In re Literary Works in Elec. Databases Litig.

05-5943-cv(L) In re Literary Works in Elect. Databases Copyright Litig. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term 2006 (Argued: March 7, 2007 Decided: August 17, 2011) Docket Nos. 05-5943-cv(L); 06-0223(CON) -----------------------------------------------------x IN RE: LITERARY WORKS IN ELECTRONIC DATABASES COPYRIGHT LITIGATION ---------------------IRVIN MUCHNICK, ABRAHAM ZALEZNIK, CHARLES SCHWARTZ, JACK SANDS, TODD PITOCK, JUDITH STACEY, JUDITH TROTSKY, CHRISTOPHER GOODRICH, KATHY GLICKEN AND ANITA BARTHOLOMEW, Objectors-Appellants, -- v. -THOMSON CORPORATION, DIALOG CORPORATION, GALE GROUP, INC., WEST PUBLISHING COMPANY, INC., DOW JONES & COMPANY, INC., DOW JONES REUTERS BUSINESS INTERACTIVE, LLC, KNIGHT RIDDER INC., KNIGHT RIDDER DIGITAL, MEDIASTREAM, INC., NEWSBANK, INC., PROQUEST COMPANY, REED ELSEVIER INC., UNION-TRIBUNE PUBLISHING COMPANY, NEW YORK TIMES COMPANY, COPLEY PRESS, INC., EBSCO INDUSTRIES, INC. AND PARTICIPATING PUBLISHER TRIBUNE COMPANY, Defendants-Appellees, MICHAEL CASTLEMAN INC., E.L. DOCTOROW, TOM DUNKEL, ANDREA DWORKIN, JAY FELDMAN, JAMES GLEICK, RONALD HAYMAN, ROBERT LACEY, RUTH LANEY, PAULA MCDONALD, P/K ASSOCIATES, INC., LETTY COTTIN POGREBIN, GERALD POSNER, MIRIAM RAFTERY, RONALD M. SCHWARTZ, MARY SHERMAN, DONALD SPOTO, ROBERT E. TREUHAFT AND JESSICA L. TREUHAFT TRUST, ROBIN VAUGHAN, ROBLEY WILSON, MARIE WINN, NATIONAL WRITERS UNION, THE AUTHORS GUILD, INC. AND AMERICAN SOCIETY OF JOURNALISTS AND -1- 1 2 3 4 5 6 7 8 9 10 11 12 AUTHORS, Plaintiffs-Appellees, EDWARD ROEDER, Appellant. -----------------------------------------------------x B e f o r e : WINTER, WALKER, and STRAUB, Circuit Judges. Plaintiffs in this consolidated class action allege 13 copyright infringements arising from defendant publishers’ 14 unauthorized electronic reproduction of plaintiff authors’ 15 written works. 16 District of New York (George B. Daniels, Judge) certified a class 17 for settlement purposes and approved a settlement agreement 18 (“Settlement”) over the objection of ten class members 19 (“objectors”). 20 of the Settlement’s release provision, the certification of the 21 class, and the process by which the district court reached its 22 decisions. 23 release, we conclude that the district court abused its 24 discretion in certifying the class and approving the Settlement, 25 because the named plaintiffs failed to adequately represent the 26 interests of all class members. 27 challenges, which are moot in light of our class certification 28 holding. 29 judgment and REMAND for further proceedings consistent with this 30 opinion. The United States District Court for the Southern In this appeal, objectors challenge the propriety Although we reject objectors’ arguments regarding the We do not reach the procedural We therefore VACATE the district court’s order and -2- 1 2 Judge STRAUB dissents in part and concurs in part in a separate opinion. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 CHARLES D. CHALMERS, Fairfax, CA, for Objectors-Appellants. CHARLES S. SIMS, Proskauer Rose LLP, New York, NY (Stephen Rackow Kaye, Joshua W. Ruthizer, Proskauer Rose LLP; Kenneth Richieri, George Freeman, The New York Times Company, New York, NY; Henry B. Gutman, Simpson Thatcher & Bartlett, New York, NY; James F. Rittinger, Satterlee Stephens Burke & Burke, New York, NY; Jack Weiss, Gibson Dunn & Crutcher LLP, New York, NY; Juli Wilson Marshall, Latham & Watkins, Chicago, IL; Ian Ballon, Greenberg Traurig LLP, Santa Monica, CA; Michael Denniston, Bradley, Arant, Rose & White, LLP, Birmingham, AL; Christopher M. Graham, Levett Rockwood P.C., Westport, CT; Raymond Castello, Fish & Richardson PC, New York, NY, on the brief), for DefendantsAppellees. MICHAEL J. BONI, Kohn Swift & Graf, P.C., Philadelphia, PA (Joshua D. Snyder, Kohn Swift & Graf, P.C.; Diane S. Rice, Hosie McArthur LLP, San Francisco, CA; A.J. De Bartolomeo, Girard Gibbs & De Bartolomeo LLP, San Francisco, CA; Gary Fergus, Fergus, A Law Firm, San Francisco, CA, on the brief), for PlaintiffsAppellees. -3- 1 2 JOHN M. WALKER, JR., Circuit Judge: Plaintiffs in this consolidated class action allege 3 copyright infringements arising from defendant publishers’ 4 unauthorized electronic reproductions of plaintiff authors’ 5 written works. 6 District of New York (George B. Daniels, Judge) certified the 7 class for settlement purposes and approved a settlement agreement 8 (“Settlement”) over the objection of ten class members 9 (“objectors”). The United States District Court for the Southern In this appeal, objectors contend that 10 (1) approval of the Settlement was impermissible because it 11 released claims beyond the factual predicate of the case, 12 (2) class certification was improper because subgroups within the 13 class have conflicting interests, and (3) the district court 14 committed procedural errors in certifying the class and approving 15 the Settlement. 16 regarding the release, we conclude that the district court abused 17 its discretion in certifying the class and approving the 18 Settlement, because the named plaintiffs failed to adequately 19 represent the interests of all class members. 20 the procedural challenges, which are moot in light of our class 21 certification holding. Although we reject objectors’ arguments We do not reach 22 We therefore vacate the district court’s order certifying 23 the class and approving the Settlement, and remand for further 24 proceedings consistent with this opinion. 25 -4- 1 2 BACKGROUND I. Factual Background 3 Plaintiffs are freelance authors (“authors”) who sold 4 written works to print publishers for publication in newspapers, 5 magazines, and other periodicals. 6 print publishers like The New York Times began to reproduce 7 authors’ works electronically by placing them in their own online 8 databases and licensing them to appear in electronic databases 9 such as LexisNexis. With the rise of the Internet, In response, authors sued the original print 10 and subsequent electronic publishers, alleging in three 11 independent class actions that the unauthorized electronic 12 publication of their works infringed upon their copyrights. 13 In June 2001, the Supreme Court endorsed authors’ theory of 14 liability, holding in another case that publishers violate the 15 Copyright Act when they reproduce freelance works electronically 16 without first securing the copyright owners’ permission. 17 Times Co. v. Tasini, 533 U.S. 483, 488 (2001). 18 lawsuits, which had been suspended pending Tasini, were 19 consolidated and coordinated with a fourth action in the Southern 20 District of New York. 21 by 21 named plaintiffs – each of whom owns at least one copyright 22 in a freelance article – and three associational plaintiffs: 23 National Writers Union, The Authors Guild, Inc., and the American 24 Society of Journalists and Authors. 25 electronic database operators such as Reed Elsevier Inc. (owner N.Y. Authors’ three The consolidated class action is brought -5- the Defendants include 1 of LexisNexis) and Thomas Corporation (owner of Westlaw), as well 2 as newspaper publishers that maintain their own archival 3 databases, such as The New York Times Company and Dow Jones Inc. 4 (collectively “publishers”). 5 parties to mediation, which began in January 2002. 6 2005, with the assistance of mediators Kenneth Feinberg and Peter 7 Woodin, authors and publishers reached a comprehensive settlement 8 agreement.1 9 The district court referred the In March The Settlement divides the works at issue (“Subject Works”) 10 into three categories: A, B, and C. 11 that authors registered with the U.S. Copyright Office in time to 12 be eligible for statutory damages and attorney’s fees under the 13 Copyright Act. 14 Settlement, registration cost $30 per work or $30 per group 15 registration covering multiple periodical contributions by one 16 individual over a 12-month period.2 17 that authors registered before December 31, 2002, but too late to 18 be eligible for statutory damages. 19 recover only actual damages suffered by the author and any See 17 U.S.C. § 412. Category A covers works At the time of the Category B includes works These claims are eligible to 1 In addition to the named defendants, non-party newspaper and magazine publishers like the Tribune Company and Time Inc. participated in the mediation, because they had provided content to – and promised to indemnify – electronic publisher defendants. Thirty-six such non-party publishers ultimately signed onto the Settlement. 2 Fees at this level were in place from 1999 through 2006. See 64 Fed. Reg. 29,518, 29,520 (June 1, 1999) (setting fees); 71 Fed. Reg. 31,089, 31,091 (June 1, 2006) (raising fees). -6- 1 profits of the infringer that are not duplicative of the actual 2 damages. 3 Category C and cannot be litigated for damages purposes unless 4 they are registered with the Copyright Office. 5 § 411(a). 6 Category B – would be eligible for awards based on authors’ 7 actual damages and infringers’ profits. 8 comprise more than 99% of authors’ total claims. 9 hold claims in more than one category, each claim based on a 10 17 U.S.C. § 504(b). All other claims fall into 17 U.S.C. If registered, however, these claims – like those in Category C claims Many authors separate freelance article they sold for publication. 11 The Settlement creates a damages formula for each category. 12 Authors holding Category A claims are paid “$1,500 for the first 13 fifteen Subject Works written for any one publisher; $1,200 for 14 the second fifteen Subject Works written for that publisher; and 15 $875 for all Subject Works written for that publisher after the 16 first thirty Subject Works.” 17 paid “the greater of $150 or 12.5% of the original sale price of 18 the Subject Work.” 19 “[t]he greater of $5 or 10% of the original price of the Subject 20 Work,” except for works sold for amounts over $249. 21 for any Category C work sold for more than $249 depends on the 22 amount for which it was originally sold: 23 sold for $250 to $999; $40 per Subject Work sold for $1,000 to 24 $1,999; $50 per Subject Work sold for $2,000 to $2,999; and $60 25 per Subject Work sold for $3,000 or more. Authors of Category B works are For each Category C claim, authors are paid -7- Compensation $25 per Subject Work 1 The Settlement caps publishers’ total liability through a 2 provision that the parties refer to as the “C reduction.” 3 total of all claims – plus the cost of notice, administration, 4 and attorney’s fees – exceeds $18 million, then the Settlement 5 reduces compensation for Category C claims pro rata until the 6 total compensation is $18 million. 7 C claims reaches zero but the claims and fees still exceed $18 8 million, then the Settlement reduces compensation for Category A 9 and B claims pro rata until the claims and fees total hits the 10 If the If compensation for Category $18 million limit. 11 The Settlement releases publishers from further litigation. 