October 11, 2018 / 5:24 PM / a month ago

Both sides want to settle class action. Judge says keep litigating. A First Amendment story?

(Reuters) - U.S. District Judge William Alsup of San Francisco has developed a rigorous set of rules to ward off collusive class action settlements that benefit no one but plaintiffs' lawyers. As the judge explained in an order in a consumer class action against the computer peripherals company Logitech, he believes class members are best positioned to understand the value of their claims after they’ve conducted discovery and litigated a motion to be certified as a class. “That way, the class certification is a done deal and cannot compromise class claims,” the judge explained in his order. “Only the risks of litigation on the merits can do so.”

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To assure an adversarial process leading up to the all-important class certification motion, Judge Alsup prohibits class action plaintiffs and defendants from even discussing a settlement before he decides whether to certify the class. He’s willing to make exceptions in extraordinary circumstances, like when a defendant is on the verge of going belly up and class members are at risk of getting nothing at all. But otherwise, Judge Alsup staunchly believes he’s best protecting absent class members by requiring their lawyers to test the strength of class claims before they talk about settling.

Alsup’s commitment to his duty to protect all class members is admirable – but is it constitutional?

That’s the fascinating question raised in a new mandamus petition at the 9th U.S. Circuit Court of Appeals. Logitech’s lawyers at Mayer Brown contend that Judge Alsup’s restriction on settlement talks before class certification violates the First Amendment. “The district court’s standing order imposed a clear prior restraint on the parties’ speech: Virtually from the outset of the case, they have been under a prospective order not to ‘discuss' settlement prior to the court’s decision on a class certification motion,” the petition said. “The restriction is presumptively invalid.”

I’ll get back to the specifics of Mayer Brown’s First Amendment argument, but it’s important to understand the context of its petition. The class action firm Edelson brought the case against Logitech last May, alleging that the company erroneously represented that certain of its speakers contained four drivers. In fact, as Logitech conceded at an oral argument before Judge Alsup in August, two of the four drivers contained no sound box or electronics. (Those so-called passive drivers apparently serve to enhance bass tones.)

When Mayer Brown and Edelson met to discuss initial case management and alternative dispute resolution, both sides agreed the case could be resolved quickly. Logitech said it was already in the process of revising its advertisements and was willing to make whole all purchasers injured by the allegedly deceptive ad.

Mindful, however, of Judge Alsup’s standing order against pre-certification settlement talks, the two sides filed a joint stipulation asking the judge to consider the case an exception to his rule and to refer the class action to a magistrate for an early settlement conference. Edelson also requested interim appointment as class counsel.

Judge Alsup was having none of it. First, he pointed out that he’s determined not to be a rubber stamp for collusive settlements. “My job is to protect absent class members,” he said. “In that kind of a deal, what the lawyer is doing for Mayer Brown, hypothetically, is buying you off with a big amount and getting a release of class (claims). I’ve had this happen many times. I stop it when I find out about it. So we are going to find out if you have got a legitimate case first.”

Edelson partner Rafey Balabanian tried to assure the judge that his firm doesn’t operate that way. Judge Alsup listened but would not budge. “I want to go through the normal process,” he said. “You lawyers ought to go out there and do – do the homework. Find out if you have got punitive damages. Spend the money on behalf of the class to do your due diligence.” The judge instructed the two sides to steam onward with fact and expert witness discovery, damages estimates and class certification briefing. He said he would refer the case to U.S. Magistrate Judge Donna Ryu for mediation, “but she is probably not going to let you do that mediation until we get a little farther along in the case.”

So, as Mayer Brown described the situation in its mandamus petition, both Logitech and class lawyers believe class members will get substantially all they’re entitled to without more litigation but the judge won’t let that happen. “Continuing the litigation will only serve to waste the money, time and resources of all concerned — including the district court,” the mandamus petition said. “At present, however, the parties are required to continue litigating the case on an adversarial basis, even though they both want to end it.”

The petition contends that Judge Alsup’s prohibition on settlement talks is an impermissible, content-based speech restriction. Even if the judge’s goal of preventing collusive settlements is a compelling state interest, the petition said, a wholesale ban in talks before class certification is not the least restrictive way to accomplish that goal. In addition, Mayer Brown argued, Judge Alsup’s policy interferes with parties’ First Amendment right to petition because it precludes them from even submitting a proposed settlement for the judge’s approval.

There’s no need for Judge Alsup to insist upon such an unyielding and draconian policy, the petition argued, when the Federal Rules of Civil Procedure already provide judges with all of the necessary authority to police class action settlements. Under Rule 23, which establishes class action procedures, judges can poke and prod proposed settlements to their hearts’ content before deciding whether to approve them. The approval process, Mayer Brown argued, gives Judge Alsup power to test the fairness of the settlement, the named plaintiff’s fitness to represent absent class members and the cohesion of the class in the approval process – the very concerns the judge cited in his policy barring precertification settlement talks.

In short, the petition said, it makes no sense for Judge Alsup to force Logitech and the class into unwarranted litigation for the sake of a constitutionally flawed policy that contradicts class action rules and the court system’s goal of resolving cases through settlement. “Although a district court is required to scrutinize any settlement for fairness to absent class members, it should not be in the business of preventing settlement altogether and denying absent class members even the chance of obtaining speedy relief,” the petition told the 9th Circuit. “This court should intervene and put a stop to the district court’s erroneous and unwarranted bar on pre-certification settlement.”

I emailed Donald Falk and Dale Giali of Mayer Brown as well as Edelson’s Balabanian but didn’t immediately hear back.

The views expressed in this article are not those of Reuters News.

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