A class of freelance authors sued publishers claiming that the electronic re-publication of their works violated their rights. The parties reached a settlement that divided the relief into three categories, and provided different recovery for each category. Although Category C encompassed more than 99% of the total claims, the bulk of the settlement compensation flowed to Categories A and B. Objectors argued that the named plaintiffs favored the fewer and more lucrative Category A and B claims over the more numerous Category C claims, and that the Category C claimants should have been separately represented as a subclass. The district court approved the settlement, but the Second Circuit reversed. In re Literary Works in Elec. Databases Copyright Litig., 654 F.3d 242 (2d Cir. 2011) (No. 05-5943). Objectors argued that even though class representatives held claims in all three categories, there was a substantial risk that the class representatives sacrificed the Category C claims in favor of more favorable compensation for Category A and B claims. The Second Circuit agreed, and held that to negotiate a fair settlement, Category C claims must be represented separately in a subclass. The court directed that, on remand, the district court establish three subclasses to negotiate a settlement.
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Second Circuit rejects settlement due to inadequate representation
- Jenner & Block
- Terrence J. Truax, Brent Caslin, Joseph A. Saltiel and Jeffrey A. Koppy
- January 31 2012
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