear Channel Communications, Inc., et al. Plaintiff initiated suit on June 13, 2002 seeking damages and injunctive relief. She amended her complaint two months later. Defendants moved unsuccessfully to dismiss the amended complaint. Plaintiff then filed a motion for class certification pursuant to Federal Rule of Civil Procedure 23(b)(3). After limited discovery, the district court denied that motion in an order dated August 11, 2003.

BACKGROUND

I The Parties

Plaintiff Malinda Heerwagen (Heerwagen, plaintiff or appellant), an Illinois resident, has lived in Chicago during the entire putative class period from 1997 to the present. During that time she attended ten rock concerts held in her hometown where she heard, among others, U-2, The Grateful Dead, The Rolling Stones, and Paul McCartney. Heerwagen has not attended any concerts outside Chicago during the class period, nor has she studied the ticket prices of concerts held elsewhere.

Defendants Clear Channel Radio, Inc. and Clear Channel Entertainment, Inc. are

wholly owned subsidiaries of defendant Clear Channel Communications, Inc. (collectively, Clear Channel, defendant, or company), which is based in Texas. Defendant, together with its subsidiaries, makes up a media empire which owns, programs, and sells air time for nearly 1,200 U.S. radio stations and has interests in 240 radio stations overseas. Through its subsidiaries defendant promotes or produces more than 26,000 live entertainment events per year; owns more than 135 live entertainment venues; and controls 900 music-related websites, 19 television stations, and more than 700,000 outdoor-advertising displays.

II Plaintiff's Allegations

A. Live Concert Industry in General

The following facts regarding the live concert ticket industry are alleged in the complaint. Typically, a live concert is the product of negotiations between a concert promoter, who stages a performance, and a booking agent, who represents an artist. The agent sells the right to organize a particular concert to a promoter who not only oversees the logistics and sells tickets to the public, but is ordinarily also responsible for the expenses of a show he promotes.

In the early 1970s, as new artists emerged whose performances could fill larger venues, certain regional promotion companies became big businesses. In 1997 a company called SFX Enterprises, Inc.(SFX) spent billions to acquire many major regional promoters. In 2000 Clear Channel purchased SFX and thereby became the nation's largest promoter and producer of live entertainment events. In 2001 defendant accounted for 70 percent of concert ticket revenue in the United States. Clear Channel's combined ownership of radio stations, outdoor advertising, and concert halls enabled it to book nationwide tours for performing artists without the involvement of independent operators, which regional promoters by definition cannot accomplish.

B. Allegations of Monopolistic Practices

Plaintiff maintains that Clear Channel uses its national presence to set nationally uniform concert ticket prices for certain tours. Specifically, plaintiff's amended complaint charges that Clear Channel has engaged in anticompetitive, predatory, and exclusionary practices in an effort to acquire, maintain and extend its monopoly power in a national ticket market for live rock concerts. Defendant's conduct allegedly constituted monopolizing and attempted monopolizing of the relevant market and thus violated § 2 of the Sherman Act, 15 U.S.C. § 2. This conduct allegedly injured plaintiff because it forced her to pay inflated prices for concert tickets. The amended complaint also asserts an unjust enrichment claim that the parties do not pursue on this appeal.

To prove an unlawful inflation of ticket prices plaintiff relies on the difference between recent increases in concert ticket prices nationwide and recent increases in the Consumer Price Index (CPI). According to Princeton University Economics Professor Alan B. Krueger, U.S. concert ticket prices rose 61 percent from 1997 to 2002, but only 21 percent between 1991 and 1996. See Alan B. Krueger, How Much is Too Much? The Economics of Concert Ticket Prices, Keynote Address at the Concert Industry Consortium 2002 (Feb. 7, 2002), in The Concert Hotwire, Mar. 4, 2002, at 16, 17 (exhibit to motion for class certification). By comparison, the CPI increased 13 percent between 1997 and 2002, and 15 percent between 1991 and 1996. Id. Prices for top groups (those listed in the Rolling Stone Encyclopedia of Rock and Roll for which Professor Krueger had data) rose even more; ticket prices for these groups rose 73 percent between 1997 and 2002. Id. In that period the price of concert tickets rose more than ticket prices for movies, theatrical performances and sporting events. Id. at 20.

Plaintiff asserts that the rise in concert ticket prices during the proposed class period, 1997 to the present, was the direct result of Clear Channel's intentional use of its dominance in other markets, particularly in the radio market, to achieve its objective of monopolistic profits through higher ticket prices. Heerwagen avers that Clear Channel has excluded competitors from the relevant market by using its position in the radio industry to put pressure on artists who do not avail themselves of Clear Channel's concert promotion services (non-Clear Channel artists) in a number of ways: (a) limiting their access to advertising on Clear Channel radio stations; (b) misrepresenting the availability of advertising; (c) charging them excessive advertising rates; (d) excluding them from updates on future concert dates; and (e) failing to include them in miscellaneous promotions such as ticket giveaway contests.

By these means, plaintiff maintains, the company has been able to lure artists to sign on with it as a promoter of their tours. According to the complaint, Clear Channel's alleged anticompetitive actions have led to reduced competition in the concert promotion market, unreasonable restraint of competitors' entry into the relevant market, limitation of air time for non-Clear Channel artists, and reduction of announcements about non-Clear Channel artists' upcoming concerts. These alleged unreasonable restraints have resulted in artificially high concert ticket prices and a decrease in concert information available to consumers. Plaintiff insists that any procompetitive benefits of defendant's actions are outweighed by these anticompetitive effects.

III District Court Proceedings

Plaintiff's amended class action complaint defined the putative class as follows

All persons (excluding defendants, their respective parents, subsidiaries and affiliates and any judge or magistrate presiding over this action and members of their families within the third degree of relationship) who purchased tickets to any live rock concert in the United States directly from any of the defendants or their affiliates or predecessors or agents during the period January 1, 1997 through the present.

After defendant moved to dismiss plaintiff's amended complaint the district court ordered minimal discovery held on the class certification issue. It included two experts' reports and depositions, plaintiff's deposition, public concert ticket pricing data, and information from publicly available sources with regard to the concert promotion business. The district court observed that resolution of the class action motion boiled down to one pivotal question: whether the relevant market for assessment of plaintiff's § 2 claim was national, thus justifying a national class. It also properly observed that beyond this pivotal question, the plaintiff had to show she was an adequate and typical representative and that a class action was the preferred method for resolving this controversy.

After discovery was completed, the district court held a three day evidentiary hearing on the class certification motion at which it heard testimony from Dr. Arthur Gruen, Jr., plaintiff's expert witness, and Professor Richard Gilbert, Clear Channel's expert witness. At the close of the hearing, the district court ruled that the relevant market was local. During the certification hearing the district judge found, in addition, that Clear Channel did not have the power to control prices and exclude competition nationally. Had it such power, the district court observed, there would be no price variations for concert ticket prices around the country, but defendant's expert had demonstrated that there was such variation. As a consequence of these rulings, the class certification petition was denied.

Un...