memorandum of law in support of objections, in re literary works in electronic databases

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK __________________________________________ : Master Docket No. M-21-90 (GBD) IN RE LITERARY WORKS IN ELECTRONIC MDL No. 1379 DATABASES COPYRIGHT LITIGATION : __________________________________________

MEMORANDUM OF LAW IN SUPPORT OF OBJECTIONS TO A/B COUNSEL’S APPLICATION FOR

ATTORNEYS’ FEES AND COSTS AND TO SETTLEMENT AGREEMENT PROVISIONS RELATED TO THAT APPLICATION BY

CLASS MEMBERS BARBARA GARSON, SONIA JAFFE ROBBINS AND JoANN KAWELL, AND GEORGE ROBINSON, ALEC DUBRO,

RUSSELL MILLER, PHIL MATTERA, JUDITH LEVINE, MYRNA EDELSTEIN WATANABE,

HARDY S. GREEN AND MARGARET BALD

Martin R. Stolar, Esq. 351 Broadway, 4th Floor New York, New York 10013 (212) 219-1919 [email protected] Attorney for Objectors to A/B Counsel’s Application

Case 1:00-md-01379-GBD Document 30 Filed 05/16/14 of 32

TABLE OF CONTENTS

Page

I. Introduction…………………………………………………………………………1

Tasini Established The Basis For This Case …………………………….............. 2

The Issue Of The Unregistereds ………………………………………………… 4

II. A/B Counsel’s Fee-Sharing Agreement, Allocation Formula And Lodestar And Percentage-of-Recovery Calculations Should Be Rejected As

Contrary To Law ……………………………….………………………………… 5

A. A/B Counsel’s “Backing Out Conceit” And Approach To Valuation Are Contrary To Law ……………………………………………………… 6

B. A/B Counsel’s “Allocation Formula” Is Contrary To Law ………………… 8 C. A/B Counsel’s Lodestar Calculations Are Contrary To Law ……………… 11

1. A/B Counsel Have Improperly Excluded F/O’s Tasini Hours

From Her Lodestar ………………………………………………… 11 2. A/B Counsel Have Included Hours In Their Own Lodestars That Did Not Benefit The Class And Are Not Properly Includible…………… 11

a. Time Block #1………………………………………………… 12

b. Time Block #2………………………………………………… 12

c. Time Block #3………………………………………………… 13

3. A/B Counsel’s Hourly Rates Are Not Reasonable and Their

Hourly Rate Subterfuge, Transparent………………………………... 15

D. Unless The Component Lodestar Values Are Corrected, A/B Counsel’s Allocation Formula Will Yield An Unfair Result……………………........ 16

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E. A/B Counsel’s Allocation Formula Cannot Be Salvaged………………... 16

F. Contrary To A/B Counsel’s Contention, The Goldberger Factors Do

Not Support Its Fee Request ……………………………………………. 17

1. Risk of Litigation ……………………………………………............. 17

a. A/B Counsel Did Not Assume Any Risk On The Issue of Liability …………………………………………….......... 17

b. Authors Guild and Posner Counsel Did Not Assume Risk

On The Issue Of The Unregistereds………………………...... 18

2. Quality of Representation ……………………………………......... 19

a. Category A Compensation ………………………………......... 20

b. Category B Compensation …………………………………..... 21

3. Time and Labor Of Counsel ……………………………………….. 21

III. The Court Must Make The Fee And Allocation Decisions In This Case, Not A/B Counsel …………………………………………....... 22

IV. A 17.1% Award May Be Inadequate To Compensate All Counsel Who Benefitted The Class. In That Event, The Court Should Find That 23.5% Would Be Reasonable ……………………………………………………………. 24 V. Conclusion ……………………………………………………………………… 25

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TABLE OF AUTHORITIES

Pages

Cases Blau v. Rayette-Faberge, Inc.,

389 F.2d 469 (2d Cir. 1968)…………………………………………………………… 7 Blum v. Stenson,

465 U.S. 886 (1984)………………….………………………………………………….15

Cablevision Sys. N.Y. City Corp. v. Diaz, 2002 U.S. Dist. LEXIS 12759 (S.D.N.Y. July 10, 2002) …………………………... 9

Class Plaintiffs v. Jaffe & Schlesinger, P.A., 19 F.3d 1306 (9th Cir. 1994)…………………………………………………………… 10

DiFillippo v. Morizio,

759 F.2d 231 (2d Cir. 1985)…………………………………………………………… 18 Dubin v. E.F. Hutton Group Inc.,

878 F. Supp. 616 (S.D.N.Y. 1995)……………………………………………… 9, 10 Gilson v. Chock Full O'Nuts Corp.,

331 F.2d 107 (2d Cir. 1964)………………………………………….…………… 7 Goldberger v. Integrated Resources, Inc.,

209 F.3d 43 (2d Cir. 2000)………………………………………………………… passim

Hayes v. Haushalter (In re FPI/Agretech Securities Litig.), 105 F.3d 469 (9th Cir. 1997) ……………………………………………………... 9, 10

In re Agent Orange Product Liability Litigation, 818 F.2d 216 (2d Cir.),

cert. denied, 484 U.S. 926 (1987)…………………………………………… 10,17, 23 In re AT&T Corp. Sec. Litig.,

455 F.3d 160 (3d Cir. 2006)………………………………………..……………........ 7

In re Cendant Corporation Securities Litigation (“Cendant II”), 404 F.3d 173 (3rd Cir. 2005) ……….………………………………………. passim In re Diet Drugs Prod. Liab. Litig., 553 F.Supp. 2d 442 (E.D. Pa. 2008),

aff’d, 582 F.3d 524 (3d Cir. 2009)…………………………………………………… 7

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https://advance.lexis.com/GoToContentView?requestid=598534f2-9436-5800-e81d-4adaafa49258&crid=0895c02c-70ee-3302-60a4-e85fe9d00450

https://advance.lexis.com/GoToContentView?requestid=598534f2-9436-5800-e81d-4adaafa49258&crid=0895c02c-70ee-3302-60a4-e85fe9d00450

Cases (cont’d) In re Initial Public Offering Securities Litigation, Case No. 21 MC 92 (SAS),

2011 WL 2732563 (S.D.N.Y. July 8, 2011)………………………………………… 22 In re Prudential Ins. Co. of America Sales Practices Litigation, 148 F.3d 283

(3d Cir. 1998)………………………………………………………………………… 7 J & J Sports Prods. v. Garcia, 06 Civ. 4297 (GBD)(HBP), 2011 U.S. Dist.

