New UnSettlement Reality Show: The C Reduction

Oh, to have been a fly on the wall today inside the hallowed Manhattan offices of such tony law firms as Proskauer Rose (outside counsel for LexisNexis). The UnSettlement is spinning out of control.

The agent of this crisis is the so-called "C Reduction." By the plaintiffs' and the defendants' joint account, 99-plus percent of the infringements involve works by freelancers whose copyrights weren't registered, or weren't registered in a timely way. Under the settlement, the unregistereds' already piddling claim awards ($5 - $60) can be canceled if the total pool of claims overloads the settlement fund.

The trigger for the C Reduction is $11.8 million, including claims of both registered and unregistered works. But only the unregistereds would get touched -- could even get reduced to nothing at all -- if the settlement fund is busted. (Why only $11.8 million, you ask? Because the other $6.2 million of the $18 million fund is already spoken for by lawyers' fees, the cost of mediation, and the costs of notice to the class and claims administration.)

On May 25 the plaintiffs and the defendants filed separate briefs opposing our appeal of Judge Daniels' approval of the class-action copyright settlement. Both opposition briefs said the C Reduction was out of the range of practical possibility because "prima facie valid claims" total $10,762,904. They said:

“It would be absurd to reverse class certification on this ground, since the claim period expired last September and the submitted claims as reported by the claims administrator make plain that there will be no C reduction whatever, even if every claim asserted were valid.”

Then the objectors asked if all the claims for registered works that didn't have a registration document were counted as registered for the "prima facie valid claims" calculation, or were counted as unregistered. The claims administration memorandum appended to the settlement agreement explicitly mandated the latter.

They didn't answer this simple question for more than a week.

Today they admitted that the $10.76 million number is wrong, for the very reason we suspected. They will withdraw their statements. They say they don’t know if the C Reduction will apply or not.

It's damn near impossible to believe that the mention of the $10.76 million figure slipped into the briefs due to a clerical error. In fact, the statement containing it was itself a blatant violation of the rules of appellate briefing, which prohibit the introduction of new information from outside the original district court record. Big law firms such as the ones involved here know these rules very well, and they have lots of hands and minds editing and revising and offering input. They don't like to get caught doing something sleazy.

But caught they have been, ladies and gentlemen. The "inconceivable," the C Reduction, might happen. Or already has happened.

Have a happy Fourth of July weekend. When it's over, we strongly suggest that you ask your writers' organizations, in no uncertain terms, to take responsibility for what they and their lawyers have just done to you.