You’ve Made Me So Very Unhappy

The United States Court of Appeals for the Ninth Circuit reversed and remanded a fee award in a class action

This case will likely make the average person shake her head in disbelief: the plaintiffs’ lawyers filed a class action lawsuit on behalf of copyright holders of musical compositions and ended up recovering a little over $50,000 for the class members. The lawyers then asked the court to award them $6 million in legal fees. And the court authorized $1.7 million in legal fees—more than thirty times the amount that the class received.

We reverse and remand. The touchstone for determining the reasonableness of attorneys’ fees in a class action is the benefit to the class. It matters little that the plaintiffs’ counsel may have poured their blood, sweat, and tears into a case if they end up merely spinning wheels on behalf of the class. What matters most is the result for the class members.

Editor’s note: thus inspiring the title to this post. 

Here, the benefit from this litigation was minimal: the class received a measly $52,841.05 and obtained no meaningful injunctive or nonmonetary relief. On remand, the district court should rigorously evaluate the actual benefit provided to the class and award reasonable attorneys’ fees considering that benefit. In determining the value of this “claims made” class action settlement, the court should consider its actual or anticipated value to the class members, not the maximum amount that hypothetically could have been paid to the class. The court should also consider engaging in a “cross-check” analysis to ensure that the fees are reasonably proportional to the benefit received by the class members.

The case

Counsel filed a class action lawsuit on behalf of copyright holders of musical compositions and recovered a little over $50,000 for the class members from defendant Rhapsody International, Inc. (now rebranded as Napster), a music streaming service. The class members obtained no meaningful injunctive or nonmonetary relief in the settlement of their action. The district court nonetheless authorized $1.7 in attorneys’ fees under the “lodestar” method.

The court

District courts awarding attorneys’ fees in class actions under the Copyright Act must still generally consider the proportion between the award and the benefit to the class to ensure that the award is reasonable. We recognize that a fee award may exceed the monetary benefit provided to the class in certain copyright cases, such as when a copyright infringement litigation leads to substantial nonmonetary relief or provides a meaningful benefit to society. But this is not such a case.

(Mike Frisch)