LEXIS 29262 at *15 (S.D.N.Y. March 1, 2011)………………………………… 9 Literary Works in Elec. Databases Copyright Litig. v. Thomson Corp.,

654 F.3d 242 (2d Cir. 2011)…………………………………………………………3, 4 Muchnick v. Thomson Corp., 509 F.3d 116 (2d Cir. 2007), rev’d

sub nom. Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2009) ………………… 4, 13 N.Y.S. Association for Retarded Children, Inc. v. Carey, 711 F.2d 1136

(2d Cir. 1983)……………………………………………………………………… 9 New York Times Co. v. Tasini, 533 U.S. 483 (2001)……………………………… passim Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2009) …...……………………… 4 Scott v. City of New York, 643 F.3d 56, 57 (2d Cir. 2011) ……………………………… 9 Smiley v. Sincoff, 958 F.2d 498 (2d Cir. 1992)………………………………………… 10 Sprague v. Ticonic Nat’l Bank, 307 U.S. 161 (1939)…………………………………… 25 Tasini v. New York Times Co., 206 F.3d 161 (2d Cir. 1999),

aff’d, 533 U.S. 483 (2001)……………………………………………………… passim Victor v. Argent Classic Convertible Arbitrage Fund L.P., 623 F.3d 82

(2d Cir. 2010)……………………………………………………………………… 22

Wal-Mart Stores, Inc. v VISA U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005)………………………………………………………… 17

Wechsler v. Southeastern Properties, Inc.,

506 F.2d 631 (2d Cir. 1974)…………………………………………….………… 7

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Statutes and Rules Fed.R.Civ.P. Rule 23……………….…………………………………………………… 23 Fed.R.Civ.P. Rule 54………………………….………………………………………… 23 Fed.R.Civ.P. Rule 72………………………………………………………….………… 23 17 U.S.C. § 504(c)(1)……………………………...………………………….………… 20 17 U.S.C. § 504(c)(2)..…………………………………………………………………… 20

28 U.S.C. § 1407……..………………………………………………………………… 3 Articles: Eisenberg and Miller, Attorneys Fees in Class Action Settlements: An Empirical

Study, 1 Journal of Empirical legal Studies 27 (2004)……………………………… 24

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1

It is traditional in class actions for Lead Counsel to make a joint application for fees on

behalf of counsel who have benefitted the class. It is also expected that they will seek

compensation for those who have come before them and discovered the cause of action or

developed the theories or arguments upon which they rely.

This is the rare or unusual case in which, rather than do so, Lead Counsel have accepted

the benefit of earlier counsel’s work, but sought to deny them compensation.1

The Lead Counsel in question will be referred to as “A/B Counsel” since they represent

the “A/B works” subclass. Earlier counsel is Emily M. Bass and her law firm. (Hereinafter,

they will be referred to as “F/O Counsel” because they were “Frozen/Out” of the litigation.)

F/O Counsel originated and actively litigated the Tasini case, which established the foundation

upon which this Class Action stands. She also worked for approximately four years in a Non-

Lead capacity in the Class Action proper2 until she was frozen out. In both capacities, she

conferred substantial benefits on the Class. (See “The History of Tasini” and “The Issue of the

Unregistereds,” post.)

F/O objects to A/B Counsel’s application for attorneys’ fees on three basic grounds: (1)

they requested a fee that is clearly inadequate to compensate all counsel who conferred benefits

on the Class (See Point IV, post); (2) they created a fee-sharing agreement and adopted an

allocation formula, both of which are contrary to law and would deny F/O compensation

commensurate with the benefits she has conferred (See Point II (A) – (F)); and (3) they used a

variety of mathematical conceits and devices that game the system and have the effect of

obscuring their misapplication of the law. (See Point II (A) – (E), post). 1 For the sake of convenience, “Memorandum of Law in support of A/B Counsel’s Application For …Award of Attorneys’ Fees” shall be referred to simply as “A/B Mem. at ___”. 2 Originally, Gaynor & Bass was appointed to serve on the Executive Committee. Ms. Bass’ Law Office is the successor in this matter. Over the past nine years A/B Counsel assigned her no work. (See Bass Declaration, dated May 6, 2005).


2

A Brief Overview of the Tasini Case and Its Relationship to the MDL

In 1993, FO instituted a case on behalf of eleven Freelancers against six Print and

Electronic Publishers (both chosen for their representative qualities) to challenge the practice of

recycling articles that Freelancers had written for print publications and incorporating them into

electronic databases. The lawsuit alleged that the practices violated the Freelancers’ copyrights.

Each of the plaintiffs who joined the suit had a different arrangement with his or her print

publisher. (None had any arrangement with the electronic publishers.) Some had no agreement

with their print publishers regarding rights. Some had oral, but no written, agreements. Still

others had a variety of written arrangements.3 Defendants included a variety of print and

electronic publishers to ensure that if copyright liability were established, it would apply

regardless of the type of “articulated” electronic database. (See Article attached as Exhibit “B” to

Bass Affidavit, dated June 30, 2005.)

The objective of the Tasini case was thus twofold: to (1) establish copyright liability on

the part of Print and Electronic Publishers, almost without regard to the particular form of e-

database involved and the arrangement between freelancer and print publisher, and (2) thereby

lay the groundwork for as broad-based a follow-up Class Action as possible. (This is described

more fully in the Bass Affidavit dated June 30, 2005 at ¶¶ 14 – 78 and the Article attached as

Exhibit “B” to Bass’ Affidavit, dated June 30, 2005).

Defendants saw beyond Tasini’s form and treated it as implicating nothing less than

industry-wide practices and norms. If the Tasini freelancers won, they said, print and electronic

publishers everywhere would be forced to purge the “nation’s archive” of all freelancers’ works.

3 These included inter alia Freelance authors who had only conveyed (a) non-exclusive rights in their works; (b) “first North American serial rights” or some other form of “first” publication rights;” (c) “print rights,” but not electronic rights ; and/or who, (d) whatever else they may have conveyed, did not convey exclusive “display” rights in their works.


3

Recognizing the defendants and their amici as having made a collective industry-wide threat, the

United States Supreme Court responded by noting that there were industry-wide solutions.

Instead of requiring databases to remove articles, it said, either “Authors and Publishers[ ] could

enter into an agreement allowing continued electronic reproduction of the Authors’ works” or a

court could “draw on numerous models for distributing copyrighted works and remunerating

authors . . ..” N.Y. Times Co. v. Tasini, 533 U.S. 483, 505 (2001).

This consolidated class action affords the global relief that Tasini and the Supreme Court

envisioned. In 2001, Lead Counsel agreed. They filed a Consolidated Amended Complaint in

the Class Action that stated:

The United States Supreme Court decided in New York Times Co., Inc. v. Tasini, ___ U.S. ___, 12 S.Ct. 2381 (2002), that the defendant print publishers, electronic databases and information aggregators there had no right or privilege under the Copyright Act to reproduce, display, sell and/or distribute without authorization copyrighted freelance works through electronic databases as alleged herein. A class action provides the most effective and meaningful vehicle to effectuate the Supreme Court’s decision and enforce the liabilities that Court established.”

Consolidated Amended Class Action Complaint filed in In re Literary Works in Electronic

Databases, MDL. No. 1379 (Dated Sept. 20, 2001).

Even before the Supreme Court decided Tasini and the three class actions were

consolidated, counsel for each class action acknowledged that it “raise[d] identical questions” to

Tasini and implicated “identical practices.”4 “If Tasini is upheld” by the United States Supreme

Court, Authors Guild and Posner Counsel advised this Court:

defendants’ liability to plaintiffs will be established as a matter of law, and the parties will be left to quarrel over…class certification and damages.

4 See Memorandum of Points and Authorities in Support of [Laney] Plaintiffs’ Motion for Transfer and Coordination or Consolidation under 28 U.S.C. § 1407 at 1, 2 filed by Laney Counsel (stating that “Tasini … raises identical questions of fact and law” to the class actions); Memorandum in Support of Joint Responses of Authors Guild and Posner Plaintiffs to Motion for Transfer and Consolidation of Actions at 6 (stating that “Tasini v. New York Times … established as a matter of law that the identical practices at issue here [in the class actions] violated the copyrights of freelance authors”).


