Tuesday, July 25, 2006

Is the Settlement Fund Already Busted?

We're in the middle of investigating the scenario of 11 writers who last year were recruited to submit declarations to the court in support of the settlement. All stated that they expected to receive this or that many thousands of dollars in C claims (non-registered). All may wind up getting zilch because, under the settlement, C claims are the first in line to get zapped if the settlement fund turns out to be too small to support the volume of claims that were filed.

We have presented this information to the 11 writers. If they weren't made fully aware of the implications of what they were signing, they should feel misused. If they were misused, and actually stand to gain little or nothing from the settlement, then we hope they will be motivated to do the right thing now: demand that the lawyers who drafted their declarations tell the truth to the class. What are the claim numbers? They should be published, not dribbled out at the convenience of a self-serving few who are slated to take their millions of dollars in fees off the top of the settlement fund, regardless of how others are impacted.

We know that the C Reduction is a real, live concern. We know this for several reasons.

The UnSettlement lawyers rescinded blue-sky statements about them in their briefs to the Court of Appeals.

Last year, in response to our objections to the district court, their line was that the C Reducton would never happen. In the recent appellate briefs they said there were "prima facie valid claims" totaling $10.76 million, or $1 million-plus below the $11.8 million number that would trigger the C Reduction. Now they've admitted that number is off by some unspecified amount.

It's hard to overstate the importance of this development. Lawyers arguing before appellate courts just aren't in the habit of adding information from outside the district court record (which is against the appellate rules in the first place) and building an entire argument around that info, then turning around and saying, "Oops." You can smell the stench all the way from Denmark.

The claim procedures give the lawyers complete control over the reporting of "interim" and "final" claims data.

Under the procedures of a claims administration memorandum appended to the settlement agreement, the claims administrator was told to flag as defective all claims submitted for A and B works (registered copyrights) that didn't include supporting documentation ... and temporarily count them as C claims.

And in the confusion of instructions to class members (many of whom submitted registration numbers only, not documentation, because that's what one of the associational plaintiff organizations publicly told them to do), many claims that will wind up counting as A's and B's did indeed get bumped down to C's in the initial -- or "prima facie valid claims" -- count. We know that the $10.76 million number is low; we just don't know how low, and the parties closely holding the information that would provide the answer aren't saying.

Even without all this mumbo-jumbo, we suspect that the settlement fund was under great strain to support claim payouts to the C subclass.

The evidence is anecdotal but compelling:

* From the get-go, a few named plaintiffs crowed about their windfalls. (See James Gleick quoted in the April 4, 2005, issue of The New York Observer.)

* An analysis of the copyright registrations of named plaintiffs, and others whom we know filed claims, indicates high levels of the senior, and much higher-paying, A and B claims, which would wipe out the C's. (Of particular interest are the named plaintiffs Mary Sherman and Paula McDonald, whom I've cheekily pegged the "Category B Goldust Twins.")

* Last year, and at the last minute, the parties amended the settlement agreement to grandfather in Amazon and HighBeam, two recently arisen infringing brands that use material supplied by the defendant database companies and their licensor newspapers and magazines. Under the amendment, many B claims have been elevated to A claims. Again, we don't know just how many because the lawyers are treating the claims data like their own private toolbox.

* We're getting credible reports that "omnibus" registrations of groups of articles were miscounted by the claims administrator. Some of the more prolific freelancers use a special form to register an entire year's output in one registration. In at least some cases, these omnibus registrations, covering 10 or 20 or 100 or more works, have been provisionally and mistakenly tabulated as only one claim.

Get the picture?


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9:08 PM  

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