Judge Dismisses Ticketfly’s Request For Pemberton Ticket Proceeds To Enter Constructive Trust

The Honorable Justice Paul Pearlman made a judgment Dec. 29 in the Supreme Court of British Columbia, dismissing an application filed by Ticketfly and Ticketfly Canada, by their assignee Pandora Media Inc., requesting that a constructive trust be established to set aside all funds held by the bankruptcy trustee that were derived from 2017 Pemberton Music Festival ticket sales in favor of fans owed refunds. The news was first reported by the Georgia Straight, which is part of the Vancouver Free Press Publishing Corp.

The organizers of the annual Pemberton Music Festival announced in mid-May 2017 that the July 13-16 festival near Vancouver, B.C., was canceled and filing for bankruptcy – and automatic refunds for tickets would not be issued. The news was shocking in the music business because Pemberton was seen as an established festival and promoter Huka Entertainment and Ticketfly were involved in the festival, both well-respected players in the industry. 

Ticketholders were advised to file a proof of claim form as an unsecured creditor with bankruptcy trustee Ernst & Young or contact their bank or credit card issuer to request refunds. 

As explained in legal documents filed in the Supreme Court of British Columbia, persuading the court to rule in favor of a constructive trust has a high burden of proof – and Pearlman wrote in his judgement filed Dec. 29 that Ticketfly didn’t sufficiently demonstrate that the festival owners had shown misconduct in obtaining the ticket sale proceeds.     

“The debtors’ estates have not been unjustly enriched, nor do other extraordinary circumstances exist that call for the imposition of a constructive trust to remedy an injustice,” Pearlman wrote.

He added that setting up a constructive trust in favor of ticketholders would prevent “the debtors’ creditors, including vendors and suppliers, from any significant recovery in the bankruptcy proceedings.”

A source confirmed to Pollstar that approximately 80 percent of ticketholders received refunds via their credit card companies, as reported by Amplify in September. When these fans got their money back, the credit card companies collected chargebacks from Ticketfly. 

– Lineup Poster For 2017 Pemberton

Ticketfly filed a proof of claim with the bankruptcy trustee in June “alleging an unsecured and contingent claim against the debtors in the amount of $7.9 million for chargeback amounts that Ticketfly claimed to have paid the credit card companies where ticket holders sought refunds for tickets purchased for the 2017 Festival,” according to the court filing. 

When the Pemberton Music Festival Limited Partnership and its general partner filed for bankruptcy the debtors had cash in hand of $3,310,837. While the filing notes that this cash is derived in large part from ticket sales, the trustee claims it is impossible to determine what portion of these funds are from tickets because the sales “were deposited to various PMFLP accounts that also held funds derived from other sources, including deposit returns and investor funds.”

Ticketfly held on to proceeds from ticket sales made May 4-18 in the amount of $348,060 – which bankruptcy trustee Ernst & Young has demanded the ticketing company remit to the trustee.  

The ticketing company released approximately $4.1 million of ticket presales to the festival owners between April 19-28, with $3.2 million going toward paying artist deposits, vendor deposits, producer fees and sales tax payable. The court filing notes that “the remaining balance of approximately $900,000 was deposited to bank accounts held by PMFLP.” 

The filing adds that after April 20, “Ticketfly Canada, at the direction of Huka and/or 111 B.C. Ltd. made several more remittances of ticket sale proceeds.” Ticketfly Canada paid $7,861,834.15 into bank accounts controlled by PMFLP and paid the remaining balance of $288,473.19 to a talent agency representing artists scheduled to perform at the 2017 festival. 

 

As part of Eventbrite’s $200 million agreement with Pandora to acquire Ticketfly, which closed in September, Pandora agreed to assume all liability in regards to the refund of ticket purchases, including the chargebacks. 

The 2017 event in Pemberton Valley, British Columbia, would have marked the fifth edition of Pemberton Music Festival, after debuting in 2008 then returning under different ownership in 2014. The lineup was supposed to feature dozens of artists, including Chance The Rapper, Muse, A Tribe Called Quest, Major Lazer, Haim, and Run The Jewels.