12 The release prohibits authors from barring publishers’ future use 13 of the Subject Works, including the selling or licensing of the 14 works to third-party sublicensees. 15 opt out of the release for future use and only grant a release 16 for past use; however, any authors who fail to affirmatively opt 17 out of the future-use release will be deemed to have granted it. 18 Authors who only grant a past-use release receive 65% of the 19 compensation that those who grant past and future releases 20 receive. A class member may choose to 21 22 23 II. Procedural Posture In March 2005, upon reaching the Settlement, authors and -8- 1 publishers moved the district court to certify the class3 for 2 settlement purposes and approve the Settlement. 3 opposed the motion. 4 objectors’ arguments, the district court certified the class and 5 approved the Settlement as fair, reasonable, and adequate. 6 Objectors In September 2005, after rejecting In October 2005, objectors appealed that order and judgment 7 on numerous grounds. 8 Works in Electr. Databases Copyright Litig., 509 F.3d 116, 128 9 (2d Cir. 2007) (Walker, J., dissenting), a majority of this panel 10 concluded sua sponte that the registration requirement imposed by 11 Section 411(a) of the Copyright Act is jurisdictional, and that 12 the district court lacked subject-matter jurisdiction to approve 13 the settlement of claims for the infringement of unregistered 14 copyrights. 15 asking the Supreme Court to review that decision. 16 Over a dissenting opinion, In re Literary Id. at 121-22. Authors and publishers joined in The Supreme Court issued a writ of certiorari and, in March 17 2010, reversed the judgment of this court, holding that the 18 district court had jurisdiction over the Settlement because 3 The class is defined as “All persons who, individually or jointly, own a copyright under the United States copyright laws in an English language literary work that has been reproduced, displayed, adapted, licensed, sold and/or distributed in any electronic or digital format, without the person’s express authorization by a member of the Defense Group or any member’s subsidiaries, affiliates, or licensees (a) at any time on or after August 15, 1997 (regardless of when the work first appeared in an electronic database) or (b) that remained in circulation after August 15, 1997, even if licensed prior thereto, including English language works qualifying for U.S. copyright protection under an international treaty (hereinafter ‘Subject Work’).” -9- 1 Section 411(a) imposes only a nonjurisdictional precondition to 2 filing a claim. 3 1237, 1247 (2010). 4 letter briefs addressing any supplemental authority relevant to 5 the merits, to which we now turn. Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. On remand, we ordered the parties to file 6 DISCUSSION 7 Objectors appeal several aspects of the district court’s 8 decision. They argue (1) that the Settlement impermissibly 9 releases claims beyond the factual predicate of the case; 10 (2) that class certification was improper because subgroups 11 within the class have conflicting interests; and (3) that the 12 district court erred procedurally in reaching its decision. 13 Although we reject the objections to the release provision, we 14 agree with objectors that not all class members were adequately 15 represented. 16 are moot in light of our class certification holding. 17 I. 18 We decline to reach the procedural issues, which Release of Claims The Settlement prohibits claimants from barring future use 19 of the Subject Works, including the selling and licensing of the 20 works to third parties, unless the class member either opts out 21 of the Settlement altogether or exercises his right to bar future 22 use. 23 continuing’ license” impermissibly releases claims that are not 24 based on the same factual predicate underlying the claims in this 25 class action. Objectors assert that this “‘irrevocable, worldwide, and -10- 1 “Plaintiffs in a class action may release claims that were 2 or could have been pled in exchange for settlement relief.” Wal- 3 Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 106 (2d Cir. 4 2005). 5 encompassing claims not presented in the complaint in order to 6 achieve comprehensive settlement of class actions, particularly 7 when a defendant’s ability to limit his future liability is an 8 important factor in his willingness to settle. 9 TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456, 460 (2d Parties often reach broad settlement agreements See id.; see also 10 Cir. 1982). 11 complaint, however, must be “based on the identical factual 12 predicate as that underlying the claims in the settled class 13 action.” 14 Any released claims not presented directly in the TBK Partners, 675 F.2d at 460. Objectors argue that releasing future claims arising from 15 licensing the Subject Works to third-party sublicensees is 16 impermissible in two ways. 17 distinct harms giving rise to independent claims of relief, with 18 factual predicates that are different from authors’ past 19 infringement claims. 20 sublicensee who is not a party to the Settlement, which means 21 that infringement could not be grounded in the factual predicate 22 of this case. 23 future use of the Subject Works, whether by publishers or by 24 sublicensees, falls squarely within the factual predicate First, future infringements are Second, future claims may be against a We find both of these arguments unavailing because -11- 1 underlying authors’ claims.4 2 Objectors’ first argument fails to recognize that the 3 consolidated complaint seeks injunctive relief for future uses, 4 and therefore contemplates these alleged future injuries. 5 another way, a trial of this case would determine whether it is 6 permissible for publishers to continue to sell and license the 7 works. 8 F.2d 9, 17-18 (2d Cir. 1981) (assessing permissibility of release 9 by looking to possible remedies if that case had proceeded to Put See Nat’l Super Spuds, Inc. v. N.Y. Mercantile Exch., 660 10 trial). Accordingly, regardless of whether future infringements 11 would be considered independent injuries, the Settlement’s 12 release of claims regarding future infringements is not 13 improper.5 14 Inc., 309 F.3d 978, 982, 984-85 (7th Cir. 2002) (permitting 15 settlement that required all class members to provide an easement 16 in resolving trespass action). See, e.g., Uhl v. Thoroughbred Tech. & Telecomms., 4 In their post-argument letter briefs, the parties raise new arguments regarding a 25-year-old Supreme Court case, Local No. 93, Int’l Ass’n of Firefighters v. City of Cleveland, 478 U.S. 501 (1986). Because these arguments were not raised in a timely fashion, we deem them waived. In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132-34 (2d Cir. 2008). 5 We find Davis v. Blige, 505 F.3d 90 (2d Cir. 2007), cited by objectors, inapposite. That case presents an altogether different issue: “whether one joint owner of a copyright can retroactively transfer his ownership by a written instrument, and thereby cut off the accrued rights of the other owner to sue for infringement,” id. at 97. As this case does not involve co-owners who are not parties to the settlement agreement, Davis does not address the issue before the court. -12- 1 Objectors’ second argument – that the Settlement 2 impermissibly releases claims against persons and entities not 3 involved in this case – takes an overly narrow view of the 4 factual predicate of authors’ claims. 5 alleges that publishers electronically displayed, sold, and 6 distributed the Subject Works. 7 maintained that the rights that the print publishers purchased 8 from authors include the rights to maintain their issues online 9 and to sublicense those issues to third-party databases. The consolidated complaint In response, publishers have Apart 10 from their argument, rejected in Tasini, that this right exists 11 pursuant to Section 201(c) of the Copyright Act, publishers 12 argued throughout the settlement process that freelance 13 contributors – who knew that the print publications for which 14 they wrote published their content online and delivered it to 15 database publishers – granted implied licenses for such 16 electronic distribution. 17 the rights of third parties to obtain sublicenses. 18 conclude that the Settlement’s release pertaining to future uses 19 by publishers and their sublicensees was permissible. 20 II. 21 Trial of this case would thus determine We therefore Adequacy of Representation The party seeking to certify a class bears the burden of 22 satisfying Rule 23(a)’s four threshold requirements: 23 (1) numerosity (“the class is so numerous that joinder of all 24 members is impracticable”), (2) commonality (“there are questions -13- 1 of law or fact common to the class”), (3) typicality (“the claims 2 or defenses of the representative parties are typical of the 3 claims or defenses of the class”), and (4) adequacy of 4 representation (“the representative parties will fairly and 5 adequately protect the interests of the class”). 6 23(a). 7 maintained under Rule 23(b)(1), (2), or (3). 8 class action settlement, the district court must assess its 9 substance and conclude that it is “fair, reasonable, and Fed. R. Civ. P. The district court must also find that the action can be 10 adequate.” 11 here, approving a settlement-only class under Rule 23(b)(3) after 12 concluding that common questions predominate over individual ones 13 and that a class action is superior to other methods of 14 adjudicating the matter. 15 Fed. R. Civ. P. 23(e)(2). Before approving a The district court did so We review a district court’s decision to certify a class for 16 abuse of discretion. Joel A. v. Giuliani, 218 F.3d 132, 139 (2d 17 Cir. 2000). 18 discretion when (1) its decision rests on an error of law (such 19 as application of the wrong legal principle) or a clearly 20 erroneous factual finding, or (2) its decision – though not 21 necessarily the product of a legal error or a clearly erroneous 22 factual finding – cannot be located within the range of 23 permissible decisions.” 24 424 F.3d 158, 165 (2d Cir. 2005) (quoting Zervos v. Verizon N.Y., A district court “‘abuses’ or ‘exceeds’ its In re Holocaust Victim Assets Litig., -14- 1 Inc., 252 F.3d 163, 169 (2d Cir. 2001)). 2 to certify a class and approve its settlement in one proceeding, 3 the Rule 23(a) requirements designed to protect absent class 4 members “demand undiluted, even heightened, attention.” 5 Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997). 6 When a court is asked Amchem Objectors argue that the Settlement contravenes Rule 7 23(a)(4) because the named plaintiffs failed to adequately 8 represent the interests of class members who hold only Category C 9 claims (“Category C-only plaintiffs”). “The adequacy inquiry 10 under Rule 23(a)(4) serves to uncover conflicts of interest 11 between named parties and the class they seek to represent.” 12 Amchem, 521 U.S. at 625. 