PASADENA, Calif. (Legal Newsline) - Lawyers who were awarded $1.7 million for a class action settlement worth only $50,000 got too much, a federal appeals court has ruled.
In an opinion amended Aug. 2 to show no judges have voted for a rehearing before the full roster, the U.S. Court of Appeals for the Ninth Circuit decided attorneys at Michelman & Robinson obtained a settlement with Napster that provided minimal benefit to class members who were copyright holders of musical compositions.
Those lawyers originally asked for more than $6 million, citing a hypothetical $20 million cap on recovery. The "touchstone" for attorneys fees, the Ninth Circuit found, was 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," the Ninth Circuit ruled.
"What matters most is the result for the class members. Here, the benefit from this litigation was minimal: the class received a measly $52,841.05 and obtained no meaningful injunctive or nonmonetary relief."
The case was remanded to the U.S. District Court for the Northern District of California for a new evaluation that takes into account the settlement's actual value while ensuring the fees are reasonably proportional to that figure.
Plaintiff David Lowery sued Rhapsody (now Napster) in 2016 over music on its streaming service. He alleged it failed to obtain voluntary or compulsory licenses to play the music he owned.
Rhapsody was already trying to negotiate its issues with the National Music Publisher Association, and a settlement was reached by April 2018. About 98% of copyright holders participated in that settlement, which left a comparative few class members for Michelman & Robinson's case and no need for injunctive relief.
Though the settlement of Michelman & Robinson's case had a $20 million cap, class members only claimed $52,841.05. The firm still submitted a $2.1 million lodestar request with a 2.87 multiplier, claiming they achieved "exceptional" results.
The magistrate judge hearing the issue reduced the lodestar to $1.7 million, finding 20% of the firm's hours were unreasonable or improperly block-billed.
She cut that figure in half with a negative multiplier but still concluded the benefit to the class was nearly $360,000, adding in settlement administration costs and a few other expenses.
The judge who had final say in district court rejected the negative multiplier and kept the $1.7 million award. The appeal followed, and the Ninth Circuit overruled.
"The district court's fee award is not reasonable... given that the $1.7 million fee award is more than 30 times larger than the amount paid to class members," the Ninth Circuit said.