Will AI Settlements Spawn More?

A federal judge presiding over a class action earlier this summer said Anthropic made fair use of many authors' work to train its AI, but said the company violated copyright law by saving pirated books to a central library not necessarily used for AI training. That proved to be too many potential liabilities facing Anthropic, which just settled before an upcoming trial in December. Likewise, in the case against Eleven Labs, the defendant allegedly copied the voices of plaintiffs without consent and removed technical protections and copyright management notices from audiobooks in order to train their models. A stipulation staying the case was filed pending settlement. Legal scholars are wondering if these settlements facilitated by mediators signal how the industry will navigate the dozens of similar lawsuits pending nationwide. While settlement details remain confidential pending court approval, the timing reveals essential lessons for AI development and intellectual property law. With almost fifty other pending cases, Professor Edward Lee opines an increased probability of settlement (with which ChatGPT agrees), though they involve different companies, different types of works, various judges, and potentially enough variety in the training of the AI models to matter. Meta’s use of copyrighted works to train Llama was considered a fair use, even where Meta had obtained those works from piracy websites. However, the Meta decision was solely based on the record before the court and not a broad holding that all of Meta’s actions were fair use as to all possible plaintiffs, with other parts of the decision less favorable to the defendant. With those fair use precedents, some defendants in the other cases could feel they have decent defenses in their litigation. Anthropic was in "a unique situation," according to Professor James Grimmelmann, with as much as $1 trillion in piracy damages at stake in its worst-case scenario. "It's possible that this settlement could be a model for other cases, but it really depends on the details," he said to Reuters. Reportedly, Professor Chris Buccafusco was surprised Anthropic chose to settle, saying Anthropic was "in a position of decent strength" because of its fair-use determination, despite the piracy decision. The fate of the pending generative AI lawsuits could hinge on fair use, a still-evolving concept that no court had addressed in the cases until June. He also said Anthropic's settlement removes an early opportunity for a federal appeals court to consider fair use and issue a decision that would be binding on other cases and likely send the issue to the U.S. Supreme Court (where a bad precedent might ensue). See more here-- https://tinyurl.com/ydkynvmp and https://tinyurl.com/527phxkw and https://tinyurl.com/yn5rdruz and https://tinyurl.com/2z7nfwps and https://tinyurl.com/ayaswu8s

3M CEO Required at Mediation

A Florida federal judge has ordered 3M CEO Michael Roman to attend mediation to resolve some 260,000 lawsuits alleging its military earplugs caused hearing loss. The judge wants the executive present so that he may "listen and engage directly with the mediators." Reportedly, mediation so far has been "encouraging," but requires 3M senior leadership to push ahead per the judge's order. Attendance of the CEO will ensure that 3M's board will have "firsthand knowledge of the current state of the negotiations" when evaluating any settlement offer. The lawsuits brought by veterans and members of the military allege that 3M's combat arms earplugs were defective. The company utilized bankruptcy of its subsidiary Aearo Technologies LLC, which manufactured the earplugs to try resolving the cases. 3M had opposed efforts to renew global mediation efforts in Florida federal court while Aearo's bankruptcy case is pending. 3M states it continues to believe that Aearo's bankruptcy provides a better option for resolving the earplug claims "more quickly, with more certainty and with more balanced recoveries among claimants." Aearo's bankruptcy strategy has been fiercely opposed by plaintiffs, who said that 3M was merely trying to escape litigation in Florida, following a series of unfavorable legal rulings and trial losses. See story here-- https://money.usnews.com/investing/news/articles/2023-05-22/3m-ceo-must-attend-mediation-in-earplug-litigation-judge-rules

Can Trump U. Settlement Objector Opt Out?

