MoFi Reaches Multi-Million Dollar Settlement Over Analog Vinyl Controversy, But Some Buyers Object

Vinyl producer Mobile Fidelity has reached a settlement that could be worth as much as $25 million to resolve allegations that the company’s pricey “all analog” records were secretly created using digital methods. But some customers strongly object to the deal, saying it’s “tainted by the stink of collusion.”

The proposed agreement, first publicly filed in court last month, would allow tens of thousands of MoFi customers to secure a full refund for any eligible records that they purchased. Alternatively, it would also allow them to keep their albums and instead take a 5% cash refund or a 10% refund in credit.

The final monetary total depends on how many consumers utilize the settlement and which options they choose, but court filings say the money available under the deal is “expected to be over $25 million.” Under the settlement, MoFi will continue to deny any wrongdoing.

But the deal is not final, and it’s already facing stiff objections from attorneys who filed similar lawsuits against MoFi. They say the settlement was struck without their input, by “ineffectual” lawyers who took a bad deal: “Despite this clear abdication of their duties to class members, counsel … are now trying to ram an inadequate, collusive settlement through this court.”

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.

Later, at least four more similar cases over the analog scandal were filed in federal courts around the country, including a class action filed in Illinois on behalf of a MoFi buyer named Adam Stiles, who claimed the company had “intentionally hid this fact from consumers.”

“When defendant began using a digital mastering process in its records as opposed to purely analog, it inherently produced less valuable records — because the records were no longer of limited quantity and were not as close to the studio recording — yet still charged the higher price,” the lawyers for Stiles wrote at the time.

The proposed settlement, first filed on Jan. 15 in the lawsuit filed by Tuttle and Collman, is expected to cover at least 40,000 consumers who purchased records marketed as analog. The “total gross value” of the refunds and credits available to consumers is over $25 million, according to the agreement; the lawyers who filed the case will be paid $290,000 for their services.

Seeking approval of the settlement, attorneys for both sides argued the deal was reached through “arm’s-length negotiations” and represents “a fair compromise in light of potential risks of continued litigation.” They warned that if the case continued, MoFi might have success in defending itself by arguing that the customers didn’t actually suffer any real harm by buying the digitally-processed records.

In a statement to Billboard in response to a request for comment on the proposed settlement, MoFi lead counsel Joseph J. Madonia said: “Unfortunately, we can’t comment on pending litigation, but MoFi stands behind its records and is offering anyone who is not satisfied a refund.”

While the new settlement was filed solely in one case (the case filed by Tuttle and Collman), it would cover all applicable MoFi buyers nationwide — including those who filed the separate cases in other courts and weren’t involved in negotiating the deal. If the agreement is approved, those other customers would be eligible for the same refunds, but they would also be barred from continuing to bring their own claims against MoFi.

Faced with that scenario, the attorneys who filed those other cases are none-too-pleased about the deal.

In a Jan. 27 filing, the lawyers who filed the Illinois case on behalf of Stiles decried the agreement as a “reverse auction” settlement, alleging that MoFi essentially shopped around between the various lawsuits and picked the most “ineffectual” lawyers it could find in order to get the cheapest nationwide settlement possible. They claimed MoFi’s lawyer had directly stated that he would “pick the lowest bidder” from the five class actions.

“There is no doubt that the [settling] plaintiffs have inadequately represented the class,” they wrote, saying that the settlement will be “perpetually tainted by the stink of collusion.”

An attorney for the settling customers declined to comment on the allegations of “collusion” and “reverse auctions.” A representative for MoFi declined to comment directly on those claims, but in a court document filed this week in the Stiles case, the company’s attorneys flatly rejected those allegations, arguing that the proposed settlement would “afford the best possible representation for the class.”

Attorneys for the objecting customers did not immediately return a request for comment on Thursday (Feb. 9).