Jacob S. Reichman

A California federal judge on Thursday blasted Arizona law firm ClaimsHero Holdings LLC for encouraging authors to opt out of Anthropic PBC's $1.5 billion deal to end copyright infringement claims, saying it looks like the firm is "trying to trick people" for a "quick buck." Anthropic settled class claims in August that it exploited the copyrighted works of authors to train its flagship large language model, Claude. The class says an Arizonia law firm is deceptively encouraging class members to opt out of the settlement. (Photo by Jaque Silva/NurPhoto via AP) At the end of a hearing in San Francisco, U.S. District Judge William H. Alsup ordered an evidentiary hearing on Nov. 25 to probe class counsel's claims that ClaimsHero is deceptively encouraging class members to opt out of the settlement. He said ClaimsHero's CEO needed to be present at the hearing and that the six opt-out clients who submitted declarations to the court must show up via videoconference. "I'm going to get to the bottom of what they thought they were getting into," Judge Alsup said. ClaimsHero is an Arizona law firm that last year received an alternative business structure license from the state, which allows for nonlawyer ownership of the firm. The firm touts itself as "more than a law firm" and promises to use technology to "flip the tables" on "corporate wrongdoers and bad actors." Its website encourages users to complete easy-to-fill-out forms to opt out of a menu of major class action settlements. A lawyer for the authors and publishers, Rachel Geman of Lieff Cabraser Heimann & Bernstein LLP, told Judge Alsup that ClaimsHero is reaching out to class members with an aggressive and misleading marketing campaign encouraging them to opt out for more money. "This is not an attempt to limit speech, that is a red herring," Geman said. "This is an attempt to stop fraud." Class members can opt out of the case, but they must first be informed of the risks and the costs, she said. Geman showed the court a letter that ClaimsHero sent out stating that class members will only receive $3,000 and "deserve more." But if class members opt out they could end up with less money or nothing at all, Geman said. Some of the wording on ClaimsHero's website also could lead people to believe they're submitting a claim instead of giving up their right to settlement funds, she said. For example, there's wording on the page about Anthropic stating, "Join thousands of Americans who've filed with ClaimsHero." The website also wrongly states that class members "should have received a claim notice" or email from the claim administrator — the notice isn't scheduled to go out until Nov. 24, Geman said. An attorney for ClaimsHero, Velvel Freedman of Freedman Normand Friedland LLP, said using the word "claims" on the ClaimsHero page about Anthropic wasn't misleading because it's also used to describe "lawsuits," which his client is prepared to file for the opt-outs. Judge Alsup asked if ClaimsHero has ever filed a lawsuit as counsel of record. Freedman said ClaimsHero is a new law firm. Judge Alsup noted that the declarations from ClaimsHero's new opt-out clients indicate that they expect that the law firm will only take "a small percentage" of any recovery at the end. "That's an impossible model, that's fraud on its face," Judge Alsup said. "There's no way that ClaimsHero, which has zero track record in any court, is going to be able to bring a lawsuit against Anthropic." He suggested that perhaps ClaimsHero planned to sue Anthropic with the expectation that the suit will be settled by "harassment." "Think again," Judge Alsup said. "These people are going to fight you, and you will lose that case." Freedman said new law firms can secure financing, partner with more established law firms and take on large cases. He also argued that ClaimsHero's opt-out clients are sophisticated authors, adding that one is Pulitzer-winning author John Carreyrou, who wrote "Bad Blood," the book about Theranos. The court is acting "paternalistically" in preventing class members from retaining ClaimsHero, he said. "They can opt out all they want," Judge Alsup said. "But they should not be tricked into opting out." Freedman later told the court that ClaimsHero's page for Anthropic opt-outs is clear. Encouraging opt-outs is beneficial, he said. "It helps you, Your Honor, in your duty of vetting the claim," Freedman said. "Because right now, you have no adversity. ... Plaintiffs and defendants are holding hands here, trying to get you to approve a settlement." At the end of the hearing, Judge Alsup said he was troubled by the matter and ordered ClaimsHero to submit to the court and class members all of its marketing materials associated with the opt-out effort. "I am disturbed by this record," the judge said, adding that it looked to him "like a blatant attempt by your client ClaimsHero to trick people into opting out" to make a "quick buck." Judge Alsup said it appeared that ClaimsHero's plan is to accumulate so many opt-outs that it can go to Anthropic and plaintiffs' counsel and try to get a better deal for its clients. "That would be extortion," the judge said. Judge Alsup said while ClaimsHero makes a $3,000 payment seem like a bad deal, it's not. "It's a good deal," the judge said. "This is not a strong case for statutory damages." The judge told Freedman that his client needed to disclose that the court had held that it was fair use for Anthropic to use the copyright-protected material to train its generative text tool. It was only the authors' claims over the company's use of online pirated works that would have gone to trial. Judge Alsup also said ClaimsHero needed to disclose that it was inexperienced and that there would likely be another law firm pulled in with a higher contingency fee. "I feel this is the single biggest misleading part," the judge said, adding if such a disclosure isn't made, it is "bait and switch" and "fraud." Authors in the class action accused Anthropic of exploiting their copyrighted works through "largescale theft" to train its flagship large language model, Claude. Anthropic announced it had reached a deal to end the authors' suit in August, and more details came out weeks later. Judge Alsup initially refused to sign off on the proposed deal but gave his preliminary approval in late September. Along the way, the judge noted during a hearing that the deal has an "abort clause" in case a high percentage of class members opt out. The specific percentage agreed upon, however, is confidential, he said. Earlier this month, the authors urged the court to stop ClaimsHero's marketing tactics. In its opposition filed on Thursday, ClaimsHero told the court that the firm's marketing is constitutionally protected commercial speech. It said that its website was never misleading but that after being contacted by counsel for the class it "immediately edited its website and advertising to eliminate any doubt about its operations." The authors and publishers are represented by Rachel Geman, Jacob S. Miller, Danna Z. Elmasry, Daniel M. Hutchinson, Jallé H. Dafa, Amelia Haselkorn and Betsy A. Sugar of Lieff Cabraser Heimann & Bernstein LLP, Justin A. Nelson, Alejandra C. Salinas, Rohit D. Nath, Michael Adamson, J. Craig Smyser and Samir H. Doshi of Susman Godfrey LLP, Scott J. Shoulder and CeCe M. Cole of Cowan DeBaets Abrahams & Sheppard LLP, Jay Edelson of Edelson PC and Matthew J. Oppenheim of Oppenheim & Zebrak LLP. ClaimsHero is represented by Ivy Ngo, Devin (Velvel) Freedman and Alex Potter of Freedman Normand Friedland LLP. The case is Andrea Bartz et al. v. Anthropic PBC, case number 3:24-cv-05417, in the U.S. District Court for the Northern District of California.

