The U.S. Court of Appeals for the Second Circuit declined to increase attorneys fees in a class action settlement that the district court described as “pretty close to … worthless.”
Two class representatives initially brought suit against TouchTunes Music Corp. over its refusal to provide refunds of songs that customers purchase on one of its machines. However the terms don’t note that venue owners are given a remote control for the machines and are able to skip songs at their discretion. Both plaintiffs claimed that different bartenders in Montana did just that after they’d already purchased the songs.
The claims against the New York-based company were ultimately whittled down to one deceptive acts or practices claim under the state’s general business law, related to the failure to disclose the ability of bars and venues to skip songs.
The parties announced a settlement agreement in October 2017, with TouchTunes agreeing to provide each class member one credit to play a song. A song credit was found to be worth approximately 40 cents for the total potential class divided between 166,000 who had definitely had songs skipped, and another 285,000 who potentially had a song skipped. The settlement was later found by the court to be worth about $75,000.
Additionally TouchTunes acquiesced to a $2,000 incentive fee for the lone remaining class representative, Michelle Cline, as well as up to $100,000 in counsel fees and expenses. No fee or incentive award would be charged against the benefits to the class.
At the final May 2018 hearing, U.S. District Judge Lewis Kaplan of the Southern District of New York took issue with settlement terms that were “pretty close to … worthless” for what he called a “nuisance case.” The lodestar fee application made by class counsel, Newman Ferrara partner Jeffrey Norton, wasn’t supported by billing records, including a $10,000 consulting fee reimbursement that couldn’t be properly explained.
Kaplan went on to award Norton 20 cents for each song credit that was actually redeemed by members of the class before the June 2018 claim deadline. As of the final hearing, only 2,200 of the 285,000 members of the possibly skipped class had made a claim. The incentive award was nixed, and only $400 was approved for the cost of filing the suit.
On appeal, the panel—composed of U.S. Circuit Judges Robert Stack, Reena Raggi and Susan Carney—declined to accept class counsel’s argument that the district court abused its discretion, finding the lack of documentation towards billing and elements of the Class Actions Fairness Act of 2005 supported Kaplan’s decisions.
Likewise, the district court did not display personal bias when it opined on the negligible value of the suit and settlement. The panel found that Kaplan’s “assessment finds support in the record.”
Norton did not respond to a request for comment.
TouchTunes’s legal team on appeal was led by Morrison & Foerster partner Joseph Palmore, who also did not respond to a request for comment.