Judge: Virginia Keeny, Case: 20VECV00691, Date: 2023-03-29 Tentative Ruling
Case Number: 20VECV00691 Hearing Date: March 29, 2023 Dept: W
SPOTLIGHT TICKET MANAGEMENT, INC. v. EBAY
INC., et al.
Defendant Stubhub, Inc’s Motion for Leave
to File Cross-Complaint and
Date of Hearing: March 29, 2023 Trial Date: None set.
Department: W Case No.: 20VECV00691
BACKGROUND
Plaintiff Spotlight Ticket Management, Inc. (“Plaintiff”) alleges
that it had an agreement to serve as a member of the StubHub Affiliate Program
(the “Affiliate Program”) for Defendants eBay, Inc. (“eBay”) and StubHub, Inc.
(“StubHub”) (collectively “Defendants”). Plaintiff’s role was to direct
consumers to Defendants’ ticket platform in exchange for commissions on orders.
Plaintiff alleges that it was not being paid commissions according to the terms
and conditions of the Affiliate Program because StubHub was underreporting and
misrepresenting commissionable transactions owed to Plaintiff. Plaintiff also
alleges that Defendants interfered with Plaintiff’s contract, contractual
interests, and business interests with non-party American Express (“Amex”), which
hired Plaintiff to manage its own ticketing platform as part of a concierge
service for Amex’s cardholders. More specifically, Plaintiff alleges that
Defendants instructed Amex not to share data detailing ticket purchases
facilitated through StubHub, and this data helped Plaintiff to discover the
underpayment of money owed to them from Defendants.
On August 28, 2020, Plaintiff filed its original complaint against
Defendants asserting causes of action for breach of contract; breach of the
implied covenant of good faith and fair dealing; unjust enrichment; quantum
meruit; promissory estoppel; tortious interference; and unlawful, unfair or
fraudulent business practices. Plaintiff’s operative Third Amended Complaint was
filed January 23, 2023.
[Tentative] Ruling
I.
Defendant StubHub, Inc’s Motion for Leave to File Cross-Complaint
Against Spotlight Ticket Management, Inc., Anthony Knopp, Kenneth Hanscom,
Joseph Greiner, Jen-Ban Ho, Mansoor Mirza, Ashley Barrett, and Matthew Huff’s is
GRANTED.
II.
Stubhub’s Motion to Compel Further Discovery Responses is GRANTED,
in part.
DISCUSSION
I.
DEFENDANT STUBHUB, INC’S MOTION
FOR LEAVE TO FILE CROSS-COMPLAINT AGAINST SPOTLIGHT TICKET MANAGEMENT, INC.,
ANTHONY KNOPP, KENNETH HANSCOM, JOSEPH GREINER, JEN-BAN HO, MANSOOR MIRZA,
ASHLEY BARRETT, AND MATTHEW HUFF
Defendant StubHub, Inc. (“StubHub”) seeks leave to file a
Cross-Complaint against Plaintiff Spotlight Ticket Management (“Spotlight”)
pursuant to California Code of Civil Procedure section 428.50 based on
newly-discovered information and testimony. StubHub seeks to includes claims
for (1) fraud, (2) trade libel, (3) breach of contract, and (4) unjust enrichment.
StubHub filed its Cross-Complaint with its answer to Spotlight’s Third Amended
Complaint (“TAC”) and now seeks the court ratify the Cross-Complaint filed on
February 14, 2023.
Code of Civil Procedure section 428.50 authorizes the court to
grant leave to file a cross-complaint in the interest of justice at any time
during the action.¿A policy of liberal construction of section 426.50 to avoid
forfeiture of causes of action is imposed on the trial court. (Silver Orgs. v. Frank (1990) 217 Cal.
App. 3d 94, 98-99.) ¿ A motion to file a cross-complaint at any time during the
course of the action must be granted unless substantial evidence of bad faith
is demonstrated. (Id.)¿Bad faith involves conduct, not prompted by an
honest mistake, but by some sinister motive, not simply bad judgment or
negligence, but rather the conscious doing of a wrong because of dishonest
purpose or moral obliquity. (Id.) Bad faith contemplates a state of mind
affirmatively operating with furtive design or ill will. (Id.) In
addition, Code of Civil Procedure section 426.10 defines a cross-complaint as
compulsory when its claims arise from the same transaction, occurrence, or
series of transactions or occurrences as the claims in the complaint.¿The
phrase “same transaction or occurrence” applies if the factual or legal issues
are logically related. (ZF Micro
Devices, Inc. v. TAT Capital Partners, Ltd. (2016) 5 Cal.App.5th 69, 83.)