Nov 13

6 min

Kirkland & Ellis advised Metagenics, a nutritional supplements provider and portfolio company of Gryphon Investors, on its acquisition of UK water-based probiotic supplement brand Symprove. Read the transaction press release The Kirkland team included corporate lawyers Carlos Gil Rivas, Andy McAlpine, John Wilkes, Jacob Reichman, Benjamin Clinger, Marion Racine, Ece Osman, Ben Whidborne and Veronica Yunlu Shen; and tax lawyers Peter Abbott, Heidi Yuen, Jessica Yeh and Hugo Coleman.

Jan 23

1 min

A California federal judge doubled down Tuesday on his concerns that Arizona law firm ClaimsHero is misleading authors to opt out of AI company Anthropic's $1.5 billion deal to end copyright infringement claims, saying the firm appears to be seeking "a nuisance settlement" and warning it against a legal strategy he called "extortion." U.S. District Judge William H. Alsup made the comments during an evidentiary hearing in San Francisco to investigate class counsel's claims that ClaimsHero is deceptively encouraging class members to opt out of the settlement. The proceedings included testimony from ClaimsHero CEO Matt Freund and six authors who have already told ClaimsHero that they want to opt out of the settlement and have the firm sue Anthropic on their behalf seeking more compensation than the approximately $3,000 per work — less legal fees and costs — they'd get under the settlement. Toward the end of the hearing, a lawyer for ClaimsHero, Velvel Freedman of Freedman Normand Friedland LLP, reminded the court that class members have a right to opt out and law firms have a "First Amendment right to advertise" to try and attract those potential clients. That provides an alternative to class members who don't want to take a settlement, and can "insert some adversity into proceedings," Freedman said. Judge Alsup, who told ClaimsHero's lawyer during a hearing earlier in the month that it looked like his client was "trying to trick people" for a "quick buck," repeated those concerns on Tuesday. "If your strategy is to opt them out and then go to Anthropic and say give us a sweeter deal — no," the judge said. "That's extortion." The judge noted that although ClaimsHero has told the court that they're going to bring individual lawsuits on behalf of their clients, none has yet been filed. ClaimsHero should also not back off after telling these authors that they're going to fight on their behalf, the judge said. "Or try to talk your clients out of it, that would be so unethical," Judge Alsup said. Even if ClaimsHero brings separate lawsuits against Anthropic, the firm is not going to win, the judge said. "They're going to fight you tooth and nail, and then your clients will wind up high and dry," the judge said. ClaimsHero's lawyer said he didn't understand why the court was making such assumptions, and the judge said he's seen the evidence in the case. "I don't see how you can get a better deal than the deal that's on the table," Judge Alsup said. "It's $1.5 billion … for all of these people in the class." Freedman told the court ClaimsHero had worked quickly to address changes to its marketing in response to concerns brought to its attention by class counsel.  The lawyer also said that ClaimsHero has teamed up with well-resourced and experienced law firms to pursue these types of cases. Freedman said ClaimsHero is prepared to file lawsuits, but put them on hold due to the court's concerns about their marketing. The judge said he expected 2025 to end with no lawsuits. "Your plan is to try to work this with no lawsuit and get 40%," the judge said. After Freedman asserted again that there's no evidence to support that characterization, Judge Alsup shot back that one of the main reasons class counsel brought ClaimsHero to the court's attention is that the law firm's online marketing suggested that authors could make a "claim" when ClaimsHero