4

(See Exh. E at pp. 3-4, attached to Bass Aff., dated June 30, 2005). Counsel for at least one

Defendant agreed:

MR. FREEMAN: What I wanted to say, your Honor, was after the Second Circuit reversed and decided in favor of the plaintiffs, that is the point at which three class action cases, which now are the MDL litigation, were filed. Those cases were immediately stayed after they were filed because at that point the Supreme Court had determined to review the Second Circuit decision. As you know, the Supreme Court affirmed the Second Circuit basically imposing liability

on the defendants. The only issue left to be determined was damages, not only in the Tasini case but also, obviously, in the followup class action cases.

(Statement of New York Times Counsel, George Freeman, from Transcript of Hearing, in Tasini

93 Civ. 8678 (GBD), dated June 17, 2004).5

Since 2005, the United States Supreme Court, in one instance, and the Second Circuit, in

two, confirmed that the Class Action is predicated on Tasini. See Reed Elsevier, Inc. v.

Muchnick, 559 U.S. 154, 158 (2009) (noting, in Tasini, “we agreed with … the Second Circuit”

and “affirmed the principal theory of liability underlying copyright infringement suits that other

freelance authors had filed after the Court of Appeals had issued its Opinion”) ; Literary Works

in Elec. Databases Copyright Litig. v. Thomson Corp., 654 F.3d 242, 245 (2d Cir. 2011);

Muchnick v. Thomson Corp., 509 F.3d 116, 118 (2d Cir. 2007), rev’d sub nom. Reed Elsevier,

Inc. v. Muchnick, supra.

F/O Counsel Conferred A Second Major Benefit On The Class: Adding The “Unregistereds" In addition to having been principally responsible for establishing the copyright liability

principles upon which the MDL is based, F/O Counsel bestowed another significant benefit on

the Class by expanding the class of works and claimants to include the “unregistereds.” She

5 Not to be left out, Counsel for the Objectors (who has become Counsel for the “C Claims”) also acknowledged the Class Action derives from Tasini. See Brief for Objector-Appellants, in 05-cv-5943 at p. 5 (“This litigation stems from this Circuit’s decision in Tasini which was affirmed by the Supreme Court . . .”). .


5

“discovered” that, like those who had registered their works with the Copyright Office, those

who hadn’t had a cause of action under Tasini. Consistent with this theory, she convinced Co-

Counsel in the Laney case to define the Class on whose behalf the suit was being brought as

including all Freelancers whose works had been infringed, whether or not they were registered.

Prior to that time, all other A/B Counsel had filed class action complaints limiting the

U.S. authors on whose behalf they were suing to those who had registered their works with the

United States Copyright Office. (See Exhs. attached to Bass Reply Aff., dated 9/30/2005).

With the expansion of the Class to include claims for the infringement of “unregistered

works,” F/O Counsel dramatically transformed the Action. The claims that F/O added to the

litigation account for at least 97% of the Class. Cf. Literary Works, 654 F.3d at 246 (“Category

C claims comprise more than 99% of authors’ total claims”).

A/B Counsel take the position that F/O’s work both in Tasini and in expanding the Class

to include the “C works” claims should be assigned a value of zero.

F/O Counsel respectfully suggests there are two ways out of the morass. (Pts II & IV).

II. Lead Counsel’s Fee-Sharing Agreement, Allocation Formula and Lodestar and Percentage-of-Recovery Calculations Should Be Rejected as Contrary to Law.

If the Court accepts the $3.3 million fee and award of 17% as inviolate, then it will need

to decide a variety of questions: Who conferred what benefits on the Freelancer Class? How

should each of these benefits be valued? How should fees be allocated?

Moreover, if the lodestar approach is used as a “cross-check,” the list of questions grows

longer: What hours could each of the firms involved in this litigation reasonably bill for? Are

those the only hours that can be included in their lodestars? Must hours that were worked, but

did not benefit the class, be excluded? Should pre-appointment hours that conferred a benefit be


6

included? What hourly rates are reasonable? Are the hourly rates A/B Counsel have used in line

with market rates in this region?

Before we address these questions, we examine how A/B Counsel proposed to value

counsels’ respective contributions and allocate fees. A/B Counsel employed at least three

devices or conceits in an effort to create the impression that the common fund’s creation is

attributable to their efforts alone. The truth stands in stark contrast.

A. Device #1: A/B’s “Backing-Out From Conceit” Is Contrary to Law

At pages 20-21 of their Memorandum in Support of their Application for Fees, Lead

Counsel suggest that “the total value of the settlement can be estimated as $12 million plus $0.3

million plus $5 million plus $2 million, or $19.3 million.” (A/B Mem. at 20). For purposes of

this discussion, we accept that estimate.

They then recount the increases to the Fund and improvements to the Settlement that C

Counsel negotiated and claim that

“. . . ‘backing out’ the increased amounts negotiated by C Counsel will reflect the results achieved by A/B Counsel.” Reducing the $19.3 million settlement value by those amounts ($610,000, $343,500, and $517,000) yields approximately $17.8 million in settlement value attributable to A/B Counsel.

(A/B Mem. at 21). They deduce from this that “[t]heir requested fee of $2.7 million is only 15

percent” of the value they have created (A/B Mem. at 21), and, thus, “easily passes scrutiny

under the percentage method.” (A/B Mem. at 20).

There are fundamental problems with Lead Counsel’s assertions and math. “The cases

are unanimous that simply doing work on behalf of the class does not create a right to

compensation; the focus is on whether that work provided a benefit to the class.” Cendant II, 404

F.3d at 191. The attorneys making a fee request must be the “competent producing cause” of the

benefits for which they are claiming fees. See Wechsler v. Southeastern Properties, Inc., 506


7

F.2d 631, 635 (2d Cir. 1974). Accord, e.g., Blau v. Rayette-Faberge, Inc., 389 F.2d 469 (2d Cir.

1968); Gilson v. Chock Full O'Nuts Corp., 331 F.2d 107 (2d Cir. 1964)(in banc). Where others

have discovered a cause of action or developed theories or arguments that have led to a recovery,

they are its competent producing cause and not those who have subsequently ‘jumped on the

bandwagon.’ See, e.g., Cendant II, 404 F.3d at 197.

It follows that in determining a fee application by any attorney or group, the court must

deduct any benefits that were created by the efforts of other attorneys or groups. See, e.g.,

In re AT&T Corp. Sec. Litig., 455 F.3d 160, 165 (3d Cir. 2006); In re Prudential Ins. Co. of

America Sales Practices Litigation, 148 F.3d 283, 338 (3d Cir. 1998); In re Diet Drugs Prod.

Liab. Litig., 553 F.Supp. 2d 442, 480 (E.D. Pa. 2008). Here, F/O Counsel:

(1) developed the theories of liability upon which the Second Circuit and U.S. Supreme Court ruled in the Freelancers’ favor in Tasini. With one minor exception, these are the very same liability principles, upon which the Freelancer Class Action is predicated; and (2) was responsible for expanding the Class of Works the Freelancer Action encompasses to include “unregistered works.” This expansion meant that instead of covering approximately 8,000 works, the Action now covers 314, 000 works. By devising and using this “back-out” maneuver, A/B Counsel assigned these

contributions a value of Zero. They recognized and deducted for subsequent contributions made

by C Counsel, but not for any of F/O’s earlier and very substantial contributions. The effect of

A/B Counsel’s failure to deduct for these benefits is at least threefold: (i) to claim the benefits as

their own; (ii) to significantly overstate the value of the benefits A/B Counsel conferred; and (iii)

to significantly understate the relation of the fee they seek to the value they created.

