Eventbrite, Inc. v. M.R.G. Concerts Ltd.

Background

MRG is described in the opinion as a Canadian-based concert-promotion company. Eventbrite provides services for planning, promoting, and producing live events and is based in California. The parties entered into an Eventbrite Services Agreement on December 5, 2019, and an amendment on January 13, 2020.

Under the amendment, Eventbrite agreed to make funds available after a written request, subject to various conditions. One condition stated that Eventbrite did not have to provide an advance if MRG had experienced, in Eventbrite’s reasonable discretion, a material adverse change in its operations, business, assets, liabilities, or ability to perform its contractual obligations.

MRG alleged that it requested an advance in March 2020 and that Eventbrite refused to provide it. MRG also alleged that Eventbrite had suspended its advance-payout program because of the pandemic, without considering MRG’s individual circumstances. MRG said its business remained operational and that most of its shows had been postponed rather than canceled. Eventbrite disputed MRG’s interpretation of the events and argued that pandemic-related shutdowns constituted a material adverse change under the contract.

Eventbrite had separately sued MRG and Matthew Gibbons, alleging that they breached the contract by terminating it early, using other vendors for services reserved to Eventbrite, and failing to make required payments. MRG responded with counterclaims against Eventbrite for breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition under California law, and declaratory relief.

Motions and Judicial Notice

Eventbrite moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss MRG’s counterclaims. That rule allows dismissal when a pleading does not allege enough facts to make a legally valid claim plausible. Eventbrite also moved under Rule 12(f) to strike MRG’s Third, Fifth, Sixth, Seventh, Eighth, Tenth, Eleventh, Twelfth, and Thirteenth affirmative defenses. A motion to strike asks the court to remove a defense that is insufficient, redundant, immaterial, impertinent, or scandalous.

The court ruled that it could consider the Eventbrite Services Agreement and the amendment because MRG’s counterclaims referred to them. The court denied without prejudice Eventbrite’s requests for judicial notice of a website Merchant Agreement and two letters from MRG’s counsel. The court granted judicial notice of Eventbrite’s August 7, 2020 filing but not of disputed facts in that document. It also took judicial notice that certain Canadian provinces issued specified public-health orders, without accepting disputed facts stated in those orders, and denied without prejudice the request concerning other public-health orders that the court found had little relevance to the dispute.

Court’s Analysis

For the breach-of-contract counterclaim, the court concluded that MRG adequately alleged a valid contract, its own performance, Eventbrite’s breach, and resulting damages. The central dispute concerned whether Eventbrite reasonably determined that MRG had experienced a material adverse change when Eventbrite denied the advance. The court held that this was largely a factual dispute. It noted that MRG alleged that it remained operational and healthy, that its shows were postponed or rescheduled, and that Eventbrite’s decision may have resulted from Eventbrite’s own business downturn rather than an individualized assessment of MRG.

The court likewise allowed MRG’s claim that Eventbrite breached the implied covenant of good faith and fair dealing. It explained that accepting Eventbrite’s reading of the contract would remove the word “reasonable” from the provision giving Eventbrite discretion. At the pleading stage, MRG had alleged factual support for its position that Eventbrite either did not exercise its discretion or exercised it unreasonably.

The court also found that MRG adequately pleaded an unfair-competition claim under the “unfair” prong of California’s Unfair Competition Law. MRG alleged that Eventbrite withheld advance payments without considering MRG’s circumstances and thereby deprived MRG of benefits it believed the contract provided.

The court declined to dismiss MRG’s declaratory-relief claim. It found that the parties had a real contractual dispute involving adverse legal interests: MRG alleged that Eventbrite breached the contract, while Eventbrite argued that the contract gave it discretion not to provide the advance.

Ruling

Judge Susan Illston denied Eventbrite’s motion to dismiss MRG’s counterclaims. She also denied Eventbrite’s motion to strike MRG’s Third, Fifth, Sixth, Seventh, Eighth, Tenth, Eleventh, Twelfth, and Thirteenth affirmative defenses. The court did not decide whether Eventbrite ultimately breached the contract. It decided only that MRG’s allegations were sufficient to proceed and that the disputed issues could not be resolved on these motions.