Oh Say Can You 'C' the Problem: UnSettlement Lawyers in Scramble Mode
Over Fourth of July weekend, the class-action copyright settlement crossed what any reasonable observer would agree was the line between marginally flawed and untenable.
This process is illuminated by the texts of correspondence between Charles Chalmers, attorney for the objectors (who have appealed to the Second Circuit Court of Appeals), and the lawyers for the settlement parties. (For those of you who want to view the actual exchanges, including attachments, we will put up a link later today.)
In subsequent posts, we'll interpret the legalese here. The implications are devastating for the settlement parties. They have admitted that they filed misleading information in their appellate briefs. And the misleading information is not trivial. In representations to the court, an as-yet-unknown quantity of claims was counted as low-payout Category C claims when they almost certainly will come out in the wash as higher-payout Categories A and B claims.
As a result, the $10.76 million figure that was supposed to comprise "prima facie valid claims" is a grave mistake. In fact, the total of claims will almost surely exceed $11.8 million, triggering what the parties had vowed would never happen: reduction -- possibly reduction to zero -- of all C claim awards. C's are 99-plus percent of the infringements in this case.
We also suggest you review our previous post, "Words of Wisdom from Jim 'Found Money' Morrison," http://freelancerights.blogspot.com/2006/07/words-of-wisdom-from-jim-found-money.html.
On to the correspondence:
++++++++++
June 20, 2006
Charles D. Chalmers [counsel for the objectors] to Charles S. Sims [counsel for defendant LexisNexis], Michael J. Boni [co-lead counsel for plaintiffs], and Gary S. Fergus [co-lead counsel for plaintiffs]
Dear Counsel:
Some of my clients (at least 5) have received letters from the Claims Administrator stating that their claim(s) are defective in some respect. They are given approximately 30 days to provide a correction. Please advise at the earliest possible time whether the claims of class members who have been sent, or will be sent, these notices are included in the term "prima facie valid claims" as used in the plaintiffs' brief. This request is urgent. If you can not respond immediately please reply today to indicate when your answer can be expected.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 20, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
Following up on my letter of earlier today, I notice that a description of the eligibility for the A Category stated in a letter from the Claims Administrator is incorrect, and would tend to understate, possibly quite significantly, the value of A claims. (copy attached) Please advise with the same degree of urgency as to whether this is the definition that has been used by the Claims Administrator in the calculation of claims value stated in one or both of your briefs.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 21, 2006
Boni to Chalmers
Charles:
As to your two letters of yesterday, Mr. Sims is out of the country until next week, and we will respond when he returns.
Michael J. Boni
***************
June 21, 2006
Chalmers to Boni
Michael:
Your response does not seem appropriate or sufficient under the circumstances. I can not believe that Mr. Sims is the sole repository of the information that I requested. Surely others in his firm, or counsel for other defendants, or counsel for plaintiffs, either possess this information or can obtain it from the Claims Administrator.
I am currently considering, and beginning the preparation of, a motion to strike portions of the parties' briefs. See, Pereira v. Felzenberg (In re Felzenberg), 2000 U.S. App. LEXIS 34103, 1-3 (2d Cir. 2000). Before making the motion I will propose a stipulation for your very brief consideration. The portions of the briefs that I will seek to have stricken, if I decide to file the motion, are the statements that I am a "professional objector" and your references to information outside the record. You have asked to have the oral argument as soon as possible, a position which we support, so I believe this motion should be filed at the earliest possible opportunity.
Charles D. Chalmers
***************
June 21, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
I request that you stipulate to strike the portions of the plaintiffs' and defendants' briefs that refer to me as a professional objector, and those portions of the briefs which state any information not in the record about the filed claims, or make any assertions or arguments based on such information. While the final decision has not been made, if you do not agree, or respond, it is likely that we will file a motion to strike.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 28, 2006
Sims to Chalmers
Dear Charles:
On behalf of the defendants, I am responding to your emails of June 20 (two) and June 21.
First, with respect to your comment that the Claims Administrator's letter reflects an inaccurate statement of the criteria for category A claim eligibility, we agree, but have been advised by the Claims Administrator that the error was textual only, and did not result in any deficiency letters being sent. No otherwise valid Category A claims have been rejected or diminished by reason of a registration on or after January 1, 2003.