13 plaintiffs must “possess the same interest[s] and suffer the same 14 injur[ies] as the class members.” 15 Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977)) 16 (internal quotation marks omitted). 17 proposed class representative must have an interest in vigorously 18 pursuing the claims of the class, and must have no interests 19 antagonistic to the interests of other class members.” 20 Deutsche Bank AG, 443 F.3d 253, 268 (2d Cir. 2006). 21 conflict among subgroups of a class will prevent class 22 certification – the conflict must be “fundamental” to violate 23 Rule 23(a)(4). 24 Litig., 574 F.3d 29, 35 (2d Cir. 2009). To satisfy Rule 23(a)(4), the named Id. at 625-26 (quoting E. Tex. “Adequacy is twofold: the Denney v. Not every See In re Flag Telecom Holdings, Ltd. Sec. -15- Where such a conflict 1 does exist, it can be cured by dividing the class into separate 2 “homogeneous subclasses . . . with separate representation to 3 eliminate conflicting interests of counsel.” 4 Corp., 527 U.S. 815, 856 (1999); see also Fed. R. Civ. P. 5 23(c)(5) (“When appropriate, a class may be divided into 6 subclasses that are each treated as a class under this rule.”). 7 Ortiz v. Fibreboard According to objectors, there was such a conflict here: the 8 named plaintiffs, who hold combinations of all three categories 9 of claims, favored the fewer and more lucrative Category A and B 10 claims over the Category C claims. 11 owning unregistered claims should therefore have been carved out 12 of the class, objectors argue. 13 defend the Settlement and the adequacy of named plaintiffs’ 14 representation. 15 16 A subclass of plaintiffs Publishers and authors vigorously A. We begin our analysis by turning to a pair of Supreme Court 17 decisions that set the contours of the adequacy of representation 18 inquiry in the settlement-class context. 19 Inc. v. Windsor, 521 U.S. 591 (1997), the Supreme Court affirmed 20 the Third Circuit’s decision to vacate a class certification 21 intended “to achieve global settlement of current and future 22 asbestos-related claims.” 23 only class encompassed hundreds of thousands, and possibly even 24 millions, of individuals who had been exposed to asbestos Id. at 597. -16- In Amchem Products, The proposed settlement- 1 products manufactured by any of 20 companies. 2 the settlement opposed the aggregation into a single class of 3 both class members who had already manifested asbestos-related 4 injuries and those who had been exposed to asbestos but had not 5 yet shown signs of injury. 6 “the interests of those within the single class” were “not 7 aligned”: 8 immediate payments,” whereas holders of future claims sought to 9 ensure “an ample, inflation-protected fund for the future.” 10 11 Id. at 607-08. Id. Objectors to The Court agreed that holders of present claims were interested in “generous Id. at 626. The two subgroups in Amchem had competing interests in the 12 distribution of a settlement whose terms reflected “essential 13 allocation decisions designed to confine compensation and to 14 limit defendants’ liability.” 15 allocation decisions – for example, to cap the annual number of 16 opt-outs, and not to adjust for inflation – disadvantaged 17 exposure-only plaintiffs. 18 “alleged a range of complaints,” none exclusively advanced the 19 particular interests of either subgroup; “each served generally 20 as representative for the whole, not for a separate 21 constituency.” 22 fatal to class certification. 23 “thought that the Settlement serves the aggregate interests of 24 the entire class[,] . . . the adversity among subgroups requires Id. Id. at 627. Some of those Although the named parties all That flaw, in light of the conflict, was Even if the class representatives -17- 1 that the members of each subgroup cannot be bound to a settlement 2 except by consents given by those who understand that their role 3 is to represent solely the members of their respective 4 subgroups.” 5 Litig., 982 F.3d 721, 742-43 (2d Cir. 1992), modified on reh’g, 6 993 F.2d 7 (2d Cir. 1993)). 7 assurance of fair and adequate representation for the diverse 8 groups and individuals affected,” the class could not satisfy 9 Rule 23(a)(4)’s standard for fair and adequate representation. 10 11 Id. (quoting In re Joint E. & S. Dist. Asbestos In the absence of any “structural Id. Two years later, in Ortiz v. Fibreboard Corp., 527 U.S. 815 12 (1999), the Supreme Court rejected a proposed settlement class 13 that was divided along two fault lines: 14 “between holders of present and future claims,” and second, 15 between holders of “more valuable” and less valuable claims. 16 at 856-57. 17 the formation of subclasses. 18 manufacturer Fibreboard Corporation’s global settlement of 19 asbestos claims against it, a deal that included indemnification 20 by two insurance companies. 21 that occurred when Fibreboard was insured had a “much higher” 22 settlement value than those for exposure after its insurance had 23 expired, because only the former group could recover from the 24 insurer. first, as in Amchem, Id. As in Amchem, those divisions were not recognized by Id. at 823 n.2. Ortiz addressed the propriety of Claims based on asbestos exposure That conflict fell “well within the -18- 1 requirement of structural protection recognized in Amchem,” the 2 Supreme Court held, and should have been redressed by way of 3 “reclassification with separate counsel.” 4 settlement failed to differentiate the claims only confirmed the 5 existence of a conflict: 6 the same is itself an allocation decision with results almost 7 certainly different from the results that those with . . . claims 8 of indemnified liability would have chosen.” That the “[t]he very decision to treat them all 9 10 Id. at 857. Id. B. The ingredients of conflict identified in Amchem and Ortiz 11 are present here. The Settlement before us “confine[s] 12 compensation and . . . limit[s] defendants’ liability” by setting 13 an $18 million recovery and cost ceiling, and distributes that 14 recovery by making “essential allocation decisions” among 15 categories of claims. 16 named plaintiffs collectively hold all three categories of claim, 17 “each served generally as representative for the whole, not for a 18 separate constituency.” 19 and B claims are “more valuable” than Category C claims,6 20 producing “disparate interests” within the class. 21 U.S. at 857. See Amchem, 521 U.S. at 627. Id. Although In addition, individual Category A 6 Ortiz, 527 Category A claims are eligible for statutory damages and therefore the most valuable. Category B claims, although registered too late for statutory damages, still qualify for actual damages and attorney’s fees. Category C claims, which were unregistered as of December 31, 2002, are ineligible for actual damages and attorney’s fees until registered. -19- 1 There are, however, clear differences between the case 2 before us and Amchem and Ortiz. The conflict in Amchem could 3 hardly have been more stark: 4 mutually exclusive camps, those injured by asbestos and those 5 with only potential future injuries. 6 members can and do hold claims in all three categories. 7 the record does not establish the precise distribution of claims 8 among named plaintiffs, that they hold a combination of 9 registered and unregistered claims is undisputed. class members fell into one of two Here, by contrast, class Although The conflict 10 alleged by objectors is therefore between class members who hold 11 Category C claims alone, and those who hold Category A and B 12 claims in addition to Category C claims. 13 respect to some claimants suggests, at least superficially, the 14 absence of a fundamental conflict. 15 Such overlap with Despite the intuitive appeal of that conclusion, we cannot 16 endorse it. Owning Category C claims in addition to other claims 17 does not make named plaintiffs adequate representatives for those 18 who hold only Category C claims. 19 of the plaintiff class are interested in maximizing their 20 individual compensation, severally they accomplish that goal in 21 different ways. 22 categories, how their compensation is allotted among their claims 23 is irrelevant; what matters is the bottom line. 24 who hold only Category C claims, on the other hand, are 25 interested exclusively in maximizing the compensation for that Although all affected members To authors who own works in all three -20- Class members 1 one category of claim. 2 sacrifice their Category C claims in exchange for more favorable 3 compensation on their Category A and B claims, no such option is 4 available to the latter. 5 Whereas the former group could choose to The selling out of one category of claim for another is not 6 improbable here. Because the Settlement capped recovery and 7 administrative costs at $18 million, named plaintiffs owning 8 claims in all three categories cannot have had an interest in 9 maximizing compensation for every category. Any improvement in 10 the compensation of, for example, Category C claims would result 11 in a commensurate decrease in the recovery available for Category 12 A and B claims. 13 approximately 1% of the total number of claims, named plaintiffs 14 would receive a greater share of a given amount of compensation 15 allocated to Categories A and B, compared to what they would 16 receive if that compensation were spread over the far greater 17 quantity of Category C claims. 18 inclination would therefore be to favor their more lucrative 19 Category A and B claims. 20 all categories does not, as the dissent asserts, eliminate the 21 risk of fundamental conflict among subgroups. 22 Further, given that Categories A and B amount to Named plaintiffs’ natural That named plaintiffs hold claims in Even if some named plaintiffs have only Category C claims, 23 that is not enough to protect the Category C-only plaintiffs, 24 because each named plaintiff represented the entire class. 25 Amchem, 521 U.S. at 627. See Without subclasses, named plaintiffs -21- 1 with only Category C claims were obligated to advance the 2 collective interests of the class, rather than those of the 3 subset of class members whose claims mirrored their own. 4 the creation of subclasses, and the advocacy of an attorney 5 representing each subclass, can ensure that the interests of that 6 particular subgroup are in fact adequately represented. 7 differences among members of a class are such that subclasses 8 must be established, we know of no authority that permits a court 9 to approve a settlement . . . on the basis of consents by members Only “[W]here 10 of a unitary class, some of whom happen to be members of . . . 11 distinct subgroups,” without creating subclasses. 12 & S. Dist. Asbestos Litig., 982 F.2d 721, 743 (2d Cir. 1992), 13 modified on reh’g, 993 F.2d 7 (2d Cir. 1993). 14 In re Joint E. To be sure, the negotiation of this Settlement featured 15 protections that were lacking in Amchem. 16 product of an intense, protracted, adversarial mediation, 17 involving multiple parties and complex issues. 