UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
IN RE ELECTRONIC BOOKS ANTITRUST
LITIGATION
No. 11-md-02293 (DLC)
ECF Case
This Document Relates to:
ALL ACTIONS
CLASS ACTION
MEMORANDUM IN SUPPORT OF CLASS PLAINTIFFS’
MOTION FOR PRELIMINARY APPROVAL OF HARPERCOLLINS, HACHETTE
AND SIMON & SCHUSTER SETTLEMENTS
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TABLE OF CONTENTS
I. INTRODUCTION ...............................................................................................................1
II. PROCEDURAL HISTORY .................................................................................................1
A. Plaintiffs’ Investigations ..........................................................................................1
B. Litigation to Date .....................................................................................................2
C. Settlement Negotiations ...........................................................................................2
III. THE PROPOSED SETTLEMENT......................................................................................3
A. Consumer Compensation .........................................................................................3
B. Payment of Class Counsel’s Attorneys’ Fees and Costs .........................................3
C. Compensation to the State of Minnesota .................................................................3
D. Settlement Notice and Administrative Costs ...........................................................4
E. Release of Claims ....................................................................................................4
IV. THE SETTLEMENT MEETS THE STANDARDS FOR JUDICIAL
APPROVAL ........................................................................................................................5
A. The Settlement Meets the Standard for Preliminary Approval ................................5
B. The Settlements Are Fair, Reasonable and Adequate ..............................................6
1. The Complexity, Expense, and Likely Duration of the Litigation ..............6
2. The Reaction of the Class to the Settlement ................................................7
3. The State of the Proceedings and Amount of Discovery Completed ..........7
4. The Risk of Establishing Liability ...............................................................8
5. The Risk of Establishing Damages ..............................................................8
6. The Risks of Maintaining a Class Action Through Trial .............................9
7. The Ability of Defendants to Withstand a Greater Judgment ......................9
8. The Range of Reasonableness of the Settlement Fund in Light of
the Best Possible Recovery ..........................................................................9
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9. The Range of Reasonableness of the Settlement Fund to a Possible
Recovery in Light of All the Attendant Risks of Litigation ......................10
V. THE PROPOSED NOTICE PLAN ...................................................................................10
VI. THE PROPOSED CONSUMER DISTRIBUTION PLAN ...............................................11
VII. THE PROPOSED CLASS MEETS ALL THE REQUIREMENTS OF RULE 23 ...........11
A. Definition of the Proposed Class ...........................................................................11
B. Certification of the Proposed Class Is Proper for Settlement Purposes .................11
1. Plaintiffs Have Met All of the Prerequisites of Rule 23(a) ........................12
a. The Class Meets the Numerosity Requirement .............................12
b. Questions of Law and Fact Are Common to the Class ..................12
c. Plaintiffs’ Claims Are Typical of the Claims of the Class .............13
d. The Settlement Class Plaintiffs Will Fairly and Adequately
Protect the Interests of the Class ....................................................15
2. The Requirements of Rule 23(b)(3) Are Satisfied .....................................16
a. Common Questions Predominate with Respect to Antitrust
Claims ............................................................................................16
b. A Class Action Is Superior to Other Forms of Adjudication .........17
C. Proposed Class Counsel Will Fairly and Adequately Represent the Class ...........19
VIII. CONCLUSION ..................................................................................................................20
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TABLE OF AUTHORITIES
Page(s)
FEDERAL CASES
Amchem Prods., Inc. v. Windsor,
521 U.S. 591 (1997) ...............................................................................................11, 12, 16, 17
City of Detroit v. Grinnell Corp.,
495 F.2d 448 (2d Cir. 1974).......................................................................................................6
Comcast Corp. v. Behrend,
__ U.S. __, 133 S. Ct. 1426 (2013) ........................................................................................8, 9
Consol. Rail Corp. v. Town of Hyde Park,
47 F.3d 473 (2d Cir. 1995).......................................................................................................12
DeMarco v. Nat’l Collector’s Mint, Inc.,
229 F.R.D. 73 (S.D.N.Y. 2005) ...............................................................................................13
Freeland v. AT&T Corp.,
238 F.R.D. 130 (S.D.N.Y. 2006) .............................................................................................14
Iglesias-Mendoza v. LaBelle Farm, Inc.,
239 F.R.D. 363 (S.D.N.Y. 2007) .............................................................................................19
In re Am. Bank Note Holographics, Inc.,
127 F.Supp.2d 418 (S.D.N.Y. 2001) ........................................................................................12
In re Austrian & German Bank Holocaust Litig.,
80 F. Supp. 2d 164 (S.D.N.Y. 2000) ..........................................................................................7
In re Catfish Antitrust Litig.,
826 F. Supp. 1019 (N.D. Miss. 1993) ......................................................................................19
In re Currency Conversion Fee Antitrust Litig.,
2006 U.S. Dist. LEXIS 81440 (S.D.N.Y. Nov. 8, 2006) ...........................................................5
In re Flag Telecom Holdings, Ltd. Secs. Litig.,
574 F.3d 29 (2d Cir. 2009).......................................................................................................15
In re J.P. Morgan Chase Cash Balance Litig.,
242 F.R.D 265 (S.D.N.Y. 2007) ..............................................................................................13
In re NASDAQ Market-Makers Antitrust Litig.,
169 F.R.D. 493 (S.D.N.Y. 1996) ...........................................................................13, 15, 17, 19
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In re Natural Gas Commodities Litig.,
231 F.R.D. 171 (S.D.N.Y. 2005) .............................................................................................13