Second, on reflection, we are agreeable to eliminating portions of the briefs which state information not in the record about the filed claims or make arguments and assertions based on such information. Attached please find the three affected pages, showing on pages 16, 21, and 25 (in brackets) the portions we've identified as based on information not in the record about the filed claims. We will shortly submit a new set of briefs, with those few sentences eliminated. We intended to identify all the passages fitting that category; if there are others you believe we've missed, please advise.
Very truly yours,
Charles S. Sims
cc: Michael Boni, Esq.
***************
June 28, 2006
Boni to Chalmers
Charles:
Plaintiffs-appellees join defendants-appellees' letter response to you earlier today, and we intend to take the same course of action as defendants-appellees.
Sincerely,
Michael J. Boni
***************
June 29, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
I will pursue the stipulation next week. Below I note additional parts of the Defendants' brief that need to be stricken, and the places where plaintiffs need to propose their strikes. In the mean time, please respond to my letter of June 20th. As I read the settlement administration memorandum, the Administrator's initial review of the claims counted claims for registered works submitted without documentation as C claims. If that methodology resulted in the figures that you stated we have a problem beyond simply striking improper material from a brief.
If the figures that you disclosed are based on the memorandum, it is likely that the C Reduction has in fact been triggered. I know of numerous registration documentation notices that will result in proof of registration. I believe that you have an obligation to present correct information to the class and the Court to avoid a miscarriage of justice in a case where the Court has a particular duty, as do class counsel, to protect the class.
Defendants
The two lines (beginning with "Second" at the bottom of page 21; in ftnt 4, the "we are advised ..." phrase; Ftnt 5, the "all of which ..." phrase.
Plaintiffs
Page 13, and ftnt 7; ftnt 12; ftnt 15.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 30, 2006
Sims to Chalmers
Dear Charles:
With respect to your identification of additional phrases in the defendants' brief based on post-record information, we agree (with the immaterial exception that in the paragraph commencing at the bottom of page 21, we will retain the phrase "Second, at the threshold" and then eliminate through the word "because").
The balance of your letter addresses a query that concerns "plaintiffs' brief" and is therefore addressed to plaintiffs, not defendants. However, it is worth pointing out that the claims administration process is not nearly sufficiently advanced to draw any reliable conclusions whatever about whether, as you put it, "the C Reduction has in fact been triggered," or even whether that "is likely." Claims have not even been passed to the defendants and publishers for review, and we are some months from that happening, since the work required by the Claims Administration Memorandum is very far from completion.
Very truly yours,
Charles S. Sims
cc: Michael Boni, Esq.
***************
June 30, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
I have Chuck Sims' letter of this morning. While the number itself is not in Defendants' brief, the following statement implies it: "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."
Although the question is not directly answered, I take Chuck Sims' statement, in the context of no direct answer to the question, as an admission that the value in the Plaintiffs' brief counted the registered claims that did not include documentation as C claims. That makes the various statements in the briefs of far greater concern than just presenting information that is outside the record. I will endeavor to avoid the possibility that any judge or law clerk assumes that a stipulation is simply based on your acknowledgement that citing information outside the record is not appropriate. I want them to know that the number is, or may be, wrong and that the real information carries the possibility that the C Reduction will be triggered.
I must have the truth immediately. I hope to receive from you both a clear explanation of the true facts today. I will not further delay any action that appears appropriate under the circumstances.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 30, 2006
Boni to Chalmers
Dear Charles:
Prior to the filing of plaintiffs-appellees' brief, the parties asked the claims administrator to calculate the aggregate potential value of the claims, i.e., before those claims are sent to the defense group for its scrutiny under the Claims Administration Memorandum. Contrary to our clear instructions, the claims administrator provided us with a value that excluded claims that were the subject of a deficiency or ineligibility letter. That included reducing to Category C Subject Works that were claimed as registered works but lacked documentation and/or a registration number. We learned of this only after the June 16, 2006 deficiency letters went out. (A subsequent letter has since gone out that clarifies the claimants' registration documentation obligations. See www.copyrightclassaction.com.)
When we learned what the claims administrator had done, we decided we would have to strike those portions of our brief that reflected the inaccurate data, and that is what we intend to do. Contrary to the suggestion in your June 29 letter, we would never consider withholding correct information, and have every intention of informing the Court of the reasons for our filing a modified brief.
At this point, we have insufficient data to conclude that the $18 million cap will be reached, and will not know this until after the claims have been examined by the defense group. It may well be that the prima facie claims with the deficiencies put back in will raise the number over $18 million, and even if that is the case, the number may yet go down after the defense group examines the claims. It goes without saying that whatever information we have that pertains to the issues before the Court, we will provide the Court with such information.
