Melissa Ferrick et al v. Spotify USA Inc., et al
Filing
418
MEMORANDUM OPINION & ORDER: For the reasons articulated herein, the Settlement is determined to be fair, reasonable and adequate. Accordingly, Plaintiffs' Motion for Final Approval of the Class Action Settlement is GRANTED. The Court awards Cl ass Counsel attorneys' fees in the amount of $13,035,000 and costs in the amount of $718,236.80. The request for a $231,000 fund for future expert expenses is DENIED. The Class Representatives' Application for Incentive Awards is GRANTED. The Court will separately enter a final judgment and order of dismissal. (As further set forth in this Order.) (Signed by Judge Alison J. Nathan on 5/22/2018) (cf)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Ferrick, et al.,
Plaintiffs,
-v-
16-cv-8412 (AJN)
MEMORANDUM
OPINION & ORDER
Spotify USA Inc., et al.,
Defendants.
ALISON J. NA THAN, District Judge:
A hearing was held on December 1, 2017, during which time the Court heard Plaintiffs'
Motion for Final Approval of the Class Action Settlement and their Application for Award of
Attorneys' Fees and Expenses and Incentive Award for Class Representatives. The Court had,
on June 28, 2017, entered an Order of Preliminary Approval approving notice to the Class,
establishing deadlines for objections, and preliminarily approving the Settlement. Dkt. No. 177.
Having considered the written submissions of the parties, having held a final fairness hearing,
and having considered the arguments offered at the final fairness hearing, it is hereby ordered
that the Class is finally certified and the Settlement is finally approved. However, the Court
reduces the attorneys' fee award to $13,035,000 and rejects Class Counsel's request to establish
a $231,000 fund for expert expenses.
I.
CLASS CERTIFICATION
The Class is defined as
[A]ll persons or entities who own copyrights in one or more musical
compositions (a) for which a certificate of registration has been issued or
applied for on or before the Preliminary Approval Date; and (b) that was made
available by Spotify for interactive streaming and/or limited downloads during
the Class Period (December 28, 2012 through the Preliminary Approval Date)
without a license ....
Dkt. No. 176, Ex. C.(Settlement Agreement) , 11.2.
For the reasons set forth below, for purposes of this settlement, the Class is
certified because it satisfies the requirements of Rule 23(a) and Rule 23(b)(3) of the
Federal Rules of Civil Procedure.
A. The Settlement Class Meets the Rule 23(a) Criteria
Rule 23(a) imposes four threshold requirements: (1) numerosity ("the class is so
numerous that joinder of all members is impracticable"), (2) commonality ("there are questions
oflaw or fact common to the class"), (3) typicality ("the claims or defenses of the representative
parties are typical of the claims or defenses of the class"), and (4) adequacy of representation
("the representative parties will fairly and adequately protect the interests of the class"). Fed. R.
Civ. P. 23(a).
Numerosity is satisfied here. The Settlement Administrator, Garden City Group LLC
("GCG"), mailed more than 535,000 notices to potential class members. See Dkt. No. 190
(Cirami Dec.)
,r, 5, 9; Dkt. No. 287 (Supplemental Cirami Dec.), 7; Dkt. No. 283 (Pl. Memo for
Approval) at 7, 11; see also Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473,483 (2d Cir.
1995) ("[N]umerosity is presumed at a level of 40 members .... ").
The commonality and typicality requirements are also met. Commonality demands that
the class's claims "depend upon a common contention ... capable of classwide resolution" such
that "its truth or falsity will resolve an issue that is central to the validity of each one of the
claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Typicality
"requires that the claims of the class representatives be typical of those of the class, and is
satisfied when each class member's claim arises from the same course of events, and each class
member makes similar legal arguments to prove the defendant's liability." Marisol A. v.
2
Giuliani, 126 F.3d 372, 376 (2d Cir. 1997) (internal quotation marks omitted). "The
commonality and typicality requirements tend to merge into one another, so that similar
considerations animate analysis of Rules 23(a)(2) and (3). The crux of both requirements is to
ensure that maintenance of a class action is economical and [that] the named plaintiffs claim and
the class claims are so interrelated that the interests of the class members will be fairly and
adequately protected in their absence." Id. (alteration in original) (internal citations and
quotation marks omitted).
Here, the settlement addresses a question common to all class members. As the class is
defined, all class members will have a certificate of registration for a musical composition that
Spotify made available for streaming or downloading without Spotify having a license to do so.
Indeed, as the Central District of California explained in its decision granting the motion to
consolidate in this case, Spotify is alleged to have infringed class members' copyrights by
"reproduc[ing] and/or distribut[ing] ... copyrighted musical compositions using Spotify's
streaming service and offline listening service, without identifying and/or locating the owners of
those compositions for payment or a notice of intent to reproduce." Dkt. No. 72 at 3. Whether
Spotify' s alleged conduct constitutes copyright infringement is "a common contention ...
capable of classwide resolution" whose "truth or falsity will resolve an issue that is central to the
validity of each one of the claims in one stroke." Wal-Mart Stores, Inc., 564 U.S. at 350. As for
typicality, the named Class Plaintiffs are Melissa Ferrick (individually and doing business as
Nine Two One Music and Right On Records/Publishing), Jaco Pastorius, Inc., and Gerencia 360
Publishing, Inc. According to the Consolidated Complaint, Ferrick has over 150 copyrighted
musical compositions, and her songs have been streamed one million times by Spotify without a
license; Jaco Pastorius, Inc. is a corporation that owns the songs of Jaco Pastorius, songs that
3
have been streamed millions of times by Spotify without a license; and Gerencia 360 Publishing,
Inc. is a company that owns copyrights to the songs of artists who are signed to the Gerencia 360
record label, and its songs have been streamed millions of times by Spotify without a license.
