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Class Action Defense Cases-John v. National Security: Second Circuit Reverses District Court Approval Of Class Action Settlement Holding Lower Court Lacked Jurisdiction Over Class Action Claims For Unregistered Copyrights

Copyright Act Section 411(a) Limits Federal Court Jurisdiction to Registered Works and District Court Lacked Jurisdiction to Approve Class Action Settlement that Included Unregistered Copyrights Second Circuit Holds

Plaintiffs filed a class action on behalf of a class that consisted primarily “of freelance writers who contracted with publishers to author the works for publication in print media, and retained the copyrights in those works,” but whose work had been reproduced without their consent on various electronic databases. In re Literary Works In Electronic Databases Copyright Litig., ___ F. 3d ___ (2d Cir. November 29, 2007) [Slip Opn., at 3]. The legal foundation of the class action rested on New York Times Co. v. Tasini, 533 U.S. 483, 488 (2001), which “held that § 201(c) of the Copyright Act does not permit publishers to reproduce freelance works electronically when they lack specific authorization to do so.” Id., at 4. Essentially, Tasini requires publishers obtain a separate license to reproduce written works electronically. Defense counsel argued, however, relying on section 411(a) of the Copyright Act, that the district court lacked jurisdiction over the class action because putative members of the class action generally failed to register their copyrights. Id., at 5. The Circuit Court noted at page 3 that “The overwhelming majority of claims within the certified class arise from the infringement of unregistered copyrights.” Nonetheless, based on Tasini the district court ordered the parties to mediation, and after three years a settlement was reached, id., at 6. The district court eventually approved the class action settlement, and several objectors appealed. Id., at 7-8. The Second Circuit reversed, holding that the district court lacked jurisdiction to approve the settlement.

We do not here discuss the details of the class action allegations or the terms of the class action settlement. For present purposes, it is sufficient to note that class was defined so as to include works that had not been registered, In re Literary Works, at 6, and that defense counsel argued “that this litigation possessed scant settlement value because the District Court could never certify the vast majority of the claims for inclusion in any proposed class” because section 411(a) of the Copyright Act provides that “no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title,” id., at 5 (quoting 17 U.S.C. § 411(a)). Defense counsel introduced survey evidence suggesting that less than one percent of the works had been registered; thus, according to the defense the jurisdictional defect exited as to “more than 99 percent of the claims at issue.” Id., at 5-6. Plaintiffs’ lawyers did not concede the precise number at issue, but admitted that “the large majority of ‘subject works’ have not been registered with the U.S. Copyright Office.” Id., at 6. “The District Court never considered whether it had jurisdiction to certify a class consisting mostly of claims arising from unregistered copyrights, or to approve a settlement resolving those claims.” Id., at 8.

“The precise issue on appeal is whether the District Court had jurisdiction to certify a class consisting of claims arising from the infringement of unregistered copyrights and to approve a settlement with respect to those claims.” In re Literary Works, at 4. Section 411(a) of the Copyright Act provides that “no action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.” 17 U.S.C. § 411(a). This requirement is jurisdictional. In re Literary Works, at 9-10. Accordingly, “section 411(a)’s registration requirement limits a district court’s subject matter jurisdiction to claims arising from registered copyrights only.” Id., at 10.

The Second Circuit further held that “each claim within the certified class” must satisfy that jurisdictional requirement of section 411(a). In re Literary Works, at 16. In so holding, the Court rejected the argument that it was sufficient jurisdiction existed “so long as the named plaintiffs’ works were registered.” Id. As a preliminary matter, the Circuit Court observed that the class action statute “does not offer any alternative source of jurisdiction in the class action context.” Id. (citations omitted). The Court then interpreted the language of section 411(a) such that the phrase “the copyright claim” referred to each claim within the class, not simply to each claim of the named plaintiffs in a class action. Id., at 17-18. As the Second Circuit concluded at page 18, “we hold that the phrase “the copyright claim” in section 411(a) refers to each claim within a purported class, and thus requires that each class member’s claim arise from a registered copyright. Only when each claim satisfies that jurisdictional prerequisite may the district court utilize Rule 23 to ‘exercise [its] jurisdiction over the various individual claims in a single proceeding.’” (Citation and footnote omitted.)

Finally, the Circuit Court considered and rejected whether the supplemental jurisdiction statute, 28 U.S.C. § 1367(a), provided an “alternative source of jurisdiction.” In re Literary Works, at 19-21. Accordingly, it reversed the district court approval of the class action settlement, id., at 21.

NOTE: Circuit Judge John Walker dissented, concluding that the district court did have jurisdiction: “The Supreme Court…in Eberhart v. United States, 546 U.S. 12 (2005) (per curiam), urged us to more carefully distinguish between true jurisdictional bars and claim-processing rules that may be waived and to revisit our use of the ‘jurisdiction’ label in that light. Following that instruction and bearing in mind the underlying purpose of 17 U.S.C. § 411(a), as well as our recent holding that not all members of a settlement-only class need to possess a valid cause of action under the applicable law, leads me to conclude that the fact that some of the otherwise presumably valid copyrights have not been registered is an insufficient basis for undoing this class-action settlement.” In re Literary Works, at 1 (Walker, Circuit Judge, dissenting).

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