This week, a Florida lawyer and former Trump University student who paid $19,000 in tuition after being upsold to a "Gold Elite" program objected to a proposed $25 million settlement that would end lawsuits against President Trump’s real estate investing education seminars. The proposed settlement is expected to pay around fifty cents on the dollar for what students initially paid to attend the now-defunct program. The class action deal resolved claims that Trump University falsely promised that Donald Trump himself had hand-picked the instructors and that the program was an “accredited university.” Most class action settlements allow individual class members to opt out of the deal just prior to final approval. The facts of this case, in which class members had an opportunity to opt out before the two sides reached a settlement, are particularly unusual. Typically classes are certified at the time of settlement, so class members receive notice of their opt-out rights at the same time they are informed of settlement terms. There’s surprisingly little precedent to guide the court on this issue. Because of the objection filed, San Diego U.S. District Judge Gonzalo Curiel could delay the settlement or even call the entire deal into question. The plaintiff seeking to opt out maintains that by not offering a formal opportunity to opt out, the settlement violates her due process rights and the Federal Rules of Civil Procedure. Plaintiff's counsel even agreed to waive its litigation fees and costs in order to assure the judge overseeing the case that the firm’s only interest was getting the best possible deal for Trump University students. See more here-- http://bit.ly/2nkEt5j and http://bit.ly/2nkNqvb and http://bit.ly/2mGHzU4 and http://bit.ly/2mGHzU4

Subway Settlement

Remember "Where's the Beef?" This week, Subway finally settled a multidistrict federal class action suit that accused Subway of defrauding its customers over the length of its bread. Some say the Subway foot-long settlement is short on dough, but Subway has agreed to pay some money and put in place a number of quality-control measures to “help ensure that the bread sold to customers is either 6 or 12 inches long." Subway is requiring that monthly restaurant inspections “include a sampling of the baked bread to ensure it is at least 12 inches long.” Subway fast-food restaurants will use bread-measuring tools that ensure their so-called six-inch and foot-long sandwiches don't come up short. According to a memorandum supporting plaintiffs' unopposed motion for final approval of class action settlement, Subway's parent company, Doctor's Associates Inc., will be required to conduct monthly compliance inspections making sure that the restaurants' bread is the size as marketed. The settlement covers only injunctive relief and does not bar individuals from suing for money damages. Nine name plaintiffs could receive up to $1,000 each. The total payout, including attorney fees, won’t exceed $525,000, according to the terms of the deal. I often encourage parties to explore non-monetary settlement terms that add value to a deal and that couldn't ordinarily be enforced by a court order or eventual judgment by a prevailing party. The remedial measures apparently sunset after four years, so get your real foot-long BMT now! See details here-- http://www.wied.uscourts.gov/mdl-no-2439-re-subway-footlong-sandwich-marketing-and-sales-practices-litigation and here-- http://www.subsettlement.com

Court Approves NFL Concussion Settlement

After the first deal was rejected by the trial court just over a year ago, a second deal doing away with a $675 million cap on the fund from which injured former players would draw was reached. Reportedly, the National Football League (NFL) projects 6,000 of some 20,000 retired football players will suffer from dementia or Alzheimer's disease. The approved settlement could payout more than $1 billion. Plaintiffs lawyers not involved in negotiations on the second deal may still appeal over previously expressed concerns about the settlement terms. One attempt to appeal to the U.S. Court of Appeals for the Third Circuit failed last fall, with that court declining to exercise jurisdiction on review of an order granting or denying class certification. The issue on appeal involved preliminary approval of the settlement and granting conditional certification of the class for settlement purposes. Even now that approval of the settlement is final, it could be appealed which would delay benefits to eligible players. Failure to compensate players with chronic traumatic encephalopathy (CTE) is the primary objection to the deal which only compensates for CTE if the player has died. The case faced significant legal hurdles at the start that could have landed the case in arbitration instead of federal court. At the outset, the district judge signaled a preference for settlement of the case, believing that the interests of all parties would be best served by a negotiated resolution. The settlement has been characterized as avoiding litigating thousands of complex individual claims over many years and providing immediate relief and support. NFL Commissioner Roger Goodell and team owners claim they wanted to "do the right thing" for former players with neurological conditions who believe their problems stem from on-field concussions. The lawsuit accused the league of hiding known risks of concussions for decades to return players to games and protect its image. See more here-- http://bit.ly/1x1uRxX and settlement info here-- http://www.bbc.com/news/world-us-canada-32420600 and http://bit.ly/1bAyhjS and www.nflconcussionsettlement.com

BP Settlement Won't Be Undone By S. Ct.