In re Playmobil Antitrust Litig.,
35 F. Supp.2d 231 (E.D.N.Y. 1998) ............................................................................13, 16, 19
In re Prestige Brands Holdings, Inc. Secs. Litig.,
2007 WL 2585088 (S.D.N.Y. Sept. 5, 2007) ...........................................................................14
In re Sumitomo Copper Litig.,
189 F.R.D. 274 (S.D.N.Y. 1999) .............................................................................................17
In re Telectronics Pacing Sys., Inc. Accufix Atrial "J" Leads Prods. Liab. Litig.,
172 F.R.D. 271 (S.D. Ohio 1997) ............................................................................................18
In re Visa Check/Mastermoney Antitrust Litig.,
280 F.3d 124 (2d Cir. 2001).........................................................................................11, 16, 18
In re Vitamin C Antitrust Litig.,
279 F.R.D. 90 (E.D.N.Y. 2012) .........................................................................................13, 17
In re Vitamins Antitrust Litig.,
2000 U.S. Dist. LEXIS 8931 (D.D.C. Mar. 31, 2000) ...............................................................5
In re Warfarin Sodium Antitrust Litig.,
391 F.3d 516 (3d Cir. 2004).......................................................................................................7
Menkes v. Stolt-Nielsen S.A.,
270 F.R.D. 80 (D. Conn. 2010)................................................................................................12
Moore v. PaineWebber, Inc.,
306 F.3d 1247 (2d Cir. 2002)...................................................................................................16
Nieves v. Cmty. Choice Health Plan of Westchester, Inc.,
2012 U.S. Dist. LEXIS 37720 (S.D.N.Y. Feb. 24, 2012) ..........................................................5
Robinson v. Metro-North Commuter R.R. Co.,
267 F.3d 147 (2d Cir. 2001).....................................................................................................15
Sullivan v. DB Invs., Inc.,
667 F.3d 273 (3d Cir. 2011).....................................................................................................17
Wal-Mart Stores, Inc. v. Dukes,
__ U.S. __, 131 S. Ct. 2541 (2011) ............................................................................................9
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FEDERAL STATUTES
15 U.S.C. § 15(c) ...........................................................................................................................14
FEDERAL RULES
Federal Rules of Civil Procedure 23 ...................................................................................... passim
STATE STATUTES
Minn. Stat. § 8.31, subd. 2(b) ..........................................................................................................3
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I. INTRODUCTION
A Settlement Class consisting of Minnesota residents, submit this memorandum in
support of the motion for preliminary approval of their settlement with defendants
HarperCollins, Hachette, and Simon & Schuster.1 The proposed settlement with these defendants
provides for the payment of $2,119,000 for the benefit of Minnesota consumers. The proposed
settlement is sufficiently fair, reasonable and adequate to justify providing notice to the affected
consumers throughout Minnesota, provisionally certifying a class of purchasers of electronic
books (“E-books”) for settlement purposes, and initiating a procedure under which consumers
may qualify for credits or checks. This settlement resolves claims brought against these
defendants by residents of the state of Minnesota alleging an unlawful agreement to fix the prices
of E-books in violation of state and federal antitrust law.
II. PROCEDURAL HISTORY
A. Plaintiffs’ Investigations
Settlement Class Counsel began its investigation in about April 2010, after market prices
for titles of the E-books that the publisher defendants sold all went up by 30 to 50 percent –
nearly simultaneously. This pricing behavior caused Settlement Class Counsel to start analyzing
the market and developing the facts pled in the first civil litigation filed, Petru, et al. v. Apple
Inc., et al., No. 11-cv-03892-EMC (N.D. Cal.). The Petru complaint contained extensive
economic analysis of historical pricing data in order to show price changes and the impact of
defendants’ conduct over time – before and after defendants engaged in the alleged conspiracy.
Class Counsel retained experts and investigators who, collectively, spent over 200 hours
1 Consistent with the settlement agreement, “Hachette” means Hachette Book Group, Inc.,
Hachette Digital, Inc. and Hachette Livre SA. “HarperCollins” means HarperCollins Publishers
L.L.C. and “Simon & Schuster” means Simon & Schuster, Inc. and Simon & Schuster Digital
Sales, Inc.
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analyzing the market, retrieving electronic pricing information, and conducting their analysis in
order to present robust factual allegations in the Petru action. On December 9, 2011, the United
States Judicial Panel on Multidistrict Litigation transferred all related actions to the Southern
District of New York. On December 21, 2011, this Court appointed Hagens Berman Sobol
Shapiro LLP and Cohen Milstein Sellers & Toll PLLC as co-lead counsel for the plaintiff
classes, after which they filed the Class Complaint.2
B. Litigation to Date
Defendants jointly moved to dismiss the class plaintiffs’ Class Complaint. The Court
denied the motions to dismiss on May 15, 2012, and the parties began several months of
coordinated discovery. Class plaintiffs (in conjunction with the State Attorneys General in the
coordinated litigation) obtained and analyzed more than 1.6 million documents and detailed
transactional data from the six defendants and numerous third parties, and conducted more than
54 depositions in coordination with the U.S. Department of Justice (“DOJ”). The bench trial on
liability with Apple Inc. began on June 2, 2013.
C. Settlement Negotiations
HarperCollins, Hachette, and Simon & Schuster settled with the Attorneys General of
fifty-five States, Commonwealths, Territories and Possessions and moved for preliminary
approval with this Court on August 29, 2012. This Court finally approved these settlements,
which created a consumer fund in the amount of $69.04 million on February 8, 2013, although
distribution has been held in abeyance while the States and the class continued litigation against
the other defendants.
2 “Class Complaint” refers to Consolidated Amended Class Action Complaint, Jan. 20,
2012, ECF No. 47.
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Class plaintiffs and HarperCollins, Hachette and Simon & Schuster began discussing
possible resolution of the claims of Minnesota residents in October 2012. On April 16, 2013, a
formal mediation session was held before Judge Kimba M. Wood. On June 20, 2013, the parties
executed a formal Settlement Agreement, a copy of which is attached as Exhibit A.
