Judge OKs Rebates to Settle Milli Vanilli Class-Action Suit

In a move likely to fuel debate over lip-sync fakery in the music industry, a Chicago judge granted final approval on Tuesday to a cash rebate to resolve a class-action fraud lawsuit against Milli Vanilli’s record company.

Under the terms of the agreement, Arista Records and parent Bertelsmann Music Group will offer $1 refunds on Milli Vanilli singles, $2 on cassettes and vinyl albums and $3 on compact discs to fans who submit a bar-code identification tag from merchandise purchased before Nov. 27, 1990.

Fans who bought tickets to Milli Vanilli concerts before that date would also be entitled to a refund of 5%--not to exceed $2.50.

Tuesday’s action is significant not only because it could resolve a dozen similar Milli Vanilli lawsuits pending in courts across the nation, but also because it may set the tone for upcoming class-action fraud battles involving other pop and dance acts such as New Kids on the Block, Paula Abdul, C+C Music Factory, Black Box and Seduction.

Judge Thomas O’Brien--who rejected the record company’s initial proposal last August because it would have required fans to purchase additional Arista products to obtain a refund--said he hoped the agreement would close the book on the Milli caper.

“The court hopes that this humble controversy will soon come to an end,� O’Brien said in his 24-page opinion, “and the courts of this and other jurisdictions can devote their time to the resolution of controversies of a more significant social and economic nature.�

The Chicago class-action fraud claim was one of 27 similar suits filed nationwide by disgruntled fans after Milli Vanilli front men Robert Pilatus and Fabrice Morvan and their German producer Frank Farian admitted that the duo never sang a note on their “Girl You Know It’s True� album, which sold 10 million copies, or in concert. Officials at Arista and BMG deny they had any knowledge of the lip-sync ruse before its revelation in November, 1990.

Many of the 27 suits have since been dropped or consolidated. Judges in Philadelphia, Los Angeles and Baton Rouge, La., dismissed or denied approval of class-action certification for several claims last year.

Because Arista and BMG can argue that the Chicago settlement--which takes effect immediately--could apply to all Milli purchasers, most observers expect the dozen Milli cases still pending across the nation--including two in Los Angeles--to be dropped.

The firms, however, have already paid $100,000 to the district attorney of Yolo County, Calif., to settle consumer fraud charges filed there and have allocated an additional $100,000 to a California state fund that supports the prosecution of consumer cases.

BMG attorneys said about 80,000 claims have been filed and that the company has agreed to donate $250,000 to charities. Neal Edelson, director of legal and business affairs for BMG, called the Chicago offer a gesture by the company to rectify the Milli Vanilli situation.

Legal experts say the biggest winners in Tuesday’s settlement will be the plaintiffs’ attorneys who helped design the Chicago agreement.

While legal fees are subject to court approval, the four Chicago law firms representing the plaintiffs in this case stand to make as much as $675,000.

But Larry D. Drury--whose firm won the case and represents fans in pending class-action suits against New Kids on the Block, Paula Abdul and Black Box--blames record companies, not attorneys, for the flurry of fraud claims against alleged lip-sync artists.

“If it wasn’t for the attorneys who are willing to take on this kind of case, wrongs of this nature that are perpetrated on the public would continue without any remuneration to those who have been injured,� Drury said. “We’ve done our job and we deserve to be compensated.