See Dkt. No. 75 (Consolidated Complaint)~~ 8-11. Thus the named Class Plaintiffs have claims
that are likely typical of the claims of other class members.
Finally, Lead Plaintiffs are adequate representatives of the class. The interests of the
named Class Plaintiffs are aligned with the interests of the class, and their claims arose from the
same course of events that are the subject of this lawsuit. There is no indication that they have
any conflict with Class Counsel or are inadequate representatives. Moreover, the class is
represented by experienced counsel. Class Plaintiffs filed their complaint on January 8, 2016, in
the Central District of California, asserting a claim of copyright infringement. See Dkt. No. 72 at
2. After cross-motions to consolidate related cases, Susman Godfrey L.L.P. and Gradstein &
Marzano P.C. were appointed Interim Co-Lead Class Counsel on May 23, 2016. See Dkt. No. 72
at 9- IO. In that order, the Central District of California recognized that Susman Godfrey and
Gradstein & Marzano had significant experience representing plaintiffs in class action lawsuits.
See Dkt. No. 72 at 9.
B. The Settlement Class Meets the Relevant Rule 23(b )(3) Criteria
To meet the requirements of Rule 23(b)(3), the Court must find "that the questions oflaw
or fact common to class members predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). "Confronted with a request for
settlement-only class certification, a district court need not inquire whether the case, if tried,
4
would present intractable management problems, for the proposal is that there be no trial."
Amchem Prods., Inc. v. Windsor, 521 U.S. 591,620 (1997) (internal citation omitted).
Here, Rule 23(b)(3) is satisfied because the Class's claims all involve the same issueSpotify streaming or making available for download music without a license. Accordingly, the
Court concludes that Rule 23(b)(3) was satisfied.
II.
NOTICE WAS APPROPRIATE
Notice was mailed to putative class members. Spotify provided to GCG the names,
addresses, and email addresses of all registered claimants of copyrights in musical compositions
whose names and addresses appear in a digital format maintained by the U.S. Copyright Office,
and GCG determined that the list contained 535,380 unique records. Cirami Dec.
,r,r 4-5.
GCG
then mailed the Court-approved "Postcard Notice" to the persons and entities identified in those
records. Id
,r,r 7-9; see Cirami Dec., Ex. C.
When a notice was returned as undeliverable, GCG
re-mailed the notice if a forwarding address was provided. Cirami Dec.
,r I 0.
For mail returned
without a forwarding address, GCG conducted and will continue to conduct searches to find new
addresses. Id The total number of mailed notices returned as undeliverable and for which a new
address could not be located is 20,093. Id GCG estimates that the mailed notices reached 95%
of the potential class members for whom Spotify originally provided a mailing address.
Supplemental Cirami Dec.
,r 9.
Notice was also provided via email and via print notice in several music magazines, and
through advertisements on the internet, social media outreach, a press release, a settlement
website, a toll-free information number, and a disclosure on Spotify's website. Cirami Dec.
,r 6;
see Cirami Dec., Exs. D-L. The email notice, like the mailed notice, provided potential class
members with the URL of the settlement website. See Cirami Dec.
5
,r 27.
Available on the
website are, inter alia, the long form notice, the mailed notice, the publication notice, the terms
of the settlement, and the procedures for objecting to or opting out of the settlement. See id.
128; Cirami Dec., Ex. K.
Additional notice and an opportunity to opt out of the class was provided to certain
putative class members at the end of February 2018. See Dkt. No. 409 (Kierkegaard Dec.) 14.
By the original opt-out deadline, Wixen Music Publishing, Inc. ("Wixen Music") had submitted
requests for exclusion on behalf of 435 individuals and entities. See Dkt. No. 209. The Court
concluded that the language in Wixen Music's agreement with its clients, Dkt. No. 258, Ex. 5,
was ambiguous with respect to whether it gave Wixen Music the authority to file requests for
exclusion on behalf of its clients, see Dkt. No. 361. Accordingly, the Court extended the request
for exclusion period for Wixen Music's clients. See Dkt. Nos. 361, 392. As part of that
supplemental exclusion period, Wixen Music mailed a letter and additional opt-out form to the
436 1 individuals and entities it had sought to opt out, and those individuals and entities then had
30 days to return the forms. See Dkt. No. 389, Exs. 1 & 2; Dkt. No. 392; Kierkegaard Dec.
The content of the written notice and the manner in which notice was provided were
sufficient to satisfy the requirements of Rule 23 and due process.
III.
SETTLEMENT
A district court's approval of a settlement is contingent on a finding that the settlement is
"fair, reasonable, and adequate." Fed. R. Civ. P. 23(e)(2). This entails a review of both
procedural and substantive fairness. D 'Amato v. Deutsche Bank, 236 F.3d 78, 85-87 (2d Cir.
2001 ). In conducting this review, the Court is mindful of the "strong judicial policy in favor of
settlements, particularly in the class action context." Wal-Mart Stores, Inc. v. Visa US.A., Inc.,
1
The errata included an additional individual. See Kierkegaard Dec.
6
13.
396 F.3d 96, 116 (2d Cir. 2005) (quoting In re Paine Webber Ltd. P 'ships Litig., 147 F.3d 132,
138 (2d Cir. 1998)). "The compromise of complex litigation is encouraged by the courts and
favored by public policy." Id. at 117 (quoting 4 Newberg § 11 :41, at 87).