III. THE PROPOSED SETTLEMENT
A. Consumer Compensation
The primary component of the settlement is the payment to Minnesota residents who
purchased E-books from any defendant publisher from April 1, 2010 to May 21, 2012. Pursuant
to the Settlement Agreement, HarperCollins, Hachette and Simon & Schuster agree to pay the
sum of $2,119,000 to compensate Minnesota class members. These funds, together with any
accrued interest, will be distributed according to a joint distribution plan with the State Attorneys
General settlements. If consumer funds remain after initial distribution, the Settlement
Agreement contemplates such funds be reserved for additional future consumer distribution
resulting from settlement or judgment. Any residue will be distributed cy pres to Reading is
Fundamental, a non-profit organization dedicated to motivating children to become lifelong
readers, or as otherwise directed by the Court.
B. Payment of Class Counsel’s Attorneys’ Fees and Costs
HarperCollins, Hachette and Simon & Schuster agree to pay to Class Counsel for the
Settlement Class $731,000 for their attorneys’ fees, costs of investigation, litigation and other
related costs. The award for attorneys’ fees shall be paid into an account designated by Class
Counsel, within ten days of preliminary approval of the settlement.
C. Compensation to the State of Minnesota
Subject to separate Assurances of Discontinuance being filed simultaneously by the State
of Minnesota in Minnesota state court pursuant to Minn. Stat. § 8.31, subd. 2(b), HarperCollins,
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Hachette and Simon & Schuster agree to pay $25,000 each to the State of Minnesota for the costs
of its investigation. These awards shall be paid directly to the State of Minnesota within fourteen
days of the effective date of the settlement.
D. Settlement Notice and Administrative Costs
HarperCollins, Hachette and Simon & Schuster previously each have made payments of
$750,000 to the Settlement Cost Account established for their settlement of The State of Texas, et
al. v. Hachette Book Group, et al., No. 12-Civ-6625 (DLC) (S.D.N.Y.). The settling parties
understand that sufficient funds remain in the Settlement Cost Account to cover the settlement
administration costs and have agreed with the Liaison States that the funds in the Settlement Cost
Account may be used for these purposes. This is particularly true, given that the parties
anticipate joint notice to the class in conjunction with the Macmillan and Penguin settlements,
and joint distribution to the class for all settlements to date.
E. Release of Claims
The class shall release the claims of individual consumers who purchased E-books from
any of the defendant publishers from April 1, 2010 to May 21, 2012, with the exception of
claims of individual consumers who exercised the right to exclude themselves from the
settlement. Claims are released against HarperCollins, Hachette and Simon & Schuster only, not
any other defendant publisher or Apple.
Minnesota will also release their sovereign enforcement claims against HarperCollins,
Hachette and Simon & Schuster that arise from the same course of conduct as alleged in the
Class Complaint through a separate action to be filed in Minnesota state court.
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IV. THE SETTLEMENT MEETS THE STANDARDS FOR JUDICIAL APPROVAL
A. The Settlement Meets the Standard for Preliminary Approval
Preliminary approval of this settlement does not require a full fairness hearing. Rather,
“[w]here the proposed settlement appears to be the product of serious, informed, non-collusive
negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to
class representatives or segments of the class and falls within the range of [possible] approval,
preliminary approval is granted.”3 “Preliminary approval of a class action settlement, in contrast
to final approval, is at most a determination that there is what might be termed ‘probable cause’
to submit the proposal to class members and hold a full-scale hearing as to its fairness.”4
Here, the requirements for preliminary approval have been met. These three settling
defendants settled with the Attorneys General of fifty-five States, Commonwealths, Territories
and Possessions in August 2012. The class has continued to actively litigate against the
remaining defendants. All counsel were well-informed of the issues; extensive investigations had
been conducted by Class Counsel before settlement negotiations proceeded in earnest. Each side
fully articulated its positions on numerous occasions. Ultimately, these negotiations resulted in
the Settlement Agreement which is now submitted for this Court’s approval.
The settlement has no “obvious deficiencies” nor does it grant preferential treatment. To
the contrary, the settlement provides extra protections for consumers as no part of the $2,119,000
consumer funds will be used for attorneys’ fees or administrative costs.5 Finally, the settlement
3 In re Currency Conversion Fee Antitrust Litig., No. 1409, 2006 U.S. Dist. LEXIS 81440,
at *13 (S.D.N.Y. Nov. 8, 2006). All internal citations and quotations omitted and all emphasis
added, unless otherwise indicated.
4 Nieves v. Cmty. Choice Health Plan of Westchester, Inc., No. 08 CV 321, 2012 U.S. Dist.
LEXIS 37720, at *12 (S.D.N.Y. Feb. 24, 2012).
5 A separate fund for payment of attorneys’ fees provides the beneficiaries of the
settlement greater certainty because the amount of money each will receive is not reduced by an
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amount for consumers undoubtedly is within the range of possible approval as it is a significant
recovery and exceeds the percentage-of-damages recovery that was approved by the Court in the
prior settlements due to the later stage of litigation.
B. The Settlements Are Fair, Reasonable and Adequate
This Court has already spent copious time reviewing the settlements with these three
defendants and the Attorneys General of fifty-five States, Commonwealths, Territories and
Possessions. During that review, the Court found that the prior settlement satisfied the factors for
final approval under Grinnell.6 Given the similarity between that settlement and this, certainly
the settlements should be seen as fair, reasonable and adequate. Plaintiffs address each of the
Grinnell factors briefly below.7
1. The Complexity, Expense, and Likely Duration of the Litigation
As this Court is aware, antitrust litigation is complex, expensive and likely to take years
to reach resolution. And even after completion in the trial court, appeals are likely short of a
settlement. Short of settlement, this litigation would likely take at least another year to complete
– as class certification motions and some class discovery against HarperCollins, Hachette and
award of attorneys’ fees. In re Vitamins Antitrust Litig., No. 99-197, 2000 U.S. Dist. LEXIS
8931, at *21 n.3 (D.D.C. Mar. 31, 2000).
