Diversified Group Inc. v. Sahn

259 A.D.2d 47, 696 N.Y.S.2d 133, 1999 N.Y. App. Div. LEXIS 9699
CourtAppellate Division of the Supreme Court of the State of New York
DecidedOctober 5, 1999
StatusPublished
Cited by2 cases

This text of 259 A.D.2d 47 (Diversified Group Inc. v. Sahn) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Diversified Group Inc. v. Sahn, 259 A.D.2d 47, 696 N.Y.S.2d 133, 1999 N.Y. App. Div. LEXIS 9699 (N.Y. Ct. App. 1999).

Opinion

OPINION OF THE COURT

Saxe, J.

This appeal requires us to address the question of what conduct constitutes ticket scalping.

The underlying dispute concerns three groups of season tickets to Rangers and Knicks games at Madison Square Garden. For many years, defendant Coleman & Co. (Coleman) held subscription rights to all three groups of season tickets. These subscription rights were explicitly nontransferable under Madison Square Garden (MSG) regulations, and were subject to cancellation by MSG. Nevertheless, in March 1997 Coleman entered into an agreement with defendant Mitchell Sahn transferring to Sahn all subscription rights to these three subscriptions; under this agreement Sahn paid Coleman $90,000 above the face value of the tickets. The contract also prohibited Sahn from selling the tickets without the prior approval of Coleman. In accordance with another term of the contract, providing that Coleman would “use its best efforts” to arrange for future notices regarding the subscriptions to be sent to Sahn’s address, on July 22, 1997, Coleman sent MSG a letter notifying it of a change in the address and contact person for the subscriptions, and giving it instead Sahn’s address, and his name as Coleman’s “contact person”.

On July 22, 1997, Sahn entered into a contract with plaintiff James Haber under which Haber purchased the subscription rights to a portion of the tickets, paying $140,000 above the price of the tickets. This contract, like Sahn’s contract with Coleman, acknowledged that transfer of ownership or subscription rights was prohibited. It further provided that if MSG canceled the subscription or tickets, “then Haber shall have no further rights against Sahn and Sahn shall have no further [49]*49obligation pursuant to this agreement.” A separate letter agreement dated July 23, 1997 set out a breakdown of the contract price, dividing the total into two categories, $52,350 for the price of the tickets, and $140,000 as payment for the “[t]ransfer of Mights”.

Before Haber could obtain or use the subject tickets, however, on August 27, 1997, MSG canceled the Coleman subscriptions, and refunded the price of the tickets themselves to Coleman, from which refund Haber was ultimately repaid for the face value of the tickets he had contracted to purchase. However, Sahn retained the $140,000 Haber had paid to him above and beyond the price of the tickets.

This action ensued, in which plaintiffs sought rescission of the contract and the refund of the $140,000, alleging as grounds for rescission failure of consideration, frustration of purpose, and violation of the anti-scalping provisions of Arts and Cultural Affairs Law article 25. On cross motions for summary judgment, the motion court agreed with plaintiffs’ contention that the contract was illegal, and awarded judgment against Sahn and his wife Karen Sahn (who had been the named payee on one of Haber’s payment checks, for part of the contract price).

We agree that the contract between Haber and Sahn was, in reality, an agreement to resell the tickets in violation of the so-called “anti-scalping law” (Arts and Cultural Affairs Law § 25.01 et seq.).

A primary goal of article 25 of the Arts and Cultural Affairs Law is “deterring ticket speculation which costs New York and visiting theater and concert goers, as well as sports fans, countless dollars in increased ticket prices or causes them simply not to attend these events” (Block, Practice Commentaries, McKinney’s Cons Laws of NY, Book 3B, Arts and Cultural Affairs Law, ch 11-C, tit G, 1999 Pocket Part, at 129). The Legislature has stated a public policy of protecting against the sale at exorbitant prices of tickets being resold by unscrupulous promoters and others who make enormous profits on ticket resales (see, Mem of State Consumer Protection Bd in Support of L 1991, ch 704, 1991 McKinney’s Session Laws of NY, at 2100-2101).

It is in order to combat such resales of tickets at exorbitant prices that Arts and Cultural Affairs Law §§ 25.07 (2) and 25.13 make it illegal both to resell tickets without a license to do so, and to resell tickets at above the “maximum premium price”, defined as “the established price plus five dollars or ten percent [50]*50of the established price, whichever is greater” (Arts and Cultural Affairs Law § 25.03 [4]).

Defendants take the position that no scalping occurred because the transaction involved two distinct salable items: the tickets themselves, sold for their face value, and the subscription rights, for which Haber paid the additional sum of $140,000. They emphasize that the terms of the contract framed the transaction this way, and argue that what was being purchased was far more than the tickets themselves, which by definition are merely a right of entry to particular games (see, Arts and Cultural Affairs Law § 25.03 [10]).

Defendants focus too much on the phrasing of the contract, and too little on its manifest intention. It is the responsibility of the court, on a motion for summary judgment, to determine the parties’ intent, if possible, from within the four corners of the document (see, International Mar. Investors & Mgt. Corp. v Wirth, 245 AD2d 544, 545). Despite their attempt to draft their contract so as to give it the appearance of a permissible transaction, Sahn’s and Haber’s intent in entering into the contract, namely, to arrange the resale of the subject tickets at a premium price, is apparent from a review of the contract as a whole.

The subscription rights that Sahn purported to sell to Haber break down into two parts: the right to purchase the tickets to specified seats for that year’s home games, and the right to renew the subscription in following years. As to the purported sale of the “right” to purchase that season’s tickets, such a sale is indistinguishable from a resale of the subject tickets. Since the contract’s right to purchase the tickets entails purchasing them, not from MSG, but from the subscriber, it amounts to simply a promise by the subscriber to resell those tickets to the contract vendee. When tickets are resold to another by a subscriber unlicensed to resell tickets, it does not matter whether the tickets are in the possession of the named subscriber before they are sold, or whether the subscriber arranges to sell them prior to actually having them in hand. Either way, the anti-scalping provisions of the Arts and Cultural Affairs Law have been violated merely by the resale. So, in that respect alone, the contract is void for illegality.

The second aspect of subscription rights, the right to renew the subscription, gives the subscriber the right (albeit a revocable one) to purchase the same seats to the home games the following year. If a right to renew the subscription the following year is transferable at the option of the subscriber, that [51]*51right might well have a value independent of the price of the tickets (see, In re I.D. Craig Serv. Corp., 138 Bankr 490; but see, In re Liebman, 208 Bankr 38, 40 [an expectation of an offer to renew season tickets does not give rise to a property interest, so bankruptcy trustee may not sell same]; In re Harrell, 73 F3d 218, 219 [“the opportunity to renew season tickets is not a property right” to be sold by bankruptcy trustee]).

However, where, as here, the owner of the arena prohibits subscribers from transferring the right to renew, the subscriber cannot sell the status of record holder of title to the subscription (compare, In re I.D. Craig Serv.

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Bluebook (online)
259 A.D.2d 47, 696 N.Y.S.2d 133, 1999 N.Y. App. Div. LEXIS 9699, Counsel Stack Legal Research, https://law.counselstack.com/opinion/diversified-group-inc-v-sahn-nyappdiv-1999.