eMusic Founder Objects to E-Book Price-Fixing Class Action Settlement

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Bob Kohn, the founder of eMusic, has objected to the preliminary approval of a class action settlement with Penguin Group USA Inc. and Macmillan Publishers USA, publishing companies that allegedly conspired with Apple Inc. to fix e-book prices. In his objection, filed on October 18, he argued that the court has insufficient facts related to the claims or potential defenses to “intelligently” approve the class action settlement.

Kohn filed his objection to the e-book price-fixing settlement as an eligible consumer, authorized under Rule 23(3) of the Federal Rules of Civil Procedure. He asked that the entire litigation be dismissed for all involved defendants.

In July, U.S. District Judge Denise Cote agreed with the U.S. Department of Justice and 33 state attorneys general that Apple had conspired with several book publishers to raise e-book prices. The publishing companies involved in the litigation include Penguin Group, Macmillan, Simon & Schuster Inc., Hachette Group Inc. and HarperCollins Publishers LLC.

Judge Cote granted preliminary approval to the Penguin Group and Macmillan class action settlement in August, which included $90 million from Penguin Group and $25 million from Macmillan, which will be divided into separate funds for consumers, attorneys and the states. The bulk of the class action settlement funds will be paid to a class of consumers from 33 states who purchased e-books from the publishing companies between April 1, 2010 and May21, 2010.

In a separate order also filed in August, Judge Cote granted preliminary approval to an e-book class action settlement between Hachette, HarperCollins and Simon & Schuster. Under the terms of that settlement, the companies will pay more than $2.1 million to Minnesota residents who purchased e-books during the class period.

Earlier this month, the plaintiffs argued that the multidistrict litigation (MDL) brought alongside 33 state attorneys general was a “textbook case for certifying a class” of consumers from the states not already involved in the litigation because Apple’s liability had already been established through a bench trial led by the U.S. Department of Justice (DOJ). Although Judge Cote has already issued an injunction to prohibit further e-book price fixing from the defendants, resolving the DOJ’s case, the states and private plaintiffs are seeking damages that could reach nearly $500 million.

In his objection to the class action settlement, Kohn argues that the court made a “fundamental error of law when it ruled that an examination into Amazon’s e-book pricing practices prior to April 2010 was not relevant to the Court’s inquiry in this case and its related actions.” Further, he asserts: “Without such an inquiry, this Court does not have sufficient facts concerning the claims or possible defenses in order to intelligently approve the Settlement.”

The putative private consumer class is represented by Hagens Berman Sobol Shapiro LLP and Cohen Milstein Sellers & Toll PLLC.

The Penguin/Macmillan E-Book Price-Fixing Class Action Lawsuit is In Re: Electronic Books Antitrust Litigation, Case No. 1:11-md-02293, in the U.S. District Court for the Southern District of New York.