Smile for Kids, Inc. v. Madison Sq. Garden Co., Index No. 652416/2016, 5/20/16(Ostrager, J.)

Preliminary injunctions; Arts & Cultural Affairs Law

By: Katherine Sullivan | Staff Writer

Plaintiffs, Smile for Kids, Inc. d/b/a S4K Entertainment Group (“S4K”) and J.A.J. Executive Services, LLC (“JAJ”), are ticket agencies that resell tickets to various events. Defendant, The Madison Square Garden Company (“MSG”), and its representatives sell season tickets to Knicks and Rangers sporting games. S4K and JAJ purchase their Rangers and Knicks season tickets from MSG or from other individual season ticket holders who resell their tickets. S4K and JAJ then resell these tickets to third party clients or the general public. S4K and JAJ control nearly 31,000 tickets for Rangers and Knicks games. MSG notified S4K and JAJ via e-mail that MSG planned to strictly enforce a policy that limited individual season ticket holders to a maximum of eight tickets per year. After the season, MSG would then limit season ticket holders to four tickets per year to ensure a greater number of fans had access to sporting events. MSG memorialized its wishes in a 2016-17 Knick Season Ticket Subscription Agreement.

S4K and JAJ filed a complaint stating MSG’s new ticket policy violated the spirit and the letter of New York Arts and Cultural Affairs Law (“ACAL”) § 25.30(1)(a) because MSG limited the purchasing of season tickets. Additionally, they moved for a preliminary injunction restraining MSG from redistributing revoked subscriptions and a mandatory injunction compelling MSG to renew subscriptions that it refused to renew. MSG answered the complaint by bringing S4K and JAJ to Court to determine whether its new policy violated ACAL § 25.30(1)(a). Before the Court decided the preliminary injunction, MSG settled with JAJ in open court.

The Court granted in part and denied in part the preliminary injunction for S4K. The Court first interpreted ACAL § 25.30(1)(a) to prohibit an operator of a place of entertainment from limiting the resale of tickets, not limiting the purchase of tickets. Therefore, MSG did not violate ACAL § 25.30(1)(a) when it communicated to S4K that it was restricting the number of tickets that customers could purchase, not the number of tickets that customers could resell. Accordingly, neither the Subscription Agreement nor ACAL § 25.30(1) (a) require MSG sell an unlimited number of tickets to vendors. Second, the Court reasoned it was consistent with public policy to limit the sale of tickets any single customer may purchase because it promotes a greater transparency of the allocation of tickets. Therefore, MSG could limit the purchase of tickets. However, MSG must have a reasonable basis to deny season ticket subscription renewals when limiting the purchase of tickets, and cannot arbitrarily, capriciously, or unreasonably associate any individual season ticket holders with S4K. Here, the Court stated that MSG could not rescind ticket subscriptions from longtime season ticket holders who did business with S4K because it would be unreasonable. Accordingly, S4K may continue to purchase tickets from ticket holders, not MSG, and resell them to third parties. In contrast, MSG may rescind season ticket subscriptions from recent season ticket holders who have had their season tickets paid for by S4K.

The Court denied S4K’s injunction in part, finding MSG could limit the purchase of tickets. It granted S4K’s injunction to the extent MSG could not deny ticket renewal to individuals who have done business with S4K and who have had season tickets for a substantial amount of time. Otherwise, S4K could purchase tickets from other individual ticket holders.

Smile for Kids, Inc. v. Madison Sq. Garden Co., Index No. 652416/2016, 5/20/16(Ostrager, J.).

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