Reading the Tea Leaves at the Second Circuit
As we await a date for oral argument before the Second Circuit Court of Appeals, it's interesting to study some of the court's loosely parallel rulings.
For example, the Second Circuit very recently handed down the Hertzberg decision affirming a district court class action settlement approval. The sole issue was whether the district court properly concluded that the settlement amount ($46 million) was fair given the circumstances. Of passing interest to us is this statement: “OCM does not contend that there was any procedural unfairness in the negotiation of the settlement agreement.”
In our case, of course, we make several significant procedural arguments; one of those -- the impropriety of the named plaintiffs with big claims for registered copyrights negotiating the compensation for unregistered holders -- has been the subject of two Supreme Court decisions in recent years. Other significant issues we raise are the ability of the named plaintiffs to grant licenses of class member copyrights without any affirmation by the class member; negotiation under the auspices of a mediator working on contingent fee; the exclusion by the settlement of a portion of the class as alleged (scientific-medical articles); and the presentation of misleading information to the district court and the Court of Appeals by the plaintiffs and defendants.
Another appellate court, the Seventh Circuit, recently handed down the Synfuel decision reversing a district court approval of a class action. The objection that the Court of Appeals found required reversal concerned a "regressive" compensation scheme for class members. That means that it penalized those who had used the defendant’s service more. The Court of Appeals was concerned that the lower court accepted the contention of the class counsel that the regressive scheme was fair, without evidence or analysis. Our case has a similar issue. The compensation scheme for unregistered holders (Category C) is regressive in two respects. First, the “C Reduction” is seriously regressive to C’s, while extremely beneficial to the registered owners. Second, the C compensation is explicitly regressive, unlike that of the registered owners, either A or B categories.
Neither of these cases has facts remotely like those in In re Literary Works and they are nowhere near as complicated. But it is interesting to see that both these decisions reflect in a very small way certain issues we raise.
Our attorney, Charles Chalmers, is sure that we will win this appeal. More on that soon.