18 were highly respected and capable, and their participation 19 provided some assurance that “the proceedings were free of 20 collusion and undue pressure.” 21 F.3d 78, 85 (2d Cir. 2001). 22 plaintiffs advanced the interests of all authors, the largest 23 contingent of which we can reasonably assume – given that 99% of 24 the total claims fall into Category C – are Category C-only 25 plaintiffs. The Settlement was the The mediators D’Amato v. Deutsche Bank, 236 Furthermore, associational While we recognize that these features offered some -22- 1 “structural assurance of fair and adequate representation,” 2 Amchem, 521 U.S. at 627, we cannot conclude that they did enough 3 to satisfy Rule 23(a)(4). 4 The Supreme Court’s decision in Amchem was motivated in part 5 by its conclusion that the settlement’s terms disfavored the 6 exposure-only plaintiffs. 7 assessing the adequacy of representation, to examine a 8 settlement’s substance for evidence of prejudice to the interests 9 of a subset of plaintiffs. Amchem therefore allows courts, in Objectors, pointing to Category C’s 10 inferior recovery, urge that we do so here. 11 receive significantly less than those in Category B. 12 example, an article sold for $200 and registered by December 31, 13 2002 – but too late to receive statutory damages – falls into 14 Category B and secures $150 under the Settlement; an unregistered 15 but otherwise identical article warrants only $20 in Category C. 16 The compensation structure for Category C is also, to use 17 objectors’ term, “regressive” in that recovery as a percentage of 18 a work’s original sale price decreases as the sale price 19 increases; Category B compensation, by contrast, is a flat 20 percentage of the sale price. 21 Category C works For That Category C claims recover less than Category A and B 22 claims tells us little about adequacy of representation, however, 23 because the Category C claims individually are indisputably worth 24 less than Category B claims. 25 copyright is a prerequisite to suit, unregistered Category C Given that registration of a -23- 1 claims would face a substantial litigation risk if the case went 2 forward. 3 weakness, the “very decision to treat [claims] all the same 4 [would] itself [have been] an allocation decision” unfair to the 5 interests of those who had authored registered works. 6 527 U.S. at 857. 7 for Category C claims to recover less than Category A and B 8 claims. 9 they cite Category C’s inferior recovery as determinative 10 Indeed, had the Settlement failed to account for this See Ortiz, It was not only appropriate but also necessary We therefore disagree with objectors to the extent that evidence of inadequate representation. 11 The problem, of course, is that we have no basis for 12 assessing whether the discount applied to Category C’s recovery 13 appropriately reflects that weakness. 14 claims are worth less than the registered claims, but not by how 15 much. 16 representation. 17 subclasses may be necessary when categories of claims have 18 different settlement values. 19 the value of any subgroup of claims be properly assessed without 20 independent counsel pressing its most compelling case? 21 this reason that the participation of impartial mediators and 22 institutional plaintiffs does not compensate for the absence of 23 independent representation. 24 the negotiation process, and the institutional plaintiffs watched 25 out for the interests of the class as a whole, no one advanced We know that Category C Nor can we know this, in the absence of independent The Supreme Court counseled in Ortiz that The rationale is simple: how can It is for Although the mediators safeguarded -24- 1 the strongest arguments in favor of Category C’s recovery. Even 2 in the absence of any evidence that the Settlement disfavors 3 Category C-only plaintiffs, this structural flaw would raise 4 serious questions as to the adequacy of representation here. 5 In addition to the structural flaw discussed above, the 6 Settlement itself contains terms that illustrate a lack of 7 adequate representation of Category C-only plaintiffs. 8 reduction” places the risk that total claims and fees exceed the 9 $18 million cap exclusively on Category C. The “C Although we disagree 10 with objectors as to the import of Category C’s inferior 11 compensation, we regard the “C reduction” in a different light. 12 The “C reduction” cannot be justified as a reflection of Category 13 C’s lower value, because the Settlement’s recovery formulae 14 already account for that difference. 15 designed to reflect the claims’ value at all, but rather is a 16 safety valve meant to preserve the integrity of the Settlement in 17 the event the cap is exceeded. The “C reduction” is not 18 The settling parties argue that the “C reduction,” as a 19 contingent provision they reasonably believed was unlikely to be 20 triggered, cannot reflect on the adequacy of representation. 21 disagree. 22 placed that risk on a single category of claims.7 We Those negotiating the Settlement identified a risk and 7 If triggered, This risk was not fanciful. In their June 23, 2010 letter briefs, publishers and authors stated that – now that all of the claims have been submitted to the claims administrator – the total face value of claims, plus fees and costs, is known to -25- 1 the “C reduction” would deplete the recovery of Category C-only 2 plaintiffs in their entirety before the Category A or B recovery 3 would be affected. 4 publishers offer none, why this burden should have been placed 5 exclusively on Category C, rather than shared equitably among all 6 three categories of claim. 7 for this penalty without credible justification strongly suggests 8 a lack of adequate representation for those class members who 9 hold only claims in this category. 10 We can discern no reason, and authors and That only one category was targeted Even if we were to conclude that, as a matter of deferential 11 review, the Settlement fairly compensates Category C claims, we 12 cannot rely on that fact to affirm class certification, because 13 doing so would conflate Rule 23(a)(4)’s adequacy of 14 representation analysis with Rule 23(e)(2)’s fairness, adequacy, 15 and reasonableness analysis. 16 subdivisions (a) and (b) against inequity and potential inequity “Rule 23 requires protections under be $2.9 million below the $18 million ceiling that triggers the reduction. However, in a January 11, 2011 letter, publishers and authors informed us that they had erroneously understated the total claims value by more than $2.6 million. The claim value is now estimated at $11.56 million, which – when added to fees and costs – comes within $300,000 of the “C reduction” threshold. This casts serious doubt on the assertion that the “C reduction” was unlikely to be triggered. However, because this information was not before the district court, we will not consider it in our analysis. Even if we were to consider it, we would find it immaterial because it was not available at the time of negotiation, which is the relevant time frame when determining whether the actions of the parties indicate a conflict of interests. Samuel Issacharoff & Richard A. Nagareda, Class Settlements Under Attack, 156 U. Pa. L. Rev. 1649, 1689-90 (2008). -26- 1 at the precertification stage, quite independently of the 2 required determination at postcertification fairness review under 3 subdivision (e) that any settlement is fair in an overriding 4 sense.” 5 The possible fairness of a settlement cannot eclipse the Rule 6 23(a) and (b) precertification requirements. 7 858-59. 8 determined solely by finding that the settlement meets the 9 aggregate interests of the class or “fairly” compensates the Ortiz, 527 U.S. at 858; accord Amchem, 521 U.S. at 621. Ortiz, 527 U.S. at Thus, the adequacy of representation cannot be 10 different types of claims at issue. 11 Dist. Asbestos Litig., 982 F.2d at 743. 12 context, we must ask independently whether the interests of all 13 class members were adequately represented. 14 We find that they were not. See In re Joint E. & S. In the Rule 23(a)(4) We agree with objectors that 15 the interests of class members who hold only Category C claims 16 fundamentally conflict with those of class members who hold 17 Category A and B claims. 18 interest in maximizing the collective recovery, their interests 19 diverge as to the distribution of that recovery because each 20 category of claim is of different strength and therefore commands 21 a different settlement value. 22 combinations of claims had no incentive to maximize the recovery 23 for Category C-only plaintiffs, whose claims were lowest in 24 settlement value but eclipsed all others in quantity. 25 interests of Category C-only plaintiffs could be protected only Although all class members share an Named plaintiffs who hold other -27- The 1 by the formation of a subclass and the advocacy of independent 2 counsel. 3 discretion in certifying the class based on its finding that 4 class representation was adequate.8 5 6 We therefore hold that the district court abused its C. The decision to require subclassing here is consistent with 7 our precedent. In Central States Southeast & Southwest Areas 8 Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 9 F.3d 229, 246 (2d Cir. 2007), a plaintiff class of trustees and 10 beneficiaries of employee welfare benefit plans sued their 11 pharmaceutical benefits manager, Medco Health Solutions, Inc. 12 (“Medco”), alleging that it breached its fiduciary duties under 13 the Employee Retirement Income Security Act of 1974 (“ERISA”) by 14 favoring the products of its parent company, Merck & Co. 15 district court approved a settlement agreement and class 8 The Objectors additionally argue that a fundamental conflict materialized in the Settlement’s treatment of foreign works and scientific and research-based medical works. We decline to address objectors’ arguments regarding the treatment of foreign works because they were not raised before the district court and are therefore waived. See In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 133-34 (2d Cir. 2008). With regard to the treatment of scientific and research-based medical works, objectors argue that the Settlement permits future uses of these works without providing any compensation for the past uses of the works to their authors. The record is plain, however, that the scientific and research-based medical claims were not released by the Settlement. The Settlement instead excluded these works altogether. Accordingly, authors of these works remain free to pursue independent actions against any or all publishers in this case for alleged infringements. -28- 1 certification over the self-funded plans’ objection that a 2 conflict of interest necessitated the certification of a 3 subclass. 4 independent representation because they “were more damaged by 5 Medco’s conduct by virtue of paying Medco the entire cost of 6 their beneficiaries’ drugs,” as compared to insured plans, which 7 paid set premiums to Medco and were therefore more insulated from 8 the effects of Medco’s conduct. 