6 City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974); The State of Texas, et al.
v. Hachette Book Group, Inc. et al., Transcript of February 8, 2013 Fairness Hearing for Final
Approval of Settlements with HarperCollins, Simon & Simon and Hachette (“Fairness Hearing
Tr.”), No.12-cv-6625 (S.D.N.Y.).
7 The nine Grinnell factors to be considered by the Court at final approval are: (1) the
complexity, expense and likely duration of the litigation; (2) the reaction of the class to the
settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks
of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the
class action through the trial; (7) the ability of the defendants to withstand a greater judgment;
(8) the range of reasonableness of the settlement fund in light of the best possible recovery; [and]
(9) the range of reasonableness of the settlement fund to a possible recovery in light of all the
attendant risks of litigation. See Grinnell, 495 F.2d at 463.
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Simon & Schuster would proceed after the conclusion of the June bench trial against Apple.
After class certification motions, summary judgment motions would be a certainty and then,
possibly, a second trial between the class plaintiffs and this group of defendants. Settlement here
ensures a quick and timely resolution of this action.
2. The Reaction of the Class to the Settlement
Minnesota residents have not received notice of any settlement in this litigation (or any
related litigation). While any analysis of this factor should be delayed until the class has been
provided the opportunity to opt-out or object, a significant number of opt-outs or objections from
Minnesota consumers is unexpected. In the defendants’ settlements with the Attorneys General
of fifty-five States, Commonwealths, Territories and Possessions, less than 100 individuals filed
valid and timely notices of exclusion out of more than 23 million consumers who received
notice.
3. The State of the Proceedings and Amount of Discovery Completed
Although preparing this case through trial would require thousands more hours of
discovery work for both sides, the parties have completed enough discovery to recommend
settlement. The proper question is “whether counsel had an adequate appreciation of the merits
of the case before negotiating.”8 “The pretrial negotiations and discovery must be sufficiently
adversarial that they are not designed to justify a settlement . . . [but] an aggressive effort to
ferret out facts helpful to the prosecution of the suit.”9
Here, a vast amount of litigation discovery has taken place in anticipation of the June
2013 trial on injunctive relief. Over 1.6 million documents have been produced and catalogued
8 In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 537 (3d Cir. 2004).
9 In re Austrian & German Bank Holocaust Litig., 80 F. Supp. 2d 164, 176 (S.D.N.Y.
2000) (alteration in original)
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by the plaintiffs, and fifty-onewitnesses have been deposed – nine of whom are employees of the
HarperCollins, Hachette and Simon & Schuster defendants. Given the length of this litigation
(over two years), and these defendants’ settlements with the Attorneys General of fifty-five
States, Commonwealths, Territories and Possessions, both sides were fully informed of the
parties’ positions and aware of the evidence expected to be presented in support of those
positions.
4. The Risk of Establishing Liability
In reviewing the prior settlements, the Court found there was a “fairly small” risk for
those plaintiffs in establishing liability, once an illicit agreement has been established.10 The
same conclusion would apply to the putative class action case against HarperCollins, Hachette
and Simon & Schuster.
5. The Risk of Establishing Damages
Plaintiffs propose an allocation to Minnesota class members based on the work of
Professor Abraham Wickelgren (who has proposed a damages model for the prior settlements
with these defendants and the current settlements with Macmillan and Penguin). In its prior final
approval of the settlements with HarperCollins, Hachette and Simon & Schuster and the
Attorneys General of fifty-five States, Commonwealths, Territories and Possessions, this Court
accepted Professor Wickelgren’s calculations. Proving damages during litigation, however,
presents a more significant litigation risk. A number of the economists who have offered reports
in this litigation to date have focused on the pricing in the E-book industry and whether or not
plaintiffs will be able to show damages. As demonstrated by the Supreme Court’s recent opinion
in Comcast, plaintiffs must present at class certification a damages model capable of measuring
10 Fairness Hearing Tr. at 7.
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damages on a class wide basis.11 A failure to do so – and to ensure that the model can withstand
“rigorous analysis” – will mean that individual damage calculations will inevitably overwhelm
questions common to the class.12 And beyond the class certification motion, plaintiffs likely
faced a Daubert challenge before their damages model was presented to a jury. The risk of
establishing damages is a significant risk to be taken into account when considering this
settlement.
6. The Risks of Maintaining a Class Action Through Trial
As always, in a class action, a risk exists that either a class will not be certified in the first
instance, or that a class will not be sustainable through trial. Recent case law from the Supreme
Court such as Dukes and Comcast has only served to further these uncertainties.13 Although
plaintiffs are confident that a class would have been certified in this case, and that the case is
amenable to trial on a class wide basis, the risk exists that this Court might disagree and the case
could not continue as a class action through trial.
7. The Ability of Defendants to Withstand a Greater Judgment
HarperCollins, Hachette and Simon & Schuster could withstand a larger judgment.
Therefore, neither potential insolvency nor lack of ability to pay is a factor that needs to be
considered, or accorded much weight in the Court’s determination.
8. The Range of Reasonableness of the Settlement Fund in Light of the Best
Possible Recovery
In approving the prior settlements with HarperCollins, Hachette and Simon & Schuster,
the Court found the settlement funds were fair and reasonable under the circumstances of the
11 Comcast Corp. v. Behrend, __ U.S. __, 133 S. Ct. 1426, 1433 (2013).
12 Id.
13 See Wal-Mart Stores, Inc. v. Dukes, __ U.S. __, 131 S. Ct. 2541 (2011); Comcast, 133 S.
Ct. at 1426.