A. Procedural Fairness
With respect to procedural fairness, a proposed settlement is presumed fair, reasonable,
and adequate if it culminates from "arm's-length negotiations between experienced, capable
counsel after meaningful discovery." McReynolds v. Richards-Cantave, 588 F.3d 790, 803 (2d
Cir. 2009) (internal quotation marks omitted).
Here, the settlement is entitled to that presumption. The parties reached a settlement after
several months of negotiations (September 2016 through May 2017). The negotiations involved
two full day, in-person mediation sessions held before a highly experienced mediator (Judge
Phillips) and multiple rounds of mediation briefing, as well as extensive in-person, telephone,
and email discussions. See Pl. Memo for Approval at 9; Dkt. No. 284 (Sklaver Dec.)
,r,r 6, 9-13;
Dkt. No. 169 (Phillips Dec.). In addition, settlement negotiations included the exchange of tens
of millions of rows of Spotify' s data and work by experts on both sides to evaluate the settlement
value of the case. See Pl. Memo for Approval at 9; Sklaver Dec.
,r 5.
Settlement negotiations
were conducted by qualified and experienced counsel on both sides at arm's length. See Sklaver
Dec.
,r 13.
B. Substantive Fairness
In assessing substantive fairness, the Comi considers the nine factors detailed by the
Second Circuit in City of Detroit v. Grinnell Corporation, 495 F.2d 448 (2d Cir. 1974):
(1) the complexity, expense and likely duration of the litigation; (2) the reaction
of the class to the settlement; (3) the stage of the proceedings and the amount
of discovery completed; (4) the risks of establishing liability; (5) the risks of
establishing damages; (6) the risks of maintaining the class action through the
7
trial; (7) the ability of the defendants to withstand a greater judgment; (8) the
range of reasonableness of the settlement fund in light of the best possible
recovery; (9) the range of reasonableness of the settlement fund to a possible
recovery in light of all the attendant risks of litigation.
Id. at 463 (internal citations omitted). "All nine factors need not be satisfied; rather, a court
should look at the totality of these factors in light of the particular circumstances." In re Top
Tankers, Inc. Sec. Litig., No. 06 Civ. 13761, 2008 WL 2944620, at *4 (S.D.N.Y. July 31, 2008)
(internal quotation marks omitted).
1. The complexity, expense and likely duration of the litigation
This case is complex and involves questions about the application of copyright laws in a
relatively novel context, as well as questions regarding whether the class could be certified as a
litigation class. See Pl. Memo for Approval at 10-11. Indeed, Spotify continues to argue that the
case would not be capable of being litigated on a class-wide basis. See Dkt. No. 294 (Spotify
Memo for Approval) at 4. Moreover, it is likely that the litigation would have been protracted,
involving numerous motions-including decertification challenges-and post-verdict and
appellate litigation.
2. The reaction of the class to the settlement
"If only a small number of objections are received, that fact can be viewed as indicative
of the adequacy of the settlement." Wal-Mart Stores, Inc., 396 F.3d at 118.
Here, GCG mailed notice to 535,380 potential class members. Supplemental Cirami Dec.
,r 7.
Class members had until September 12, 2017, to object or exclude themselves from the
Settlement. Id.
,r 19.
GCG initially received 822 timely requests for exclusion, 697 of which
included at least one copyright registration number, for a total of 26,426 copyright registration
numbers, see id.; Dkt. No. 287, Ex. B, and objections from 13 unique individuals or law firms,
see Supplemental Cirami Dec.
,r 21; Dkt. No. 376 ,r 7.
8
During the supplemental exclusion
period, GCG received another 402 timely requests for exclusion, which represent 12,026
compositions and 8,824 unique copyright registration numbers. See Kierkegaard Dec.
~
6. Despite the exclusions and objections, discussed more fully below, the vast majority of class
members did not object to the settlement or opt out of it, which indicates that the settlement is
fair. See Wal-Mart Stores, Inc., 396 F.3d at 118; see also Wright v. Stern, 553 F. Supp. 2d 337,
345 (S.D.N.Y. 2008) ("The fact that the vast majority of class members neither objected nor
opted out is a strong indication that the proposed settlement is fair, reasonable, and adequate.").
The content of the objections do not undermine that conclusion. For the reasons explained
below, the Court overrules all objections.
3.The stage of the proceedings and the amount of discovery completed
While the parties need not have engaged in extensive discovery, a sufficient factual
investigation must have been conducted to afford the Court the opportunity to "'intelligently
make ... an appraisal' of the Settlement." In re Austrian and German Bank Holocaust Litig., 80
F. Supp. 2d 164, 176 (S.D.N.Y. 2000) (quoting Plummer v. Chem. Bank, 668 F.2d 654, 660 (2d
Cir. 1982)), aff'd, D 'Amato v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2001). In addition, "the
pretrial negotiations and discovery must be sufficiently adversarial that they are not designed to
justify a settlement ... [,but] an aggressive effort to ferret out facts helpful to the prosecution of
the suit." Id. (alterations in original) (quoting Martens v. Smith Barney, Inc., 181 F.R.D. 243,
263 (S.D.N.Y. 1998)).
Here, there were comprehensive settlement negotiations, and the parties exchanged a
significant amount of information, including tens of millions of rows of Spotify' s data.
Moreover, experts performed substantial work to evaluate the value of the case.
9
4. The risks of establishing liability and damages
Plaintiffs face risks of establishing liability. Spotify moved to strike class action
allegations, see Dkt. No. 148,-a motion that Plaintiffs had not yet survived-and it maintains
that class certification would be improper for a litigation class, see Spotify Memo for Approval.