Sincerely,
Michael J. Boni
***************
June 30, 2006
Chalmers to Boni and Sims
Dear Michael and Chuck:
I will reflect on this. I am puzzled by your description of asking the claims administration for a certain calculation. If I correctly read the claims administration memorandum that calculation is exactly what the administrator is supposed to provide you, and has been providing you, without being asked.
I request that you, with the greatest urgency, advise me of exactly how, and when, you intend to advise the court as you describe. I do not, however, commit to waiting for your proposal, or your action.
I personally believe, as argued in our briefing, that you have misled the district court, and by extension the Court of Appeals, with respect to the scientific/medical issue and the C Reduction. In that context, you can imagine how skeptical, and concerned, I and my clients are by this development.
While I am sure to develop my thinking on this further, I have to initially note the following problem. You and your clients (your named clients) have staked your credibility in this matter on the C Reduction not occurring. Plaintiffs' counsel is supposed to advocate for claimants whose claims are challenged. There is a conflict. Moreover, a certain part, of potential great importance, of this claims process is obscured to the class, knownj only to the counsel for the parties, the defendants and publishers and the claims administrator. Under the circumstances, this is not acceptable.
Charles D. Chalmers
***************
July 4, 2006
Chalmers to Sims and Boni
Dear Counsel:
Do Ms. De Bartolomeo's and Chuck Sims' statements below about interim claims data contain the same flaw as the statements about final claims in your briefs? They refer to reports from the Administrator. (A 1482, paragraph 40; A 1571, paragraph 11.) The reports the Administrator was required to provide weekly would not reflect "registered" value for registered works if the proof of registration was not submitted. (A 384-385) If the statements (and related arguments in briefs (A 1450; A 1553) are thus misleading, what do you propose to do about that?
Is it true that some organizations, such as ASJA, or their representatives, such as Jim Morrison, encouraged class members not to submit documentation? Is that the reason you have reversed the request to class members to provide proof of registration? How many (measured in claims, not claimants) requests to provide proof of registration were sent out by the Administrator?
To correct the Defendants' brief would also require elimination of the "B." heading on page 24, and the first sentence of that section.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
This process is illuminated by the texts of correspondence between Charles Chalmers, attorney for the objectors (who have appealed to the Second Circuit Court of Appeals), and the lawyers for the settlement parties. (For those of you who want to view the actual exchanges, including attachments, we will put up a link later today.)
In subsequent posts, we'll interpret the legalese here. The implications are devastating for the settlement parties. They have admitted that they filed misleading information in their appellate briefs. And the misleading information is not trivial. In representations to the court, an as-yet-unknown quantity of claims was counted as low-payout Category C claims when they almost certainly will come out in the wash as higher-payout Categories A and B claims.
As a result, the $10.76 million figure that was supposed to comprise "prima facie valid claims" is a grave mistake. In fact, the total of claims will almost surely exceed $11.8 million, triggering what the parties had vowed would never happen: reduction -- possibly reduction to zero -- of all C claim awards. C's are 99-plus percent of the infringements in this case.
We also suggest you review our previous post, "Words of Wisdom from Jim 'Found Money' Morrison," http://freelancerights.blogspot.com/2006/07/words-of-wisdom-from-jim-found-money.html.
On to the correspondence:
++++++++++
June 20, 2006
Charles D. Chalmers [counsel for the objectors] to Charles S. Sims [counsel for defendant LexisNexis], Michael J. Boni [co-lead counsel for plaintiffs], and Gary S. Fergus [co-lead counsel for plaintiffs]
Dear Counsel:
Some of my clients (at least 5) have received letters from the Claims Administrator stating that their claim(s) are defective in some respect. They are given approximately 30 days to provide a correction. Please advise at the earliest possible time whether the claims of class members who have been sent, or will be sent, these notices are included in the term "prima facie valid claims" as used in the plaintiffs' brief. This request is urgent. If you can not respond immediately please reply today to indicate when your answer can be expected.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 20, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
Following up on my letter of earlier today, I notice that a description of the eligibility for the A Category stated in a letter from the Claims Administrator is incorrect, and would tend to understate, possibly quite significantly, the value of A claims. (copy attached) Please advise with the same degree of urgency as to whether this is the definition that has been used by the Claims Administrator in the calculation of claims value stated in one or both of your briefs.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 21, 2006
Boni to Chalmers
Charles:
As to your two letters of yesterday, Mr. Sims is out of the country until next week, and we will respond when he returns.
