{"id":2610,"date":"2025-12-29T15:37:49","date_gmt":"2025-12-29T19:37:49","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=2610"},"modified":"2025-12-29T15:37:49","modified_gmt":"2025-12-29T19:37:49","slug":"california-federal-court-orders-disclosure-of-side-deals-in-connection-with-class-action-settlement","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2025\/12\/29\/california-federal-court-orders-disclosure-of-side-deals-in-connection-with-class-action-settlement\/","title":{"rendered":"California Federal Court Orders Disclosure Of Side Deals In Connection With Class Action Settlement"},"content":{"rendered":"
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By Gerald L. Maatman, Jr. and Justin R. Donoho<\/strong><\/p>\n\n\n\n

Duane Morris Takeaways:<\/em><\/strong>\u00a0 On December 23, 2025, Judge William Alsup of the U.S. District Court for the Northern District of California entered an order <\/a>in Bartz, et al. v. Anthropic PBC, Case No. 24-CV-5417 (N.D. Cal. Dec. 23, 2025), requiring five law firms seeking a fee award in connection with a class action settlement to file a declaration setting forth the full extent of any of the firms\u2019 actual or proposed fee-sharing agreements and the extent to which any arrangement may result in some class members receiving a sweeter recovery than other class members.\u00a0 Judge Alsup also ordered preservation of all communications and other documents relating to such side deals.\u00a0<\/em><\/p>\n\n\n\n

The ruling is significant because it shows that only appointed<\/u> class counsel may be eligible to receive a fee award in connection with a class action settlement, and may not outsource its responsibilities to non-appointed counsel or seek any other arrangements that may favor some class members to the detriment of other class members.  Furthermore, the ruling shows that any such side deals must be <\/em>disclosed <\/em>publicly prior to any final approval of a class action settlement.<\/em><\/p>\n\n\n\n

Background<\/strong><\/p>\n\n\n\n

This case is one of several class actions that plaintiffs have filed alleging that developers of generative artificial intelligence  (\u201cgen AI\u201d) violated copyright laws by generating infringing outputs and\/or by using unauthorized copies of copyrighted works as inputs to train the developer\u2019s models. <\/p>\n\n\n\n

Many of these gen AI class actions are \u201cbet-the-company\u201d lawsuits, even for the world\u2019s largest companies. Plaintiffs in gen AI class actions typically invoke the Copyright Act in order to seek millions \u2014 and sometimes even billions \u2014 of dollars on the theory that thousands or millions of unauthorized copies of copyrighted works, times up to $150,000 per copyrighted work for willful infringement, equals a crushing, settlement-inspiring number. <\/p>\n\n\n\n

In Bartz,<\/em> the parties reached a $1.5 billion settlement, which the Court preliminary approved, and which we blogged about previously here<\/a> and here<\/a>.<\/p>\n\n\n\n

Following preliminary approval, two law firms appointed as class counsel and three additional non-appointed firms filed a petition for fees to be awarded in connection with the class action settlement.  The fee petition sought $225 million for class counsel and $75 million for the non-appointed law firms.  Id.<\/em> at 3, 7.  These three non-appointed firms had agreed to gather contact information for the class list and to provide input on the claim form and claims process, two for the publisher class members (\u201cPublishers\u2019 Coordination Counsel\u201d), and one for the author class members (\u201cAuthors\u2019 Coordination Counsel\u201d).  Id. <\/em>at 3.<\/p>\n\n\n\n

The Court\u2019s Decision<\/strong><\/p>\n\n\n\n

The Court declined to rule on the fee petition, ordering that a number of disclosures and preservation efforts be made first in order \u201cto set the record straight\u201d concerning aspects of the fee petition.  Id. <\/em>at 1.  Such was necessary, according to the Court, because it appeared that counsel may have entered into one or more \u201cside deals.\u201d  Id. <\/em>at 3.<\/p>\n\n\n\n

As the Court explained, \u201c[t]wo and only two law firms were ever appointed class counsel.\u201d  Id.<\/em> at 1.  Moreover, \u201cpreliminary approval and the class notices confirmed that only two firms were approved to serve the class … Those firms never proposed a fee splitting scheme, and none was ever even preliminarily approved.\u201d  Id. <\/em>at 7. <\/p>\n\n\n\n

As to the three non-appointed law firms, the Court found that they \u201ccannot appoint [themselves] class counsel by showing up.  Nor can class counsel appoint someone else to do its work.\u201d  Id. <\/em>at 2.  As the Court further explained, it had not had a chance to vet the non-appointed counsel for conflicts, or to prevent duplication of effort by overlapping law firms.  Id. <\/em>at 8.  In addition, the Court found it concerning that \u201cwe do not yet know whether \u2018Publishers\u2019 Coordination Counsel\u2019 will share any part of their bonanza with one or more publishers so as to give those publishers a premium to not opt out … and thereby avoid triggering [the defendant]\u2019s right to about the settlement.\u201d  Id.  <\/em>Furthermore, the class notice \u201cnever alerted class members that still other lawyers would come out of the woodwork to seek a third<\/em> again whatever their class counsel would seek for its work.\u201d  Id. <\/em>(emphasis added).<\/p>\n\n\n\n

For these reasons, the Court ordered that, within one week, all law firms who filed fee petitions or on whose behalf fee petitions were filed, must publicly file a declaration (not under seal) setting forth the \u201cfull extent\u201d to which such firm agreed or made a proposal \u201cto share any portion(s) of any fee award in this class action or in any other class action (putative or certified) involving any party (or class member) herein,\u201d and stating as to each such agreement or proposal its date, terms, the extent to which it is verbal and the extent to which it is in writing (or in an email or text or other message), and the parties and the names of all persons who made the agreement.  Id. <\/em>at 10.  The Court also ordered public disclosure in a declaration of the \u201cfull extent to which any arrangement has been made or proposed by which any class member would receive a sweeter recovery than other class members.\u201d  Id. <\/em>at 10-11.  Finally, the Court further ordered that \u201c[a]ll emails, messages, and written materials relating to any of the above shall be preserved for future potential discovery.\u201d  Id. <\/em>at 11.<\/p>\n\n\n\n

Implications For Companies<\/strong><\/p>\n\n\n\n

The Bartz <\/em>fee petition order is as extraordinary as it is unique. It offers strong precedent for any company defending a large class action and preparing to enter into a class action settlement.  Specifically, Bartz <\/em>shows that plaintiffs\u2019 firms seeking any portion of a fee award in connection with such a settlement will need to publicly disclose any side deals prior to any final settlement approval.  Therefore, settling defendants should consider seeking to discover any side-deal information before entering into such settlement.  That way, any obstacles to final settlement approval such as that presented by the Bartz <\/em>fee petition order might be considered before the parties reach any settlement.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Gerald L. Maatman, Jr. and Justin R. Donoho Duane Morris Takeaways:\u00a0 On December 23, 2025, Judge William Alsup of the U.S. District Court for the Northern District of California entered an order in Bartz, et al. v. Anthropic PBC, Case No. 24-CV-5417 (N.D. Cal. Dec. 23, 2025), requiring five law firms seeking a fee … <\/p>\n

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