In addition, Spotify raised several affirmative defenses to Plaintiffs' claims. See id. Moreover,
even if Plaintiffs establish liability at trial, it is likely that Spotify would file post-trial motions
and an appeal, thereby increasing the duration and cost of the litigation. See Pl. Memo for
Approval at 19.
Plaintiffs also face risks of establishing damages, and there is a risk that they might
recover much less than the value of the settlement. Establishing damages would likely require a
battle at trial, and it could be difficult for Plaintiffs to establish recovery without risking
decertification of the class. See Pl. Memo for Approval at 18.
5. The risks of maintaining the class action through the trial
Spotify continues to contend that a litigation class would not and should not be certified
in this case. See Spotify Memo for Approval. There is thus a significant risk that the Court
would not certify the class as a litigation class.
6.The ability of the defendants to withstand a greater judgment
That Spotify may be able to withstand a greater judgment, does not, standing alone,
suggest that the settlement is unfair. In re Austrian & German Bank Holocaust Litig., 80 F.
Supp. 2d at 178 n.9.
7.The range of reasonableness of the settlement fund in light of the best
possible recovery and in light of all the attendant risks of litigation
"The determination whether a settlement is reasonable does not involve the use of a
'mathematical equation yielding a particularized sum."' Frank v. Eastman Kodak Co., 228
10
F.R.D. 174, 186 (W.D.N. Y. 2005) (quoting In re Austrian and German Bank Holocaust Litig.,
80 F. Supp. 2d at 178). "[I]n any case there is a range ofreasonableness with respect to a
settlement-a range which recognizes the uncertainties of law and fact in any particular case and
the concomitant risks and costs necessarily inherent in taking any litigation to completion-and
the judge will not be reversed if the appellate court concludes that the settlement lies within that
range." Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972). "It is well-settled that a cash
settlement amounting to only a fraction of the potential recovery will not per se render the
settlement inadequate or unfair." Morris v. Affinity Health Plan, Inc., 859 F.Supp.2d 611, 621
(S.D.N.Y. 2012) (quoting Officers for.Justice v. Civil Serv. Comm'n, 688 F.2d 615,628 (9th Cir.
1982)). Indeed, "there is no reason, at least in theory, why a satisfactory settlement could not
amount to a hundredth or even a thousandth part of a single percent of the potential recovery."
Grinnell, 495 F.2d at 455 n. 2.
The overall settlement value exceeds $112.55 million. See Pl. Memo for Approval at 20.
That amount includes an immediate cash payment of $43 .45 million to Class Members to
compensate them for Spotify making available tracks embodying their composition for streaming
and/or limited download, Settlement Agreement, 3.1 (a); Spotify's agreement to pay all
settlement administration costs and notice costs, including publication notice, which is estimated
to cost more than $1 million, see id , 9; Pl. Memo for Approval at 4; a commitment by Spotify
to pay ongoing compensation royalties to complainants for tracks identified by those
complainants, a commitment valued at $63.1 million, see Dkt. No. 288 (Dos Santos Dec.), Ex. B
, 1; Settlement Agreement, 4; and an additional, separate payment of $5 million in attorneys'
fees, see Settlement Agreement, 15.1. The remaining $8,035,000 in attorneys' fees and the
litigation expenses of $718,236.80 will be paid from the settlement fund, thus reducing the
11
settlement fund, and resulting in an immediate cash payment to Class Members of
$34,696,763.20.
In addition, Class Counsel has retained a third-party Settlement Claim Facilitator to assist
class members in identifying possible claims they may have, see Dkt. No. 285 (Bernstein Dec.)
~
3; Spotify will establish an audit procedure so that class members can verify the accuracy of
Spotify's royalty payments, see Settlement Agreement~ 5; and Spotify will work with Class
Plaintiffs to develop tools to facilitate the licensing of content on Spotify and will collaborate
with others in the industry to improve the sharing of data, including efforts to digitize registration
records from the U.S. Copyright Office, see id.
~~
6-8. Moreover, each claimant shall receive a
minimum guaranteed payment from the Net Settlement Fund, and claimants whose works have
been streamed more than 100 times shall receive an additional payment. See id.
~
3.5.
The combination of the immediate and future monetary relief, along with the nonmonetary benefits provided, constitutes a significant recovery.
At the same time, though, although there is a detailed report explaining how and why the
parties value the future benefits of the settlement at $63 .1 million, see Dos Santos Dec., there is
not much evidence showing exactly how the parties arrived at the amount of $43 .45 million for
past damages, or how much the parties anticipate each class member would receive from that
fund. The complaint noted that "Plaintiffs and the class members are entitled to recover up to
$150,000 in statutory damages for each musical composition infringed," Consolidated Complaint
~
49, and sought judgment against Spotify "[f]or compensatory and/or statutory damages in an
amount in excess of $200 million," Consolidated Complaint at 17.
Nevertheless, Plaintiffs emphasize that the cash payment is greater than the $30 million
amount in a similar case. See Sklaver Dec.
~
15 ("In March 2016, Spotify reached a settlement
12
with the National Music Publishers Association ('NMPA') totaling $30 million to compensate
publishers and songwriters for infringement of their mechanical licenses."); Dkt. No. 327 (Pl.
Reply for Approval) at 8 ("[T]he $30 NMPA settlement [was] for 96% of the market share.");
see also Dkt. No. 249, Ex. 3 (Wixen Music Letter to Clients) ("Considering that 96% ofNMPA
members opted-in to the NMPA settlement and are presumably barred from paiiicipating in the
Ferrick settlement, the financial terms of the Ferrick settlement are likely to be several times
better than the NMPA settlement.").