could only handle opt-outs. "Don't tell me that was honest," the judge said. "That was dishonest." Freedman said the marketing error had been fixed and reminded the judge that the clients who testified said they knew that ClaimsHero was not obligated to file a lawsuit if they retained the firm. "They were aware that there's a 40% fee," Freedman said, acknowledging that at the prior hearing he "misspoke" in suggesting it was a small fee. The lawyer added that if ClaimsHero investigates its author clients' claims and determines they're "frivolous," they can't file a claim under the Rules of Professional Responsibility. Judge Alsup told Freedman that their retainer agreements needed to spell that out. "Write this down," the judge told ClaimsHero's lawyer. "That if you opt out, then we may decide not to file a lawsuit after all, and you may be left without any remedy." A lawyer for the authors and publishers, Rachel Geman of Lieff Cabraser Heimann & Bernstein LLP, told the court that 45,000 people created ClaimsHero accounts on or after Oct. 27, the date the law firm launched its marketing campaign to sign on Anthropic class members. She acknowledged that some of the 45,000 may have been signing up for other cases. She asked that a curative notice about the marketing be sent to all 45,000 and Judge Alsup said he felt that was unnecessary. During Tuesday's proceeding, Geman and another lawyer for the plaintiffs pointed out that one of the founding partners of Freedman Normand, Kyle Roche, is also a founder of ClaimsHero. The other lawyer for the plaintiffs, Samir Doshi of Susman Godfrey LLP, told the court that Roche had been removed as lead counsel in a proposed class action in California and interim class counsel in a New York case after a video emerged in which he's seen claiming to have used class-action lawsuits to obtain information about competitors for the benefit of one of his cryptocurrency platform clients and calling jurors "idiots." The judge subsequently asked Geman how those decisions by other judges factored into what he had to decide. She noted that ClaimsHero has talked about the experience and background and knowledge of their law firm. "We think the entire background should be relevant," she said. The case is one of many that have hit the courts accusing an AI company of using copyrighted material to train large language models. A group of authors said Anthropic had used their books to train the LLM that powers the chatbot Claude. Judge Alsup ruled that the books Anthropic legally purchased could fall under fair use, but said the class could proceed on claims that the startup had pirated large numbers of books. The parties later settled for $1.5 billion. The authors and publishers are represented by Rachel Geman, Jacob S. Miller, Danna Z. Elmasry, Daniel M. Hutchinson, Jallé H. Dafa, Amelia Haselkorn and Betsy A. Sugar of Lieff Cabraser Heimann & Bernstein LLP, Justin A. Nelson, Alejandra C. Salinas, Rohit D. Nath, Michael Adamson, J. Craig Smyser and Samir H. Doshi of Susman Godfrey LLP, Scott J. Shoulder and CeCe M. Cole of Cowan DeBaets Abrahams & Sheppard LLP, Jay Edelson of Edelson PC, and Matthew J. Oppenheim of Oppenheim & Zebrak LLP. Anthropic is represented by Douglas A. Winthrop, Joseph Farris, Jessica L. Gillotte, Estayvaine Bragg, Angel T. Nakamura, Oscar Ramallo and Allyson Myers of Arnold & Porter Kaye Scholer LLP, Mark Lemley of Lex Lumina LLP, and Joseph R. Wetzel and Andrew M. Gass of Latham & Watkins LLP. ClaimsHero is represented by Ivy Ngo, Devin "Velvel" Freedman and Alex Potter of Freedman Normand Friedland LLP. The six opt-out class members are represented by Elizabeth Rogers Brannen of Stris & Maher LLP and Devin "Velvel" Freedman of Freedman Normand Friedland LLP. The case is Bartz et al. v. Anthropic PBC, case number 3:24-cv-05417, in the U.S. District Court for the Northern District of California.

