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.