Thursday, October 05, 2006

Speaking of the Associational Plaintiffs ...

The issue of "adequate representation" -- especially for the owners of unregistered copyrights -- is almost as powerful an issue for the objectors as the License by Default.

The importance of separate representation for parts of a class that are, or even might be, in conflict has emphasized by the Supreme Court twice in the last ten years. And the Supreme Court said that when you are looking at that adequacy question with a settlement, you should look at the settlement to see if there is any conflict.

Of all the opinions on this issue from all 11 circuit Courts of Appeal, the Supreme Court picked the following quote from ours, the Second Circuit, to make their point:

"The class representatives may well have thought that the Settlement serves the aggregate interests of the entire class. But the adversity among subgroups requires that the members of each subgroup cannot be bound to a settlement except by consents given by those who understand that their role is to represent solely the members of their respective subgroups."

The Second Circuit panel scrutinizing this settlement will confront the C Reduction: a provision that protects registered copyright owners by sacrificing the compensation of unregistered copyright holders in the context of a fixed fund. You don’t have to be a lawyer, or a Supreme Court justice, to see the conflict in that.

Next, the appellate judges will see that registered holders in the B category have a rational compensation scheme (a straight percentage) based on the price originally paid, while the unregistered have an irrational scheme whereby the percentage declines the more the freelancer was paid for the work. No explanation for this was ever offered.

Did the plaintiffs and class counsel stumble into this unawares? No. The defendants argued at the beginning that named plaintiffs could not represent unregistered holders. Irony abounds in this case. The plaintiffs had a law professor, Samuel Issacharoff, give “expert” testimony about the settlement. One of the plaintiffs’ arguments is that the less favorable treatment of the unregistered holders is justified because without a registration they could not sue themselves. They did not use Professor Issacharoff to support that idea, which is no surprise. He's on record as saying there is a particular danger that in a settlement covering claims that could not have been brought in the action the plaintiffs’ counsel may trade off the rights of those claims. We told the Court of Appeals about the professor’s view of this danger, which we say is exactly what happened here. We also told the court, “Law professors are no substitute for proper class representatives.” Smith v. Sprint Comm. Co., 387 F.3d 612, 614 (7th Cir. 2004)(reversing class certification for inadequacy).


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