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HENRY GRADSTEIN (89747) hgradstein@gradstein.com MARYANN R. MARZANO (96867) mmarzano@gradstein.com DANIEL B. LIFSCHITZ (285068) dlifschitz@gradstein.com GRADSTEIN & MARZANO, P.C. 6310 San Vicente Blvd., Suite 510 Los Angeles, California 90048 Telephone: 323-776-3100 MARC M. SELTZER (54534) mseltzer@susmangodfrey.com STEVEN G. SKLAVER (237612) ssklaver@susmangodfrey.com KALPANA D. SRINIVASAN (237460) ksrinivasan@susmangodfrey.com KRYSTA KAUBLE PACHMAN (280951) kpachman@susmangodfrey.com SUSMAN GODFREY L.L.P. 1901 Avenue of the Stars, Suite 950 Los Angeles, CA 90067-6029 Telephone: (310) 789-3100 Facsimile: (310) 789-3150

(See Signature Page for Additional Counsel For Plaintiffs) Attorneys for Plaintiffs Melissa Ferrick and Jaco Pastorius, Inc.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

WESTERN DIVISION

MELISSA FERRICK, individually and doing business as Nine Two One Music and Right On Records/Publishing; JACO PASTORIUS, INC., and on behalf of all others similarly situated

Plaintiffs, v.

SPOTIFY USA INC., a Delaware corporation,

Defendant.

Case No. 16-CV-180-BRO (RAOx) PLAINTIFFS MELLISSA FERRICK AND JACO PASTORIUS, INC.’S OPPOSITION TO CROSS-MOTION OF PLAINTIFFS LOWERY, ET AL. TO CONSOLIDATE RELATED CASES AND APPOINT INTERIM LEAD COUNSEL Date : May 16, 2016 Time : 1:30 p.m. Crtrm : 14

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DAVID LOWERY, VICTOR KRUMMENACHER, GREG LISHER, and DAVID FARAGHER, individually and on behalf of himself and all others similarly situated, Plaintiff, v. SPOTIFY USA INC., a Delaware corporation, Defendant.

Case No. 15-cv-09929-BRO (RAOx)

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TABLE OF CONTENTS I. INTRODUCTION .............................................................................................................. 1

II. BACKGROUND ................................................................................................................ 4

III. SUSMAN GODFREY AND GRADSTEIN & MARZANO ARE BEST ABLE TO REPRESENT THE INTERESTS OF THE CLASS ..................................................... 6

A. Susman Godfrey and Gradstein & Marzano have extensive experience representing plaintiffs in class action litigation ...................................................... 6

B. Susman Godfrey and Gradstein & Marzano have thoroughly investigated the claims in the Complaint ................................................................ 7

C. Susman Godfrey and Gradstein & Marzano have the resources to best represent the interests of the class ........................................................................... 9

IV. CONCLUSION ................................................................................................................. 11

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TABLE OF AUTHORITIES

Cases

Anderson v. United States, 612 F.2d 1112 (9th Cir. 1979) .............................................................................. 9

Biondi v. Scrushy, 820 A.2d 1148 (Del. Ch. 2003) ............................................................................. 8

Four In One Co., Inc. v. SK Foods, 2009 WL 747160 (E.D. Cal. 2009) ..................................................................... 10

In re Mun. Derivatives Antitrust Litig., 252 F.R.D. 184 (S.D.N.Y. 2008) ......................................................................... 10

In re Processed Egg Products Antitrust Litig., 302 F.R.D. 339 (E.D. Pa. 2014) ............................................................................ 6

Mendoza v. Casa de Cambio Delgado, Inc., No. 07CV2579(HB), 2008 WL 3399067 (S.D.N.Y. Aug. 12, 2008) ................... 6

Michelle v. Arctic Zero, Inc., No. 12CV2063-GPC NLS, 2013 WL 791145 (S.D. Cal. Mar. 1, 2013) ............ 8

Nowak v. Ford Motor Co., 240 F.R.D. 355 (E.D. Mich. 2006) ............................................................... 3, 5, 8

Parkinson v. Hyundai Motor Am., Case No. CV 06-2553-AHS(MLGX), 2006 WL 2289801 (C.D. Cal. Aug. 7, 2006) ........................................................................................................................ 9

