Court of Appeals Denies Excessive Attorney Fees in Napster Class Action: “Benefits from this lawsuit were minimal”

Photo credit: Napster

An appeals court has officially denied pre-approval of $1.7 million in attorneys’ fees for attorneys who recovered $52,841.05 on behalf of copyright owners in a copyright infringement lawsuit against new company Napster (formerly Rhapsody International).

The three-judge panel recently overturned and remanded $1.7 million in attorneys’ fees awarded to a district court, with Judge Kenneth K. Lee noting in the related opinion that “the case is likely to turn the average person’s head in disbelief shake”.

Said case began in early 2016 when plaintiffs, including David Lowery and Victor Krummenacher of Camper Van Beethoven, filed a class action lawsuit against the company, now known as Napster, for allegedly infringing on their compositions. But before the parties could reach a settlement, the National Music Publishers’ Association (NMPA) negotiated a separate settlement with Napster (forcing the involved rightsholders to waive claims in that lawsuit) in advance of the passage of the Music Modernization Act. .

“As of April 2018, Rhapsody had notified plaintiffs in this lawsuit of this NMPA settlement,” Judge Lee concluded in his opinion. “It informed them that the copyright owners of approximately 98% of the musical works available on their streaming service had elected to participate in the NMPA agreement, effectively ‘decimating’ the alleged class in this lawsuit.”

Nonetheless, plaintiffs’ attorneys and the Rhapsody/Napster legal team continued discussions and eventually reached the settlement that resulted in the originally announced compensation of approximately $50,000 in January 2019 (a sum, of course, made up of relatively yielded few claims). The musicians’ lawyers then sought a staggering approximately $6 million in fees, citing the “extraordinary” result they allegedly achieved.

The district court then turned to a magistrate to review the multimillion-dollar application. And after recalculating based on a number of factors and adjusted numbers (“Nearly 20% of the hours worked on the case were improper or not properly billed at a flat rate”), that judge recommended approximately $860,000 in attorneys’ fees.

Eventually, the district court accepted part of the judge’s decision, decided not to apply a “negative 0.5 multiplier,” and settled for the aforementioned $1.7 million at trial — an award Judge Lee said stressed “more than…”. thirty times greater than the amount paid to class members.”

“We believe that when assessing the value of a class action settlement, courts must consider the actual or reasonably anticipated benefit to the group — not the maximum or hypothetical amount,” Judge Lee said in his opinion, then made it clear that “the District The court should disregard the theoretical settlement ceiling of $20 million and instead start with the $52,841.05 required by the class.”

“Except in exceptional cases,” the judge continued, “a fee award should not exceed the value that the litigation has brought to the class.” … No sane person would spend, say, $1 million in attorneys’ fees – and the trouble and Endure the headache of a lawsuit – to get just a small fraction of that amount. Likewise, it is improper to pay attorneys’ fees in excess of the amount recovered for the class action unless there is reasonable non-monetary compensation or other sufficient justification.”

As the district court reconsiders attorneys’ fees, it should “determine the actual value of the class action settlement to the class plaintiffs and then award attorneys’ fees proportionately and equitably to the benefit of the class,” Judge Lee concluded.