A California federal court has ruled a judge was "unreasonable" in awarding $1.7 million in fees to lawyers who handled a copyright class action against music streamer Napster, which only netted their clients a "measly" $52,841.
"This case will likely make the average person shake her head in disbelief," said Circuit Judge Kenneth Lee.
The June 7 decision was set down by Circuit Judge Lee, with concurrence from Circuit Judges Daniel Collins and Milan Smith Jr., of the U.S. Court of Appeals for the Ninth Circuit. The decision favored Napster in its dispute with the Los Angeles firm Michelman & Robinson (M&R).
M&R pressed a lawsuit lodged in 2016 in U.S. District Court for the Northern District of California against Napster, which was then known as Rhapsody. The plaintiffs were David Lowery, Victor Krummenacher, Greg Lisher and David Faragher, who claimed Napster infringed on their copyrights by reproducing and distributing their songs without securing a license.
Within weeks of the suit's filing, settlement talks began, with a settlement reached in January 2019. In the agreement, Napster denied liability, but agreed to pay plaintiffs and any claimants from a kitty limited to $20 million.
In the end, few claims were filed, because a spring 2018 settlement in another similar class action against Napster by the National Music Publishers Association (NMPA), had already absorbed most claimants. As a consequence, Napster paid out a total of only $52,841 in the suit advanced by M&R.
The settlement also called for Napster to set up a board, with an annual budget of $30,000, to protect artists' rights and promote Napster.
M&R asked District Judge Jeffrey S. White to make Napster pay another $6 million to cover M&R's fees for pursuing the suit. Instead, White awarded $1.7 million. Napster appealed, contending $1.7 million for M&R was still too much considering M&R only collected $52,841 for its clients.
Circuit Judge Lee agreed, observing White's fee award was "not reasonable" and "not proportional" given that it was "more than 30 times larger" than the amount paid members of the class action.
"No rational person would spend, say, $1 million in legal fees — and endure the hassles and headaches of litigation — to recover only relief that is a small fraction of that amount. It does not matter that class action attorneys may have devoted hundreds or even thousands of hours to a case. The key factor in assessing the reasonableness of attorneys’ fees is the benefit to the class members," Lee said.
The M&R lawyers were "overcompensated" by the $1.7 million figure for only achieving "meager success" for members of the class, according to Lee.
Lee added, "Class counsel harbored little realistic probability that they would recover substantial compensation for the class."
Lee explained M&R had to know payouts would never reach $20 million and the number of claimants would be low, because the NMPA settlement had drained away the pool of claimants.
The M&R lawyers who handled the Napster suit were Reuben Ginsberg, Sanford Michelman, Mona Hanna and Jennifer Mauri,
Napster was represented by Karin Kramer, William Adams and Thomas Rubin, of Chicago-based Quinn, Emanuel, Urquhart & Sullivan.