Put another way, A/B Counsel’s “back-out” maneuver has the effect of assigning the

following values to the following contributions of Counsel:


8

Liability Extent/Composition of Class Damages Cat. A: F/O Counsel

Assigned $0 Value

1st Level: F/O Counsel

Assigned $0 Value

Cat. A: A/B Counsel

Cat. B: F/O Counsel

Assigned $0 Value

2nd Cir.: A/B Counsel* Cat. B: A/B Counsel A/B Have Assigned Shaded Areas A Combined Value

of $17.8 million

Cat. C: F/O Counsel

Assigned $0 Value

S.Ct.: A/B Counsel* Cat. C: C Counsel

Assigned $1.4 million

* based in significant part, albeit not entirely, on F/O Counsel’s work

This assessment of the respective benefits counsel have conferred bears little relation to reality.

B. Device #2: A/B’s “Allocation Formula” Is Contrary to Law

A/B Counsel employed a second stratagem to game the system. They propose using a fee

allocation formula that, on its face, appears to be fair, reasonable and objective, but in fact is

none of these. They describe their plan of allocation in full on page 22 of their Memorandum in

Support of their application for fees. A/B Mem. at 22. Reduced to its essence, A/B Lead

Counsel propose to divide any fees awarded by the Court into three equal parts. Each of the

three Leads will then allocate fees as between them and Non-Lead Counsel on their teams

strictly in accordance with “their respective lodestars.”

Although it sounds inoffensive enough, in fact, purpose and effect, the process and

formula are designed to be anything but fair and objective. There are at least five problems with

A/B Counsel’s plan. First, the law requires (and Para. 9(c) of the Revised Settlement Agreement

contemplates) that fees be allocated on the basis of the relative contributions counsel have made

and not “in proportion to time spent.” See, e.g., Hayes v. Haushalter (In re FPI/Agretech

Securities Litig.), 105 F.3d 469, 473 (9th Cir. 1997). F/O Counsel has not agreed to any other


9

arrangement. Second, although Lead Counsel acknowledged knowing, throughout the past nine

(9) years, that F/O Counsel was always “ready, willing and able” to work, they assigned her zero

hours during this period. Third, during the same period that they assigned her no work, Lead

Counsel appropriated theories she had developed and benefits she had conferred and presented

them as their own. They thereby utilized F/O’s work to increase their own lodestars, while

ensuring that F/O’s lodestar was frozen. Fourth, on top of not assigning her work after 2005,

Lead Counsel also sought to exclude her pre-appointment work from her lodestar. Put another

way, they refused to acknowledge that her Tasini work conferred substantial benefits on the

Class and excluded her Tasini time from her lodestar. As a consequence, they understated F/O’s

lodestar by at least $ 1,274,664.72. (They also denied F/O reimbursement of $67,170.17 in

expenses.) (See 6/30/2005 Bass Aff., attached to 7/1/2005 Notice of Motion, at ¶ 104). Fifth,

conversely, A/B Counsel included untold amounts of time in their own lodestars that are not

properly included – inflating them, it would appear, by possibly as much as a factor of three.6

Sixth, on top of this, A/B Counsel further magnified the discrepancy between their own lodestars

and F/O’s lodestar by effectively freezing F/O’s hourly rate at 2005 levels, while, in significant

part, utilizing 2014 rates for themselves.

6 It is impossible to determine, with even ballpark precision, how much time was improperly included because A/B Counsel’s motion for attorneys’ fees is not accompanied by contemporaneous time records. Rather, as they did (over objection) nine years ago, each A/B firm summarized its activities over the nine-year period in a few pages or paragraphs and provided a single “all-in” figure for each claiming attorney. That single all-in figure represents the total number of hours over the nine-year period that attorney is alleged to have worked. But see, N.Y.S. Association for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1147-48, 1154 (2d Cir. 1983) (requiring that counsel applying for fees produce “contemporaneous time records indicating, for each attorney, the date, the hours expended, and the nature of the work done). Accord, Scott v. City of New York, 643 F.3d 56, 57 (2d Cir. 2011) (“Carey establishes what is essentially a hard-and-fast-rule from which attorneys may deviate only in the rarest of case”); Dubin v. E.F. Hutton Group Inc., 878 F.Supp. 616, 621-622 (S.D.N.Y. 1995) (collecting cases to the same effect). "Attorneys' fees applications that do not contain such supporting data … 'should normally be disallowed.'" J & J Sports Prods. v. Garcia, 06 Civ. 4297 (GBD)(HBP), 2011 U.S. Dist. LEXIS 29262 at *15 (S.D.N.Y. March 1, 2011); Cablevision Sys. N.Y. City Corp. v. Diaz, 01 Civ. 4340 (GEL)(FM), 2002 U.S. Dist. LEXIS 12759 at *5 (S.D.N.Y. July 10, 2002), quoting Carey, supra, 711 F.2d at 1154.


10

Even putting aside the fact that a formula that allocates fees according to time, rather than

benefits, is contrary to law, such a formula cannot fairly, accurately and objectively compare

lodestars unless the lodestars are properly determined. Here, they were not properly determined.

Rather, as stated above, A/B Counsel grossly overstated their own lodestars and understated

F/O’s lodestar so as to ensure that, if fees are allocated in proportion to “lodestars,” they will be

assured the lion’s share of the fees.

While “[t]here is very little case law concerning the allocation of attorneys’ fees among

co-counsel, that which does exist indicates that district courts may refuse to accept a fee

allocation agreement whenever there is good cause to do so.” Hayes v. Haushalter,105 F.3d at

473. Accord, In re Agent Orange Prod. Liab. Litig., 818 F.2d 216, 222 (2d Cir.), cert. denied,

484 U.S. 926 (1987). The district court need not find a legal “irregularity” before it rejects such a

formula or agreement. “[I]t may reject an agreement as to attorneys’ fees just as it may reject an

agreement as to the substantive claim” . . . “[w]henever . . . [it] finds good reason to do so . . .”.

Smiley v. Sincoff, 958 F.2d 498, 501 (2d Cir. 1992).

One good reason for refusing to approve such an agreement or formula is that it will

result in Lead and Non-Lead Counsel being compensated out of proportion to the benefits each

conferred on the Class. That is always the touchstone for a fee: the value of the benefits

conferred. See, e.g., Hayes v. Haushalter, 105 F.3d at 473 (“a court may reject a fee allocation

agreement where it finds that the agreement rewards an attorney in disproportion to the benefits

that attorney conferred upon the class — even if the allocation in fact has no impact on the

class.”); Class Plaintiffs v. Jaffe & Schlesinger, P.A., 19 F.3d 1306, 1308 (9th Cir. 1994); Dubin,

845 F.Supp. at 1013 (“[w]hen a fund is created through the settlement of a class action, the court,

as guardian of the rights of the class members, is not bound by the amount of the fee award


11

requested by counsel even where notice of the fee request has been provided to all class members

and no objections have been received”).

Here, there are countless reasons that militate in favor of rejecting A/B Counsel’s fee-

sharing agreement, allocation formula and analyses.

C. A/B Counsel’s Approach to Lodestars Is Contrary to Law.

1. A/B Counsel Improperly Excluded F/O’s Tasini Hours From Her Lodestar.

F/O Counsel filed a motion nine years ago, seeking the inclusion of her firm’s Tasini

hours in her lodestar.7 The motion was fully litigated and is now ripe for decision. There, F/O

Counsel demonstrated the benefit her firm’s work conferred on the Class. The determination of

that motion will govern this aspect of these Objections.

