Tuesday, December 18, 2007

Let the Sun Shine in on the C Reduction Question

As explained at length elsewhere, the objectors are appealing the approval of the settlement on several grounds. One of them is the so-called C Reduction – the structuring of the settlement so that holders of unregistered copyrights, a super-super-majority of the class, can see their claims payouts reduced or eliminated altogether. If registered (A and B) claims exceed $11.8 million, that is exactly what will happen.

Of course, if the current Second Circuit Court of Appeals ruling stands, barring jurisdiction of claims of unregistereds even for the purpose of approving a global settlement, then the C Reduction will be moot. The entire settlement, or any settlement remotely like it, will be moot.

We think the latest ruling will be reversed. There’s a ton of existing law suggesting that the two of the three judges on the panel got it wrong. (Judge Walker, in dissent, got it right.) Both the appellants appellants (objectors) and the appellees (defendants and plaintiffs) are working to make the fundamental global structure of the settlement viable again.

If and when we succeed, the C Reduction will loom again. And here’s the thing. Unlike the objectors’ other two issues – inadequate representation and the “license by default” – the C Reduction is, at this point, an empirical question. Claims closed in 2005. Leaving aside whether the C Reduction could have happened by the way the settlement was designed, there is no doubt that the C Reduction either did or did not happen.

The parties holding the information to answer that question are the defendants and the plaintiffs. As the appeal faces its hiatus to resolve the jurisdiction issue, we think everyone would be served by publishing the claims data. And we call on the appellees to do so.


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