9 rejected this argument, observing that the settlement properly 10 accounted for this disparity by applying a 55% discount to the 11 claims of the insured plans, a figure determined by counsel with 12 the assistance of expert opinion and a special master. 13 237, 245. 14 The objectors argued that the self-funded plans needed Id. at 245. The district court Id. at Although all class members “advanced similar theories of 15 liability against Medco predicated on the same or similar facts” 16 and all wished to “obtain the highest possible recovery,” the 17 Second Circuit sided with the objectors. 18 deciding “whether the self-funded Plans in fact suffered greater 19 injury,” we thought it “proper to allow them to raise their 20 claims as part of a separate subclass.” 21 that “the antagonistic interests apparent in the class should be 22 adequately and independently represented,” we remanded to the 23 district court “for certification of a subclass encompassing the 24 self-funded plans in order to better protect their claims in this 25 litigation.” Id. -29- Id. at 245-46. Id. at 246. Without Finding 1 Central States is parallel to the instant case in several 2 key respects. First, the settlement agreement established a fund 3 ($42.5 million) that would “allocate[] an amount to the settling 4 class members” based on “the nature of [each] Plan’s relationship 5 with Medco.” 6 accounted for a disparity in the strengths of two discrete 7 categories of claims: 8 discounted by 55% to reflect that they were more insulated from 9 Medco’s improper conduct. Id. at 236. Second, the settlement recognized and the recovery for insured plans was Third, class counsel had the benefit 10 of an impartial special master in determining that allocation. 11 There is also a key difference: 12 evidence of inadequate representation in the settlement terms. 13 Even in the absence of such evidence, we found that the district 14 court’s certification of the class was an abuse of discretion 15 because the self-funded plans required independent 16 representation. 17 compelling in this case. 18 settlement fund was allocated differently among categories of 19 claims of different strength without separate counsel to protect 20 each category’s interests.9 Central States cited no direct The case for subclassing is, if anything, more As in Central States, a capped Unlike in Central States, the 9 We observed that the conflict in Central States went beyond a “simple disagreement over potential differences in the computation of damages,” since the “relationship of the Plans to Medco . . . [went] to the very heart of the litigation.” 504 F.3d at 246. The dissent, highlighting this language, argues that the conflict before us cannot be “fundamental” because the claim categories differ only in their relative strength, and all class members otherwise “had the same basic relationship with the -30- 1 instant Settlement not only suffers from a clear structural 2 defect, but also provides strong evidence – in the “C reduction” 3 – of inadequate representation.10 4 5 D. Having concluded that a fundamental conflict exists, we turn 6 now to the question of subclassing. Objectors demand that the 7 unregistered copyright holders be defined as a subclass to 8 provide structural assurance of fair and adequate representation. 9 Remedying this conflict may not be so simple, however. Will the 10 subclass be limited to the Category C-only plaintiffs, or should 11 it also include those class members who own registered defendants.” Dissent at [5-6]. That argument fails to account for Ortiz. The difference underlying the conflict in Ortiz was whether or not Fibreboard had insurance at the time of plaintiffs’ asbestos exposure, which – as in the present case – affected the claims’ strength and settlement value but not the parties’ “basic relationship.” 10 The Third Circuit approved a class action settlement that allocated the recovery among three distinct classes of plaintiffs without creating subclasses. In re Insurance Brokerage Antitrust Litig., 579 F.3d 241 (3d Cir. 2009). The court affirmed certification of the single class despite unequal allocations between the groups because the settlement agreement was “simply a reflection of the extent of the injury that certain class members incurred and does not clearly suggest that the class members had antagonistic interests.” Id. at 272. The court recognized that “some potential benefits may have been realized from utilizing subclasses,” but ruled that the district court’s failure to take that step was not an abuse of discretion. Id. at 273. We, to the contrary, hesitate to conclude here that the Settlement’s allocation is “simply a reflection of” the claims’ differing settlement values in the absence of separate counsel advancing each category’s interests. Furthermore, the “C reduction” offers specific evidence of inadequate representation, which was not present in Insurance Brokerage. -31- 1 (Categories A and B) in addition to unregistered (Category C) 2 copyrights? 3 the interests of the remaining class members? 4 counsel sit across the negotiating table from counsel 5 representing “everyone else,” or will everyone else’s interests 6 be sufficiently divergent to require further subclassing? 7 questions greet us as soon as we open the door to subclassing, 8 and we must at least acknowledge them before we can enter. 9 However the subclass is defined, who will advance Can Category C These We would ordinarily allow the district court to work out the 10 details of subclassing and leave these questions to be resolved 11 in that process. 12 there must be an end to reclassification with separate counsel.” 13 Ortiz, 527 U.S. at 857. 14 subclassing if subclasses were administratively impracticable. 15 We now, therefore, assess whether subclasses can be devised to 16 remedy the conflict we have identified. 17 We recognize, however, that “at some point It would be imprudent to require The simplest and most logical approach may be to create a 18 subclass for every category of claim, with separate counsel 19 representing the interests of Categories A, B, and C. 20 different claim categories are, after all, the fault lines along 21 which the conflict runs. 22 strength, must compete with one another over the allocation of 23 the capped Settlement fund. 24 assigning counsel to represent their interests, would protect 25 each category’s interests. The These categories, each of different Designating each a subclass, and -32- 1 This case is more complicated than most, however. 2 Plaintiffs cannot all be neatly segregated into one of three 3 categories, because some class members hold claims in more than 4 one category. 5 works, and some plaintiffs may assert claims only in Category A 6 or B, the remaining class members have claims in two or three 7 categories. 8 falls into more than one subclass could require as many as seven 9 subclasses: Although many plaintiffs only authored Category C Structuring the subclasses so that no class member plaintiffs holding (1) only A claims, (2) only B 10 claims, or (3) only C claims, or a combination of (4) A and B, 11 (5) A and C, (6) B and C, or (7) A, B, and C claims. 12 surely beyond the point at which “reclassification with separate 13 counsel” must end. 14 That is Creating only three subclasses – one for each category of 15 claim – would, by contrast, be efficient and straightforward. 16 This approach satisfies objectors’ concerns, as the Category C- 17 only plaintiffs will all fall within the Category C subclass and 18 have their own counsel. 19 interests of Categories A and B, respectively, giving each 20 category a voice advocating for a share of the Settlement 21 commensurate with their value. 22 provide a substantial guarantee that the values assigned to each 23 category of claim resulted from merits-based negotiation, greatly 24 reducing the risk that a deficiency in representation for one or 25 more subgroups will affect the outcome. Separate counsel will also advance the This structural protection will -33- 1 Although some class members would fall into more than one 2 subclass, we can see no reason why that would be fatal to such a 3 structure. 4 23(c)(5), which allows a class to “be divided into subclasses 5 that are each treated as a class under this rule.” 6 P. 23(c)(5). 7 All class members are interested in receiving the maximum 8 possible recovery for their claims. 9 representative advocate exclusively for each of those claims is It is certainly not precluded by the language of Rule Fed. R. Civ. And it makes sense from a practical perspective. Having a separate subclass 10 the most effective means of achieving that result. 11 who holds claims in Categories B and C would, for example, be 12 represented by different subclass representatives and counsel 13 with respect to each category. 14 would, in turn, represent plaintiffs’ interests with respect to 15 only that category of claim. 16 A plaintiff Each subclass representative We intend by no means to bind the district court or the 17 parties to the subclass structure we have outlined. We address 18 this issue only to ensure that we are not asking the district 19 court to carry out instructions that are impracticable to 20 implement. 21 within the practical limits of “reclassification with separate 22 counsel,” 23 court for subclassing while recognizing that another solution may 24 be more appropriate than the one we have proffered. Satisfied that the conflict here can be remedied Ortiz, 527 U.S. at 857, we remand to the district 25 -34- 1 CONCLUSION 2 Because the named plaintiffs are inadequate representatives 3 for class members who hold only Category C claims, we VACATE the 4 district court’s order and judgment and REMAND for further 5 proceedings consistent with this opinion. -35- 1 STRAUB, Circuit Judge, dissenting in part, concurring in part: 2 The majority observes that the Settlement in this case “was the product of an intense, 3 protracted, adversarial mediation” with “highly respected and capable” mediators that provided 4 assurance that the “‘proceedings were free of collusion and undue pressure.’” Maj. Op. at [22- 5 23] (quoting D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001)). While conceding this 6 point, however, as well as that the Settlement offered “some ‘structural assurance of fair and 7 adequate representation,’” Maj. Op. at [23] (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 8 591, 627 (1997)), the majority holds that the District Court abused its discretion in certifying the 9 class because not “enough” was done to “satisfy [Federal] Rule [of Civil Procedure] 23(a)(4),” 10 Maj. Op. at [23]. I disagree. I respectfully dissent because it is my view that the named 11 plaintiffs adequately represent the interests of all class members as required by Rule 23(a)(4) and 12 that the District Court was well within its discretion to certify the class and approve the 13 Settlement. I do concur with the majority that the Settlement’s release provision is permissible. 