Class-Action CD Lawsuit Ends in Refunds of $13.86

When I signed up to get money back in the CD price-fixing lawsuit against record labels, I didn't think I'd be hitting the lottery or anything. The maximum refund, after all, was only supposed to be 20 bucks.

But when I finally opened the envelope and saw a check for all of $13.86, I have to confess a nasty little thought sprang to mind: something along the lines of "That's it?" or "You're kidding me!" if my memory serves me right.

The massive class-action lawsuit against the music industry (search) — which named major labels like Universal Music Group, Sony Music, BMG, EMI and Warner Music as defendants — argued that record labels pressured retailers to keep CD costs up by threatening to withhold stores’ advertising and promotions money if they dared charge too little.

Vendors that didn’t comply with the so-called “minimum advertised price,” or MAP program (search) were in danger of losing millions if they didn’t go along with the scheme, the suit contended.

The record labels agreed to settle — for $143 million — and my gut tells me the class-action lawyers who sued them walked away with a little more than $13.86 apiece.

The Cost of Music

CD prices have stayed fairly steady over the years — in the ballpark of $14.99 to $19.99 a pop.

For music fans who have long felt gypped by the cost of music, the refund seemed too good to be true: All they had to do was go to a Web site by early last March and fill out an application saying they'd bought at least one CD between Jan. 1, 1995, and Dec. 22, 2000. No receipts or other proofs-of-purchase were necessary.

So if you thought the whole thing was an Internet hoax or an urban legend when some of us media types covered it in the winter of ‘03, well, guess what? It wasn’t.

And now, a year and change later — just when most of the 3.48 million who joined the class of plaintiffs had forgotten all about it — the checks were in the mail, as the saying goes.

Mine sat unassumingly in my apartment letterbox, wedged between the electric bill and a political flier, looking more like a present from the IRS than a few extra dollars and cents.

In fact, the settlement was so far from my mind that I didn’t open the envelope from the New York attorney general right away. I figured I’d deal with it when I did my taxes. But a week or so later, I realized what it was.

“Obviously nobody’s getting rich on this claim, but it does get money back in the hands of consumers,” Joseph C. Kohn, a Philadelphia lawyer for the plaintiffs, told me.

But there are those who say somebody is in fact getting rich on this claim: class-action lawyers like Kohn, a partner at Kohn, Swift & Graf, P.C. (search), which served as lead counsel in the case.

“You can look at it as some wonderful result that came down from the heavens and rained $13.86 on the people,” said Michael D. Friedman, head of the entertainment practice at Jenkens & Gilchrist Parker Chapin, LLP. “Or you can look at it as a concoction by the lawyers to create some perceived consumer benefit, but in reality is a vehicle for them to collect fees.”

Of the $67.3 million cash portion of the settlement, 90 percent went to claimants like me, and 10 percent was paid in fees and expenses to the lawyers involved.

In all, 43 state attorney general offices and more than 50 private firms jointly filed the lawsuit, though only about 20 attorneys were at the forefront of the battle.

The other $75.7 million of the settlement went toward CDs that are to be donated to schools, libraries and other nonprofit organizations.

Little Guys Win?

People tend to assume that a settlement is an admission of guilt — but that’s not always the case, according to Friedman.

In this situation, since the matter never went to trial, we may never know whether a price-fixing conspiracy existed.

The labels might have just wanted to cut their losses, get the matter out of the press and prevent other lawsuits from cropping up.

I can’t say for sure, though, since the companies and their lawyers have been mum on the case and wouldn’t talk to me for this story.

And as for whether the lawsuit and settlement will result in lower CD prices, so far, it’s hard to tell. Costs seem lower in some cases, but not in others.

Philadelphia theater student Dave Ebersole, who also got his just-shy-of-$14 check recently, said he hasn’t noticed much difference in CD costs lately, except that nowadays the same old prices get buyers more for their money, like a DVD of “extras” thrown in.

But 24-year-old Ebersole, a critic of the current state of affairs at record companies, was pleased that the suit resulted in a refund all the same.

“They’ve gotten too big for their britches,” he said of the mainstream record labels. “This shows people caught on to what they’re doing.”

What did we claimants do with our refunds? Mine went into my bank account and barely made a dent in my astronomical Manhattan rent. Ebersole used his to buy gas for his car.

But some probably did exactly what the music giants wanted them to do with their $13.86.

“I’m sure the record industry is hoping the money will be reinvested in CDs,” Friedman said.