Nov 25

6 min

Dickinson Wright and several of its lawyers are facing a malpractice lawsuit in Michigan state court alleging that they overstated their Bitcoin regulatory expertise and failed to disclose conflicts of interest in a cryptocurrency recovery effort. The case dates back to early 2022, when the Jonna Group retained Dickinson Wright in connection with a $541,045 investment in Bitcoin Latinum, a cryptocurrency project the investors alleged engaged in securities fraud. The clients sought the recovery of their principal and lost profits, which the law firm allegedly valued at more than $6.7 million. Dickinson Wright promoted its experience in Bitcoin regulation and the credentials of partners Frank Gilligan and Jacob S. Frenkel, including Frenkel’s experience in whistleblower matters, per the lawsuit. At various times, the firm projected a potential case value of up to $120 million and described Frenkel as a “master of the craft,” representations that the plaintiffs said induced them to retain the firm. Key to the litigation strategy, the lawsuit alleged, was the role of Don Basile, an individual connected to Bitcoin Latinum who was also involved in other crypto startups and had a sketchy reputation. The firm allegedly advised that the Jonna Group could pursue whistleblower status tied to anticipated U.S. government investigations into Basile and related entities. However, the strategy unraveled because Dickinson Wright allegedly failed to disclose a conflict of interest involving Basile and affiliated companies, per the complaint. The firm had an attorney-client relationship with Monsoon Blockchain Corp., an entity contractually linked to Bitcoin Latinum through intellectual property and network agreements funded by token presales. Bitcoin Latinum was associated with non-fungible token projects and other ventures affiliated with Monsoon and entities owned or operated by Basile, the lawsuit says. At the same time, Dickinson Wright represented Basile and received attorney fees from Monsoon as a current client, even as it pursued claims on Jonna Group’s behalf against Bitcoin Latinum. The conflict surfaced when Dickinson Wright served discovery demands on Bitcoin Latinum, seeking formation documents relating to Monsoon, prompting a motion to disqualify the firm, according to the complaint. In support of that motion, Bitcoin Latinum disclosed payments it had made to Dickinson Wright for legal services provided to Monsoon. The plaintiffs further alleged that they later learned that Dickinson Wright intentionally failed to file a formal whistleblower claim because of its undisclosed relationship with Basile and his companies. That decision, the lawsuit says, jeopardized the Jonna Group’s ability to recover a judgment by failing to name Basile as a defendant and preserve potential whistleblower protections. The complaint alleged that the disqualification required the investors to retain successor counsel, driving up legal costs because new attorneys had to become familiar with the underlying litigation. The plaintiffs also alleged that Dickinson Wright engaged in excessive billing, including fees associated with whistleblower efforts that ultimately yielded no recovery. The case is pending before the Wayne County Circuit Court in Michigan and asserts claims for legal malpractice and breach of fiduciary duty. The plaintiffs seek disgorgement of all attorney fees paid to Dickinson Wright and monetary damages “for significant losses sustained as a direct result of the flawed representation.” Lawrence J. Acker of the Acker Law Firm in Traverse City, Michigan, who represents the plaintiffs, and Dickinson Wright did not respond to a request for comment.

