settlement

A federal judge has approved a $25 million settlement struck by vinyl producer Mobile Fidelity to resolve accusations that the company’s pricey “all analog” records were secretly created using digital methods, overruling objections from some customers that the settlement was “tainted by the stink of collusion.”
Though the deal would allow tens of thousands of MoFi customers to secure full refunds, some consumers argued that the deal was unfair — claiming it had been reached through a “reverse auction” in which MoFi bargained with “ineffectual” plaintiff’s lawyers to find the cheapest settlement possible.

But in a ruling Tuesday (May 9), U.S. District Judge James L. Robart rejected those claims and preliminarily approved the settlement deal. He said the agreement would likely fairly compensate any MoFi buyers who had been misled, and that there was no concrete evidence of impropriety in how it had been reached.

“The undisputed facts demonstrate that proposed settlement is not the product of a reverse auction or otherwise the result of collusion,” the judge wrote, saying it appeared to have been reached via “arm’s length negotiations” between attorneys for MoFi and the plaintiffs.

Among other things, the challengers had argued that the settlement’s payouts were insufficient based on how much they might have won at trial. But Judge Robart said those arguments ignored key factual details about how MoFi’s records were produced — and that such claims were at times “nonsensical.”

In a statement to Billboard, MoFi lead counsel Joseph J. Madonia said: “We appreciate the court’s ruling, which supports all of our claims that there was no reverse auction or collusion. As always MoFi continues its commitment to provide the best-sounding records possible.”

Attorneys for the consumers who challenged the settlement did not immediately return a request for comment.

The scandal at MoFi first erupted last summer, after Phoenix-area record store owner Mike Esposito posted a pair of videos to YouTube alleging that the company’s “all-analog” and “triple analog” records were in fact partially created using so-called direct stream digital technology. In one of the videos, MoFi’s engineers appeared to confirm that some digital tech had in fact been used in production.

As reported by The Washington Post, the digital revelations created “something of an existential crisis” in the analog-obsessed vinyl community. In a statement in late July, MoFi apologized for using “vague language” and for “taking for granted the goodwill and trust” of its customers: “We recognize our conduct has resulted in both anger and confusion in the marketplace. Moving forward, we are adopting a policy of 100% transparency regarding the provenance of our audio products.”

But the apology wasn’t enough to avoid litigation. In early August, a pair MoFi customers named Stephen J. Tuttle and Dustin Collman filed a proposed class action in Washington federal court, claiming the company’s analog branding had been “deceptive and misleading” and had duped them into paying premium prices. Four more cases were later filed in other federal courts by other groups of buyers.

In January, MoFi decided to settle the case. Calling the deal “a fair compromise,” the company agreed to let consumers either secure a full refund or keep their albums and instead take a 5% cash refund or a 10% refund in credit. The agreement would cover all customers nationwide, and the total money that could be paid out was “expected to be over $25 million.”

But some of the consumers who filed those other lawsuits quickly threw up red flags about the deal. They said the settlement was insufficient, struck without their input by bad lawyers who simply wanted a payout: “Despite this clear abdication of their duties to class members, counsel … are now trying to ram an inadequate, collusive settlement through this court.”

In Wednesday’s ruling, however, Judge Robart said those allegations had little basis. He pointed out there was “no evidence” that MoFi had “shopped” the case in search of a settlement — and that the plaintiffs’ lawyers had actually capped their own fees lower than necessary.

“This is one of the lower proposed fee awards this court has encountered in a class action settlement,” the judge wrote.

Following this week’s ruling, the settlement must still be granted final approval; during the process, the aggrieved MoFi buyers will still have additional chances to object to the terms of the deal or to opt out of it entirely. A hearing on final approval is tentatively set for October.

In a statement to Billboard, Duncan C. Turner — lead counsel for the customers that settled with MoFi — praised the judge’s decision: “There was never any substance to the intervenors’ made-up collusion story. The settlement terms are sound and fair, so we will be turning our attention to executing the notice program and getting the class members their compensation.”