Bit Parts

The U.S. District Court for the Southern District of New York denied class certification in a consumers' suit alleging price-fixing and restraint of trade by record labels in setting the price for digital downloads for music services the labels had formed. In re Digital Music Antitrust Litigation, 06-md-1780. The long-running case, which has been in federal court since 2007, arose out of the major labels' attempts at founding the MusicNet and pressplay download services, with a 70-cent wholesale price, in the pre-Apple iTunes era. Citing the litigation's fourth amended complaint, Senior United States District Judge Loretta A. Preska noted: “All [the label] Defendants signed distribution agreements with MusicNet and pressplay. These joint ventures, along with the Recording Industry Association of America, allowed Defendants to 'maintain[] prices at artificially high levels, eliminate[] competition among the Defendants in the pricing and terms of Internet Music sales, and provide[] one of several forums in which the Defendants could discuss their general desires to restrain trade in Internet Music and come to agreement on the specifics.'” But Senior Judge Preska decided the plaintiffs failed to meet the “typicality” requirement of Rule 23(a) of the Federal Rules of Civil Procedure that “claims or defenses of the representative parties are typical of the claims or defenses of the class.” Judge Preska acknowledged: “The Court is well-aware that Plaintiffs have dedicated years of this litigation to adding and withdrawing Proposed Class Representatives in order to find individuals who can both provide proof of music download purchases during the class period and did not engage in illegal downloading.” The court concluded: “Here, large numbers of the proposed class members engaged in illegal downloading of Digital Music and would therefore be subject to counterclaims on the basis of an unclean hands theory, while the Proposed Class Representatives would not. These counterclaims would likely become the focus of the litigation if the Court were to grant Plaintiffs' motion for class certification.”

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