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case.14 Here, the settlement with these three defendants on behalf of Minnesota residents
provides for a higher amount of recovery, due to the later stage of litigation.15 This settlement is
well within the range of reasonableness.
9. The Range of Reasonableness of the Settlement Fund to a Possible Recovery
in Light of All the Attendant Risks of Litigation
Any class action is attendant with a high amount of risk. This Court has already ruled that
similar settlements between these defendants and the Attorneys General of fifty-five States,
Commonwealths, Territories and Possessions in their parens patriae capacity was “in all respects
fair, reasonable, and adequate and in the best interests of the Consumers in the Plaintiff States.”16
This settlement agreement provides for a larger percentage of recovery than these prior
settlements due to the later stage of litigation, while avoiding the same or higher risks of
litigation. This settlement equally deserves a finding of fairness, reasonableness and adequacy.
V. THE PROPOSED NOTICE PLAN
To maximize efficiency and to minimize the expense, notice to Minnesota consumers
regarding the settlement with the HarperCollins, Hachette and Simon & Schuster defendants will
be sent at the same time, in the same manner and in the same documents as the notice of
settlement with the Macmillan and Penguin defendants. The proposed Consumer Notice Plan is
attached as Exhibit D to the Motion for Preliminary Approval of the Macmillan and Penguin
Settlements.17 Because the plans are identical, plaintiffs do not repeat the discussion here.18
14 Final Judgment at 4, Feb. 8, 2013, ECF No. 279.
15 Expert Report of Abraham L. Wickelgren, Sept. 13, 2012, ECF No. 11-5.
16 Final Judgment at 4, ECF No. 279.
17 See Memorandum in Support of Plaintiffs’ Motion for Preliminary Approval of
Macmillan and Penguin Settlements and Proposed Consumer Notice and Distribution Plans, filed
concurrently herewith.
18 See id., section V.A.2.
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VI. THE PROPOSED CONSUMER DISTRIBUTION PLAN
Again, to maximize efficiency and minimize the expense of distribution, plaintiffs, the
litigating 33 State Attorneys General involved in the Macmillan and Penguin settlements, and the
defendants have agreed to a combined distribution plan that will allow Minnesota residents to
receive compensation from all five separate settlements (the settlements with HarperCollins,
Hachette, Simon & Schuster, Macmillan and Penguin) at the same time and through the same
manner. The proposed Consumer Distribution Plan is attached as Exhibit G to the Motion for
Preliminary Approval of the Macmillan and Penguin Settlements. Because the plans are
identical, plaintiffs do not repeat the discussion here.19
VII. THE PROPOSED CLASS MEETS ALL THE REQUIREMENTS OF RULE 23
A. Definition of the Proposed Class
HarperCollins, Hachette, Simon & Schuster Settlement Class consists of natural persons
who purchased E-books published by the named publishers from April 1, 2010 until May 21,
2012, and who resided in Minnesota at the time of their E-book purchase.20 Except for
geographical distinctions, this class mirrors that of the parens patriae actions and other class
settlements.
B. Certification of the Proposed Class Is Proper for Settlement Purposes
The Court must first determine whether the proposed settlement class is a proper class for
settlement purposes.21 The Court may certify a class where plaintiffs demonstrate that the
proposed class and proposed class representatives meet the prerequisites in Rule 23(a) –
19 See id., section VI.A.2.
20 See Exhibit A (Settlement Agreement) at 4.
21 See e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) (courts examine
whether the proposed class would be adequately represented and fairly treated by a class action
settlement).
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numerosity, commonality, typicality and adequacy of representation – and one of the three
requirements of Rule 23(b).22 To establish a class under Rule 23(b)(3), plaintiffs must show that
“questions of law or fact common to class members predominate over any questions affecting
only individual members, and that a class action is superior to other available methods for fairly
and efficiently adjudicating the controversy.”23 In certifying a settlement class, the court is not
required to determine whether the action, if tried, would present intractable management
problems.24 Rather, whether to certify a class rests in the court’s discretion.25
1. Plaintiffs Have Met All of the Prerequisites of Rule 23(a)
Plaintiffs have satisfied the numerosity, commonality, typicality and adequacy of
representation requirements under Rule 23(a).
a. The Class Meets the Numerosity Requirement
Based on information provided by six E-book retailers (Amazon, Barnes & Noble, Apple,
Kobo, Sony and Google), it is estimated that the Minnesota class consists of approximately
449,000 class members,26 which makes joinder of all settlement class members impracticable.27
b. Questions of Law and Fact Are Common to the Class
The Rule 23(a)(2) requirement that there be “questions of law or fact common to the
22 Fed. R. Civ. P. 23; In re Visa Check/Mastermoney Antitrust Litig., 280 F.3d 124, 132-33
(2d Cir. 2001).
23 Fed. R. Civ. P. 23(b)(3).
24 Amchem Prods., 521 U.S. at 620 (“Confronted with a request for settlement-only class
certification, a district court need not inquire whether the case, if tried, would present intractable
management problems . . . for the proposal is that there be no trial.”).
25 See In re Am. Bank Note Holographics, Inc., 127 F.Supp.2d 418, 429 (S.D.N.Y. 2001)
(“All aspects of settlement approval . . . rest in the sound discretion of the district court.”).
26 See Declaration of Kim Schmidt, ¶ 7, filed concurrently herewith.
27 See Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995)
(numerosity is presumed at a level of 40 members).