By excluding F/O’s Tasini hours, A/B Counsel profoundly understated her lodestar.

2. A/B Counsel Have Included Hours in Their Own Lodestars That Did Not Benefit the Class and Are Not Properly Includible.

A counsel’s “lodestar” consists of “the number of hours reasonably billed to the class

… multiplie[d] . . . by an appropriate hourly rate.” Goldberger v. Integrated Resources, Inc., 209

F.3d 43, 47 (2d Cir. 2000). In order to be reasonably billed under common fund principles, the

work attorneys do must confer a benefit on the Class. See, e.g., Cendant II, 404 F.3d at 191

(“[T]he cases are unanimous that simply doing work on behalf of the class does not create a right

to compensation; the focus is on whether that work provided a benefit to the class.”)

It follows that three blocks of time must be excluded from A/B Counsel’s lodestars or

significantly reduced or discounted. They can be described generally as follows:

7 See Notice of Motion, dated July 1, 2005, together with Exhibits A through I, the accompanying volume of contemporaneous time records, Memorandum and Reply Affidavits.


12

a. Time Block #1: A/B Counsel’s Appellate Work on the Question of Whether the First Settlement Was Fair, Reasonable And Adequate8

The great bulk of A/B Counsel’s work during these two periods necessarily concerned

the F.R.A. Objectors’ contention that the First Settlement was not fair, reasonable and adequate.

The Objectors prevailed on this question on appeal and their Counsel (who became “C Counsel”)

billed the Class for his appellate time. (See Chalmers Dec. in Support of Application for

Attorneys’ Fees, Doc. 26 at ¶¶ 3, 6). Is A/B Counsel really suggesting that both winning and

losing counsel on appeal can reasonably bill the Class for their time? We think not.

b. Time Block #2:9 A/B Counsel’s Phase I Work Related to The First Round of Mediation. The Second Circuit found a “fundamental conflict” between different claims groups

(A, B and C) and that, accordingly, inadequate representation of the “C works” claims. (654

F.3d at 252-255). Are A/B Counsel really suggesting that they can reasonably bill the Class for

work the Second Circuit found to have been conflicted? We think not.10

8 This first time block covers much of A/B Counsel’s appellate work before the Second Circuit and covers two distinct periods: (i) from November 2, 2005 to approximately December 2007 and (ii) from March 2, 2010 to August 17, 2011. 9 This second major block of time covers the period from September 1, 2001 to September 27, 2005. 10 While it is undoubtedly true that some of A/B Counsel’s work during Time Blocks 1 and 2 was compensable, there is no practical way to separate compensable from non-compensable time because A/B Counsel haven’t produced contemporaneous time records. The best that F/O Counsel can do, insofar as Phase I is concerned, is to suggest the following “rough justice” basis for apportionment: since 97% of the Class consists of “C works” claims, the Court should presume that 97% of A/B Counsel’s Phase I work was not compensable and 3% was. In other words, essentially, the Second Circuit required a “do-over” of the Phase One mediation. While, at first blush, this conclusion may appear to be harsh, it is fully coincides with A/B Counsel’s own assessment. See Plaintiffs-Appellees’ Petition for Panel Rehearing and Suggestion For Rehearing In Banc at p. 13, where A/B Counsel assert that if the Second Circuit adheres to its August 17th Opinion, it will have “vitiate[d] the settlement in full, leaving the parties where they were at the outset of the litigation”)(emphasis added); id. at p. 5 (where they assert that adhering to the 8/17/11 Opinion would have the effect of “completely unravel[ing] a comprehensive settlement reached after years of mediated negotiation”). On November 17, 2011, the Second Circuit denied the parties’ petitions for rehearing.


13

c. Time Block #3:11 A/B Counsel’s Appellate Time on the Jurisdictional Issue

Throughout Phase I, A/B Counsel were unenthusiastic about the argument that the

District Court had subject matter jurisdiction over the unregistered claims and, therefore, that

such claims could be included in the Class. (In truth, they were hostile to the argument.) With

the promulgation of Judge Walker’s dissent on November 29, 2007, however, A/B Counsel

appeared to do an about-face. (See Muchnick v. Thomson Corp., 509 F.3d at 128 (dissent)). From

that point forward, they embraced several jurisdictional arguments F/O had developed and

presented them as their own.12 Thus, beginning with their Petition for Rehearing and/or

Rehearing in Banc in the Second Circuit and continuing through their Opening and Reply Briefs

in the United States Supreme Court, A/B Counsel utilized arguments F/O developed in support

of the assertion that a district court has jurisdiction over unregistered claims.

Unlike A/B Counsel, who have assigned “zero value” to F/O’s Tasini work and de

minimis value to her other work, F/O Counsel is not so uncharitable. She does not believe that

A/B Counsel should be denied all compensation for the work they did on the jurisdictional issue.

Rather, in line with Cendant II and other common fund cases, she believes there should be a

deduction from A/B Counsel’s lodestars since others discovered or developed the arguments.

In this instance, ironically, probably the largest benefit conferred on the Class during the

Supreme Court proceedings, was conferred by counsel for the Defendants. In many respects,

they - and not Plaintiffs’ Counsel at all - led the way to a victory. To the extent that A/B Counsel

contributed, they did so once again on the back of F/O. Accordingly, F/O Counsel proposes,

conservatively, that A/B’s hours in Time Block #3 should be reduced or discounted by half. 11 This third block also covers the period from approximately December 2007 through March 2, 2010. 12 To be clear, F/O Counsel does not object to A/B Counsel having used arguments she developed. Rather, her objection is that they have increased their own lodestars by piggybacking on her work, while keeping her lodestar frozen and denying her compensation. They should not be unjustly enriched.


14

At present, A/B Counsel credit themselves and Associated Non-Lead Counsel with

having put in “almost 17,000 hours” on this matter. See A/B Mem. at 10. As best as F/O

Counsel can tell, A/B claim 16,951.28 hours, with the breakdown in their hours as follows:13

Firm Phase I Hrs

Phase II Hrs Claimed Hours (I + II)

Claimed Lodestar

Kohn Swift 3,013.80 721.70 3,735.50 1,534,574.50

Boni Zack 1,620.75 1,620.75 1,158,618.75 Girard Gibbs 2,642.00 1,649.40 4,291.40 1,924,834.50 Brobeck 2,569.23 2,569.23 1,125,603.00 Hosie

850.01 2,326.25 (from 2003)

3,176.26 ?? (see note 13)

1,215,035.05

Fergus 533.20 490.80 1,024.00 702,477 Hoguet 534.14 534.14 220,262 Totals 10,142.38 6,808.90 16,951.28 ?? 8,277,224

Notwithstanding their claim to have worked close to 17,000 hours and to be entitled to a

“total lodestar of over $8 million,” see A/B Fee Petition at p. 10, A/B Counsel repeatedly

emphasize they are only asking to be paid “approximately one-third” of their lodestar,” id. at 10 -

in other words, approximately 6,000 hours and 2.7 million U.S. Dollars. They pretend to be

voluntarily reducing their fee by two-thirds out of modesty and in a spirit of altruism.

