Ninth Circuit Slashes Exorbitant Attorney's Fee Award That Would "Make The Average Person Shake Her Head In Disbelief"

• Jurisdiction: United States,Federal,California
• Law Firm: Sheppard Mullin Richter & Hampton
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Copyright, Class Actions
• Author: Ms Anna McLean
• Published date: 04 July 2023

The Ninth Circuit recently struck a blow against plaintiffs' attorneys' ability to recover handsome attorney's fee awards in class action settlements when there is little actual benefit to the class. In Lowery v Rhapsody International, Inc., No. 22-15162 (9^th Cir. June 7, 2023), a Ninth Circuit panel reversed the U.S. District Court for the Northern District of California's award of $1.7 million in attorney's fees to plaintiffs' counsel in a copyright class action, finding that the fee award was not reasonable when compared to the class' actual recovery of $52,841, without any injunctive relief.

In 2016, a putative class of music copyright-holders filed suit against Rhapsody International, a musical streaming platform, for copyright infringement. Rhapsody International and the putative class agreed to a settlement, with a cap of $20 million for class recovery. However, many of the putative class members were barred from recovery, as Rhapsody International had settled with the National Music Publishers Association ("NMPA") prior to settling with the Lowery class. As most of the putative class members could not recover due to Rhapsody International's prior settlement with the NMPA, qualified class members submitted claims totaling only $52,841.

Despite this minimal settlement recovery, plaintiffs' attorneys requested over $6 million in attorneys' fees (a $2.1 million lodestar with a 2.87 multiplier). When this request was reviewed at the district court level, the magistrate judge reduced the lodestar to $1.7 million and applied a negative .5 multiplier due to the minor benefit ultimately received by the class, which would result in an award of $850,000 in attorney's fees. In reviewing the magistrate judge's determination, the trial judge rejected the magistrate's addition of negative multiplier but accepted the magistrate's lodestar calculation of $1.7 million and awarded that amount in attorneys' fees. Defendant appealed.

The Court of Appeal reversed the district court's ruling, concluding that the award of $1.7 million'an amount more than 30 times larger than the "measly" actual benefit received by the class'was not reasonable. The court applied Kim v Allison, holding that when calculating attorney's fees, the award must be based on the actual or realistically anticipated benefit to the class, not an "illusory" maximum or hypothetical amount. Id. at 10-12 (quoting Kim v. Allison, 8...