StubHub seeks to file a cross-complaint against Spotlight and
several of their top executives on the grounds Spotlight recently produced
documents and testimony of Spotlight’s executives purportedly revealing Spotlight
had been perpetrating a massive fraud on StubHub, authorized by Spotlight’s top
executives, and carried out with knowledge by almost every employee who touched
the account. StubHub contends the claims against Spotlight are compulsory and
the claims against Spotlight’s executives arise out of the same central facts.
Spotlight opposes the motion for leave to file the cross-complaint
on the grounds it is made in bad faith and the proposed cross-complaint is
futile. First, Spotlight argues the late filing of the Cross-Complaint is part
of a broader, desperate attempt by StubHub to delay trial and exhaust
Spotlight’s resources as StubHub has actually been on notice of its supposed
cross-claims against Spotlight for years. For example, the parties collaborated
to reconcile apparent unpaid commissions as early as 2016 and on July 26, 2019,
counsel for Spotlight sent StubHub a letter demanding reconciliation and
payment for transactions that were not properly tracked and attributed to Spotlight—in
other words, the very same conduct StubHub now alleges was a “fraudulent
scheme.” (See Sandberg Decl. ¶19, Exh. 9.) Moreover, StubHub’s cross-claims are
a repackaging of its affirmative defenses, which StubHub first pled over two
years ago. Stubhub’s cross-complaint also quotes emails that were produced
months, and in some cases more than a year, before StubHub filed its cross-complaint.
(Sandberg Decl. ¶20, Exhs. 10-16.) On top of actual notice of its claims,
Spotlight argues StubHub’s continued conduct since filing the cross-complaint
further establishes bad faith including improper ex parte relief and a
barrage of last-minute deposition notices.
The court finds no strong showing of bad faith. As noted above, bad
faith generally involves actual or constructive fraud, a design to mislead or
deceive another, or neglect or refusal to fulfill some duty. (Silver Orgs.,
supra, 217 Cal.App.3d at 100.) It is not prompted by an honest mistake,
bad judgment, or negligence. Id. Rather, it is the conscious doing of a wrong
because of dishonest purpose. (Id.) StubHub’s actions, like the
appellants in Silver Orgs., do not demonstrate a dishonest purpose. StubHub
does not dispute it previously had some of the core documents at issue in
StubHub’s Cross-Complaint. However, StubHub’s counsel, under penalty of
perjury, has stated without the November 2022 production and deposition of
Spotlight witnesses StubHub could not have discovered this activity any
earlier. (Kuwhara Decl.¶¶12-13.) Additionally, the court agrees that Stubhub’s
affirmative defenses do not demonstrate bad faith. While StubHub may have
answered Spotlight’s first complaint with affirmative defenses of unjust
enrichment and fraud, StubHub’s claims are based on documents that were not
available at the time the answer was filed. As for StubHub’s additional discovery
requests after serving the cross-complaint, again, such testimony would be
based on the new claims by StubHub. Although StubHub may have deposed or knew
of the executives and employees previously, it is unclear how StubHub should
have known to depose them regarding these matters previously.
Spotlight also argues the cross-claims are legally deficient in
numerous respects. First, Spotlight argues the claims are time barred against
the individual cross-defendants and are protected by the litigation privilege. Based
on a reading of the face of the cross-complaint, the claims are not time
barred. As noted by StubHub, California’s delayed discovery rule, the statute
of limitations is tolled “until such time as a reasonable investigation would
have revealed its factual basis.” (Fox v. Ethicon Endo-Surgery,
Inc. (2005) 35 Cal. 4th 797, 803.) Moreover, upon review of the
cross-complaint, StubHub is not seeking damages for communications made during litigation
to “achieve the objects of the litigation.” (See Flickinger v. Finwall
(2022) 85 Cal.App.5th 822, 840.) Rather, the allegations are based on conduct
outside of litigation but discovered during the course of it. Spotlight also
argues StubHub’s claims are barred by California’s Anti-SLAPP statute,
particularly those being pursued against certain of the “new” individual
defendants because such conduct constitutes malicious prosecution under the
Anti-SLAPP statute. Spotlight has not demonstrated the cross-complaint is
malicious prosecution from the face of the complaint.[1]
Spotlight is free to make merit-based arguments on a demurrer, special motion
to strike, summary judgment, or the like.