Modesty and altruism have nothing to do with it. Common fund principles determine

what can and cannot be billed for, and preclude billing for work that did not confer a benefit on

the Class. Here, that means, at a minimum, that substantial reductions must be made in A/B

Counsel’s hours for work performed during Time Blocks 1, 2 and 3. Such reductions could well

13 This does not include C Counsel’s hours. It also does not include F/O Counsel’s hours. There is also an ambiguity regarding the Hosie Firm. It is unclear whether the total number of hours it claims to have worked is 2,326.25 hours or 3,176.26. Hosie McArthur claimed 850.01 hours in the First Petition; Hosie Frost, 2,326.25 hours in the Second. But the Second Petition suggests it may include hours covered by the First Petition since it includes hours going back to 2003.


15

have the effect of reducing A/B Counsel’s time by two-thirds. In other words, it would appear

that A/B Counsel are only asking to be paid for one-third of their time because that is all they can

reasonably bill for. It necessarily follows that is all they can include in their lodestars.

One question remains: If they are not even asking to be paid for the other “two-thirds,”

why even attempt to include those additional hours in their lodestars? Logically, there are two

possible explanations: First, to make themselves appear so reasonable that the Court will shrink

from reducing their fee request further. Second, to ensure that, if permitted somehow to apply

their “allocation formula,” use of these all-inclusive lodestars for themselves will assure them a

more favorable pay-out. See Point II (D), post.

3. A/B Counsel’s Hourly Rates Are Not Reasonable and Their Hourly Rate Subterfuge Is Transparent There are three reasons the hourly rates A/B Counsel employed are unreasonable. First

and foremost, because the current “market rates” they are claiming are not “in line with those

[rates] prevailing in the community for similar services by lawyers of reasonably comparable

skill, experience, and reputation.” Blum v. Stenson, 465 U.S. 886, 895 n. 11 (1984). Their

claimed rates of between $650 and $800/hr. are significantly higher. Second, because they have

use dramatically different rates for different law firms. Thus, they have computed a substantial

portion of their own lodestars using “current rates,” while multiplying all of F/O’s hours using a

lower 2005 rate.14 Third, they cannot reasonably use current rates to compensate for a delay in

payment (A/B Mem. at 17) when they themselves are largely responsible for the delay.

14 In another effort to gain the Court’s sympathy, at page 17 of their Brief, A/B Counsel state that their “reported lodestar actually understates the present value of the time they spent” because they could have, but did not, “valu[e] all their time in this case using current rates.” (A/B Mem. at 17 n. 4). They have only used current rates for time after June, 2005, but not before then. Id. at 16. Again, what initially sounds reasonable turns out to be another mathematical sleight of hand. By calculating different firms’ lodestars at dramatically different rates, A/B Lead Counsel have ensured themselves a more favorable


16

D. Unless The Component Lodestar Values Are Corrected, Lead Counsel’s Allocation Formula Will Yield an Unfair Result.

The math is relatively straightforward. Under A/B Counsel’s allocation formula, the total

A/B fee of $2.7 million is supposed to be divided, initially, into three equal shares. In other

words, each of the three A/B “Leads” is supposed to get $900,000. Two of the three are then

supposed to share that amount with Non-Lead counsel in proportion to their A/B-“approved”

lodestars. A/B Counsel have approved a highly inflated or overstated lodestar of $1,924,834.50

for Girard Gibbs, and a grossly understated lodestar for Bass or F/O Counsel of $280,536.00.

That means that the proportion in which Girard Gibbs presently plans to share any fee

they receive is 87.3% to themselves and 12.7% to F/O Counsel. It follows that, if the allocation

were done today, out of the $900,000 they received in the initial 3-way ‘split,’ Girard Gibbs

would pay $785,700 to themselves and $108,000 to F/O. It is not being done today, however; it

will be done on or after the “Effective Date.” By then, given the amount that remains to be done

‘administering’ the Settlement, F/O has little doubt that GG’s “lodestar” will have so increased

as to afford F/O a fee of only half that amount or approximately $50,000.

In sum, if A/B Counsel are afforded discretion in the matter, F/O Counsel will receive

between $50,000 and $108,000 for twelve-plus years of work that not only established the basic

liability principles for this case, but expanded the Class from 8,000 to 314,000 claims.

E. Even If the Lodestars Are Adjusted, the Allocation Formula Will Yield an Unfair Result. The Formula Cannot Be Salvaged.

If we credited A/B Counsel with only those hours for which they can reasonably bill –

i.e., which by their own account would appear to approximate 1/3 of their lodestar - the lodestar

for Girard Gibbs would be closer to $641,611.50 than to $1,924,834.50. Conversely, if F/O’s

“split” under the second part of their allocation formula. At first blush, three firms would appear to be affected; on closer examination, only two. (A/B Mem. at 22). F/O Counsel is one of them.


17

lodestar is adjusted to include her Tasini hours, as it properly should be, her lodestar would be

$ 1,590,267.72 rather than the $280,536-lodestar A/B Counsel assigned her.

Now, if we apply A/B Counsel’s allocation formula, the allocation is turned on its head.

Out of $900,000, Girard Gibbs would receive $259,200 and F/O Counsel would receive

$640,800. Although this allocation might be fairer and truer to the benefits each conferred on the

Class, both sets of counsel would then be undercompensated. F/O Counsel is not looking for an

unfair result. Another solution must be available.15

F. The Goldberger Factors Do Not Support A/B Counsel’s Fee Request

The trend in this Circuit is to apply the percentage-of-recovery approach to determine an

appropriate fee. Wal-Mart Stores, Inc. v VISA U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005). In

determining the appropriate percentage to apply, courts look to several Goldberger factors.

Recompense for counsel’s risk of litigation is “’perhaps the foremost’ factor to be considered”.

See, e.g., In re Agent Orange, 818 F.2d at 232.

1. Risk of Litigation: Here, A/B Counsel claim to have taken “enormous” risks

deserving of substantial recompense. (A/B Mem. at 12). The truth is the opposite. There were

two and only two issues that were ever risky: (1) the underlying issue of liability, and (2) the

issue of whether or not the “unregistereds” could be included in the Class.

With one exception, A/B Counsel did not take either risk. F/O Counsel took both.

a. A/B Counsel Did Not Assume Any Risk on the Issue of Liability

A/B Counsel are being less than forthright with the Court when they state at pages 12-13

of their Memorandum:

15 Nor should Girard Gibbs alone bear the impact of the inclusion of Tasini hours in F/O’s lodestar. F/O Counsel’s Tasini work conferred a benefit on all members of the Class. Accordingly, the cost of achieving those benefits should not be so cabined.


18

Tasini by no means minimized A/B Counsel’s litigation risk, as such risk is measured at the time the case is filed. The Supreme Court did not decide Tasini until after this litigation was initiated.”

A/B Mem. at 13 (emphasis added).

A/B Counsel neglect to mention three critical facts: First, the class actions piggybacked

on the Second Circuit’s Tasini decision.16 Class actions were commenced in California

(Posner), Delaware (Laney) and the Southern District of New York (Authors Guild).17 Second,

counsel for the Authors’ Guild and Posner cases fought to have Laney transferred to New York

and the three class actions coordinated or consolidated there precisely so as to be able to rely on

Tasini. (See Mem. in Support of Joint Responses of Authors Guild and Posner Plaintiffs to

Motion for Transfer and Consolidation of Actions at 6-7). After all, they pointed out, Tasini was

only binding precedent in the Second Circuit. In other Circuits, it was only persuasive authority.