This week, the U.S. Supreme Court denied a petition for certiorari by BP challenging its own 2012 multibillion dollar settlement over the Deepwater Horizon oil spill in the Gulf of Mexico. BP asserted there was fraud in some settlements, while plaintiffs have already been paid over two billion dollars in such claims. BP sought to reopen the lower court-approved settlement it negotiated that allowed the businesses and families impacted to continue to make claims. BP's attempt to halt payments from a settlement fund to reimburse businesses and individuals for losses following the 2010 accident was previously rejected following arguments that the fund administrator had misinterpreted claims and miscalculated payments-- allegedly amounting to fictitious claims. BP maintains decisions made in claims handling exposed the company to losses never contemplated in the settlement. Initially, it was estimated BP would pay roughly $7.8 billion to resolve tens of thousands of claims by businesses and individuals covered by the settlement. The company said it couldn't give a reliable estimate for the total value of the deal, but now believes its liability under the business-claims settlement will exceed $9.7 billion. It is very difficult to reopen a settlement of this type at the appellate level because of extensive negotiation and ultimate approval by BP and its legal team. See new story here-- http://buswk.co/1wXIVJK and ruling here-- http://www.supremecourt.gov/orders/courtorders/120814zor_f2bh.pdf

GM Mediator Crash Payouts

A plan recently developed for General Motors (GM) by Mediator Kenneth Feinberg, who previously helped develop terms following the 9-11 terror attacks, BP oil spill and multiple shooting incidents, will provide compensation for people killed in accidents caused by faulty ignition switches. Under the guidelines, families will be offered $1 million for the death of the victim, plus $300,000 for the surviving spouse and $300,000 for each of the victim's surviving dependents. Those payments are intended to cover non-economic losses, such as emotional distress. Claimants in the case can choose options for economic losses and look at the victim's previous earnings, benefits, age and household to determine how much should be awarded, including a victim's past, present and assumed future income. The protocol takes effect August 1. GM has launched a website that describes the plan-- www.gmignitioncompensation.com. Victims submitting personal injury claims are being compensated for economic and non-economic losses on a sliding scale, from $500,000 if they were hospitalized for at least 32 days, down to $20,000 for one overnight hospitalization. Eligible claimants who were physically injured in an accident related to the ignition switches but not hospitalized overnight will receive up to $20,000 for medical treatment. The compensation plan also notes that, "because the physical injuries are so vastly different, and have significantly different long-term effects," each major injury claim will be evaluated to establish non-economic loss. Lawsuits against GM claim a death toll of around 60. The U.S. Department of Transportation already fined GM $35 million for the safety issues related to the delayed recall. See news story here-- http://cbsn.ws/1qgPuzY

HP Shareholder Suits Over Autonomy Settle

Today Hewlett-Packard reached a settlement in shareholder lawsuits related to its acquisition of software firm Autonomy. Hp stockholders alleged CEO Meg Whitman didn't do enough to follow up on warning signs about weaknesses in Autonomy's financials and products. Hp claimed it was duped into paying more than $11 billion for Autonomy, because of willfully inflated financial statements at the U.K. firm. Autonomy's former CEO denied accusations of improper accounting. Hp continues to face other lawsuits and regulatory inquiries into the Autonomy deal, but the settlement reportedly demonstrates cleaning up the mess from the acquisition, which contributed to a huge write down and shake-up of Its board. See full story here-- http://bit.ly/1pFMmlo