Wiener v. Dannon Co., 255 F.R.D. 658 (C.D. Cal. 2009) .......................................................................... 7

Statutes

17 U.S.C. §301 ............................................................................................................ 9

Rules

Fed. R. Civ. P. 23 ........................................................................................................ 2

Fed. R. Civ. P. 23(g) .......................................................................................... passim

Fed. R. Civ. P. 23(g)(2) .......................................................................................... 2, 4

Fed. R. Civ. P. 23(g)(4) .............................................................................................. 2

Fed. R. Civ. P. 42(a) ............................................................................................... 7, 9

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I. INTRODUCTION

Pending before this Court are two competing motions consisting of

alternative proposals for interim leadership in this class action. The first motion

was filed on April 4, 2016 and seeks appointment of two firms – Susman Godfrey

L.L.P. (“Susman”) and Gradstein & Marzano, P.C. (“G&M”) – as interim class

counsel for the class pursuant to Federal Rule of Civil Procedure 23(g). The

Susman/G&M proposed team would bring forward as interim lead counsel the

firms who have extensive and far-reaching experience in the underlying substantive

area of copyright infringement. And the proposed structure includes the only firms

which have ever run a class action on behalf of plaintiffs, and the only firms which

have been appointed by a Court as class counsel.

Representing a plaintiff class is an area in which Susman/G&M has a

demonstrated record of achieving real benefit for class members and leading some

of the largest and most significant cases. For example, in the landmark Toyota

MDL, where Judge Selna appointed Susman Godfrey co-lead sua sponte and

affirmed that appointment after over 50 firms applied, the Court commented: “Class

counsel has consistently demonstrated extraordinary skill and effort.” In re Toyota

Motor Corp. Unintended Acceleration Mktg. Sales Practices, & Prods. Liab. Litig.,

Case No. CV 10-ML-2151 (C.D. Cal.), Dkt. No. 3933 at 12. Judge McMahon in

the Southern District of New York recently praised court appointed sole-lead

counsel Susman Godfrey for achieving “the best settlement pound for pound for the

class that I’ve ever seen.” Fleisher, et al. v. Phoenix Life Ins. Co., Case No. CV 11-

8405 (S.D.N.Y.) (Sept. 9, 2015 Tr. at 3). Judge Gutierrez appointed G&M as class

counsel in that Court’s ground-breaking class certification order on behalf of certain

owners of sound recordings fixed prior to February 15, 1972 exploited by Sirius

XM in Flo & Eddie, Inc. v. Sirius XM Radio, Inc., Case No. CV 13-5693.

As its cross-motion implicitly recognizes, the Michelman & Robinson

(“M&R”) firm’s experience lies in defending class actions rather than representing

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and advocating for a class of injured plaintiffs. See, e.g., Cross-Motion at 3

(arguing that M&R has “unsurpassed experience with class actions as defense

counsel”); id. at 15 (emphasizing cases in which M&R has “defeated certification”

and “obtained dismissal” of class actions). According to its application, M&R has:

never before been appointed as class counsel,

never served on an executive committee, steering committee, or any other

facet of a leadership structure of complex class action, and

never litigated a class action on behalf of a plaintiff.

This case and the numerous absent class members affected by it are entitled

to representation by firms with established and extensive experience in both the

underlying legal area of copyright law and in representing plaintiffs through the

procedural mechanism of a class action. Although M&R states that “when

appropriate” it will try to “call upon” Susman/G&M to advise it how to best handle

a plaintiff side class action, see Cross-Motion at 2 n.1, that only underscores why

Susman/G&M should be lead counsel, not the other way around.

To support its first ever class counsel appointment, M&R advances a series

of arguments that do not bear on the proper inquiry under Rule 23 when

considering class counsel appointment. First, M&R emphasizes the qualifications

of one of its named plaintiffs, David Lowery, and suggests he prefers M&R over

Susman/G&M, after interviewing both. Cross-Motion at 1-2, 4, 19-20. Rule 23(g),

however, addresses the appointment of interim lead counsel, not plaintiff. There is

no question that all competing counsel’s plaintiffs are adequate class

representatives, but the issue before the Court under Rule 23(g)(4) is which counsel

will best represent the interests of the entire class, not any particular plaintiff. “If

more than one adequate applicant seeks appointment, the court must appoint the

applicant best able to represent the interests of the class.” Fed. R. Civ. P. 23(g)(2).

