DePaul Business and Commercial Law Journal Volume 2 Issue 4 Summer 2004: Symposium - Emerging Trends in Commercial Law: Surviving Article 9 Tomorrow's Challenges Cavoto v. Chicago Nat'l League Ball Club, Inc.: Chicago Cubs Ticket Scalping Scandal and the Relationship Between Separate Corporate Entities Owned by a Common Parent Mathew Siporin Follow this and additional works at: https://via.library.depaul.edu/bclj Recommended Citation Mathew Siporin, Cavoto v. Chicago Nat'l League Ball Club, Inc.: Chicago Cubs Ticket Scalping Scandal and the Relationship Between Separate Corporate Entities Owned by a Common Parent, 2 DePaul Bus. & Com. L.J. 723 (2004) Available at: https://via.library.depaul.edu/bclj/vol2/iss4/9 This Comment is brought to you for free and open access by the College of Law at Via Sapientiae. It has been accepted for inclusion in DePaul Business and Commercial Law Journal by an authorized editor of Via Sapientiae. For more information, please contact [email protected]. Cavoto v. Chicago Nat'l League Ball Club, Inc.: Chicago Cubs Ticket Scalping Scandal and the Relationship Between Separate Corporate Entities Owned by a Common Parent I. INTRODUCTION An important decision was recently handed down that could have transformed the loveable image of the Chicago Cubs ("the Cubs") into woefully dishonest ticket scammers. 1 In the class-action lawsuit Cavoto v. Chicago Nat'l League Ball Club, Inc. ,2 the Chicago Tribune- owned Cubs allegedly scalped its own tickets in violation of Illinois law.3 The popular debate, which stemmed from the admiration the Cubs engender from its loyal fans, became entangled with the substantive law. The lawsuit contended that Wrigley Field Premium Tickets, Inc. ("Premium"), a sister company to the Cubs, was established so that the Cubs could withhold tickets from games. Consumers are com- pelled to buy tickets from its affiliated brokerage at prices above those printed on the ticket. 4 Not surprising, many considered the Cubs to be scalping its own tickets in violation of the Illinois Ticket Scalping Act. Following the Cubs successful defense, echoes of former Chicago Cubs announcer Harry Caray could be heard emanating from the courtroom: Cubs Win!!! Cubs Win!!! This Note will discuss whether Premium was merely an extension of the Cubs, or an entirely separate subsidiary corporation. This distinc- tion is crucial when considering whether the Cubs and Premium vio- lated Illinois law and deceived consumers. Part II will discuss the background and legal history of ticket scalping leading up to Cavoto v. Chicago National League Ball Club, Inc. Additionally, this section will address the relevant statutes and case law courts consider when asked to disregard the corporate separateness of affiliated corpora- tions. The factors courts take into account when considering claims of consumer fraud, unfair competition and the likely confusion as to the 1. Lester Munson, Scalp Treatment?: The Cubs are Ticking Off Fans by "Brokering" Tickets for Far Above Face Value, Sports Illustrated, June 23, 2003, at 22. 2. Cavoto v. Chicago Nat'l League Ball Club, Inc., No. 02 CH 18372 (Ill. Cir. Ct. Nov. 24, 2003). 3. Sara D. White, For the Record, Crain's Chicago Business, August 18, 2003, at 42. 4. David Eggert, Cubs Exec Defends Club's Ticket Brokerage Operation,Medill News Service, at http://xavier.cs.northwestern.edu:8000/article.asp?articlelD=8137&item=2 (Aug. 13, 2003). 724 DEPAUL BUSINESS & COMMERCIAL LAW JOURNAL [Vol. 2:723 source of sponsorship will also be discussed. Part III will explain the underlying facts in Cavoto and the Circuit Court's decision. Part IV will critique the Circuit Court's decision in Cavoto. Part V will specu- late how Cavoto will affect consumers and how other event promoters will alter ticket sales strategies at their venues. II. BACKGROUND In order to understand the current state of ticket scalping in Illinois, a brief history of ticket scalping will be discussed. This section will also attempt to clarify the concept of disregarding the corporate form and explain the factors courts examine when determining if corpora- tions are truly separate, co-existing legal entities. How a private indi- vidual can establish a cause of action under the Illinois Consumer Fraud and Deceptive Business Practices Act will also be discussed. Furthermore, an explanation of how courts determine whether a prac- tice is unfair will be discussed as well. Finally, this section will ex- amine what a consumer must prove in order to maintain an action under the Uniform Deceptive Trade Practices Act. a. Ticket Scalping and Its Legal Evolution Ticket scalping is defined as "the reselling of tickets to popular en- tertainment or sporting events at whatever price the market will bear."5 By direct or indirect methods, professional scalpers acquire