Lastly, Spotlight contends the cross-complaint is futile because StubHub’s
corporate representative—speaking for the Company—admitted at deposition that
there is no factual basis for the allegations in the Cross-Complaint. (Sandberg
Decl., Exh. 8 at 192:9-193:13.) Spotlight also contends Mr. Huff testified that
it was simply his own suggestion to his lawyers that Spotlight and its
customers’ use of “ad blockers” or browser privacy settings could have caused a
transaction not to track, even though he had no firsthand or actual knowledge
of any such issues. (Sandberg Decl., Exh. 8 at 82:18 – 86:21.) The court finds
this does not make the cross-complaint futile. As noted by StubHub, there are
others who are most knowledgeable that would be better suited to testify on
certain topics including reconciliation payments.
Accordingly, StubHub’s Motion for Leave to File Cross-Complaint is
GRANTED.
II. STUBHUB’S MOTION TO COMPEL FURTHER DISCOVERY RESPONSES
StubHub move this court for an order (1) compelling Spotlight to
provide further discovery responses to StubHub’s Sixth Set of Requests for
Production (RFPs), Nos. 85-93, and 95-97; and (2) imposing monetary sanctions
against Plaintiff Spotlight in the amount of $8,500. StubHub makes the motion
on the grounds Spotlight’s responses to StubHub’s requests are incomplete and
evasive.
A motion to compel further responses to a demand for inspection or
production of documents may be brought based on: (1) incomplete statements of
compliance; (2) inadequate, evasive or incomplete claims of inability to comply;
or (3) unmerited or overly generalized objections. (CCP §2031.310(c).) A motion to compel further production must set
forth specific facts showing good cause justifying the discovery sought by the
inspection demand. (See Code Civ. Proc., § 2031.310(b)(1).) It is not necessary
for the motion to show that the material sought will be admissible in evidence.
“Good cause” may be found to justify discovery where specific facts show that
the discovery is necessary for effective trial preparation or to prevent
surprise at trial. (See Associated Brewers Dist. Co. v. Superior Court
(1967) 65 Cal.2d 583, 586-588.)
StubHub argues Spotlight refuses to produce documents related to
its damages claims. According to StubHub, RFPs 85-88 seek documents related to
Spotlight’s financial statements and reports. RFPs 89 and 90 seek documents
related to the value of Spotlight’s technology, which is directly relevant to
its overall value. RFP 91 seeks information
regarding Spotlight’s attempts to fundraise, including any notes or discussions
and the identity of prospective or actual funders and RFP 97 asks Spotlight to
produce documents “regarding any valuations received from third parties” in connection
with the sale of Spotlight or its technology. RFP 92 seeks documents and communications
“which mention, discuss, or refer to any damages, injuries, or harms” that
Spotlight claims to have suffered as a result of StubHub’s tortious
interference and 93 seeks “All DOCUMENTS sufficient to show the identity of
YOUR customers and the revenues from each customer by month.” Lastly, RFPs 95
and 96 seek documents related to Spotlight’s actual or potential customers,
including surveys or documentation of any customer’s decision to terminate its
license with Spotlight. StubHub contends Spotlight’s insistence that time frame
should start in 2018 is unreasonable and the requests for documents related to
the valuation of the company is directly relevant to Spotlight’s damages
theories of loss of business valuation.
In opposition, Spotlight argues StubHub’s requests are patently
overbroad and seek detailed information about irrelevant aspects of Spotlight’s
business. Specifically, Request Nos. 85-87 seek a broad range of documents
related to Spotlight’s finances without any limitation as to time. Spotlight
objected to these requests on several grounds but agreed to produce responsive
documents from 2018 to present, the time period at issue in Spotlight’s Third
Amended Complaint.
The court agrees the RFPs are overbroad as to time. RFPs Nos. 85-88
do not provide a timeframe. StubHub argues in an effort to compromise, StubHub
offered to limit the timeframe from January 2012 through the present. StubHub
seeks production dating back to 2012 on the grounds the relationship with AMEX
began in 2014 and going back two years would test the loss of business
valuation theory. The court disagrees. The court finds RFPS Nos. 85-87 should
go back 2014 to present. This should be sufficient to test the loss of business
valuation theory.