Ultimately, the Court is persuaded that determining how many infringements occurred or
defining the exact size of the class at this stage would undermine the benefit of the settlement in
reducing litigation burdens. See Pl. Reply for Approval at 7-8.
As noted, if Plaintiffs proceeded with litigation, it is far from clear that they would have
been able to establish liability or damages-or damages as significant as the recovery established
in the settlement.
C. Objections
The Court overrules all objections.
l.Objections by Wixen Music
If an individual opts out of a settlement, he no longer has standing to challenge the
settlement. See, e.g., In re Warner Commc'ns Sec. Litig., 618 F. Supp. 735, 753 (S.D.N.Y. 1985)
(noting that objectors who had opted out of the class "no longer ha[d] standing to challenge the
settlement"); see also Stinson v. City of New York, 256 F. Supp. 3d 283,292 (S.D.N.Y. 2017)
("Class members who opt-out of the settlement extinguish their ability to object to it and those
objections need not be considered.").
13
Here, Wixen Music filed both objections and requests for exclusions for works in its
clients' names and for those it owns. 2 See Dkt. No. 208. To the extent Wixen Music has opted
out the musical compositions it owns, it no longer has standing to raise objections on its own
behalf, and the 34 Wixen Music clients who have not filed timely requests for exclusion, see
Kierkegaard Dec. 17, have not filed any objections to the Settlement. Accordingly, the Court
does not consider Wixen Music's objections. In any event, if the Court were to consider Wixen
Music's objections, it would overrule them.
2.0bjections by Watson Music, DM Records, and Kingfish Music
On January 30, 2018, Watson Music Group, LLC, DM Records, Inc., and Kingfish Music
Group, Inc. submitted a letter indicating that they had not received notice of any purported class
membership and requesting an opportunity to raise objections both to being included in the class
and to the proposed settlement. See Dkt. No. 383.
As discussed, the notice that was provided satisfied the requirements of Rule 23 and due
process. Accordingly, the Court declines to provide an additional opportunity for the three
entities to file requests for exclusion or objections.
3.0bjections re: Amount
Some Objectors contend that the payment from Spotify should be greater. See, e.g., Dkt.
Nos. 183, 184, 3 211, 241, 244. However, "[t]he question is whether the terms of the settlement
as a whole are fair and reasonable, and not whether every member of the class is fully
2
It seems that Wixen Music wanted to submit opt-outs, but decided to submit objections as well
because it could not "comply fully with the directions given in the long-form Notice of
Settlement because of each Objector's inability to provide an exhaustive list of copyright
registration numbers for the works being opted out of the settlement." Dkt. No. 208 at 2.
3
It is possible that one of these objectors-Mr. Turney, Dkt. No. 184-is not even a class
member because his songs may not be on Spotify; in that case, he would lack standing to object
to the settlement.
14
compensated." In re Nissan Radiator/Transmission Cooler Litig., No. 10 CV 7493, 2013 WL
4080946, at *11 (S.D.N.Y. May 30, 2013) (internal quotation marks omitted); see also Newman,
464 F.2d at 693 ("[T]here is a range of reasonableness with respect to a settlement .... "). Thus
Objectors' claims that the amount of the settlement is insufficient does not automatically render
the settlement inadequate. Moreover, the Objectors tend to focus on the value of the immediate
payment while largely ignoring the future royalty payment program and the nonmonetary
benefits that the settlement provides. As discussed, when all of the benefits of the settlement are
considered, and in light of the risks of litigation, the amount of the settlement is not
unreasonable.
4.0bjections re: Notice and Lack of Information
Other Objectors complain that the notice was unclear or ambiguous or lacked sufficient
information. See, e.g., Dkt. Nos. 186, 201, 218, 234. But the notice sufficiently summarized the
litigation and the settlement such that it "describe[d] effectively the scope of [the] release." WalMart Stores, Inc., 396 F.3d at 116. Moreover, the postcard notice and publication notice referred
putative class members to the settlement website where the long-form settlement notice was
displayed, which provided extensive details about the settlement. See Settlement Agreement,
Exs. A-C. Although it is true that the notice did not provide information from which a class
member could calculate a potential payment, see Dkt. No. 234, the long-form settlement notice
described how payments would be allocated, see Settlement Agreement, Ex. A, and the actual
amount that each class member would receive cannot be determined until the number of
participants in the settlement is definite. It would have been impossible to provide more
information from which a class member could calculate a potential payment before the number
of paiiicipants in the settlement was more definite-though one Objector takes issue with this
15
very fact. See Dkt. No. 306 at 2 ("If a putative class member ... has no idea whether he would
get one dollar or one thousand dollars, ... how then is he supposed to know whether to opt
out?"). Two Objectors make similar arguments regarding the lack of information about the
market rate for the claims at issue and/or the amount of money that a class member could expect
to receive from the settlement. See Dkt. Nos. 218, 234. The settlement agreement describes the
plan of allocution, but it does not provide details regarding a class member's expected payment
because such a payment depends on the number of paiiicipants in the settlement. Although the
Court understands the concerns regarding the limited information available about the value of the
settlement, the Court also appreciates the difficulty in providing those details at this stage.
Ultimately, the Court concludes that there is sufficient evidence to evaluate the value of the
settlement. Moreover, as explained, that formal discovery has not occurred does not render the
settlement unfair, unreasonable, or inadequate. See Plummer, 668 F.2d at 660.
5.0bjections re: Class Counsel's Fee Request and Incentive Awards
Several Objectors express dissatisfaction with the fees sought by Class Counsel. See,
e.g., Dkt. Nos. 204, 234. 4 However, as discussed more fully below, the Court is reducing the
attorneys' fee award, and the resulting award is reasonable given the complexity of the case and
the quality of representation.