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class” is “not a demanding standard” and “is established so long as the plaintiffs can identify
some unifying thread among the [class] members’ claims.”28 Commonality does not require a
showing that all the questions raised by the class claims are identical; it is sufficient if a single
common issue is shared by the class.29 Antitrust price-fixing cases inherently present common
legal and factual questions that satisfy the requirement of Rule 23(a)(2).30
Here, where plaintiffs allege an anticompetitive scheme to eliminate retail price
competition and elevate retail prices for the sale of E-books, commonality is plainly present.31
c. Plaintiffs’ Claims Are Typical of the Claims of the Class
Rule 23(a)(3) requires that “the claims or defenses of the representative parties are typical
of the claims or defenses of the class.” By its terms, the rule only requires the named plaintiff’s
claims to be typical of the class. Typicality “does not require that the factual background of each
named plaintiff’s claim be identical to that of all class members.”32 “Rather, the named plaintiff
must simply raise claims that arise from the same course of events as the class claims and make
28 Menkes v. Stolt-Nielsen S.A., 270 F.R.D. 80, 90 (D. Conn. 2010) (alteration in original).
29 DeMarco v. Nat’l Collector’s Mint, Inc., 229 F.R.D. 73, 80 (S.D.N.Y. 2005); In re
Natural Gas Commodities Litig., 231 F.R.D. 171, 180 (S.D.N.Y. 2005) (noting that the
“common question” requirement is a “low hurdle”).
30 See In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 509 (S.D.N.Y. 1996)
(“Numerous courts have held that allegations concerning the existence, scope, and efficacy of an
alleged antitrust conspiracy present important common questions sufficient to satisfy the
commonality requirement of Rule 23(a)(2).”) (collecting cases); see also, e.g., In re Vitamin C
Antitrust Litig., 279 F.R.D. 90, 99 (E.D.N.Y. 2012) (“The most significant question posed by this
lawsuit will generate common answers among all class members: did the defendants’ price-
fixing agreement cause an artificial increase in the market price of vitamin C?”).
31 See Class Complaint, ¶¶ 10-20.
32 In re J.P. Morgan Chase Cash Balance Litig., 242 F.R.D 265, 272-73 (S.D.N.Y. 2007).
See also In re Playmobil Antitrust Litig., 35 F. Supp.2d 231, 242 (E.D.N.Y. 1998) (“Typicality
refers to the nature of the claims of the representative, not the individual characteristics of the
plaintiff[s]. Personal traits or variables . . . are irrelevant to the typicality criterion.”).
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similar legal arguments to prove the defendant’s liability.”33 The test for typicality is not
demanding,34 and in the antitrust context, “will be established by plaintiffs and all class members
alleging the same antitrust violations by the defendants.”35
Here, there are twenty-five proposed Settlement Class Plaintiffs.36 The claims of these
representatives are typical of the claims of the entire Settlement Class. Each proposed Settlement
Class Plaintiff purchased E-books from one or more of the publisher defendants.37 Each claims
that he or she was injured by paying unlawfully inflated and stabilized prices as a result of
defendants’ anticompetitive scheme; each alleges a common course of unlawful conduct by
33 In re Vitamin C, 279 F.R.D. at 105.
34 See, e.g., In re Prestige Brands Holdings, Inc. Secs. Litig., No. 05-6924, 2007 WL
2585088, at *3 (S.D.N.Y. Sept. 5, 2007).
35 Id.; see also, e.g., Freeland v. AT&T Corp., 238 F.R.D. 130, 141 (S.D.N.Y. 2006)
(typicality satisfied because all class members’ claims based on same conspiracy and legal
theories).
36 The proposed Settlement Class Plaintiffs are those named in the Class Complaint:
Anthony Petru, Marcus Mathis, Christian Gilstrap, Cynthia J. Tyler, Thomas Friedman, Jeremy
Sheppeck, Aloysius J. Brown, III, Anne M. Rinaldi, Laura J. Warner, Barbara Heath, Kathleen
Linda Pitlock, Kathleen Weiss, Matthew A. Hosking, Diane Urbanec, Ed Macauley, Ronna
Hamelin, James L. Nesmith, Lauren Albert, Sue Roberts, Shane S. Davis, Sue Ellen Gordon,
Charles Leonard Pelton, Sr., Kimberly Whiteside Brooks, Steven D. Campbell, and Jessica
Moyer.
For the avoidance of doubt, certain of these individuals (Marcus Mathis, Christian
Gilstrap, Jeremy Sheppeck, Anne Rinaldi, Barbara Heath, Matthew A. Hosking, Diane Urbanec,
Ed Macauley, Ronna Hamelin, Charles Leonard Pelton Sr., Kimberly Whiteside Brooks, Steven
D. Campbell, and Jessica Moyer) reside in a State in which an action was already brought by the
Attorneys General in their capacity as parens patriae under the authority of Section 4C of the
Clayton Act, 15 U.S.C. § 15(c) and in which Final Judgment already has been entered. See The
State of Texas et al. v. Hachette Book Group, Inc. et al., Case No. 12-cv-6625 (DLC) (Feb. 8,
2013) (ECF No. 71) (“States Action”). Nor did these individuals file valid or timely requests for
exclusion from the settlement agreements in connection with the States’ Action. Consequently,
these individuals are bound by the terms of the settlement agreements and Final Judgment
entered in connection with the States’ Action and have no remaining claims against
HarperCollins, Hachette, or Simon & Schuster.
37 Class Complaint, ¶¶ 22-47.
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defendants directed against all class members; and each asserts the same theory of antitrust
liability.38 Nothing more is required by Rule 23(a)(3).
d. The Settlement Class Plaintiffs Will Fairly and Adequately Protect
the Interests of the Class
Rule 23(a)(4) requires that the “representative parties will fairly and adequately protect
the interests of the class.”39 Courts generally consider two factors when analyzing the adequacy
of the named plaintiffs: “(1) absence of conflict and (2) assurance of vigorous prosecution.”40
This inquiry focuses “on uncovering conflicts of interest between named parties and the class
they seek to represent.”41 Certification will only be defeated by “fundamental” conflicts,42 and
courts reject efforts to defeat certification “by raising the possibility of hypothetical conflicts or
antagonisms among class member” that are not “apparent, imminent, and on an issue at the very
heart of the suit.”43
The proposed Settlement Class Plaintiffs readily meet the requirements of Rule 23(a)(4).