Michael J. Boni
***************
June 21, 2006
Chalmers to Boni
Michael:
Your response does not seem appropriate or sufficient under the circumstances. I can not believe that Mr. Sims is the sole repository of the information that I requested. Surely others in his firm, or counsel for other defendants, or counsel for plaintiffs, either possess this information or can obtain it from the Claims Administrator.
I am currently considering, and beginning the preparation of, a motion to strike portions of the parties' briefs. See, Pereira v. Felzenberg (In re Felzenberg), 2000 U.S. App. LEXIS 34103, 1-3 (2d Cir. 2000). Before making the motion I will propose a stipulation for your very brief consideration. The portions of the briefs that I will seek to have stricken, if I decide to file the motion, are the statements that I am a "professional objector" and your references to information outside the record. You have asked to have the oral argument as soon as possible, a position which we support, so I believe this motion should be filed at the earliest possible opportunity.
Charles D. Chalmers
***************
June 21, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
I request that you stipulate to strike the portions of the plaintiffs' and defendants' briefs that refer to me as a professional objector, and those portions of the briefs which state any information not in the record about the filed claims, or make any assertions or arguments based on such information. While the final decision has not been made, if you do not agree, or respond, it is likely that we will file a motion to strike.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 28, 2006
Sims to Chalmers
Dear Charles:
On behalf of the defendants, I am responding to your emails of June 20 (two) and June 21.
First, with respect to your comment that the Claims Administrator's letter reflects an inaccurate statement of the criteria for category A claim eligibility, we agree, but have been advised by the Claims Administrator that the error was textual only, and did not result in any deficiency letters being sent. No otherwise valid Category A claims have been rejected or diminished by reason of a registration on or after January 1, 2003.
Second, on reflection, we are agreeable to eliminating portions of the briefs which state information not in the record about the filed claims or make arguments and assertions based on such information. Attached please find the three affected pages, showing on pages 16, 21, and 25 (in brackets) the portions we've identified as based on information not in the record about the filed claims. We will shortly submit a new set of briefs, with those few sentences eliminated. We intended to identify all the passages fitting that category; if there are others you believe we've missed, please advise.
Very truly yours,
Charles S. Sims
cc: Michael Boni, Esq.
***************
June 28, 2006
Boni to Chalmers
Charles:
Plaintiffs-appellees join defendants-appellees' letter response to you earlier today, and we intend to take the same course of action as defendants-appellees.
Sincerely,
Michael J. Boni
***************
June 29, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
I will pursue the stipulation next week. Below I note additional parts of the Defendants' brief that need to be stricken, and the places where plaintiffs need to propose their strikes. In the mean time, please respond to my letter of June 20th. As I read the settlement administration memorandum, the Administrator's initial review of the claims counted claims for registered works submitted without documentation as C claims. If that methodology resulted in the figures that you stated we have a problem beyond simply striking improper material from a brief.
If the figures that you disclosed are based on the memorandum, it is likely that the C Reduction has in fact been triggered. I know of numerous registration documentation notices that will result in proof of registration. I believe that you have an obligation to present correct information to the class and the Court to avoid a miscarriage of justice in a case where the Court has a particular duty, as do class counsel, to protect the class.
Defendants
The two lines (beginning with "Second" at the bottom of page 21; in ftnt 4, the "we are advised ..." phrase; Ftnt 5, the "all of which ..." phrase.
Plaintiffs
Page 13, and ftnt 7; ftnt 12; ftnt 15.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 30, 2006
Sims to Chalmers
Dear Charles:
With respect to your identification of additional phrases in the defendants' brief based on post-record information, we agree (with the immaterial exception that in the paragraph commencing at the bottom of page 21, we will retain the phrase "Second, at the threshold" and then eliminate through the word "because").
The balance of your letter addresses a query that concerns "plaintiffs' brief" and is therefore addressed to plaintiffs, not defendants. However, it is worth pointing out that the claims administration process is not nearly sufficiently advanced to draw any reliable conclusions whatever about whether, as you put it, "the C Reduction has in fact been triggered," or even whether that "is likely." Claims have not even been passed to the defendants and publishers for review, and we are some months from that happening, since the work required by the Claims Administration Memorandum is very far from completion.
Very truly yours,
Charles S. Sims
cc: Michael Boni, Esq.