Second, M&R notes that it was the “first to file” an action against Spotify by

a mere 11 days, but “[w]hether someone was ‘first to file’ by itself has little to do

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with who is the best qualified to lead the case, and does not satisfy the requirements

of Rule 23(g).” Nowak v. Ford Motor Co., 240 F.R.D. 355, 365 (E.D. Mich. 2006).

Consideration as to the best appointment of class counsel involves more than who

raced to the courthouse first to get on file. G&M has been investigating and

researching the allegations and legal theories in this case for years, long before

M&R. In 2013, G&M filed a novel, individual case on behalf of a songwriter and

copyright owner against MediaNet Digital. See Aimee Mann v. Medianet Digital,

Inc., Case No. CV 13-05269-GHK (FFMx) (the “2013 Action”). For the Court’s

convenience, a copy of G&M’s 2013 Action (without exhibits) is attached to this

opposition as Exhibit 1. See also id. (Dkt. 13, First Amended Complaint).

MediaNet is a distributor of streaming music, online radio, and music downloads to

companies like MTV, Yahoo Music, Time Warner Cable, and others. See also id.,

Nov. 27, 2013 Order (Dkt. 20) at 1. G&M’s 2013 Action alleged violations of the

Copyright Act for the digital music service’s failure to pay mechanical rights –

which is the core set of allegations at issue here, and which eventually led to this

litigation. The case was resolved on confidential terms in 2015. Id. (Dkt. 46-48).

Later that year, it was widely reported in the press that Spotify was in a dispute

with Victory Records over Spotify’s failure to pay mechanical royalties. See, e.g.,

Rolling Stone Magazine, Oct. 20, 2015, Spotify Drops Victory Records Catalog

Over Disputed Royalties.1 G&M had numerous meetings and telephone calls with

catalogue owners and their representatives to discuss filing a class action, and, as

M&R acknowledges, met with Mr. Lowery as well. Mr. Lowery, in turn, then had

a conversation with M&R who rushed to file its action first.

Third, M&R has pledged to donate 10% of any fees it recovers to an

unspecified charity that supports starving artists, subject to approval of the court.

That, too, is not a factor under Rule 23(g). While it is laudable when anyone

chooses to donate money to charity, and the lawyers at Susman/G&M certainly do

1 http://www.rollingstone.com/music/news/spotify-drops-victory-records-catalog-over-disputed-royalties-20151020

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that privately with their own compensation from whatever the source, it is not and

should not be a factor for determining the best qualified class counsel. In this

situation, when the Court is selecting who should be lead counsel for the class,

M&R’s proposal provides no benefit to the class and could undermine the incentive

to represent the class adequately. The reason a Court awards fees to lawyers in a

class action on a contingency basis is to incentivize the lawyers to litigate

vigorously for the class. Charitable motive notwithstanding, a pledge to donate fees

paid for by the class is not relevant to whether M&R is the best firm to represent

the interests of the class.

Susman/G&M respectfully request appointment as interim lead counsel to

give all absent class members the plaintiff-side class action experience, skill, and

attention that this case deserves, and because Susman/G&M are “best able to

represent the interests of the class.” Fed. R. Civ. P. 23(g)(2).

II. BACKGROUND

Susman Godfrey and Gradstein & Marzano have a proven track record of

success in plaintiff-side class action litigation and music industry litigation. From

the historic settlement in In re Toyota Motor Corp. Unintended Acceleration

Marketing Sales Practices, and Product Liability Litigation to achieving the

landmark certification and music-related intellectual property rulings in Flo &

Eddie, Inc. v. Sirius XM Radio, Inc., Case No. CV 13-05693-PSG (RZx) action here

in the Central District of California, Susman Godfrey and Gradstein & Marzano are

veteran plaintiff-side litigators in the field.

