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.