(Id. at 7). Third, when the Supreme Court subsequently granted certiorari in Tasini, three of four

A/B Counsel sought and obtained stays of their own actions in order to avoid any risk that the

Second Circuit might be reversed. Those stays were lifted and the actions proceeded only after

the Supreme Court ruled in the Freelancers’ favor. Shortly thereafter, a Consolidated Class

Action Complaint was filed and the case was sent to mediation.

b. Authors Guild and Posner Counsel Did Not Assume Risk on the Issue of the Unregistereds As A/B Counsel concede, risk is to be determined ex ante, rather than in hindsight. (See

A/B Mem. at 13, citing DiFillippo v. Morizio, 759 F.2d 231, 234 (2d Cir. 1985). At their

16 By their own account, A/B Counsel commenced work on their Class Actions “[b]eginning in October 1999.” (Boni Dec., dated June 14, 2005 at ¶ 2). The date is not a happenstance: The Second Circuit ruled in the Freelancers’ favor on September 24, 1999. See Tasini v. New York Times Co., 206 F.3d 161 (2d Cir. 1999), aff’d, 533 U.S. 483 (2001). Also, see footnote 5, ante. 17 Although they originally filed in the Northern District of California, a month later, “the Posner plaintiffs voluntarily dismissed the case in California and refiled in the Southern District of New York.” (Rice Dec. at ¶ 3.)


19

commencement, the Authors Guild and Posner cases only included U.S. authors to the extent

that they had registered their works with the United States Copyright Office. The Complaints in

those two cases did not include claims for their unregistered works. There was absolutely no risk

whatsoever in such a lawsuit. Tasini had established liability and the standing of “registereds” to

sue for damages was clear on the Act’s face.

As already noted, the GG-F/O team was the lone exception. They alone defined the Class

as including all Freelancers whose works had been infringed, within the meaning of Tasini,

whether or not they had been registered with the U.S. Copyright Office. Accordingly, only that

team assumed the risks associated with “maintaining the litigation on behalf of unregistered

authors” and “certifying” a class that included them. (Cf. A/B Mem. at 12, where A/B Counsel

claim that they all took these risks.) The Girard Gibbs-F/O team did so at F/O Counsel’s

instance, based upon theories she had already developed.

In sum, at the commencement of litigation, most A/B Counsel assumed virtually no risk.

2. Quality of Representation: A/B Counsel seem to believe they should be awarded

fees here because of work they did in other actions. Consistent with this position, their

Declarations contain lengthy resumés that dwarf the barebones “summaries” of their work in this

case. But, achieving victories in other lawsuits confers benefits on other classes and not this one.

Accordingly, at least in this Circuit, as A/B Counsel concede, the rule is that “the quality of legal

representation is best measured by the result obtained.” (A/B Mem. at 13, citing Goldberger,

209 F.3d at 55). A/B Counsel characterize the result achieved here as “outstanding,” and their

work as at all times “skillful,” “non-duplicative,” “diligent” and “efficient.” (A/B mem. at 13, 14,

16, 10, and 21). We briefly examine that proposition.


20

There are considerable grounds on which to question these assertions. Since A/B

Counsel neither established the legal principles upon which (i) classwide liability was predicated

nor (ii) the Class was expanded to include the “unregistereds,” the quality of A/B’s work should

be judged by their degree of success in representing the “A” and “B” claims. The fruit of their

labors in this regard is summed up or encapsulated in ¶¶ 3.a and 3.b of the Settlement.

While F/O does not question the fact that the formulas contained in these two

subparagraphs satisfy the requirement that they be “fair, reasonable and adequate,” the result

A/B achieved can hardly be called “outstanding.” Consider the following.

a. Category A Compensation: Category A claims are those entitled to statutory

damages. Ordinarily, under the Copyright Ac t, statutory damages range from a minimum of

$750 to $30,000 per infringed work. 17 U.S.C. § 504(c)(1). Where infringement is willful,

statutory damages range from $750 to $150,000 per work. 17 U.S.C. § 504(c)(2).

Here, A/B Counsel negotiated a formula for “A” claimants that pegs pay-out to number

of works infringed. For the first fifteen “A” works written for and infringed by any one pub-

lisher, a Class Member will receive $1,500 per work; for the second fifteen, $ 1,200 per work;

and after the first thirty, $875 per work. (Settlement at ¶ 3.a). While certainly not “inadequate,”

these figures can hardly be called exceptional when one considers the statutorily-prescribed

range.18

18 This conclusion is only reinforced when one considers a further fact: i.e., that the compensation formula is bifurcated. Sixty-five (65) % of the amount being paid represents compensation for past infringement. The remaining thirty-five (35) % represents payment for a non-exclusive license going forward, under which certain Defendants will be permitted to continue to use the work. See Settlement at ¶¶ 4.a, 4.b. But, this means that Class Members are really receiving payments of $975, $780 and $568.75 for past infringements. $568.75 is 24% below the statutory minimum. See 17 U.S.C. § 504(c)(1) (“the copyright owner may elect … an award of statutory damages … in a sum of not less than $750” per infringed work). This does not invalidate the Settlement. Negotiated settlements often yield less than would be achieved by victory at trial. The result, however, can hardly be called outstanding.


21

b. Category B Compensation: The issue here concerns a discrepancy in

treatment. Category B is a true hybrid. Insofar as past infringement is concerned, a Category B

claim is indistinguishable from a Category C claim. (Neither is entitled to statutory damages.)

Insofar as licensing and compensation going forward is concerned, however, Category B claims

and A claims are indistinguishable . Yet, first-tier “A” Claims will receive $525 per work for a

license, while it appears most B claims will receive a flat $52.50 for their continued use. In other

words, even though - in this regard - they are similarly situated, a B claimant will only get one-

tenth of what the first-tier A claimant gets for the continued use of their registered work.

While this doesn’t require that the B compensation formula be rejected, meeting a

threshold requirement and achieving an outstanding result are two very different things.

3. Time and Labor of Counsel: We have already addressed this issue at length

elsewhere. Here, we make an even more fundamental point. A/B Counsel piggybacked on other

counsel’s work in terms of liability and the “unregistereds.” C Counsel negotiated compensation

for the “C” Claims. That leaves A/B Counsel with the responsibility of negotiating

compensation for the “A” and “B” Claims.

Can it really have taken them thousands of hours to do so, or some significant portion of

that? And, if it did take them thousands of hours, how can one explain this? Logic suggests that

there may have been (i) redundant, unnecessary and/or duplicative work over the 14 years and/or

(ii) seasoned attorneys performing work that should have been delegated to paralegals or

administrative personnel. Logic also suggests that not all of these hours can be reasonably

billed.19 Since they have not produced contemporaneous time records, however, A/B have

deprived the Court, Class and other counsel of the necessary means to answer these questions.

19 The suggestion that A/B Counsel could reasonably bill for thousands of hours to come up with the “A” and “B” compensation formulas or matrices is suspect for at least three reasons: It flies in the face of


22

III. The Court Must Make the Fee and Allocation Decisions in This Case, Not A/B Counsel. At pages 21-22 of their Memorandum, A/B Counsel assert that “it is appropriate for A/B

Counsel to allocate the fee award among themselves and other Co-Counsel.” See A/B Mem. at

21. In Section 9(c) of the Settlement Agreement, they provide for the Court to cede them this

authority. Such a delegation would be unlawful and inappropriate for at least six reasons.