Defendant Spotify, Inc.’s (“Defendant”) misconduct became publicly known

when Audiam, a technology company that specializes in tracking down unpaid

royalties online, began matching master recording royalty payment statements

against music publishing payment statements. Though M&R’s application takes

sole credit for investigating the allegations at issue, in fact, M&R cited an article in

its Complaint that highlighted Audiam’s investigation into how songwriters were

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being underpaid by Spotify’s streaming services. See Dkt. 1 ¶ 24. After this

information became publicly available, Susman/G&M conducted a thorough

investigation into Spotify’s misconduct. Susman/G&M interviewed industry

participants to gain a broader understanding of Spotify’s business model and

uncovered a wealth of information that was not previously publicly known. For

example, Susman/G&M learned that Spotify outsourced its licensing and

accounting obligations to the Harry Fox Agency (“HFA”), a music publishing

rights organization that was ill-equipped to obtain licenses for all of the songs

embodied in the phonorecords distributed by Spotify. See Ferrick, Dkt. 39 ¶ 6.

Neither Spotify nor HFA directly licensed or timely issued notices of intent for

many of the musical compositions embodied in phonorecords that Spotify was

reproducing and distributing on a daily basis as part of the Service. Id. This

information is critical to understanding how Defendant failed to obtain licenses and

the scope of their infringement.

Susman/G&M have vigorously prosecuted the case for the reasons already

articulated in its opening motion, as a result of G&M’s work in the 2013 Action,

and by, inter alia,

serving jurisdictional discovery and negotiating with Spotify as to the

scope of that discovery, in order for the class to be in the best position

possible to respond to Spotify’s anticipated motions to dismiss, transfer,

and strike the class action allegations, and

Bringing order and structure to these actions by:

o filing the only notice of related case bringing to the Court’s

attention that the Ferrick action and Lowery action were pending in

different courts. Dkt. 6 (filed Jan. 8, 2016). Counsel for Lowery

failed to take that basic step in its action, despite the continuing

duty requirements of L.R. 83-1.3.3;

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o filing the first and only request for a status conference and proposed

agenda to address consolidation and appointment of interim class

counsel. Dkt. 21 & 32 (filed Feb. 18 & 29, 2016); and

o filing the first motion to consolidate and appoint interim class

counsel, Dkt. 47 (filed April 4, 2016), seeking to ensure interim

class counsel file a consolidated complaint and handled the briefing

on Spotify’s motion to dismiss, transfer, and/or strike class

allegations so the Court would not receive competing briefing on

duplicative motions, as would otherwise have occurred in the

absence of the motion.

III. SUSMAN GODFREY AND GRADSTEIN & MARZANO ARE BEST

ABLE TO REPRESENT THE INTERESTS OF THE CLASS

A. Susman Godfrey and Gradstein & Marzano have extensive

experience representing plaintiffs in class action litigation

Susman Godfrey and Gradstein & Marzano are uniquely equipped to serve as

class counsel because both firms have significant experience representing plaintiffs

in class action litigation, in contrast with representing defendants in class action

litigation. Rule 23(g) recognizes the importance of considering “counsel's

experience in handling class actions, other complex litigation, and claims of the

type asserted in the action.” Other courts have considered whether a law firm

applying to be lead counsel has litigated similar cases “on behalf of plaintiffs.” See

Mendoza v. Casa de Cambio Delgado, Inc., No. 07CV2579(HB), 2008 WL

3399067, at *7 (S.D.N.Y. Aug. 12, 2008) (finding class counsel to be adequate and

granting motion for class certification); In re Processed Egg Products Antitrust

Litig., 302 F.R.D. 339, 350 (E.D. Pa. 2014) (considering that counsel was a “well-

respected law firms in the plaintiffs’ class action bar” in evaluating the 23(g)

factors). See also Wiener v. Dannon Co., 255 F.R.D. 658, 672 (C.D. Cal. 2009)

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(“focusing on the firms’ experience in litigating consumer class actions when

analyzing 23(g) factors).

Susman Godfrey and Gradstein & Marzano’s experience is detailed in the

Motion to Consolidate Relates Cases Pursuant to Fed. R. Civ. P. 42(a) and to

Appoint Interim Co-Lead Class Counsel Pursuant to Fed. R. Civ. P. 23(g). See

Ferrick, Dkt. 48. Both Susman Godfrey and Gradstein & Marzano have a wealth of

experience in litigating class actions on behalf of plaintiffs and are best equipped to

provide the class with the best possible representation to further the interests of the

class.