14 I. Class Certification 15 A. Standard of Review 16 We review a district court’s decisions to certify a class and approve a settlement for 17 abuse of discretion. In re Nassau County Strip Search Cases, 461 F.3d 219, 224 (2d Cir. 2006) 18 (applying standard to class certification); Joel A. v. Giuliani, 218 F.3d 132, 139 (2d Cir. 2000) 19 (applying standard to settlement approval). In assessing the reasonableness of a proposed 20 settlement of a class action, “[t]he trial judge’s views are accorded great weight because he is 21 exposed to the litigants, and their strategies, positions and proofs. Simply stated, he is on the 22 firing line and can evaluate the action accordingly.” Joel A., 218 F.3d at 139 (internal quotation 1 1 marks and ellipses omitted); see also TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456, 463 2 (2d Cir. 1982) (“It is well settled that great weight must be accorded the views of the trial judge 3 because exposure to the litigants and their strategies makes him uniquely aware of the strengths 4 and weaknesses of the case and the risks of continued litigation.”). As the Supreme Court has 5 observed, however, “a court asked to certify a settlement class will lack the opportunity, present 6 when a case is litigated, to adjust the class, informed by the proceedings as they unfold.” 7 Amchem, 521 U.S. at 620. Therefore, “where, as here, the district court simultaneously certifies 8 a class and approves a settlement of the action, we will more rigorously scrutinize the district 9 court’s analysis of the fairness, reasonableness and adequacy of both the negotiation process and 10 the proposed settlement.” In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292 (2d 11 Cir. 1992).1 12 B. Adequacy of Representation 13 The party seeking to certify a class bears the burden of satisfying Rule 23(a)’s four 14 threshold requirements: (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of 15 representation. See Fed. R. Civ. P. 23(a). As the objectors to the Settlement do not contest that 16 the first three prerequisites are met here I, like the majority, confine my discussion to the fourth: 17 adequacy of representation. In determining whether Rule 23(a)(4)’s adequacy requirement is 1 The objectors to the Settlement argue that “deference to the district court should be reduced [further] in this case” because “deference is premised on the judge’s familiarity with the case” and “the [D]istrict [C]ourt had no occasion to become familiar with the issues.” I find this argument meritless and agree with the majority that we employ our normal “abuse of discretion” analysis, albeit with some “heightened [ ] attention,” Amchem, 521 U.S. at 620, to the certification decision because it was made for settlement purposes only. Maj. Op. at [15]. The District Court’s involvement with this case was intensive and it “comprehensively explored all relevant factors,” Malchman v. Davis, 706 F.2d 426, 434 (2d Cir. 1983), in analyzing the Settlement. See infra Section II.A. 2 1 satisfied, the most important factors are whether the class representatives have any “interests 2 antagonistic to the interests of other class members,” and relatedly, whether the representatives 3 “have an interest in vigorously pursuing the claims of the class,” Denney v. Deutsche Bank AG, 4 443 F.3d 253, 268 (2d Cir. 2006). See Amchem, 521 U.S. at 625 (“The adequacy inquiry under 5 Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they 6 seek to represent.”). In answering these questions, the “terms of the settlement” and “the 7 structure of negotiations” are relevant factors, but the focus must always remain on whether “the 8 interests of those within the single class are . . . aligned.” Amchem, 521 U.S. at 626-27. Even if 9 a conflict is discovered, it will not “necessarily defeat class certification—the conflict must be 10 ‘fundamental.’” Denney, 443 F.3d at 268 (quoting In re Visa Check/MasterMoney Antitrust 11 Litig., 280 F.3d 124, 145 (2d Cir. 2001)). While we have yet to explicitly define a 12 “fundamental” conflict, such a conflict must go to the “very heart of the litigation,” Cent. States 13 Se. & Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 F.3d 229, 14 246 (2d Cir. 2007). See 6 ALBA CONTE & HERBERT NEWBERG, NEWBERG ON CLASS ACTIONS § 15 18:14 (4th ed. 2002) (discussing antitrust class actions); see also Gunnells v. Healthplan Servs., 16 Inc., 348 F.3d 417, 430-31 (4th Cir. 2003). It exists when “the interests of the class 17 representative can be pursued only at the expense of the interests of all the class members.” 1 18 CONTE & NEWBERG, supra, § 3:26. A “fundamental” conflict may not be “merely speculative or 19 hypothetical.” 5 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE § 23.25[2][b][ii] (3d 20 ed. 2011); accord In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d at 145. 21 22 The majority finds that the District Court exceeded its discretion in certifying the class because the “interests of class members who hold Category C claims fundamentally conflict with 3 1 those of class members who hold Category A and B claims,” Maj. Op. at [28], and therefore 2 concludes that the class members holding Category C claims are not adequately represented in 3 the Settlement. Relying principally on Amchem and Central States, the majority contends that 4 “[o]nly the creation of subclasses, and the advocacy of an attorney representing each subclass, 5 can ensure that the interests of that particular subgroup are in fact adequately represented.” Maj. 6 Op. at [22]. Looking to these cases and the record before us, I find this conclusion unavailing. 7 In Amchem, the class representatives, some of whom had medical conditions as a result 8 of asbestos exposure and some of whom had not yet manifested any asbestos-related condition, 9 “sought to act on behalf of a single giant class rather than on behalf of discrete subclasses.” 10 Amchem, 521 U.S. at 626. In finding their representation inadequate, the Supreme Court looked 11 to whether the interests of the class members conflicted in any respects, and concluded that they 12 did. Namely, the “currently injured” sought “generous immediate payments,” while the 13 “exposure-only” claimants sought to ensure “an ample, inflation-protected fund for the future.” 14 Id. at 626. The Court also found that the terms of the settlement prejudiced the interests of a 15 subset of plaintiffs because the “essential allocation decisions designed to confine compensation 16 and to limit defendants’ liability”—including caps on the number of claims payable for each type 17 of disease per year and limits on the number of claimants who could opt out—disadvantaged 18 exposure-only plaintiffs. Id. at 627. Moreover, the Court held that the process of negotiation did 19 not provide “structural assurance of fair and adequate representation for the diverse groups and 20 individuals affected” because there existed adversity among subgroups, yet those subgroups 21 were not represented individually so that they could aggressively pursue their own distinct 22 interests. Id. 4 1 In Central States, a case in which “a capped settlement fund was allocated differently 2 among categories of claims of different strength without separate counsel to protect each 3 category’s interests,” Maj. Op. at [31], we held that it was an abuse of discretion for the district 4 court to certify the class without subclasses. Cent. States, 504 F.3d at 246. The class members 5 in Central States maintained employee benefit plans, though some were self-funded and others 6 were insured with set premiums. See id. at 245. We found that “[s]elf-funded Plans differ[ed] 7 significantly from insured or capitated Plans because only self-funded Plans assumed the direct 8 risk of absorbing any increases in prescription drug costs that were caused by [the defendant’s] 9 conduct.” Id. at 246. We explained that the conflict among the different types of “Plans [did] 10 not represent a simple disagreement over potential differences in the computation of damages, 11 since the relationship of the Plans to [the defendant] and its effect on each Plan [went] to the 12 very heart of the litigation.” Id. 13 The concerns that drove Amchem and Central States are not present in this case. First 14 and foremost, there is no fundamental conflict between class members here, as there was in 15 Amchem and Central States. The named plaintiffs, like all class members in this case, had the 16 same basic relationship with the defendants. They are all freelance authors who sold written 17 works to print publishers for publication in newspapers, magazines, and other periodicals. They 18 also each suffered similar injuries in that their works were reproduced in electronic and Internet 19 databases without the plaintiffs receiving additional compensation. The only differences 20 between A-, B-, and C-class plaintiffs—and the resulting allocation of the Settlement funds—are 21 found squarely in the comparative strengths and weaknesses of the asserted claims. In re 22 Holocaust Victim Asset Litig., 413 F.3d 183, 186 (2d Cir. 2005) (per curiam) (holding that the 5 1 district court did not exceed its discretion in allocating the bulk of class action settlement funds 2 to one group of claimants because “allocation of a settlement of this magnitude and comprising 3 such different types of claims must be based, at least in part, on the comparative strengths and 4 weaknesses of the asserted legal claims”). And, even if a conflict exists due to the comparative 5 strengths of the claims in this case, the District Court’s decision to certify the class was not an 6 abuse of discretion because the conflict does not rise to such a level as to be “fundamental,” 7 Denney, 443 F.3d at 268; see In re Pet Food Prods. Liab. Litig., 629 F.3d 333, 347 (3rd Cir. 8 2010) (“The fact that the settlement fund allocates a larger percentage of the settlement to class 9 members with [higher value claims] does not demonstrate a conflict between groups. Instead, 10 11 the different allocations reflect the relative value of the different claims.”). Second, the named plaintiffs in this case “have an interest in vigorously pursuing the 12 claims of the class,” Denney, 443 F.3d at 268, as many of them hold a variety of A-, B-, and/or 13 C-class claims. To the extent that the existence of some class representatives holding only 14 registered copyrights creates a conflict, such conflict is significantly mitigated by the presence of 15 other named plaintiffs holding unregistered copyrights and is not “fundamental,” id. Named 16 plaintiffs Letty Pogrebin, James Gleick, and Marie Winn each hold at least some unregistered 17 copyrights and had an incentive to secure the best settlement for all three classes of claims and 18 the highest possible compensation in each category. Moreover, the associational plaintiffs that 19 participated in the negotiations certainly have members who hold unregistered copyrights and 20 they had an incentive to “advance[ ] the interests of all authors.” Maj. Op. at [23]. The fact that 21 class representatives here hold a variety of claims across the spectrum eliminates the risk of 22 fundamental conflict among subgroups within the class, precisely because there are no easily 6 1 defined subgroups. See, e.g., In re Pet Food Prods. Liab. Litig., 629 F.3d at 347 (observing that 2 “the fact that the fund was allocated so that a greater percentage of the settlement value was 3 designated for certain class members [need not] demonstrate[ ] a conflict between groups,” 4 especially when “many class members were members of both . . . groups”). This is underlined 5 by the majority’s discussion of the difficulty in creating subclasses in this case. See Maj. Op. at 6 [32-35]. 