tickets from the box office and retain the tickets until other buyers have exhausted the box office supply.6 Scalpers then offer to resell their tickets at prices substantially higher than their original value.7 The event's popularity is the only ceiling for what scalpers charge.8 Scalpers damage the goodwill of event promoters. The sudden ex- haustion of box office supply and the emergence of scalpers with nu- merous tickets inevitably induce accusations of fraud and collusion against the promoter.9 Thus, promoters detest ticket scalpers. Nevertheless, while the public and promoters have consistently re- garded ticket scalping with antipathy, the opinion of the courts has changed over time. In Illinois, the judicial response to legislative at- tempts at regulating ticket scalping has varied. In 1907, Illinois adopted a law that "prohibited the sale of tickets for more than the 5. Thomas A. Diamond, Ticket Scalping: A New Look at An Old Problem, 37 U. Miami L. Rev. 71 (1982). 6. Id. 7. Id. 8. Id. 9. Id. 2004] CHICAGO CUBS TICKET SCALPING SCANDAL price printed thereon, for theaters, circuses and places of amuse- ment,"'10 and prohibited the establishment of an agency for such a sale." However, in People v. Steele, the Illinois Supreme Court de- clared the act to be an unconstitutional violation of the due process clause of the Illinois Constitution. 12 The court reasoned that "[t]here is nothing immoral in the sale of theater tickets at an advance over the price of the box-office. Such sale is not injurious to the public welfare and does not affect the public health, morals, safety, comfort or good order. '1 3 The court further contended that the buyer was not com- pelled, but purchased tickets voluntarily.1 4 Hence, the Illinois Su- preme Court originally regarded ticket sale restrictions to be arbitrary and unreasonable interferences with the rights of the individuals con- cerned.'5 Thus, as the Illinois legislature's aversion to ticket scalping became apparent, the Illinois Supreme Court did not originally be- lieve that ticket scalping injured the buyer or the proprietor of a theater.16 Thereafter, Chicago enacted an ordinance restricting theatre ticket sales and the formation of collusive alliances. 17 The object of the ordi- nance was to compel impartial treatment of all buyers of tickets by the licensee. 18 However, the Illinois Supreme Court in People ex rel. The Cort Theater Co. v. Thompson changed its opinion of ticket scalping. The court conceded that individuals were not technically forced to buy tickets from scalpers, but had a choice between paying the higher price and not attending the ticketed event.19 The Illinois Supreme Court in Cort Theater reasoned that "[w]itnessing a theatrical per- formance is not one of the necessaries of life, but that affords no rea- son why the legislative power should not be exerted to prevent misrepresentation and fraud in the sale of theater tickets by the thea- 10. People v. Steele, 83 N.E. 236 (Ili. 1907). 11. Id. at 238. 12. Id. at 240. 13. Id. at 238. 14. Id. 15. People v. Patton, 309 N.E.2d 572, 573 (Ill. 1974). 16. Steele, 231 N.E. at 238. 17. People ex rel The Cort Theater Company v. Thompson, 119 N.E. 41, 42 (Ill. 1918). The Chicago ordinance stated: [E]very ticket of admission to a theater shall have printed upon its face the price therof, and that no licensee, and no officer, manager or employee of the licensee, shall directly or indirectly receive any consideration... upon the sale of any such ticket beyond or in excess of the price designated theron, or directly or indirectly enter into any arrange- ment or agreement for the receipt of such consideration. 18. ld. at 43. 19. Id. at 45. 726 DEPAUL BUSINESS & COMMERCIAL LAW JOURNAL [Vol. 2:723 ter owners and to require fair and impartial treatment of the public." 20 Thus, the court upheld the Chicago ordinance. In Cort Theater, a theater owner entered into a collusive alliance where perspective ticket buyers were told the show was sold out and subsequently purchased tickets above face value from a scalper that directed the theater to provide the ticket.21 The court believed that the type of collusive alliances the Chicago ordinance was directed at were those where the "theater owner entered into a secret agreement with a ticket reseller in which they both shared in the profits gener- ated by the reseller's sale of tickets above face value. '2 2 Thus, the court realized what it refused to recognize in Steele; ticket scalping injured consumers. In 1927, the United States Supreme Court examined a New York ticket scalping law in Tyson and Brother-United Theatre Ticket Of- fices v. Banton.23 The New York statute forbade the resale of any ticket to any theater "at a price in excess of fifty cents in advance of the price printed on the face of such ticket..