B. Susman Godfrey and Gradstein & Marzano have thoroughly

investigated the claims in the Complaint

Susman/G&M have invested substantial time and effort into researching the

claims, analyzing Spotify, and determining the scope of the infringing conduct at

issue. Before the first complaint was filed, counsel interviewed numerous industry

participants to confirm the theory of the case, develop the allegations, and

understand the industry. Indeed, the investigation went beyond the information that

was published in publicly available articles and unearthed the role of HFA in

Defendant’s misconduct. Defendant outsourced its licensing and accounting

obligations to HFA, which failed to license or issue timely notices of intent for the

musical records that that Spotify was reproducing and distributing on a daily basis

as part of the Service. See Ferrick, Dkt. 39 ¶ 6. Given that Defendant’s actions

alleged in this case pertains to its reproduction and distribution of music without a

license, this information is critical to understanding Defendant’s wrongdoing.

Susman/G&M have continued their investigation since the cases were filed. They

have worked and consulted with a leading expert to study class member

compensation and possible methods and data sources for assessing Spotify’s

conduct and damages.

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Susman/G&M also have engaged Defendant in all steps required under the

Federal Rules of Civil Procedure, Local Rules, and Standing Orders of this Court.

They already served discovery on Spotify, began negotiations on an operative

protective order to govern production of documents in the action, and took the first

steps in the related actions by requesting a status conference and scheduling order

to bring efficiency to the matters.

Counsel for Lowery argue in their motion they should be appointed lead

counsel because they were the first to file a complaint. Courts within the Ninth

Circuit have acknowledged the question of who was first to file should only be

considered when the factors for class counsel do not tilt heavily in either direction

and there is a need for an objective tie-breaker. See Michelle v. Arctic Zero, Inc.,

No. 12CV2063-GPC NLS, 2013 WL 791145, at *2 (S.D. Cal. Mar. 1, 2013)

(noting that the question of which law firm was first to file was not a relevant factor

in selecting class counsel because one firm was better equipped to serve as class

counsel). See also Biondi v. Scrushy , 820 A.2d 1148, 1159 (Del. Ch. 2003)

(noting that the “mere fact that a lawyer filed first for a representative client is

scant evidence of his adequacy and may, in fact, support the contrary

inference.”); Nowak v. Ford Motor Co., 240 F.R.D. 355, 365 (E.D. Mich. 2006)

(“[w]hether someone was ‘first to file’ by itself has little to do with who is the best

qualified to lead the case, and ... [t]o hold otherwise would further encourage a

‘rush to the courthouse’ in ... class action cases”).

M&R also cites in support of its motion the request in its complaint for a

mandatory injunction requiring that Spotify “pay for the services of a third party

auditor to identify the owners of Works” at issue. Cross-Motion at 10. Rather than

supporting their appointment, this request actually undermines their motion because

it endangers classwide claims. According to M&R, it is unable to identify class

members without obtaining a Court order requiring Spotify to pay for and hire an

auditor to do so. That is not a prayer for relief that experienced, plaintiff-side class

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action counsel would allege. See also Anderson v. United States, 612 F.2d 1112,

1115 (9th Cir. 1979) (mandatory injunctions generally “are not granted unless

extreme or very serious damage will result and are not issued in doubtful cases or

where the injury complained of is capable of compensation in damages.”)

(quotations omitted) The Susman/G&M complaint takes a different approach,

consistent with the results of the pre- and post-filing work that Susman/G&M

conducted. See, e.g., Ferrick, et al. Amended Complaint ¶ 25 (class members can

be “readily located”).

In a hurry to file preemptively, M&R’s original complaint in Lowery also

alleged a state law claim for unfair business practices under Cal. Civil Code

§17200. Susman/G&M raised in its notice of related cases that the claim under

California state law was preempted under 17 U.S.C. §301. (Ferrick Dkt. 6, filed

1/8/16). Only after Susman/G&M raised this issue did M&R file a stipulation to

dismiss the state law claim. (Lowery Dkt. 22, filed 2/12/16).