They have no interests antagonistic to the unnamed class members; rather, they share the same
interest in proving and recovering the damages caused by defendants’ conspiracy. Additionally,
they have demonstrated that they can and will pursue the action vigorously, having reviewed
pleadings, submitted declarations in opposition to Penguin’s motion to compel arbitration, and
38 Id.
39 Fed. R. Civ. P. 23(a)(4).
40 Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 170 (2d Cir. 2001).
41 In re Flag Telecom Holdings, Ltd. Secs. Litig., 574 F.3d 29, 35, 40-41 (2d Cir. 2009).
42 Id. at 33, 35.
43 In re NASDAQ, 169 F.R.D. at 514.
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responded to discovery requests.44 In sum, the Settlement Class Plaintiffs have demonstrated
they can and will represent the class fairly and adequately.
2. The Requirements of Rule 23(b)(3) Are Satisfied
The proposed class’s claims also must meet the standards of Rule 23(b)(3), which
requires the plaintiff to show that questions of law or fact common to the members of the class
“predominate over any questions affecting only individual members and class [treatment is]
superior to other available methods for the fair and efficient adjudication of the controversy.”45
a. Common Questions Predominate with Respect to Antitrust Claims
“In order to meet the predominance requirement of Rule 23(b)(3), a plaintiff must
establish that the issues in the class action that are subject to generalized proof, and thus
applicable to the class as a whole, . . . predominate over those issues that are subject only to
individualized proof.”46 “Class-wide issues predominate if resolution of some of the legal or
factual questions . . . can be achieved through generalized proof, and if these particular issues are
more substantial than the issues subject only to individualized proof.”47 Unless “it is clear that
individual issues will overwhelm the common questions,” the predominance requirement is
satisfied.48 The Supreme Court has stated that this test is “readily met in certain cases
44 See, e.g., Declaration of Kit A. Pierson in Support of Plaintiffs’ Opposition to Defendant
Penguin Group (USA), Inc.’s Motion to Stay Proceedings and Compel Arbitration, Mar. 30,
2012, ECF No. 112, Exhibits N-GG (submitting declarations from 20 of the class representatives
opposing Penguin’s motion to compel arbitration).
45 Amchem, 521 U.S. at 615, 623
46 In re Visa Check, 280 F.3d at 136 (alterations in original).
47 Moore v. PaineWebber, Inc., 306 F.3d 1247, 1252 (2d Cir. 2002).
48 In re Playmobil, 35 F. Supp. 2d at 245.
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alleging . . . violations of the antitrust laws,”49 because “the existence and effect of the
conspiracy are the prime issues in the case and are common across the class.”50
This case is a classic example. The overwhelming focus of plaintiffs’ evidence and theory
of the case is defendants’ conscious commitment to a common scheme to elevate the prices of E-
books, and each individual defendant’s participation in that scheme. The documents, testimony,
and data demonstrate that defendants agreed to raise retail prices for E-books and eliminate retail
price competition – and each piece of evidence focuses on the actions of defendants, rather than
the actions of any individual class member.51 Such evidence “will not vary among class
members.”52 Proof of defendants’ violation of the antitrust laws not only is an element on which
common issues predominate, but is itself sufficiently significant to cause common issues to
predominate.53
b. A Class Action Is Superior to Other Forms of Adjudication
Rule 23(b)(3) also requires a finding that “a class action is superior to other available
methods for the fair and efficient adjudication of the controversy.” The Second Circuit has
identified four factors which guide the superiority analysis:
49 Amchem, 521 U.S. at 625.
50 In re Vitamin C, 279 F.R.D. at 109; see also Sullivan v. DB Invs., Inc., 667 F.3d 273 (3d
Cir. 2011) (en banc) (predominance requirement satisfied by allegations of a price-fixing scheme
and resultant inflated prices), cert. denied, Murray v. Sullivan, _U.S._, 132 S. Ct. 1876 (2012); In
re NASDAQ, 169 F.R.D at 518 (collecting cases).
51 See, e.g., Class Complaint, ¶¶ 5, 6, 18-19, 70, 79-82 (using public statements of
defendants to demonstrate their coordinated activities); ¶¶ 84-89 (using pricing data common to
the class to demonstrate injury and damages to the class); ¶¶ 152, 164 (showing meetings
between publisher defendants to implement the E-book price fix – evidence common to the
class).
52 In re Sumitomo Copper Litig., 189 F.R.D. 274, 279 (S.D.N.Y. 1999).
53 See, e.g., In re Vitamin C, 279 F.R.D. at 109.
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(A) the interest of the members of the class in individually
controlling the prosecution or defense of separate actions; (B) the
extent and nature of any litigation concerning the controversy
already commenced by or against members of the class; (C) the
desirability or undesirability of concentrating the litigation of the
claims in the particular forum; and (D) the difficulties likely to be
encountered in the management of a class action.54
The Court should balance, “in terms of fairness and efficiency, the merits of a class action
against those of ‘alternative available methods’ of adjudication.”55
This case plainly satisfies the four factors outlined in In re Visa Check. First, no class
member has demonstrated any interest in litigating his or her claims individually. And even if
they had such an interest, as the Court recognized in denying Penguin’s motion to compel
arbitration, the value of an individual claim is too small for individual class members to
prosecute separate and expensive actions.56 As to the second, third and fourth factors, as is clear
from the pending joint settlements with 33 State Attorneys General, in their parens patriae
capacity, and the Penguin and Macmillan defendants, and notwithstanding the State of
Minnesota’s parallel investigation, plaintiffs have coordinated the litigation and settlement of the
actions with these governmental entities.