7 Despite the lack of fundamental conflicts between the named plaintiffs and the class as a 8 whole, the majority attempts to craft “simple[ ],” “logical,” and “efficient and straightforward” 9 subclasses to guide the District Court on remand. Maj. Op. at [33,34]. It suggests creating three 10 subclasses, each representing the unique interests of Category A, B, and C plaintiffs. While it 11 recognizes that “some class members would fall into more than one subclass, [the majority] can 12 see no reason why that would be fatal.” Maj. Op. at [34]. Of course I agree, should the parties 13 and the District Court follow this suggestion, that such a structure would not be fatal because, at 14 bottom, plaintiffs holding Category A-, B-, and C-class claims all want the same thing: as much 15 compensation as possible for the same injury. It may be that the current scheme allows for some 16 competition among the subgroups, but our cases do not hold that all competition must be 17 eliminated, and, moreover, the majority concedes that even its suggested alternative would 18 present conflict amongst subclass members because many of the plaintiffs possess more than one 19 type of claim. In noting its suggested subclasses’ deficiencies as well as admitting that it is not 20 normally the province of our court to offer these types of suggestions in the first instance, the 21 majority exposes why the District Court’s approval of the Settlement was the correct course of 22 action: The District Court was “uniquely aware of the strengths and weaknesses of the case and 7 1 the risks of continued litigation,” TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456, 463 (2d 2 Cir. 1982), and properly concluded that the plaintiffs need not be segregated into subclasses 3 because any conflicts that could be eased by division into subclasses were not “fundamental,” 4 Denney, 443 F.3d at 268. 5 Third, unlike the settlement terms in Amchem and Central States, this Settlement does 6 not unfairly disadvantage one portion of the class. No claims unique to a portion of the class are 7 forfeited without compensation, no hard claim or opt-out limits exist, and no awards are 8 postponed without adjustments for inflation. The majority finds that the “C-reduction” provides 9 strong evidence that the named plaintiffs inadequately represented class members with C-class 10 claims because “only one category was targeted for this penalty without credible justification.” 11 Maj. Op. at [27]. While it is true that the “C-reduction” disadvantages C-class claims, this 12 disadvantage does not suggest an intra-class conflict because it is only a result of the inherent 13 lower value of the C-class claims. See In re Pet Food Prods. Liab. Litig., 629 F.3d 333 at 347. 14 The “C-reduction” and the different award structures for registered and unregistered 15 copyright holders reflect the relative strengths and weaknesses of the respective claims as well as 16 the practical fact that the overwhelming majority of claims at issue in this case—99%—are C- 17 class claims. Unregistered copyright holders may not maintain a suit for copyright 18 infringement.2 17 U.S.C. § 411(a) (providing that, with some exceptions, “no civil action for 2 In Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237 (2010), the Supreme Court held that § 411(a)’s registration requirement was “a precondition to filing a claim that does not restrict a federal court’s subject-matter jurisdiction,” id. at 1241, and did not address whether § 411(a) “is a mandatory precondition to suit that . . . district courts may or should enforce sua sponte by dismissing copyright infringement claims involving unregistered works,” id. at 1249. It is clear, however, that § 411(a) imposes some substantial obstacle to the success of suits for infringement of unregistered copyright claims. 8 1 infringement of the copyright in any United States work shall be instituted until preregistration 2 or registration of the copyright claim has been made”). This precondition weakens the claims of 3 unregistered copyright holders because the authors would have to expend energy to complete the 4 registration process as well as pay $30 to properly register each of their unregistered works. Cf. 5 City of Detroit v. Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974) (“The proposed settlement 6 cannot be judged without reference to the strength of plaintiffs’ claims. The most important 7 factor is the strength of the case for plaintiffs on the merits, balanced against the amount offered 8 in settlement.”). Likewise, if unregistered copyright holders ultimately were to register in order 9 to bring suit, they would not be entitled to judicial presumptions that benefit copyright holders 10 who had registered within five years of their work’s creation. See 17 U.S.C. § 410(c); Boisson v. 11 Banian, Ltd., 273 F.3d 262, 267-68 (2d Cir. 2001). Accordingly, at trial, claimants holding 12 unregistered works would have to prove originality, copyrightability, and compliance with 13 statutory formalities—a costly, and perhaps losing, exercise that other claimants could forego. 14 Finally, “the structure of negotiations” in this case provided assurance that the named 15 plaintiffs adequately represented the interests of A-, B-, and C-class claimants. Unlike the 16 attorneys in Amchem, who lacked any ongoing attorney-client relationship with exposure-only 17 claimants, see Amchem, 521 U.S. at 601-02, and in Ortiz v. Fibreboard Corp., 527 U.S. 815, 857 18 n.31 (1999), where the named plaintiffs were not even “named [until] after the agreement in 19 principle was reached,” the attorneys conducting the negotiations here represented holders of all 20 three species of claims from the outset. Further, unlike Amchem, which was never intended to be 21 litigated, see Amchem, 521 U.S. at 601, there is no indication that this suit was brought 22 exclusively for the purposes of settlement. On the contrary, litigation apparently was a realistic 9 1 possibility, and mediator Kenneth R. Feinberg, Esq., noted that “[a]t various times, it appeared 2 likely that the mediation process and negotiations would break down[,] resulting in a return to 3 the courtroom.” In addition, there is no indication here that settlement of any single type of 4 claim (A, B, or C) was the immediate focus of the parties, nor that settlement of another type of 5 claim was tacked on belatedly and thus potentially leveraged to ensure the successful completion 6 of the original settlement talks. This is unlike Amchem, where one defendant refused to settle 7 present claims until future claims were included. In Amchem, plaintiffs’ representatives had an 8 incentive to bargain away exposure-only claimants’ rights in order to ensure a generous 9 settlement for their original, currently-injured clients. No such incentive existed here. Also, 10 these negotiations, unlike those in Amchem, occurred under the direction of an impartial 11 mediator who could search out each party’s respective strengths and weaknesses, advise them to 12 adjust their positions accordingly, and vouch that each side fully represented its clients to the 13 best of its ability. Indeed, mediator Feinberg stated in a sworn declaration that “[a]ll members of 14 the defined class . . . were adequately represented during the lengthy course of the mediation” 15 and that “[a]ll sides exhibited great skill and determination . . . resulting in a comprehensive 16 settlement of a very complex matter which [he] believe[s] is the fairest resolution which could be 17 obtained.” The participation of mediator Feinberg in this case, while by no means ensuring fully 18 adequate representation, does make it more likely that the parties reached the limits of 19 compromise. See generally D’Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001) (“This 20 Court has noted that a court-appointed mediator’s involvement in pre-certification settlement 21 negotiations helps to ensure that the proceedings were free of collusion and undue pressure.”). 22 10 1 In sum, Amchem and Central States both turned on the existence of a fundamental 2 conflict between class members that was never mitigated.3 In this case, on the other hand, C- 3 class claimants merely have less valuable claims than other class members, and the resulting 4 Settlement, and specifically the “C-reduction,” only reflects the C-claims’ inherent lower value.4 5 The valid distinctions among A-, B-, and C-class claims simply did not exist between the present 6 and future claims at issue in Amchem or between the different benefit plans in Central States. 7 Furthermore, the Settlement in this case had strong structural protections not found in Amchem. 8 Accordingly, the “fundamental” intra-class conflict so evident in Amchem is not present here. 9 The District Court exercised sound discretion in finding that the adequacy of representation 10 requirement was met. 11 II. The Objectors’ Other Challenges to the Settlement The majority contends that, in distinguishing Central States, I fail to account for Ortiz. Ortiz does not control here. While Ortiz notes that the presence of some class members with “more valuable claims” may be “a second instance of disparate interests within the certified class,” Ortiz v. Fibreboard Corp., 527 U.S. 815, 857 (1999), the Court found the class inadequate because “it is obvious after Amchem that a class divided between holders of present and future claims . . . requires division into homogeneous subclasses under Rule 23(c)(4)(B),” and “[n]o such procedure was employed,” id. at 856. In this case, the class is not divided between holders of present and future claims and “the requirements of structural protection applicable to all class actions under Rule 23(a)(4)” were firmly in place. Id. at 857. 