C. Susman Godfrey and Gradstein & Marzano have the resources to

best represent the interests of the class

Susman/G&M have more experience and greater resources, and are better

equipped to represent the class. As indicated in the Motion to Consolidate Relates

Cases Pursuant to Fed. R. Civ. P. 42(a) and to Appoint Interim Co-Lead Class

Counsel Pursuant to Fed. R. Civ. P. 23(g), Ferrick, Dkt. 48, Susman/G&M have the

necessary roster of talented attorneys, capable professional staff, and monetary

resources, to advance the class’s interest efficiently and aggressively and to pursue

all necessary avenues of discovery. Together, Susman/G&M comprise a leadership

structure equal to the challenges they will face in this litigation, while at the same

time ensuring that the actions progress in the most efficient and professional

manner. See Parkinson v. Hyundai Motor Am., Case No. CV 06-2553-

AHS(MLGX), 2006 WL 2289801, at *3 (C.D. Cal. Aug. 7, 2006) (appointing the

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firms that “collectively, have more experience and greater resources to commit to

representing any class that may be certified”).

M&R also contends it is better equipped to serve as lead counsel because

M&R is a single firm. However, given the very substantial law firm and corporate

treasury arrayed against the class, the two firm structure proposed by Susman/G&M

will be best equipped to handle the case. See In re Mun. Derivatives Antitrust

Litig., 252 F.R.D. 184, 187 (S.D.N.Y. 2008) (appointing three firms as lead

counsel, finding that their collective resources would be required to take on

defendants’ substantial financial and legal resources). Contrary to M&R’s

suggestion otherwise, duplication of effort is not a concern when two co-lead firms

are appointed to serve as class counsel. Four In One Co., Inc. v. SK Foods, 2009

WL 747160 at *3 (E.D. Cal. 2009) (selecting two co-lead firms as class counsel).

Susman/G&M have also agreed to assign primary responsibly for specific tasks to a

specific firm. For example, a single firm will have primary responsibility for

preparing each brief (or, as appropriate, major sections of a brief), and a single firm

will be in charge of conducting discovery against a particular third-party witness.

Susman/G&M will report their time and expenses on a monthly basis to each other,

and those reports will be detailed in nature in conformance with the practice in

other class action litigation, such as the Toyota unintended acceleration class action

litigation mentioned above. The firms will review each other’s time records

monthly and strike any duplicative or unnecessary billings. Susman/G&M have

also agreed to the following additional measures to ensure the efficient and cost-

effective prosecution of these actions:

1. As a general rule, only one attorney from a single plaintiffs’ law

firm will attend fact depositions.

2. No more than one lawyer from one of the plaintiffs’ co-lead law

firms will attend discovery hearings, except where deemed necessary because of

special circumstances.

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3. No more than one lawyer from each co-lead firm will bill for

time to attend significant hearings, such as hearings on motions to dismiss, for class

certification, or summary judgment, except the lawyer taking the lead at the hearing

may also bring a more junior lawyer.

4. Generally, no more than one plaintiffs’ lawyer will participate in

meet and confer sessions with defendant.

These are similar case management billing proposals that Judge Koh adopted

when she appointed Susman Godfrey as co-lead with two other law firms in In re

Animation Workers Antitrust Litigation, Case No. CV 14-4062 (N.D. Cal.), Dkt. 54.

IV. CONCLUSION

For the foregoing reasons, Susman Godfrey and Gradstein & Marzano

respectfully oppose the cross-motion of Michelman & Robinson for appointment as

interim class counsel, and respectfully request that the Court appoint Susman

Godfrey and Gradstein & Marzano as interim class counsel.

Dated: April 25, 2016

HENRY GRADSTEIN MARYANN R. MARZANO DANIEL LIFSCHITZ GRADSTEIN & MARZANO, P.C. MARC M. SELTZER STEVEN G. SKLAVER KALPANA D. SRINIVASAN KRYSTA KAUBLE PACHMAN SUSMAN GODFREY L.L.P. STEPHEN E. MORRISSEY (187865) smorrissey@susmangodfrey.com SUSMAN GODFREY L.L.P. 1201 3rd Avenue, Suite 3800 Seattle, WA 98101 Telephone: (206) 373-7383 Facsimile: (206) 516-3883 By: /s/ Steven G. Sklaver

Steven G. Sklaver Attorneys for Plaintiffs Melissa Ferrick and Jaco Pastorius, Inc.

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