First, the cases that A/B Counsel rely upon to support such a delegation are both PSLRA

cases. See Victor v. Argent Classic Convertible Arbitrage Fund L.P., 623 F.3d 82 (2d Cir. 2010)

and In re Initial Public Offering Securities Litigation, Case No. 21 MC 92 (SAS), 2011 WL

2732563 (S.D.N.Y. July 8, 2011). A class action under the PSLRA differs from a non-PSLRA

class action in at least two significant respects. Under the PSLRA, the Court is required to select

an institutional investor or other plaintiff with a large financial stake in the case to serve as “lead

plaintiff.” 15 U.S.C.S. § 78u-4(a)(3)(B)(iii)(I). Once the lead plaintiff is appointed, it is

“assigned the right to appoint and duty to monitor lead counsel for the class.” 404 F.3d at 180.

In turn, generally, the lead counsel it selects controls subsequent decisions regarding the

assignment and compensation of counsel. This is not a PSLRA case, nor is a comparable

statutory scheme involved. Accordingly, the Court retains plenary authority over the assignment

and compensation of counsel.

Second, in all class actions – even PSLRA cases – decisions regarding pre-appointment

work are for the Court to make, not lead counsel. (Cendant II, 404 F.3d at 194-95, 197). Here,

almost all work for which F/O Counsel is seeking fees was performed pre-appointment. That

includes both her Tasini work (all of it) and her inclusion of the unregistereds in the Class. But common sense. The A and B matrices had already been agreed upon by March or April, 2003, i.e., over 11 years ago. Finally, the formulas did not change at all during Phase II. (Notice of Revised Class Action Settlement, dated 1/22/2014, at p. 4, 1st para.) (“The payment schedules for Category A and B Subject Works remain unchanged”). Yet, the hours for which A/B Counsel claim to be “reasonably billing” have continued to rise and rise. (Their lodestars appear to have increased by 6,808 hours during Phase II.)


23

for her work in the latter regard, there would have been no Complaint filed on behalf of a Class

of U.S. authors whose “unregistered,” as well as “registered,” works were infringed. Since all of

this transpired pre-appointment, it is for this Court and not A/B Counsel to make all decisions

regarding F/O’s compensation.

Third, in non-PSLRA cases, Lead Counsel isn’t competent to make fee determinations

either as to pre- or post-appointment work. This conclusion is required by Fed.R.Civ.P. 23(h).

Under the present rule, all applications for attorneys’ fees must be made by motion and on

notice, whether they are made by Lead, Non-Lead or Non-Designated Counsel. Fed.R.Civ.P.

23(h)(1). As to each applicant, the Court must make findings of fact and conclusions of law.

Fed.R.Civ.P. 23(h)(3). While it is empowered to refer issues concerning the amount of the

award “to a special master or … magistrate . . .” (Fed.R.Civ.P. Rule 23(h)(4)), it is nowhere

given the authority to refer such issues to private counsel. Equally significantly, even a referral

to a magistrate judge or special master can only be “as provided in Rule 54(d)(2)(D).” In other

words, their authority is to recommend and report. Fed.R.Civ.P. 72(b). It necessarily follows

that A/B Counsel’s claim, here, to have plenary authority over fees – i.e., greater authority than

a Magistrate Judge or Special Master – is absurd.

Fourth, A/B Counsel are self-interested. Permitting them to determine F/O Counsel’s

fees would be a denial of due process.

Fifth, A/B Counsel in any event disqualified themselves from making fee determinations

by their pronouncements and conduct. See, generally, Cendant II, 404 F.3d at 200 . They failed

to disclose their fee-sharing arrangement until four years into the litigation. But see In re Agent

Orange, 818 F.2d at 226. They announced that any authority they are given over fees will be

exercised both contrary to Section 9(c) of the Settlement Agreement and contrary to law.


24

(Compare Sec. 9(c) with A/B Mem. at 22, where A/B Counsel confessed they have no intent of

going so “far” as to “in good faith … weigh[] relative contributions” of counsel and award fees

in proportion to benefits that have been conferred). Finally, they have clearly, consistently and

unremittingly evinced their bias towards F/O over the course of eleven years. Most recently,

they concluded a Settlement Agreement that they are well aware, if approved without any

alteration, will deprive F/O of two significant property interests. (See Bass Dec., dated May 6,

2014). Notwithstanding this, they did not even bother to serve her with the Settlement

Agreement or the Preliminary Approval papers or notify her of same. Id.

IV. A 17.1% Award May Be Inadequate To Compensate All Counsel Who Benefitted The Class. In That Event, the Court Should Find That 23.% Would Be Reasonable. If, notwithstanding the above, the Court concludes that A/B are entitled to the amounts

they have requested, a further question remains: Is the $3.3 million A/B negotiated adequate to

compensate all Counsel who conferred benefits? If not, what should be done?

Even a cursory examination of the literature suggests that the total amount allocated is

low. Thus, the $3.3 million that has been requested for fees represents 17.10% of the Class’

recovery. By Eisenberg and Miller standards, the percentage is remarkably small. See Eisenberg

and Miller, Attorneys Fees in Class Action Settlements: An Empirical Study, 1 Journal of

Empirical Legal Studies 27 (2004). According to their classic study, for nonsecurities class

actions, the “mean” and “median” percentages awarded as attorneys’ fees for class recoveries in

the range of $15 to $22 million are 26.6% and 30.0%, respectively. Id. at 73. See Manual on

Complex Litigation (4th) § 14.121 (25% of a common fund "represents a typical benchmark.")

Here, an award of only 23.5% would fully compensate all counsel entitled to an award of

fees. It would compensate F/O Counsel for the benefits she has conferred on the Class and A/B

and C Counsel at the levels they have requested. There would be no diminution in any counsel’s


25

fee requests, and no need for further proceedings. Moreover, the percentage-of-recovery

awarded would still be at least 3 to 6.5 percentage points below established norms. (F/O Counsel

does not seek by this suggestion to have the Class’ recovery diminished, but for Defendants to

contribute an additional adequate amount towards fees.)

It is clearly within this Court’s power to find – and undersigned Counsel respectfully

suggests it is for the Court to consider – that the amount A/B Counsel negotiated is not adequate

to compensate all Counsel who benefitted the Class. The Court has this power under the

common fund doctrine, as well as both Rule 23 and the Agreement. Indeed, the latter not only

empowers the Court to “modify” any aspect of the Agreement, but clearly contemplates that it

may do so. In the event, the parties can determine whether or not “to proceed with the settlement

as modified by the Court.” (Settlement Agreement at ¶ 11.e).

CONCLUSION

The common fund doctrine has roots deep in equity. Sprague v. Ticonic Nat’l Bank,

307 U.S. 161 (1939) (tracing equity courts’ authority over fees to the First Judiciary Act). Its

rationale is to prevent the “unjust enrichment of those benefitting from a lawsuit without

contributing to its cost.” Goldberger, 209 F.3d at 46. It would be unfortunate, indeed, if a

doctrine designed to prevent unjust enrichment were instead used to promote it.

Dated: May 8, 2014

Respectfully submitted,

__________________________________ Martin R. Stolar, Esq. 351 Broadway, 4th Floor New York, New York 10013 (212) 219-1919 [email protected]


26

Attorney for Barbara Garson, Sonia Jaffe Robbins and JoAnn Kawell, and George Robinson, Alec Dubro, Russell Miller, Phil Mattera, Judith Levine, Myrna Edelstein Watanabe, Hardy S. Green and Margaret Bald


memorandum of law in support of objections, in re literary works in electronic databases

Documents