3 As I agree with the majority that the C-class claims’ inferior recovery under the Settlement is not determinative evidence of inadequate representation, I need not belabor this point by opining on it further. I must note, however, that objectors further attempt to fold this case under Amchem by arguing that C-class claimants are just like the exposure-only claimants because they are “holders of . . . future claims” that mature at a later date (here, upon registration). This argument fails because C-class claimants possess a present injury insofar as their copyrights have already been infringed. Also, C-class claims do not concern only unregistered copyrights; they also concern copyrights registered after December 31, 2002. Moreover, the C-class compensation scheme proceeds in rational, linear fashion: as the original price of the work increases, the author’s compensation increases. The flat fees account for the $30 registration fee discussed above. 4 11 1 Beyond their challenge to the District Court’s certification of the class, the objectors to 2 the Settlement also contend that (1) approval of the Settlement was impermissible because it 3 released claims beyond the factual predicate of the case and (2) the approval process denied 4 them procedural due process. As I find that the Settlement’s release pertaining to future uses by 5 publishers and their sublicensees was permissible, I join the majority’s opinion in that respect. 6 Because I would affirm the District Court’s decision to certify the class, I now turn to the 7 objectors’ procedural challenges to the Settlement. 8 First, the objectors claim that the District Court lacked sufficient information to evaluate 9 the Settlement at the preliminary approval stage. Second, they claim that because the parties did 10 not produce their damages study until six days before the final approval hearing, after the 11 deadlines for objecting and opting out, the objectors were denied the opportunity to properly 12 frame their objections and to opt out in a timely fashion. Third, they claim that the District Court 13 improperly required objectors to appear in person at the fairness hearings. These arguments are 14 all meritless. 15 16 17 18 A. The Absence of the Damages Report at the Preliminary Approval Stage Did Not Deny Due Process The objectors assert that the District Court had before it “no evidence of the Settlement’s 19 adequacy presented with the motion for preliminary approval.” In particular, they claim that 20 because the District Court lacked a damages report, it could not evaluate, as required by City of 21 Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974), whether the Settlement was 22 reasonable in light of (1) the best possible recovery and (2) all the attendant risks of litigation. 23 24 It is true that the District Court had scant information at the preliminary approval phase. In connection with the original motion for preliminary approval, the parties only cursorily 12 1 briefed the issue of how the risks of litigation impacted the Settlement. Although the parties 2 submitted twenty-two declarations with their motion, none addressed the issue of the 3 Settlement’s fairness; instead, they all concerned efforts by defendants to locate records as to the 4 identity of class members. The hearing itself was quick and fairly non-inquisitive. 5 However, our standard of review does not focus on whether a specific piece of 6 information was present at any single stage of proceedings. Instead, we focus more generally on 7 whether, at the end of the process, the District Court had before it sufficient information to grant 8 final approval. In a nutshell, “[t]he question becomes whether or not the District Court had 9 before it sufficient facts intelligently to approve the settlement offer.” Grinnell, 495 F.2d at 462- 10 63; see also In re Agent Orange Prod. Liab. Litig., 818 F.2d 145, 170 (2d Cir. 1987) (rejecting 11 claim that failure to hold preliminary approval hearing was error because, regardless of whether 12 hearing was held, the district court “was thoroughly informed of the strengths and weaknesses of 13 the parties’ positions”), cert. denied, 484 U.S. 1004 (1988). 14 In this case, it is clear that by the time the District Court approved the Settlement, it had 15 before it sufficient materials to evaluate the Settlement thoroughly and intelligently. Over the 16 course of the litigation, it held three hearings and reviewed exhaustive briefing, much of which 17 was authored by the objectors’ counsel and thus raised the very issues presented on appeal. The 18 District Court had ample materials to evaluate both the class certification decision and the 19 Settlement, and the record includes numerous declarations by the parties and their experts 20 describing the strengths and weaknesses of the claims and potential amounts of recovery, as well 21 as two declarations by mediator Feinberg describing the settlement process. The objectors 22 themselves concede that the parties “filed a veritable avalanche of pleadings to support the 13 1 2 settlement, including arguments, declarations, and exhibits.” In response to the objectors’ motion to vacate the preliminary approval, the parties 3 submitted a declaration from mediator Feinberg in which he asserted that “$18 million is 4 absolutely the most that good-faith negotiators acting at arms length could agree upon,” and that 5 the sum was “substantially in excess” of what “defendant companies were willing to pay at the 6 outset of the mediation.” The District Court then held a substantial hearing on the motion to 7 vacate the preliminary approval, during which counsel for the objectors was heard at length on 8 the substance of their objections, including those going to the fairness of the Settlement. See, 9 e.g., TBK Partners, Ltd. v. W. Union Corp., 675 F.2d 456, 463 (2d Cir. 1982) (affirming district 10 court order approving Settlement when “[t]he District Court approved the Settlement only after 11 giving comprehensive consideration to all relevant factors and listening carefully to each 12 contention of the objectors”). 13 Following the hearing, the Court received several written objections in declaratory form, 14 including objections as to the fairness of the Settlement. Thereafter, when it was discovered that 15 new infringements had occurred during the pendency of the suit, the District Court held a second 16 round of preliminary approval briefing and a second preliminary approval hearing. At that 17 hearing, which was lengthy, counsel for the objectors again discussed the objections to the 18 Settlement’s fairness. 19 In addition, on the motion for final settlement approval, the parties submitted extensive 20 briefing on the issues of whether the Settlement was fair in light of the total possible recovery 21 and the risks of litigation. They also submitted another twelve declarations. Included within 22 these submissions was defendants’ original mediation brief, in which they specifically cataloged 14 1 their view of the legal weaknesses of plaintiffs’ claims and their view of actual damages. In 2 addition, mediator Feinberg submitted another declaration describing the adversarial negotiating 3 process. Further, before it granted final approval, the District Court received the damages study 4 that the objectors reference, in which bulk damages were measured using three different 5 methodologies.5 Last, before granting final approval, the District Court held yet another lengthy 6 hearing, at which counsel for the objectors again spoke at length. 7 Given the extensive process and copious submissions below, it is of no moment that the 8 District Court had few materials before it at the first preliminary approval hearing. Prior to final 9 approval, the Court received and reviewed “sufficient materials to evaluate the Settlement” and 10 to determine, among other things, that the Settlement was reasonable in light of possible 11 recoveries and the risks of litigation. Malchman v. Davis, 706 F.2d 426, 434 (2d Cir. 1983). 12 13 14 15 B. Objectors Had Adequate Opportunity to Lodge Objections Based On the Damages Study The objectors assert that because the damages study was submitted to the District Court 16 after the deadline for objecting to the Settlement, class members were deprived of the 17 opportunity to base their objections on the study. However, the objectors did file objections 18 based on the damages study, which the District Court accepted, even though they were untimely. 19 Accordingly, class members had the opportunity to base objections on the study, and any 20 argument to the contrary fails. 21 22 23 24 C. No Due Process Violation Occurred By Requiring Objectors to Appear at the Fairness Hearing In Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985), the Supreme Court held 5 This information was identical to that presented by the plaintiffs at mediation. 15 1 that “minimal procedural due process protection” within the context of class actions required that 2 plaintiffs receive “notice plus an opportunity to be heard and participate in the litigation, whether 3 in person or through counsel,” and the opportunity to opt out of the settlement. Here, the District 4 Court attempted to satisfy that standard by allowing class members the opportunity to appear, in 5 person or through counsel, and to object to the Settlement, as well as to opt out. The District 6 Court’s requirement that objectors appear in person or through counsel at the fairness hearing 7 does not rise to the level of a due process violation. See, e.g., Spark v. MBNA, 48 F. App’x 385, 8 391 (3d Cir. 2002) (unpublished opinion) (holding that personal appearance requirement did not 9 violate due process). 10 CONCLUSION 11 In sum, the District Court was well within its discretion, even when reviewed at a 12 heightened level, to certify the class and approve the Settlement. As the majority notes, “at some 13 point there must be an end to reclassification with separate counsel,” Maj. Op. at [33] (citing 14 Ortiz v. Fibreboard Corp., 527 U.S. 815, 819 (1999)), and it is especially unnecessary to require 15 such reclassification and subclasses where, as in this case, any conflict that exists is not 16 “fundamental,” Denney v. Deutsche Bank AG, 443 F.3d 253, 268 (2d Cir. 2006). Today’s 17 opinion may seriously hamper settlement negotiations in complex class action lawsuits, as 18 parties that participate in “intense, protracted, adversarial mediation” with proceedings “free of 19 collusion and undue pressure,” Maj. Op at [23] (internal quotation marks omitted), will fear 20 being told by our Court at the conclusion of their work that they have not done “enough,” Maj. 21 Op. at [23], to satisfy Rule 23(a)(4)’s requirement that the “representative parties . . . fairly and 22 adequately protect the interests of the class,” Fed. R. Civ. P. 23(a). After today’s opinion, 16 1 plaintiffs may proceed by breaking into numerous and unnecessary subclasses that could stall 2 mediation proceedings and lead to protracted litigation. Thus, and for the reasons stated above, I 3 respectfully dissent in part and would affirm the District Court’s order in its entirety certifying 4 the class and approving the Settlement. 17