Howard Erichson was quoted in a Reuters article about Logitech’s class action lawsuit.
Facing a mandamus petition by a class action defendant challenging his policy of barring settlement discussions before class certification, U.S. District Judge William Alsup of San Francisco told the 9th U.S. Circuit Court of Appeals that his rule enhances the negotiating power of absent class members whose interests he is obliged to protect.
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Logitech’s lawyers at Mayer Brown, as you may recall, contend that Judge Alsup’s policy of generally prohibiting pre-certification settlement negotiations is an unconstitutional prior restraint on defendants’ free speech rights. Judge Alsup told the 9th Circuit that his policy implicates commercial speech, which isn’t as robustly protected as other forms of speech. According to Judge Alsup, commercial speech may be restrained as long as there is a “reasonable fit” between the means of restriction and its intended purpose. Here, he said, his policy merely delays settlement talks for the greater good of assuring fair negotiations between class defendants and absent class members.
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Alsup emphasized that his rule just delays settlement talks to even the power imbalance between defendants and prospective class members. Before the class is certified, he said, plaintiffs’ lawyers discount the potential value of their claims to account for the risk that they won’t be able to sue on behalf of everyone who has alleged been injured. “Plaintiff’s counsel necessarily negotiates from a position weakened by the uncertainty over whether or not counsel will later win or lose a class certification motion,” the judge wrote, citing Fordham class action expert Howard Erichson. “In turn, this weakness can prejudice any deal struck before the issue of certification is determined. To avoid this prejudice to absent class members, it is better to clear away any doubts about certification, so that if certification is granted, plaintiff’s counsel can negotiate from strength with a certification win in hand.”
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Logitech lawyer Donald Falk of Mayer Brown declined to comment on Alsup’s filing. So did plaintiffs’ lawyer Rafey Balabanian at Edelson. But Fordham’s Erichson – who seems to be Judge Alsup’s guru when it comes to protecting absent class members – told me by email that he thinks the judge has shown considerable insight about the dynamics of class action negotiations and has devised a policy to address the power imbalance between defendants and prospective class members.“Judge Alsup is entirely correct that in a settlement-only class action, the class negotiates from a position of weakness,” Erichson said in an email. As Judge Alsup told the 9th Circuit, plaintiffs’ lawyers discount their claims to account for the risk of losing a class certification motion, Erichson said. And before a class is certified, Erichson said, defendants can shop around for a plaintiffs’ lawyer willing to settle cheaply. Too many judges, the Fordham prof said, don’t bother to police class action settlements to make sure they’re fair. Judge Alsup, he said, deserves cheers for telling lawyers exactly what he will and won’t stand for.
“This kind of clarity is a model for how judges should interact with lawyers, in my view,” Erichson said.
If there was a flaw in Judge Alsup’s 9th Circuit filing, it’s that the judge could have sidestepped the question of whether his prohibition on precertification settlement talks is a prior restraint on speech, Erichson said. “If I were in his shoes, I would have said to the 9th Circuit that the main point of my order was to prevent bad settlements, not to impose a prior restraint on speech,” the professor said. “Judge Alsup may very well be right that, even as a prior restraint on speech, his order is defensible under the First Amendment. But I don’t see that as the main issue here. One way or another, the important thing is for the 9th Circuit to leave Judge Alsup plenty of room to do his job as a district judge who must decide whether a proposed class settlement is fair, reasonable and adequate.”