***************
June 30, 2006
Chalmers to Sims, Boni, and Fergus
Dear Counsel:
I have Chuck Sims' letter of this morning. While the number itself is not in Defendants' brief, the following statement implies it: "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."
Although the question is not directly answered, I take Chuck Sims' statement, in the context of no direct answer to the question, as an admission that the value in the Plaintiffs' brief counted the registered claims that did not include documentation as C claims. That makes the various statements in the briefs of far greater concern than just presenting information that is outside the record. I will endeavor to avoid the possibility that any judge or law clerk assumes that a stipulation is simply based on your acknowledgement that citing information outside the record is not appropriate. I want them to know that the number is, or may be, wrong and that the real information carries the possibility that the C Reduction will be triggered.
I must have the truth immediately. I hope to receive from you both a clear explanation of the true facts today. I will not further delay any action that appears appropriate under the circumstances.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
***************
June 30, 2006
Boni to Chalmers
Dear Charles:
Prior to the filing of plaintiffs-appellees' brief, the parties asked the claims administrator to calculate the aggregate potential value of the claims, i.e., before those claims are sent to the defense group for its scrutiny under the Claims Administration Memorandum. Contrary to our clear instructions, the claims administrator provided us with a value that excluded claims that were the subject of a deficiency or ineligibility letter. That included reducing to Category C Subject Works that were claimed as registered works but lacked documentation and/or a registration number. We learned of this only after the June 16, 2006 deficiency letters went out. (A subsequent letter has since gone out that clarifies the claimants' registration documentation obligations. See www.copyrightclassaction.com.)
When we learned what the claims administrator had done, we decided we would have to strike those portions of our brief that reflected the inaccurate data, and that is what we intend to do. Contrary to the suggestion in your June 29 letter, we would never consider withholding correct information, and have every intention of informing the Court of the reasons for our filing a modified brief.
At this point, we have insufficient data to conclude that the $18 million cap will be reached, and will not know this until after the claims have been examined by the defense group. It may well be that the prima facie claims with the deficiencies put back in will raise the number over $18 million, and even if that is the case, the number may yet go down after the defense group examines the claims. It goes without saying that whatever information we have that pertains to the issues before the Court, we will provide the Court with such information.
Sincerely,
Michael J. Boni
***************
June 30, 2006
Chalmers to Boni and Sims
Dear Michael and Chuck:
I will reflect on this. I am puzzled by your description of asking the claims administration for a certain calculation. If I correctly read the claims administration memorandum that calculation is exactly what the administrator is supposed to provide you, and has been providing you, without being asked.
I request that you, with the greatest urgency, advise me of exactly how, and when, you intend to advise the court as you describe. I do not, however, commit to waiting for your proposal, or your action.
I personally believe, as argued in our briefing, that you have misled the district court, and by extension the Court of Appeals, with respect to the scientific/medical issue and the C Reduction. In that context, you can imagine how skeptical, and concerned, I and my clients are by this development.
While I am sure to develop my thinking on this further, I have to initially note the following problem. You and your clients (your named clients) have staked your credibility in this matter on the C Reduction not occurring. Plaintiffs' counsel is supposed to advocate for claimants whose claims are challenged. There is a conflict. Moreover, a certain part, of potential great importance, of this claims process is obscured to the class, knownj only to the counsel for the parties, the defendants and publishers and the claims administrator. Under the circumstances, this is not acceptable.
Charles D. Chalmers
***************
July 4, 2006
Chalmers to Sims and Boni
Dear Counsel:
Do Ms. De Bartolomeo's and Chuck Sims' statements below about interim claims data contain the same flaw as the statements about final claims in your briefs? They refer to reports from the Administrator. (A 1482, paragraph 40; A 1571, paragraph 11.) The reports the Administrator was required to provide weekly would not reflect "registered" value for registered works if the proof of registration was not submitted. (A 384-385) If the statements (and related arguments in briefs (A 1450; A 1553) are thus misleading, what do you propose to do about that?
Is it true that some organizations, such as ASJA, or their representatives, such as Jim Morrison, encouraged class members not to submit documentation? Is that the reason you have reversed the request to class members to provide proof of registration? How many (measured in claims, not claimants) requests to provide proof of registration were sent out by the Administrator?
To correct the Defendants' brief would also require elimination of the "B." heading on page 24, and the first sentence of that section.
Sincerely,
Charles D. Chalmers
cc: All other counsel of record, by email
posted by Irv Muchnick at 6:52 PM
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