One objection that raises the same issue, see Dkt. No. 312, is untimely, see Dkt. No. 376 ~~ 6-7.
That the order preliminarily approving the settlement allowed "parties to the action" to file and
serve reply papers in response to the papers "in support of an award of attorneys' fees,
reimbursement of costs, and Incentive Awards," Dkt. No. 177 ~ 21, up to seven days before the
final approval hearing did not change or extend the timeline to file objections, see Dkt. No. 312
at 1 n.1 (incorrectly asserting that objections to the fee award were timely if filed at least seven
days before the fairness hearing).
4
16
6.Miscellaneous Objections
Beyond the objections described above, there are several other objections, several of
which lack much detail or explanation. For example, one Objector objects to the "use" of his
works "in [the] settlement," but does not describe why. See Dkt. No. 328, Ex. A. Other
Objectors do not really discuss the settlement but instead state that they do not want Spotify
playing their music, or that they want Spotify to put their playlist online. See Dkt. Nos. 201, 241.
To the extent that those Objectors are objecting to the requirement that they license their works
to Spotify, see Dkt. No. 211, doing so ensures that they will receive royalties on those works, and
Spotify might be able to obtain a compulsory license for their works any way, see 17 U.S.C.
§ 115; Dkt. No. 291 (Pl. Omnibus Response) at 16.
One Objector argues that Class Members should not have to pay for audit rights. See
Dkt. No. 234. But the settlement establishes that class members do not have to pay for audits if
the audit reveals an underpayment greater than or equal to 5%, or class members can pursue a
streamlined audit for a cost of $100. See Settlement Agreement~ 5.5.
Another Objector complains about the "onerous requirement" that Objector's counsel
identify any objections filed during the past five years, see Dkt. No. 204 at 4, but this
requirement may help identify nonmeritorious objections.
In addition, one Objector contends that the settlement is procedurally unfair because it
requires members to provide copyright registration numbers to submit claims and to opt out. See
Dkt. No. 211. But requiring class members to submit copyright registration numbers is
reasonable because plaintiffs would have to provide that information to pursue their own
copyright infringement action. See Reed Elsevier, Inc. v. Muchnik, 559 U.S. 154, 158 (2010)
(observing that a plaintiff must ordinarily satisfy the condition of copyright registration "before
17
filing an infringement claim"). Moreover, as part of the settlement, Spotify will make efforts to
digitize records for works registered before 1978 and will make that information available to the
class, which will make it easier to obtain copyright registration numbers for pre-1978 works. See
Settlement Agreement ~ 7.
Finally, one Objector complains that she could not fill out a claim forms online or that
she lacked the requisite information to do so, see Dkt. No. 218, but the Settlement will allow
class members to submit forms online, see Settlement Agreement~ 3, and a third-party
Settlement Claim Facilitator will assist class members in identifying possible claims they may
have, see Bernstein Dec.
~
3.
Accordingly, the Court overrules all objections.
*
*
*
The Comi therefore concludes that the Grinnell factors weigh in favor of approving the
proposed settlement. For the forgoing reasons, the Comi finds the Settlement to be fair,
reasonable and adequate.
IV.
ATTORNEYS' FEES AND EXPENSES
A. Attorneys' Fees
Class Counsel seeks an attorneys' fee award of $15,860,000. See Dkt. No. 290 (Pl.
Memo for Fees).
It is well-established that in a class action settlement like this one counsel may be entitled
to a "reasonable fee." Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 47 (2d Cir. 2000).
Courts may use either of two methods to determine what constitutes a reasonable award of
attorneys' fees. Goldberger, 209 F.3d at 47. Under the percentage method, the district court
simply sets a percentage of the recovery as a fee. Id. In setting the percentage, courts consider
18
the time and labor expended by counsel, the magnitude and complexity of the litigation, the risk
of litigation, the quality of representation, the requested fee in relation to the settlement, and
public policy considerations. Id. at 50. Under the second method, known as the lodestar
method, "the district court scrutinizes the fee petition to ascertain the number of hours
reasonably billed to the class and then multiplies that figure by an appropriate hourly rate." Id. at
47. "Once that initial computation has been made, the district court may, in its discretion,
increase the lodestar by applying a multiplier" based on the same factors that guide the court's
approach to setting a percentage. Id.
Here, Class Counsel has expended more than 4,000 hours working on this case. See Dkt.
No. 411 (Sklaver Supplemental Dec.). The case is large and complex, and prior to settlement,
significant risks remained in the litigation. Indeed, Spotify had moved to strike class action
allegations and had raised several affirmative defenses to Plaintiffs' claims. See Spotify Memo
for Approval. In addition, Class Counsel provided high-quality representation. These factors
weigh in favor of awarding a significant attorneys' fee award.
On the other hand, the duration of the litigation in this case was relatively short. In
addition, Class Counsel is seeking approximately 36.5% of the cash fund of $43 .45 million,
which translates to 14% of the Gross Settlement Fund. 5 See Pl. Memo for Fees at 5-8. Those
percentages are less than the 40% that Class Counsel typically receive pursuant to their standard
contingency agreements. See Sklaver Dec. ,i 19. However, "[t]o avoid routine windfalls where
the recovered fund runs into the multi-millions, courts typically decrease the percentage of the
fee as the size of the fund increases." In re Interpublic Sec. Litig., No. 02 Civ. 6527, 2004 WL
5
The attorneys' fees minus the $5 million set aside by Spotify for fees (so, $10,860,000)
comprise 9.6% of the Gross Settlement Fund, or 24.99% of the cash fund.
