True Benefit To The Class And Proportionality Of Fees Had To Be Scrutinized On Remand.
The beginning paragraph in Lowery v. Rhapsody International, Inc., Case No. 22-15162 (9th Cir. June 7, 2023) (published) is a doozy:
“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.”
Followed by the start of the second paragraph: “We reverse and remand.”
The facts showed that the putative copyright class action was dead in its tracks based on a settlement in another case which made very little compensation possible in the case. The putative class and defendant agreed to a “claims made” settlement having a hypothetical value of $20 million but with defendant only paying $52,841.05 to satisfy class members’ claims. No significant injunctive or nonmonetary relief was a component of the settlement. Class counsel requested over $6 million in fees, a magistrate judge recommended about $860,000 in fees, and the district judge awarded $1.7 million in fees to class counsel.
The Ninth Circuit reversed, following a trend in recent years to scrutinize class action fee awards more closely. The problem here was two-fold: there was a need to assess the fee award based on the real benefit to the class (not a hypothetical benefit, given there would not be many claims made based on a prior settlement in another matter) and the need to have a class action fee award—even in a Copyright Act case—to be proportional to the class benefits. Reversed and remanded to reconsider the award based the proportionality/actual benefit standards articulated in the appellate opinion.