Judge Lucy Koh Questions Tech Class Settlement

Major technology companies recently agreed to settle a class-action lawsuit in which 64,000 employees accused them of conspiring not to recruit each other's workers, suppressing compensation. The case alleged an inner circle of Silicon Valley executives communicated during a period when the interoperability of companies' products was often discussed. Embarrassing emails between company executives surfacing during E-discovery played a role in the settlement, with four tech companies agreeing to pay plaintiffs $324.5 million. Plaintiffs had planned to ask for about $3 billion in damages at trial, which could have been trebled under antitrust law. Last week, Judge Koh told plaintiffs during a hearing that they had leverage going into trial against the defendants, given the strength of emails showing former CEOs, such as Apple's Steve Jobs and Google's Eric Schmidt, were planning to enforce their no-poaching agreement. Reportedly, Judge Koh had concerns about whether the amount is really fair to the class and deferred a decision about whether to approve the deal. Though Plaintiffs' attorney said the workers faced serious risks on appeal all the way up, Judge Koh was skeptical the Supreme Court would get involved by further restricting class actions. She has previously approved separate settlements totaling $20 million reached by Disney's Lucasfilm and Pixar units, and Intuit. Apple, Google, Intel and Adobe are paying a higher premium to settle this case than Disney and Intuit did, as calculated by the number of employees from each company in the class. Avoiding executives appearing on the witness stand made a settlement attractive. The civil case followed a 2010 Justice Department case on the same matter. Trial was set to begin last month in California. See story here-- http://reut.rs/1q5cB3Y

NCAA Settles Player Likeness Lawsuit

The NCAA has agreed to pay $20 million to settle a class-action lawsuit filed by players whose likenesses were used in EA games developed by the EA Tiburon studio, Electronic Arts Inc.'s Central Florida division. The suit over royalties for videogames produced here was filed in 2009 by Sam Keller. According to the NCAA, the settlement will award money to certain Division I men’s basketball and bowl football student-athletes who attended certain institutions during the years the games were sold. “With the games no longer in production and the plaintiffs settling their claims with EA and the Collegiate Licensing Company, the NCAA viewed a settlement now as an appropriate opportunity to provide complete closure to the video game plaintiffs,” said NCAA Chief Legal Officer Donald Remy. The Keller lawsuit was scheduled to go to trial next year. Courts are expected to approve the agreement. EA Sports already settled a $40 million lawsuit with players and is no longer making its college football game. This news comes during E3, the Electronic Entertainment Expo, where EA is expected to announce its newest lineup of video games today. The NCAA hopes the settlement the will help it in the larger trial getting underway Monday, named for former UCLA star and lead plaintiff Ed O'Bannon. Reportedly, the settlement is historic in that the NCAA will cut a check to players for their on-field performance, though it maintains there is nothing illegal in prohibiting college athletes from earning money off their play while in school. See stories here-- http://bit.ly/TAtl5i and http://on.wsj.com/1uLM7DV

Tech Firms Settle Recruiting Suit on Eve of Trial

Major technology companies agreed yesterday to settle a class-action lawsuit in which 64,000 employees accused them of conspiring not to recruit each other's workers, suppressing compensation. Terms of the settlement involving Apple, Google, Intel, and Adobe weren't immediately released, but the case reportedly settled for about $325 million. During pretrial proceedings, emails from top executives including Steve Jobs, Sergey Brin and Eric Schmidt surfaced, showing the executives conferred on hiring plans, sometimes through intermediaries. Defendants filed motions seeking to exclude evidence that made Jobs appear as a bully, which was apparently validated in Brin's deposition. Avoiding executives appearing on the witness stand made a settlement attractive. Intel stated it was settling to avoid the risks of litigation, but denied violating any laws or obligations. Adobe elected to settle this matter in order to avoid the uncertainties, cost and distraction of litigation. Apple and Google declined comment. Employees of the companies had been seeking $3 billion in damages. Under antitrust rules, that could have been tripled to $9 billion. The settlement follows settlements reached last year with Lucasfilm, Pixar and Intuit for a combined $20 million. The civil case followed a 2010 Justice Department case on the same matter. Trial was set to begin May 27th before U.S. District Judge Lucy Koh in San Jose, Calif. The case alleged an inner circle of Silicon Valley executives communicated during a period when the interoperability of companies' products was often discussed. Emails between the executives embarrassed executives and their companies. E-discovery played a role in the deal, as Schmidt had emailed about only conferring on agreements not to recruit from other companies verbally, so as not to create a paper trail which could later be sued upon. See story here-- http://on.wsj.com/1mEOu7N