19
2397190, at* 11 (S.D.N. Y. Oct. 26, 2004) (internal quotation marks and citations omitted); see
also Dial Corp. v. News Corp., 317 F.R.D. 426,435 (S.D.N.Y. 2016) ("In mega-fund cases ... ,
several courts in this Circuit have subscribed to the view that the percentage used in calculating
any given fee award must follow a sliding-scale and must bear an inverse relationship to the
amount of the settlement." (internal quotation marks omitted)); see also id. at 433 ("There is no
one-size-fits-all benchmark in determining the appropriate fee-in fact, courts should avoid that
practice because it could easily lead to routine windfalls where the recovered fund runs into the
multi-millions." (internal quotation marks omitted)); In re NASDAQ Market-Makers Antitrust
Litig., 187 F.R.D. 465,486 (S.D.N.Y. 1998) ("[T]he expectation is that absent unusual
circumstances, the percentage will decrease as the size of the fund increases." (internal quotation
marks omitted)).
The percentage of the cash fund is high for attorneys' fee awards in settlements of this
magnitude. See In re Colgate-Palmolive Co. ERISA Litig., 36 F. Supp. 3d 344, 349-50
(S.D.N.Y. 2014) (describing one study that found that for settlements between $38.3 million and
$69.6 million, "the median fee was 21.9% of the fund with a standard deviation of 10%," and
another study that found that for "settlements between $30 million and $72.5 million, the median
fee percentage was 24.9% with a standard deviation of 8.4%"), though the percentage of the
Gross Settlement Fund is within the range of such awards, see Dial Corp., 317 F.R.D. at 436
(noting that in class action settlements ranging from $15 million to $336 million, the court had
awarded attorneys' fees amounting to between 12% and 28% of the settlement fund).
Nevertheless, "fees in the range of 6-10 percent and even lower are common in megafund cases."
In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. at 486.
20
When the lodestar method is applied here to cross-check the reasonableness of the
requested percentage, it becomes apparent that the requested award is too high. Susman Godfrey
L.L.P. spent 2,642.8 hours 6 on this case through March 31, 2018, resulting in a lodestar value of
$1,557,624.50. See Sklaver Supplemental Dec.~ 8. Hourly rates for attorneys who billed more
than ten hours on the case ranged from $800 for two partners to $425 for an associate, and the
rates for paralegals, legal assistants, and summer associates ranged from $125-$275. See id.
Gradstein & Marzano P.C. spent a total of 1,439.7 hours on this case through March 31, 2018,
resulting in a lodestar value of $1,040,870 See id.~~ 12-13. The hourly rates ranged from $750
for two partners to $3 50 for an associate. See id.
~
12. The total lodestar value is thus
$2,598,494.50. The resulting multiplier is quite high-6.10-and the billing rates for partners,
associates, and paraprofessionals are also relatively high. Cf Woburn Ret. Sys. v. Salix Pharm.,
Ltd., 14-CV-8925, 2017 WL 3579892, at *6 (S.D.N.Y. Aug. 18, 2017) ("Although a lodestar
multiplier of 3.14 for a settlement of $210 million is high, it is still within the range of lodestar
multipliers approved in this Circuit."); see also Wal-Mart Stores, Inc., 396 F.3d at 123 (citing In
re Cendant Corp. PRIDES Litig., 243 F.3d 722, 742 (3d Cir. 2001), for the proposition that a
lodestar multiplier of 1.3 5 to 2. 99 is common in megafunds over $100 million); In re ColgatePalmolive Co. ERISA Litig., 36 F. Supp. 3d at 353 (noting that a lodestar multiplier of five was
"on the high end" but "not unreasonable").
The Court concludes that a multiplier of 6.10 in this case is too high and that the
percentage of the fee should be decreased to avoid a windfall to Class Counsel. See Dial Corp.,
317 F.R.D. at 437 (reducing the multiplier because the "original lodestar was premised on a
6
Class Counsel reports the amount of hours as 2,656.5, see Sklaver Supplemental Dec.~~ 8-9,
but according to the Court's calculations, the total number of hours is 2,642.8. The lodestar
reported by Class Counsel is accurate, though.
21
blended billing rate saturated by excessive partner time and timekeeper rates, and further bloated
by time records reflecting an inscrutable division oflabor among the five firms [representing the
class]"); In re IndyMac Mortg.-Backed Sec. Litig., 94 F. Supp. 3d 517, 528 (S.D.N.Y. 2015)
(reducing a multiplier after explaining that the proposed multiplier was not warranted); Parker v.
Time Warner Entm 't Co., L.P., 631 F. Supp. 2d 242, 276 (E.D.N.Y. 2009) (concluding that no
lodestar multiplier was necessary because "any thought of increasing Class Counsel's award for
bringing a suit that risked non-payment is overcome by the need to avoid a windfall award that
exceeds the value of the benefits to Class Members and unduly incentivizes the prosecution of
such claims in the future"). Accordingly, the Court reduces the attorneys' fee award to
$13,035,000, which represents approximately 11.6% of the total value of the settlement, or 30%
of the $43,450,000 cash fund, and results from a multiplier of approximately 5.02. That amount
of fees-$13,035,000-will adequately compensate Class Counsel, and it recognizes the
complexity of the case, the risks involved in the litigation, the efforts of Class Counsel and the
quality of representation provided, and the benefits to the class from the settlement. The
reduction in attorneys' fees shall come from the portion of the fee payment taken from the
settlement fund rather than from the $5 million that Spotify has agreed to pay for attorneys' fees
over and above the net settlement amount. See Dial Corp., 317 F.R.D. at 436 ("[C]ourts
must ... guard against providing a monetary windfall to class counsel to the detriment of the
plaintiff class." (internal quotation marks omitted)); see also In re Sony SXRD Rear Projection
Television Class Action Litig., No. 06 Civ. 5173, 2008 WL 1956267, at* 15 (S.D.N.Y. May 1,
2008) (noting that when attorneys' fees are not awarded from the common fund created for the
class, "the fee award does not reduce the recovery to the class" and therefore "the danger of
conflicts of interest between attorneys and class members is diminished").
