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International Law

: Excess Copyright

Approval of $45 million Estate of Chet Baker Estate class action settlement is somewhat unsettled

By Howard Knopf, Esq.

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The fate of the potentially largest Canadian copyright class action lawsuit may be in limbo.

Here's an update on the class action law suit against the four big multinational record companies led by the Estate of Chet Baker. This update follows upon a report from March 8, 2011 by Drew Hasselback, himself a lawyer and the legal post editor of the National Post/Financial post. Here is my original blog about this from February 8, 2011.

It seems that certain matters had not been finalized at the time of the settlement approval hearing scheduled for February 15, 2011. I don't know whether these may have included some of the issues I raised in my earlier posting. Moreover, Paul Baker, the son of Chet Baker had raised an issue concerning the right of his mother, Carol Baker, one of the representative plaintiffs, to enter into an agreement on behalf of the estate.

The class action settlement web site has been updated since my last blog, which noted the absence of the apparently important CSI Term sheet. The site now includes the term sheet agreed upon by the Estate and Chet Baker Enterprises LCC and an amended cooperation and minutes of settlement agreement agreed upon by Carol Baker as Personal Representative for the Estate of Chesney Henry "Chet" Baker Junior and Chet Baker Enterprises LLC. Both documents were executed on behalf of these parties by Jon Foreman, who I assume is the same Jonathan Foreman who is one of the lead class action counsel. These two documents are dated January 31, 2011, i.e. about two weeks before the originally scheduled settlement approval hearing date of February 15, 2011. I don't know when they were posted on the settlement website but it appears that they were scanned on February 14, 2011. The Term Sheet is very complex.

If approved by the Court, the settlement would be by far the largest copyright class action settlement in Canada to date - about three times bigger than the Robertson case, which took years to resolve and went all the way to the Supreme Court of Canada. Indeed, it would entail more than one third of the total face value of the settlement in the proposed Google Book Settlement, the mother of all copyright class actions that may or may not get approved by a US Court. It is about the same as the US $45 million that Google agreed to pay rights holders, apart from other payments for legal fees and establishment of a registry that would bring the Google total to about $125 million. However, legal fees and other significant costs will be deducted from this proposed Canadian settlement.

The Robertson case took at least a dozen years from the statement of claim until the payout cheques were finally mailed just the other day and had to go to all the way to the Supreme Court of Canada, where judgment was rendered in 2006. The Google class action is now about 5.5 years old and has probably not even reached the "end of the beginning" stage. Indeed, Judge Denis Chin - one of the most highly regarded and decisive trial judges in the USA (he was entrusted with Bernie Madoff) - has been deliberating on a decision on the amended settlement for over a year. Few expect that his decision will be the end of the matter. Here's a possible flow chart for the aftermath.

By contrast, this "pending lists" matter will have been resolved - if indeed it does get approved by the Court as requested - relatively extremely quickly in about 2 1/2 years and without most of the normal and time consuming litigation stages. In fact, there is no reference on the settlement website to even a statement of defence having been filed. So, presumably there was no discovery. The publicly available documentation in support of the approval hearing is available here, and is not very extensive - though as noted above it now finally includes the important 36 page "term sheet" which is described on the settlement website as "Key Terms of Settlement". Presumably very few potential class members would have had a chance to see this essential document prior to it being posted. Some other significant aspects of the settlement have not been made public at all, as I noted earlier. One of the more interesting aspects of the settlement was that the opt-out threshold is to be provided to the Court on a confidential basis. The total fees sought for class action counsel have also not been disclosed. By way of contrast, the posted Google documentation is vastly more detailed, voluminous and informative.

The settlement is for less than the face amount of $50 million allegedly admitted to be owing by the record companies.

Out of that, there will be a request for approval of what will likely be several million dollars in legal fees, disbursements and commissions deducted before any money reaches music composers. The total amount of deductions that will be sought has not been disclosed on the settlement website. While $45 million or so is indeed an impressive amount, it is a very small fraction of the originally estimated liability figure of more than $6 billion based upon potential statutory minimum damages. This $6 billion figure was originally announced and explained by Prof. Michael Geist, who who founded and oversees CIPPIC (the legal clinic located at and supported in part by by the University of Ottawa), that has been closely involved in this very big stakes case.