Dec 17

2 min

A California federal judge has ordered changes to the notice emails being sent to members of a class of writers who secured a $1.5 billion settlement of copyright infringement claims against artificial intelligence firm Anthropic, saying the current wording does not give "equal dignity" to the option of opting out of the settlement versus filing a claim. U.S. District Judge William Alsup said in a Tuesday order that the current notices steer class members toward filing a claim before mentioning the opt-out option. The case is one of many that have hit the courts accusing an AI company of using copyrighted material to train large language models. A group of authors said Anthropic had used their books to train the LLM that powers the chatbot Claude. Judge Alsup ruled that the books Anthropic legally purchased could fall under fair use, but said the class could proceed on claims that the startup had pirated large numbers of books. The parties later settled for $1.5 billion. The judge said there were previously ordered changes that had still not been made to materials being mailed to class members. A prior order required counsel to add in the notices that the settlement documents had to be personally signed by the class member, and to strike a portion saying they could be inked by an authorized representative. Requests for exclusion, reinclusion, objections and claims had to be personally signed by class members, if they are living individuals, Judge Alsup said. The judge said there were several "obvious errors" that previous orders had addressed that had not been remedied. These included breaking out "the lengthy lists of requirements now embedded in paragraphs ... so they can be consumed easily as checklists like the others," and fixing a series of typos. Judge Alsup denied a request from the authors to allow them to remove their real names from the settlement website in favor of pen names. The judge approved a passage to be added to the notices explaining that the information available on the site was taken from publicly available sources, and that "such records often already list an author's real name and the author's pen name." The revision informs class members that they must provide "compelling reasons" to remove their real names. Judge Alsup said a "curative statement" should be added to the website for people who might have visited prior to his order to explain what the added clarifications were. "This is final. Do not argue with it, please," the judge said. "Implement these requirements, then disseminate the long-form notice with buckslip." On Nov. 13, Judge Alsup criticized Arizona law firm ClaimsHero Holdings LLC for encouraging authors to opt out of the settlement and suggesting the move could get class members better results. Judge Alsup said all class members have the right to opt out, but added that he "urges any class members tempted by such an encouragement or advertisement to first study the class notice and the reasons for the settlement, and to study the track record of any such law firm when it comes to actual litigation in any state or federal court." An attorney for the authors declined to comment Wednesday, and counsel for Anthropic did not immediately respond to requests for comment. The authors and publishers are represented by Rachel Geman, Jacob S. Miller, Danna Z. Elmasry, Daniel M. Hutchinson, Jallé H. Dafa, Amelia Haselkorn and Betsy A. Sugar of Lieff Cabraser Heimann & Bernstein LLP, Justin A. Nelson, Alejandra C. Salinas, Rohit D. Nath, Michael Adamson, J. Craig Smyser and Samir H. Doshi of Susman Godfrey LLP, Scott J. Shoulder and CeCe M. Cole of Cowan DeBaets Abrahams & Sheppard LLP, Jay Edelson of Edelson PC, and Matthew J. Oppenheim of Oppenheim + Zebrak LLP. Anthropic is represented by Douglas A. Winthrop, Joseph Farris, Jessica L. Gillotte, Estayvaine Bragg, Angel T. Nakamura, Oscar Ramallo and Allyson Myers of Arnold & Porter Kaye Scholer LLP, Mark Lemley of Lex Lumina LLP, and Joseph R. Wetzel and Andrew M. Gass of Latham & Watkins LLP. The case is Bartz et al. v. Anthropic PBC, case number 3:24-cv-05417, in the U.S. District Court for the Northern District of California.

Nov 19

3 min