Toyota Seeks Settlements

This month, Toyota said it would begin negotiations to settle hundreds of pending federal and state lawsuits over the sudden acceleration of its vehicles. Lawyers suing Toyota claim unintended acceleration reports increased after Toyota began equipping vehicles with electronic throttle control via its ETCS-i system. Signals from a sensor detecting how far the gas pedal is pressed control the throttle. An Oklahoma jury recently found a Camry’s electronic throttle system was defective and that Toyota had acted with reckless disregard. Previously, Toyota won sudden-acceleration trials; this being the automaker’s first loss. Reportedly, this verdict likely caused Toyota to pursue settlements in its remaining cases. Negotiations could put an end to a lengthy process that hurt Toyota financially and affected its reputation for quality. Last summer, Toyota agreed to pay $1.6 billion to settle a class-action lawsuit brought by vehicle owners who suffered financial losses. Toyota still faces hundreds of personal injury and wrongful death suits, most of which are consolidated in California. The decision to pursue a comprehensive settlement process will suspend that litigation. Lawyers representing plaintiffs in those cases felt talks would save both sides time and legal costs. Over the past few years, Toyota recalled over ten million Toyota and Lexus vehicles for problems including floor mats that caused the accelerator to become stuck. U.S. District Judge James Selna of Santa Ana issued an order halting the lawsuits. A hearing has been set next month in case 8:10-ml-02151, United States District Court for the Central District of California. See stories here-- http://nyti.ms/1h46mJ4 and http://bloom.bg/KbMiqp

Class Arbitration?

Recently, because of a split of authority, the U.S. Supreme Court heard argument on whether an arbitrator exceeded his powers under the Federal Arbitration Act in determining parties agreed to authorize class arbitration using broad contractual language. Justices apparently expressed an unwillingness to create a special standard for reviewing class arbitration decisions for this particular result. Cases like Stolt-Nielsen and Concepcion established a presumption of no consent to class arbitration without a clear meeting of the minds. However, the Court repeatedly gives a highly deferential standard of review to decisions by arbitrators, preventing most inquiries into the merits of an arbitrator’s award. There are generally very limited grounds for vacating an arbitration award. To argue the arbitrator exceeded his power requires manifest disregard of the law or clearly governing legal principle. Still, the Court appeared skeptical of the capability of arbitrators to handle class actions, even questioning incentive. In this case, the class involved some 20,000 doctors. Inquiries into arbitrator compensation and experience went unanswered, since that information is non-public. Congress passed the Federal Arbitration Act in 1925 to encourage litigants to settle disputes without resorting to litigation. Should the Court rule for business here, arbitration of class actions could squelch these cases before they become high stakes gambles. See docket- Oxford Health Plans v. Sutter http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/12-135.htm and discussion here- http://bit.ly/121VC1l and article here- http://onforb.es/14lln2A

Knocking heads together for NFL settlement

At NFL meetings this week, settlement of a class action lawsuit against the league by retired players was announced along with the creation of a league fund to help former players in need. Jim Brown, who lobbied hard for the deal, was asked incidentally about his opinion of the proposal to ban backs from using their head to smash into defenders. “I didn’t use my head,” Brown said. “I wasn’t putting my head into too much of anything. I don’t think that’s a good idea." The NFL agreed to pay $42 million as part of a settlement with a group of retired players who challenged the league over using their names and images without consent. The league will use the money to fund a trust to help retired players with an array of issues including medical expenses, housing and career transition. The settlement also establishes a licensing agency for retired players to ensure they are compensated for the use of their identities in promotional materials."We look forward to building an unprecedented new relationship with retired players that will benefit everybody, especially those who need extra medical or financial assistance," Commissioner Roger Goodell said in a statement issued by the league. The federal class action lawsuit accused the NFL of blatantly exploiting retired players' identities in films, highlight reels and memorabilia to market the league's "glory days." The so-called Common Good fund will be administered by a group of retired players approved by the court. A licensing agency will for the first time market retired players' publicity rights in conjunction with the NFL, making it easier for retired players to work with potential sponsors and advertisers. A new licensing agency, to be overseen by a board of retired players, will streamline that process for one-stop shopping. The league will also pay another $8 million in assorted costs associated with the settlement, including money needed to help set up the trust and pay attorneys. The settlement still needs court approval. Retired players will have the chance to review the settlement throughout the summer, when final approval is scheduled. See items at http://bit.ly/ZYSmUF and http://on.nfl.com/ZtAHW8