Why Won't MLB Teams Issue Refunds?

MLB and its ticketing partners are facing litigation for refusing to issue refunds for games that are currently "postponed."

At what point must a sports organization offer to refund money for a ticket to a game scheduled during the coronavirus pandemic? Is it when the pandemic started several months ago? Or when President Donald Trump proclaimed a national emergency on March 13? Or when states began to issue gathering restrictions and similar measures? Or when a game is formally postponed? Or when a game is either cancelled or played without spectators? Or is no refund required at all—can the organization simply credit the money for a future game to be played when life returns to normal?

These questions are central to a federal lawsuit brought by Matthew Ajzenman and Susan Terry-Bazer, two New York residents who contend their tickets to postponed, but not cancelled, New York Yankees and New York Mets games should be fully refunded.

Through their attorney, David Azar of Milberg Phillips Grossman, Ajzenman and Terry-Bazer filed a complaint on Monday in a Los Angeles federal court. They have sued MLB commissioner Rob Manfred, the 30 MLB teams and five ticket merchants (Ticketmaster, Live Nation Worldwide, Live Nation Entertainment, Stubhub and Last Minute Transactions). The case centers around the legal ramifications of MLB postponing the first eight weeks of the regular season and whether persons holding tickets to those games are legally entitled to a refund.

Ajzenman and Terry-Bazer assert the defendants are in violation of California statutes that outlaw unfair competition, unlawful conspiracies and unjust enrichment. The lawsuit portrays MLB and its teams as unethically conspiring with merchants to hoard many millions of consumers’ dollars for games that might never be played or that might be played without fans in the ballpark. The lawsuit stresses that numerous fans have lost jobs or experienced diminished wages as a result of the pandemic. Therefore, the plaintiffs contend, people need their money back. Ajzenman and Terry-Bazer depict MLB as acting in bad faith by not returning fans’ dollars.

Ticket sales are more integral to MLB’s business structure than they are in the NFL and NBA. According to Statista, gate receipts account for approximately 30% of MLB revenue. In contrast, roughly 22% of NBA revenue and 15% of NFL revenue derive from gate receipts (in the NHL, gate receipts account for approximately 37% of league revenue). This highlights why MLB teams might be reluctant to part ways with ticketholders’ payments.

Ajzenman and Terry-Bazer demand a court-issued injunction that would order full restitution plus interest, along with an accounting of all MLB tickets sold for the regular season and disgorgement of related profits. They also seek to have their case certified as a class action on behalf of similarly situated ticketholders. The case has not yet been assigned to a specific judge.

The uncertainty of the 2020 MLB season and how it relates to the lawsuit

As the lawsuit details, it’s a mystery when, or if, MLB will play the 2020 regular season. There are numerous hurdles for a season to be played, with or without fans at ballparks. While MLB and the Major League Baseball Players’ Association have negotiated player compensation and service time policies for a season, they have not yet formalized an agreement on the conditions of such a season—including where and when games would be played, how players (and managers, coaches and umpires) would be tested for COVID-19, whether everyone involved would be quarantined and what “quarantining” would exactly mean.

Even if MLB and MLBPA, along with managers, coaches and umpires, all agree on the circumstances for a return, the legal circumstances necessary for a 2020 regular season are complex and diffusely controlled. The federal government can’t order the country to return to normal. Under the U.S. Constitution, states enjoy wide latitude in determining matters of public health, safety and the general well-being of citizens. This is why states, along with cities, can issue very different gathering restrictions, shelter-in-place orders and non-essential services closings. In some states, it would be illegal for MLB games to be held at this time, even without spectators. In contrast, other states are more willing to “open up for business” in spite of public health risks. One of those states is Florida, where MLB could play games so long as the games are closed to the public.

While there are scientific reasons to believe the pandemic will lessen in the approaching months, medical experts fear the virus won’t fully go away for a while. It could trigger outbreaks in different places at different times over the next several years. Meanwhile, the creation of an effective and approved vaccine could take at least 18 months, plus additional time would be needed to ramp up vaccine production and distribute it. There have been encouraging reports about the development of medicines and drugs that might mitigate COVID-19’s worst symptoms, but nothing is certain yet. Without safeguards in place, some states will likely continue to limit economic activity, including the playing of sporting events.

For ticketholders to MLB games, this situation doesn’t provide much hope that they’ll be able to use their tickets. Even if the pandemic becomes much less problematic in the near future and even if games could occur with fans in attendance, some fans would likely feel reluctant to use their tickets. The psychological impact of the pandemic might last longer than the pandemic itself. Some consumers might remain wary of partaking in activities where they (and their families) are near other people, be it sitting in a ballpark, flying on an airplane or eating in a restaurant.

Unpacking the legal claims against Baseball

Within this context, Ajzenman and Terry-Bazer maintain that MLB clubs, and the ticket merchants with whom they do business, should issue refunds. The plaintiffs assert it is “virtually impossible” that games will be played in 2020 with fans in attendance.

To that end, they insist the defendants are in violation of California’s Legal Remedies Act. The Act makes it unlawful for businesses to falsely market products. Here, the plaintiffs charge that MLB advertised and sold tickets to games that they can’t hold or can’t allow fans to attend.

Ajzenman and Terry-Bazer also claim the defendants have violated California’s Unfair Competition Law. This law prohibits business activity that is immoral, unethical, oppressive or substantially injurious to consumers. The plaintiffs insist that baseball’s refusal to issue refunds during a pandemic constitutes a cruel and unscrupulous practice that greatly injures consumers. They further allege that consumers were deceived when buying tickets. As Ajzenman and Terry-Bazer see it, consumers “had no way of knowing” that MLB teams wouldn’t issue refunds in the event of a pandemic and they didn’t known teams would “unfairly retain the payments of consumers for tickets of games that are not going to be played.”