It is expected that few potential class member claimants will receive more than a few hundred or a few thousand dollars at most. The class action lawyers and CSI will receive several millions if the settlement if approved. The record companies will have gotten off for less than the allegedly admitted face value of the amount owing.

It would all work out to something less than $135 per song net in the hands of composers after deductions. The record companies apparently didn't pay for the necessary rights over the years, thereby allegedly infringing their own artists' and other artists' copyrights. The normal minimum statutory damages amount that a court would award is $500 per title, though the court has discretion to reduce this figure.There were allegedly more than 300,000 works in issue. So, a "volume" discount would have been conceivable if the court were to have found that application of the minimum of $500 was "grossly out of proportion to the infringement".

Interestingly, these are the very same commercial record companies that are saying that a proposed $5,000 cap on statutory damages per individual for non-commercial copying in Bill C-32 is a "license to steal".

Here is the Judge's recent order and endorsement, which is rather unusual for a matter involving a settlement worth almost $50 million dollars. This recent order and the adjournment is not currently reflected on the class action settlement website.

*******************

ENDORSEMENT AND DIRECTION

[1] This motion for certification of this action as a class proceeding under the Class Proceedings Act 1992, S.O. 1992, c. 6, and for approval of a settlement agreement made between the representative plaintiffs and the defendants, was originally returnable on February 15, 2011. On that date, counsel reported that certain aspects of the settlement had not been finalized and the motion was adjourned to this date.

[2] On the appearance before me today, counsel advised me that the final settlement documentation will likely be completed in the next few days and that a further adjournment is requested. All parties agree to an adjournment.

[3] There is a further issue. A letter was sent to the court by Paul Baker, the son of Chet Baker, who claims a one-eighth interest in the estate. Mr. Baker raises an issue concerning the right of his mother, Carol Baker, one of the representative plaintiffs, to enter into an agreement on behalf of the estate. A copy of Mr. Baker?s letter was forwarded to all counsel. Mr. Baker was informed by my assistant that his letter would be raised at the hearing today and he was asked to direct further correspondence to counsel and not to the court.

[4] Counsel for the plaintiffs is considering the appropriate response to the concerns raised by Mr. Baker. This may include the production of further evidence (if available) to satisfy the court and counsel for the defendants that Carol Baker has authority to enter into an settlement agreement on behalf of the estate and on behalf of the corporate plaintiff. It may include a motion to substitute or add another representative plaintiff. It may include some other form of relief.

[5] In view of the foregoing, I adjourn the motion for settlement approval, and any other motions the plaintiffs wish to bring, to Monday, March 28, 2011, at 10:00 a.m. in Courtroom #6, Osgoode Hall, 130 Queen Street West, Toronto Ontario.

[6] I give the following additional directions with respect to the issues raised by Mr. Baker:

(a) Mr. Baker shall be provided with all material in support of the motion for settlement approval and all material in support of any other motions to be heard on March 28, 2011.

(b) Mr. Baker shall be provided with PDF copies of material previously filed and shall be referred to the location of such material on the web site of plaintiffs? counsel. Mr. Baker shall be served with both paper copies and electronic copies of any new material to be filed on the motion(s).

(c) Service shall be effected by either registered mail or by courier to the address shown on Mr. Baker?s letter of February 6, 2011 and by email addressed to the internet address shown on that letter.

(d) Mr. Baker shall also be served with a copy of this endorsement, in both paper and electronic form.

(e) Mr. Baker shall be informed, by letter from plaintiffs? counsel enclosing a copy of this endorsement, that (i) he is entitled to appear on the motion(s) in person or by counsel; (ii) he is entitled to file sworn evidence on the motion(s); (iii) he is entitled to make written submissions on the motion(s); and (iv) if he fails to appear on the motion(s), or fails to instruct counsel to appear on his behalf, the court may proceed in his absence. Any evidence or submissions made by Mr. Baker shall be delivered to plaintiffs? counsel and to counsel for the defendants. Plaintiffs? counsel is directed to provide the court with a copy of any evidence or submissions made by Mr. Baker.

G.R. Strathy J.

Date: March 7, 2011