69 F.4th 994
9th Cir.2023Background
- Rhapsody (now Napster) was sued in 2016 in a putative class action by music-composition copyright owners alleging unlicensed reproduction/distribution under the pre‑MMA §115 compulsory‑license regime.
- While this suit proceeded, Rhapsody settled with the National Music Publishers Association; about 98% of works on Rhapsody were covered by that settlement, substantially reducing the class’s potential recovery in this case.
- In January 2019 the parties executed a class settlement with a $20 million cap, but only $52,841.05 was actually claimed and paid to class members; the settlement also funded an Artist Advisory Board ($30,000/year) and provided modest administrative costs and representative awards.
- Plaintiffs’ counsel computed a lodestar near $2.1 million and sought a multiplier to reach over $6 million; the magistrate reduced the lodestar and applied a negative multiplier, but the district court awarded about $1.7 million in fees (no multiplier).
- The Ninth Circuit reversed and remanded, holding the district court abused its discretion by failing to value the settlement based on the actual/realistic benefit to the class and by not ensuring fees were proportionate to that benefit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court may value fees against the settlement cap ($20M) rather than actual claimed recovery | The $20M cap reflects the fund and supports a larger fee award | Only amounts actually claimed/payable to class should count; Rhapsody’s liability was contingent on claims | Court held district must value settlement by actual/realistic benefit (start with $52,841.05), not the hypothetical cap |
| Whether awarding $1.7M (lodestar) was reasonable given the small class recovery | Counsel invested significant hours and litigation effort justifying lodestar-based fee | A $1.7M fee dwarfs the class recovery and is not proportional to the benefit conferred | Court held $1.7M was unreasonable and not proportional to the meager benefit; remanded for recalculation |
| Whether the lodestar should be cross‑checked against percentage‑of‑recovery | Lodestar alone is appropriate given work performed | Court should cross‑check to ensure fees do not dwarf class recovery | Court instructed district to consider a cross‑check and ensure fees are reasonably proportional to class benefit |
| Whether fee awards under the Copyright Act can ignore proportionality (civil‑rights analogy) | Copyright fees may exceed monetary relief as in civil‑rights fee jurisprudence | Copyright statutory goals differ from civil‑rights; proportionality to class benefit remains important | Court held Copyright Act fees generally must be proportionate to class benefit, except in extraordinary cases with substantial nonmonetary or societal benefits |
Key Cases Cited
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (benefit to the class is primary factor; recommend cross‑check against percentage‑of‑recovery)
- Kim v. Allison, 8 F.4th 1170 (9th Cir. 2021) (compare fees to anticipated monetary relief based on timely claims, not settlement maximum)
- Boeing Co. v. Van Gemert, 444 U.S. 472 (1980) (fees may be based on entire fund when defendant’s liability is a sum certain)
- Camp Drug Store, Inc. v. Cochran Wholesale Pharm., Inc., 897 F.3d 825 (7th Cir. 2018) (Boeing does not govern when defendant’s liability is contingent on individual claims)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (distinguishing Copyright Act fee policy from civil‑rights fee shifting)
- Chambers v. Whirlpool Corp., 980 F.3d 645 (9th Cir. 2020) (district courts must guard against phantom settlement caps used to justify excessive fees)
- In re Hyundai & Kia Fuel Econ. Litig., 926 F.3d 539 (9th Cir. 2019) (lodestar and percentage‑of‑recovery methods described)
- Hensley v. Eckerhart, 461 U.S. 424 (1983) (fee awards must be reasonable in relation to results obtained)