The complaint also asserts the defendants engaged in “coordination and cooperation” as part of an unlawful conspiracy. The conspiracy, the plaintiffs charge, was designed to use game postponements as pretext for retaining consumers’ monies. Ajzenman and Terry-Bazer further charge that by holding onto the money, MLB and the other defendants have been unjustly enriched at the expense of innocent ticketholders.

Ajzenman and Terry-Bazer have petitioned the court to certify their case as a class action. They propose two classes:

Team Purchaser Class: All persons and entities who purchased regular season tickets for MLB games directly from one or more Team Defendants for games scheduled to be played during the 2020 MLB season affected by COVID-19 that will not proceed as initially scheduled.

Resale Purchaser Class: All persons and entities who purchased regular season tickets for MLB games directly from one or more Ticket Merchant Defendants for games scheduled to be played during the 2020 MLB season affected by COVID-19 that will not proceed as initially scheduled.

The judge who is assigned to the case will review class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure. Under this rule, class certification is only appropriate when the plaintiff establishes four prongs or findings:

1. The class is so numerous that joinder (joining individual claims) of all members would be impracticable.

2. There are questions of law or fact common to the class.

3. The claims or defenses of the representative parties are typical of the claims or defenses of the class

4. The representatives would fairly and adequately protect the interest of the class.

Ajzenman and Terry-Bazer argue their proposed class is numerous (millions of consumers bought tickets), the questions raised in the case are common (other people seeking MLB refunds are in the same predicament); the legal arguments are typical (other consumers with tickets might seek to rely on California’s consumer-friendly statutes); and the two plaintiffs would fairly and adequately protect the class (they hired a class action specialist who specializes in consumer cases).

Forecasting MLB’s legal defenses

In the coming weeks, MLB and the other defendants will answer the complaint. They are likely to assert several arguments.

First, MLB will contend that the case is not yet ripe for litigation. Teams have postponed, not cancelled, games. To that end, the league will carefully distinguish postponement from cancellation. If the league cancels the games, plays them without fans or plays them in a different ballpark, the fans would gain a more compelling argument that they are owed refunds. In any of those circumstances, MLB would have failed to provide the advertised service: a license to enter a particular ballpark and sit in a particular seat to watch two teams play. For now, however, MLB maintains that it intends to play postponed games in advertised venues. As a rebuttal, the plaintiffs would insist this type of defense is made in bad faith, and that MLB is using “postponement” as mere pretext to keep money.

Second, MLB will highlight teams’ well-established ticket policies. These policies explicitly state that postponed games do not compel refunds. MLB will thus assert that consumers were on notice before they made their purchases.

Take the ticket policy for the Washington Nationals. It expresses that in the event a game “is not played due to weather or any other reason, the ticket will constitute a rain check that can be either: (a) used for admission to the rescheduled game, if any, subject to certain doubleheader limitations; or (b) the paid value of your tickets to a postponed or cancelled game can be redeemed for tickets to a future 2019 regular season game, subject to blackout dates and availability, and minus any Loaded Value previously spent. Under no circumstances will a refund be given.” This language indicates that so long as a postponed game is played during the same regular season, no refund is required.

The Yankees also feature language in their ticket policy that attempts to limit their legal exposure and disclaim potential liability. Consider their “Rain Check Policy”, which states, in all caps:

IN NO EVENT WILL THE YANKEES BE LIABLE TO THE TICKET HOLDER AND/OR TICKET PURCHASER FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, EXEMPLARY, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES OR FOR LOST PROFITS, REVENUES OR BUSINESS OPPORTUNITIES EVEN IF THE YANKEES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Third, Ticketmaster’s website expresses language that similarly notifies consumers that MLB doesn’t provide refunds for postponed games: “Postponed MLB games are not eligible for refunds.” The defendants can thus cite repeated instances of language telling consumers that postponed games are not refundable events. As a rebuttal, the plaintiffs might argue that none of these policies contemplated a once-in-a-century pandemic and thus boilerplate language ought not to apply.

MLB is also poised to argue that the case should neither be tried in California nor certified as a class action. According to the complaint, Ajzenman spent $1,730 for tickets to more than 20 Mets games at CitiField. Terry-Bazer, meanwhile, spent $926 to purchase six tickets to watch the Yankees play the Boston Red Sox on May 9 in Yankee Stadium. She intended to take her grandson to the game. MLB, which like the two plaintiffs is based in New York, could petition to have the case moved to federal court in New York on grounds that it would be a more appropriate and convenient forum for many of the parties (the ticket merchants are located in different states). This type of petition would, at a minimum, delay the proceedings and potentially preclude the plaintiffs from using California law. MLB could maintain the case should not be certified since, among other reasons, consumer laws vary significantly among the states where MLB games are played.

Should the litigation advance, it’s possible MLB and the ticket merchants could point figures at each other. Their contracts with each other could become crucial evidence.

The scheduling of the litigation is uncertain. As a result of the pandemic, many courts have adopted limited operations procedures. These procedures prioritize available court time for criminal cases over civil matters. This is true of the U.S. District Court for the Central District of California, the Los Angeles-based federal court where the plaintiffs filed their civil suit. It’s possible the litigation will take longer to play out than the plaintiffs hope.

We will keep you posted on key developments.

Michael McCann is SI’s Legal Analyst. He is also an attorney and the Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.