The ability to concentrate these claims in a single forum also demonstrates the
superiority of a class action. It would be enormously inefficient – for both the Court and the
54 In re Visa Check, 280 F.3d at 133.
55 In re Telectronics Pacing Sys., Inc. Accufix Atrial "J" Leads Prods. Liab. Litig., 172
F.R.D. 271, 290 (S.D. Ohio 1997).
56 Opinion & Order at 9, June 27, 2012, ECF No. 190 (“Plaintiffs’ affidavits demonstrate
that it would be economically irrational for any plaintiff to pursue his or her claims through an
individual arbitration. Penguin has presented no serious argument to the contrary.”).
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parties – to fracture this case into countless individual actions.57 The parties and the Court
expended considerable time to arrive at and maintain an expeditious and efficient discovery and
trial schedule coordinating the DOJ, Class and State Attorneys General actions, a schedule that
would be completely undone were this action stripped of its class nature and individual
consumers forced to begin litigation. Even if such a course of action were possible, it would not
be desirable, as it would consume substantial judicial and private resources.58
C. Proposed Class Counsel Will Fairly and Adequately Represent the Class
Pursuant to Rule 23(g), a court must appoint class counsel, who can “fairly and
adequately represent the interests of the class.”59 The court evaluates counsel according to
(1) their work in identifying and investigating plaintiffs’ claims, (2) their experience in similar
litigation, (3) their knowledge of applicable law, and (4) the resources they will commit to
prosecuting the action.60
These criteria are met by the two proposed class counsel firms, Hagens Berman Sobol
Shapiro LLP and Cohen Milstein Sellers & Toll PLLC. Both firms are composed of highly
experienced counsel with decades of experience litigating antitrust class actions.61 They have
vigorously and effectively prosecuted this case on behalf of the class, conducting a
57 See, e.g., In re NASDAQ, 169 F.R.D. at 527 (“Multiple lawsuits would be costly and
inefficient, and the exclusion of class members who cannot afford separate representation would
be neither ‘fair’ nor ‘an adjudication’ of their claims.”).
58 In re Playmobil, 35 F. Supp. 2d at 249; In re Catfish Antitrust Litig., 826 F. Supp. 1019,
1034 (N.D. Miss. 1993).
59 Fed. R. Civ. P. 23(g)(1)(B).
60 Fed. R. Civ. P. 23(g)(1)(A)(i); see Iglesias-Mendoza v. LaBelle Farm, Inc., 239 F.R.D.
363, 375 (S.D.N.Y. 2007).
61 See Application to Appoint Hagens Berman Interim Lead Counsel, Dec. 19, 2011, ECF
No. 19; Application of Cohen Milstein Sellers & Toll PLLC Seeking Appointment to Represent
Consolidated Putative Class, Dec. 19, 2011, ECF No. 11.
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comprehensive pre-filing investigation, preparing and filing detailed amended complaints,
retaining experts to evaluate the economic realities of this case, opposing and defeating
defendants’ motions to dismiss and to compel arbitration, and collaborating closely with DOJ
and the Plaintiff States in executing an accelerated discovery schedule, including by taking
several key depositions.
VIII. CONCLUSION
For the foregoing reasons, the plaintiffs respectfully request that the Court (1) grant
preliminary approval of the Settlement Agreement with HarperCollins, Hachette and Simon &
Schuster, the Consumer Notice Plan and the Consumer Distribution Plan; (2) grant conditional
class certification for settlement purposes only; and (3) order that notification to eligible
consumers may begin within thirty (30) days of the Court’s Order. A proposed Preliminary
Approval Order for the Court’s consideration is appended as Exhibit B.
DATED: June 21, 2013 HAGENS BERMAN SOBOL SHAPIRO LLP
By /s/ Jeff D. Friedman
JEFF D. FRIEDMAN (Pro Hac Vice)
Shana Scarlett (217895) (Pro Hac Vice)
HAGENS BERMAN SOBOL SHAPIRO LLP
715 Hearst Avenue, Suite 202
Berkeley, CA 94710
Telephone: (510) 725-3000
Facsimile: (510) 725-3001
jefff@hbsslaw.com
shanas@hbsslaw.com
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Steve W. Berman (Pro Hac Vice)
George W. Sampson (GS-8973)
HAGENS BERMAN SOBOL SHAPIRO LLP
1918 Eighth Avenue, Suite 3300
Seattle, WA 98101
Telephone: (206) 623-7292
Facsimile: (206) 623-0594
steve@hbsslaw.com
george@hbsslaw.com
Kit A. Pierson (Pro Hac Vice)
Jeffrey Dubner (4974341)
COHEN, MILSTEIN, SELLERS & TOLL, PLLC
1100 New York Avenue, N.W.
South Tower, Suite 500
Washington, D.C. 20005
Telephone: (202) 408-4600
Facsimile: (202) 408-4699
KPierson@cohenmilstein.com
jdubner@cohenmilstein.com
Douglas Richards (JR6038)
COHEN, MILSTEIN, SELLERS & TOLL, PLLC
88 Pine Street
14th Floor
New York, NY 10005
Telephone: (212) 838-7797
Facsimile: (212) 838-774
DRichards@cohenmilstein.com
Co-Lead Counsel for Plaintiffs
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CERTIFICATE OF SERVICE
I hereby certify that on June 21, 2013, I electronically filed the foregoing document using
the CM/ECF system which will send notification of such filing to the e-mail addresses registered
in the CM/ECF system, as denoted on the Electronic Mail Notice List, and I hereby certify that I
have caused to be mailed a paper copy of the foregoing document via the United States Postal
Service to the non-CM/ECF participants indicated on the Manual Notice List generated by the
CM/ECF system.
/s/ Jeff D. Friedman
JEFF D. FRIEDMAN
Case 1:11-md-02293-DLC Document 362 Filed 06/21/13 Page 28 of 28