Spotlight also argues Request No. 88 is entirely duplicative of
Requests 85-87 and to the extent it is not duplicative, this request is
overbroad, including to the extent it contains no temporal limitation, and it
is vague and ambiguous. In addition, Spotlight unilaterally limits responsive documents
relating to its financial condition that are sufficient for StubHub to
investigate Spotlight’s damages including (i) financial reports with profit and
loss statements, (ii) purchasing reports, and (iii) revenue summaries by
customer. (Sandberg Decl. ¶7.) The court finds the request is not so
duplicative. Moreover, the request seeks more than the limitation imposed by
Spotlight. Spotlight is to produce all documents describing the financial
condition of Spotlight from 2014 to present.
Next, Spotlight argues RFPs Nos. 89 and 90 are patently overbroad.
Spotlight contends they are not limited by any date range or subject matter, contain
several vague and ambiguous terms and phrases, and invasive. The court agrees
the requests are overbroad and invasive. As worded, the requests seek nearly
every aspect of Spotlight operational development plans. The parties must work
together to narrow down the requests.
Spotlight further argues RFPS 91 and 97 StubHub’s requests are
wildly overbroad. The requests contain no temporal limitation. Moreover, Spotlight
has already provided discovery relevant to this request and has informed StubHub’s
counsel that it will supplement its response to Request No. 105 (RFP 15
requests “All DOCUMENTS sufficient to show YOUR alleged $7,500,000 in lost
equity bridge financing as described in YOUR response to Form Rog No. 9.1 in
STUBHUB’s Fourth set of Form Interrogatories and how that amount was
calculated.) As for the time frame, the court the request vague as it does not
state a time frame. StubHub has said it would limit the time frame from 2012 to
present. However, documents dating that far back are not relevant to
Spotlight’s claims. As noted above, Spotlight is to produce responsive
documents from 2014 to present. Spotlight began its fulfillment agency with
AMEX in 2014 and in 2016, Spotlight discovered uncovered that it was not being
paid commissions pursuant to the Affiliate Program’s terms and conditions. (TAC
¶¶4, 67.) If Spotlight maintains it has produced such documents, Spotlight must
identify what documents it is referring to.
Spotlight also opposes StubHub’s RFP no. 92 on the grounds it was
duplicative of RFP no. 40 and in any event, Spotlight has already produced, or
will produce, all relevant documents in its possession relating to damages,
injuries, or harms Spotlight suffered as a result of StubHub’s tortious interference
as alleged in the operative complaint. If Spotlight has produced such
documents, Spotlight must identify what documents it is referring to.
Next, Spotlight objects to RFP no. 93 on the grounds this request
is extremely overbroad in that it once again contains no temporal limitation
and seeks documents related to aspects of Spotlight’s business that have
nothing to do with the instant lawsuit. The request is too broad. As noted by
Spotlight, Spotlight has numerous products and services that are part of its
enterprise software offering and Spotlight’s customers use its software for a
variety of reasons. StubHub must limit the scope to platforms regarding Spotlight’s
claims against StubHub. StubHub must also limit the time frame to 2014 to
present. If Spotlight has already produced documents containing revenue
summaries by customer, Spotlight must identify what documents it is referring
to.
Lastly, Spotlight argues Request Nos. 95 and 96 are overbroad and
seek irrelevant information about aspects of the Spotlight system that are
wholly unrelated to the allegations in this case. The court notes there is no
time frame provided. StubHub must also limit the time frame to 2014 to present.
Moreover, the court finds these requests relevant. As noted by StubHub, if a
loss of business or reputation was related to Spotlight’s software and not
anything related to any alleged interference with American Express, that information
would be directly relevant to combatting these damages claims. Executive
meeting notes are not fully responsive to the request.
Sanctions
Code of Civil Procedure section 2031.310(h) provides for mandatory
monetary sanctions “against any party, person, or attorney who unsuccessfully
makes or opposes a motion to compel further response to a demand, unless it
finds that the one subject to the sanction acted with substantial justification
or that other circumstances make the imposition of the sanction unjust.” (CCP § 2031.310(h).)
StubHub seeks monetary sanctions in the amount of $8,500 on the
grounds Spotlight cannot establish “substantial justification” for its blanket
refusal to provide documents to certain of its document requests relevant to
its damages claims.
Spotlight also seeks monetary sanctions in the amount of $7,190 on
the grounds StubHub’s Motion to Compel is “without substantial justification”
because it fails to make any compelling argument as to why Spotlight’s valid
and justified objections should not stand.
The court, finding a genuine dispute between the parties, denies
both parties’ request for sanctions.