22
B. Litigation Costs and Expenses
Class Counsel initially requested reimbursement for $632,111.92 in litigation expenses,
see Pl. Memo for Fees, and now requests an additional $86,124.88 for expenses incurred from
November 10, 2017 through March 31, 2018, for a total of $718,236.80, see Dkt. No. 410 (Pl.
Supplemental Memo for Approval) at 9-10. Class Counsel also now requests that the Court
establish a fund of $231,000 for "future expert expenses that will be incurred by Class Counsel
during the claims administration process and in supporting the Future Royalty Payments
Program." Pl. Supplemental Memo for Approval at 10.
Class Counsel is entitled to be reimbursed for litigation costs and expenses. See In re
Marsh ERISA Litig., 265 F.R.D. 128, 150 (S.D.N.Y. 2010). The costs and expenses requested by
Class Counsel are reasonable. The $718,236.80 reimbursement is thus approved.
However, the Court denies the request to establish a fund of $231,000 for future expert
expenses. Although some comis in this District have authorized the establishment of reserves
for future attorneys' fees and future expert fees and expenses, see, e.g., In re Painewebber Ltd.
P 'ships Litig., No. 94 Civ. 8547, 2003 WL 21787410, at *8 (S.D.N.Y. Aug. 4, 2003), the
attorneys' fee award and the requested reimbursement for costs and expenses are already
significant. Moreover, that Class Counsel did not initially request the $231,000 undermines any
argument that such reimbursement is necessary. Accordingly, the request for a fund for future
expert expenses is denied.
C. Incentive Awards
Finally, Class Counsel requests incentive awards of $25,000 for each Class Plaintiff. See
Pl. Memo for Fees.
23
In the Second Circuit, Class Plaintiffs may receive additional payments as "incentive
awards." Roberts v. Texaco, Inc., 979 F. Supp. 185,200 (S.D.N.Y. 1997). Here, awards ofup to
$25,000 for each Class Plaintiff are reasonable given their eff01is to achieve a positive outcome
for the class. Although the awards are at the higher end, they are within the range of what other
courts have found to be reasonable. See In re Currency Conversion Fee Antitrust Litig., 263
F.R.D.110, 131 (S.D.N.Y.2009).
D. Michelman & Robinson LLP Request for Attorneys' Fees
Michelman & Robinson LLP, counsel for David Lowery, Victor Krummenacher, Greg
Lisher, and David Faragher, also seek $3,699,148.75 in attorneys' fees and $30,590.91 in costs.
See Dkt. No. 261. Although Michelman & Robinson sought to be appointed Class Counsel,
Susman Godfrey and Gradstein & Marzano, were appointed instead. See Dkt. No. 72.
Fees incurred by non-lead counsel after the appointment of lead counsel are not
compensable. See In re lndep. Energy Holdings PLC Sec. Litig., 302 F. Supp. 2d 180, 182
(S.D.N.Y. 2003). However, a court may award non-lead counsel fees for work completed prior
to the appointment of lead counsel if non-lead counsel "provided a compensable, substantial
benefit to the class," and if the requested award is reasonable. Victor v. Argent Classic
Convertible Arbitrage Fund L.P., 623 F.3d 82, 88 (2d Cir. 2010). But "non-lead counsel is not
automatically entitled to an award from a common fund each time one of its claims is utilized in
the complaint that lead counsel ultimately files." Id. at 87.
When appointing Susman Godfrey and Gradstein & Marzano Class Counsel, Judge
O'Connell found "that both the Lowery Plaintiffs' [represented by Michelman & Robinson] and
the Ferrick Plaintiffs' proposed class counsel have engaged in a substantial amount of time and
effort identifying and investigating the potential claims of the putative class in this case." Dkt.
24
No. 72 at 6. In a footnote, Judge O'Connell noted that Gradstein & Marzano had investigated
and filed the Ferrick complaint. Dkt. No. 72 at 6 n.3. Thus although Michelman & Robinson
filed the first complaint in this action and committed time and effort to investigating potential
claims, that commitment was not unique to Michelman & Robinson; to the contrary, Class
Counsel took similar actions. Moreover, Michelman & Robinson declined to share information
with Class Counsel once they were appointed. Dkt. No. 318 (Sklaver Dec. in Opp. to M&R) ,i,i
2-4. Accordingly, Michelman & Robinson did not provide any unique or substantial benefit to
the class. The Court thus denies their request for attorneys' fees.
V.
CONCLUSION
For the reasons articulated herein, the Settlement is determined to be fair, reasonable and
adequate. Accordingly, Plaintiffs' Motion for Final Approval of the Class Action Settlement is
GRANTED. The Court awards Class Counsel attorneys' fees in the amount of $13,035,000 and
costs in the amount of $718,236.80. The request for a $231,000 fund for future expert expenses
is DENIED. The Class Representatives' Application for Incentive Awards is GRANTED. The
Court will separately enter a final judgment and order of dismissal.
SO ORDERED.
Dated: May ).~2018
New York, New York
United States District Judge
25
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