(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Alison Frankel

Nov 14 (Reuters) - Live Nation is calling on a U.S.

appeals court to undo a three-judge panel ruling last month

that, in the words of the entertainment behemoth, has created

"massive uncertainty" about corporate tactics to combat mass

arbitration.

In a Nov. 12 petition for reconsideration by the three-judge

panel or rehearing by an expanded panel of judges from the 9th

U.S. Circuit Court of Appeals, Live Nation scorched the panel's

holding that the Federal Arbitration Act does not apply when

companies require consumers to accede to procedures that strip

them of the right to arbitrate claims individually.

Such procedures, said 9th Circuit Judges William Fletcher,

Morgan Christen and Lawrence VanDyke, don't match the federal

law's vision of arbitration as a streamlined, bilateral

alternative to court proceedings.

That conclusion, in turn, led the panel to hold that Live

Nation's contract with consumers is unenforceable under a 2005

California decision known as Discover Bank, which says consumer

contracts barring classwide litigation are unconscionable.

The U.S. Supreme Court, as you know, held in 2011's AT&T

Mobility v. Concepcion that the Federal Arbitration Act

pre-empts California's Discover Bank rule. But the Live Nation

panel said in last month's decision that because the Federal

Arbitration Act does not apply when companies subject consumers

to problematic consolidated proceedings, the California Supreme

Court decision regains the force of law.

Live Nation argued in the new petition for rehearing

that the panel's Discover Bank holding "threatens extreme

consequences."

Here's why. As Live Nation said in its new petition,

companies that require consumers to arbitrate claims instead of

litigating in class actions have been blindsided in recent years

by the phenomenon of mass arbitration, in which hundreds or

thousands of customers file near-identical demands to arbitrate.

Defendants at first balked at paying millions of dollars in fees

to initiate all of those arbitration cases, but as courts

insisted that they comply with the terms they imposed on their

consumers, companies have devised more sophisticated strategies

to counter mass arbitration campaigns.

Live Nation's approach was to change from a traditional

arbitration forum, JAMS, to a start-up provider called New Era,

which offered companies special protocols for mass arbitration.

Those protocols included "batching" similar cases before a

single arbitrator who would then oversee three bellwether

proceedings. Under New Era's protocol, rulings in the

bellwethers could, at the arbitrator's discretion, bind

plaintiffs in all of the batched cases.

In last month's opinion, the 9th Circuit panel determined

that New Era's rules were so confusing and one-sided that Live

Nation's consumer contract was unenforceable.

But as Live Nation's lawyers at Latham & Watkins pointed out

in the new petition, many other companies have adopted similar

batching procedures to mitigate mass arbitration fees. So the

panel's holding that the Federal Arbitration Act does not extend

to batch-and-bellwether proceedings, Live Nation said, "will

confound courts, consumers and companies seeking to understand

how the FAA applies to mass arbitration procedures."

At the very least, Live Nation argued, the panel's

"gratuitous and wrong" holding on the applicability of the

Federal Arbitration Act to mass arbitration defenses will have a

chilling effect on corporate strategies to stave off these

campaigns.

"The panel's ruling here purported to follow Concepcion, but

actually turned the [U.S. Supreme] Court's reasoning on its

head," Live Nation said in the rehearing petition. "It shrinks

the scope of FAA protections, constraining the parties' choices

and undermining workable arbitration."

As evidence of the proposed confusion created by the panel

decision, the company cited a post-ruling letter to the 9th

Circuit from Keller Postman, the plaintiffs' firm in both the

Live Nation case and a separate appeal challenging the mass

arbitration protocols that streaming service Starz Entertainment

has imposed on its customers.

Keller Postman told the 9th Circuit judges overseeing the

Starz case that the Live Nation decision backed plaintiffs'

assertion that Starz's protocol - consolidating nearly 7,500

cases before a single arbitrator to resolve a threshold question

-- is not protected by the Federal Arbitration Act and is

therefore unenforceable under California's Discover Bank

precedent.

Starz's lawyers at DLA Piper countered in their letter to

the 9th Circuit that Keller Postman is overreading the Live

Nation decision. The panel opinion, Starz said, did not actually

hold that every arbitration agreement calling for the

consolidation of mass arbitration claims is outside of the aegis

of the Federal Arbitration Act. In Starz's reading of the Live

Nation decision, the panel was focused on Live Nation's

batch-and-bellwether process, not merely consolidation.

Keller Postman's Warren Postman did not respond to my email

query on Live Nation's petition for rehearing the panel

decision.

Postman previously told me that in his interpretation of the

panel ruling, "corporate attempts to impose novel group

procedures to gain tactical advantages over consumers and

employees will strip those agreements of the protections of

federal law and leave them vulnerable to unconscionability

challenges under state law."

Live Nation appellate lawyer Roman Martinez of Latham

declined to comment on the petition.

One interesting complication for Live Nation: The 9th

Circuit panel, as I mentioned, offered two "alternative and

independent" justifications for invalidating the company's

consumer contract. It ruled on the narrow ground that New Era's

rules were too unfair to bind consumers and on the much broader

rationale that the Federal Arbitration Act does not pre-empt

California precedent when arbitration protocols contravene the

federal law's vision of arbitration as a streamlined, bilateral

proceeding.

Live Nation emphasized the potential consequences of the

broader holding but asked the 9th Circuit to revisit both.

Otherwise, there wouldn't be much benefit to the company: If the

court were to overturn only the panel's Federal Arbitration Act

analysis, the consumer contract would still be unenforceable for

the alternative reason that New Era's rules are unconscionable.

Does the 9th Circuit really want to revisit those rules?

We'll soon find out.

Read more:

Live Nation decision will force companies to rethink

consumer arbitration rules

Live Nation must face consumer lawsuit over ticket prices,

US appeals court rules

In Live Nation case, appeals court mulls mass arbitration

breakthrough