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State Appeals Court Rules for Online Ticketing Site Under Federal Communications Law
By Geng Chen – Edited by Lauren Henry

Hill v. StubHub, Inc., NO. COA11-685, 2012 WL 696223 (N.C. App. Ct. March 6, 2012)
Slip Opinion

The Court of Appeals of North Carolina reversed the Guilford County Superior Court’s grant of summary judgment for the plaintiffs in an unfair and deceptive trade practices case arising out of the 2007 “Miley Cyrus as Hannah Montana” concert tour. The trial court found StubHub in violation of N.C. Gen.Stat. § 14–344, which prohibits a seller from reselling tickets for more than $3 over their “face value.” It also rejected StubHub’s argument that it was immune from liability under 47 U.S.C. § 230, which provides immunity to liability to providers or users of interactive computer services, who act as publishers or speakers of information provided by another information content provider.

The Court of Appeals conducted a de novo review of the trial court’s summary judgment decision on the issue of the scope of 47 U.S.C. § 230 immunity, an issue of first impression in North Carolina. The court held that StubHub acted not as a seller but as a broker, making § 230 immunity applicable. The court also held that StubHub was not liable under North Carolina law for the fees it charged the ticket-seller for use of the site because it was not the seller or the seller’s agent in the transaction.

Eric Goldman provides an overview of the case and discusses the holding in light of other §230 cases.

StubHub operates an online ticket exchange site that connects sellers of surplus tickets with buyers. StubHub receives a percentage-based commission for each sale, calculated from the sale price set by the seller. In September 2007, the plaintiffs bought tickets through StubHub for $149 each, a $93 markup from the face value, from a then-anonymous seller. StubHub also collected a service fee of 10% of the sale price of the tickets from the plaintiffs.

Under 47 U.S.C. § 230, StubHub would be liable for the unlawful ticket price if it served as an information content provider, but not if it were merely a service provider. In the absence of any Supreme Court ruling on the scope of 47 U.S.C. § 230, the court looked to decisions of lower federal courts for guidance in interpreting the federal statute.

The court first noted that § 230 is generally interpreted broadly in deference to congressional intent “not to deter harmful online speech.” Hill v. StubHub, Inc., NO. COA11-685, 2012 WL 696223 (N.C. App. Ct. March 6, 2012), slip. op. at 15 (quoting Universal Communication v. Lycos, Inc., 478 F.3d 413, 418-19 (1st Cir. 2007)). The court then surveyed the case law and found that “all but a handful” of cases accepted the website defendant’s claim of immunity. Id. at 20. Under Fair Housing Coun, San Fernando v. Roommates.com, 521 F.3d 1157 (9th Cir. 2008), a defendant loses §230 immunity when it “materially contributed” to the development of unlawful content. If the website affirmatively developed, effectively controlled, or took other actions which essentially ensured the creation of the unlawful content, immunity is denied. Id.

The court relied heavily on the Ninth Circuit’s reasoning in Roommates to articulate the test for applying § 230. An interactive website can “materially contribute” to the development of unlawful content if it actively requires users to provide the illegal information. Id. at 29. However, the website does not lose its immunity if it is only aware of the unlawful content. Zeran v. America Online, 129 F.3d 327, 333 (4th Cir. 1997). Furthermore, any tools provided by the website which can be used to generate both lawful and unlawful content are considered neutral and do not transform the website into an information content provider. Jurin v. Google, 695 F. Supp. 2d 1117 (E.D. Cal. 2010).

In the instant case, the court held that because the actual ticket seller, and not StubHub, set the price of the tickets, StubHub lacked responsibility for creating or developing the unlawful ticket price and is immune from liability. The court also held that StubHub had not violated N.C. Gen. Stat. § 14-344 because simply because the statute only punishes sellers of tickets, and StubHub acted merely as an independent brokerage.

The Court of Appeals rejected the trial court’s examination of StubHub’s website as a whole, including its ticket pricing tools, on the grounds that (1) there is no evidence the seller actually used any of these tools, and that (2) these tools are neutral per Jurin. In addition, the Court of Appeals explicitly disavowed NPS, LLC v. StubHub, Inc., 2009 WL 995483 (Mass. Super. Ct. Jan. 26, 2009), finding its holding “inconsistent with the decisions concluding that knowledge of unlawful content does not strip the website of . . . immunity.” Id. at 35.

Hill v. StubHub joins several other cases in which courts have in applied § 230 immunity to ticket resale websites.  See Milgram v. Orbitz Worldwide, LLC, 16 A.3d 1113 (N.J. Super. Ct. Law Div. 2010); Fehrs v. StubHub, Inc., #0801-00515 (Ore. Cir. Ct. Sept. 9, 2008).

Geng Chen is a 1L at Harvard Law School.

Posted On Mar - 20 - 2012 Comments Off

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