A federal appeals court has referred a writ petition to a motions panel that challenges U.S. District Judge William Alsup’s pretrial orders preventing lawyers in a case against Logitech Inc. from engaging in settlement talks prior to class certification.
Thursday’s order, by the U.S. Court of Appeals for the Ninth Circuit, came after Alsup, of the Northern District of California, defended his pretrial orders as necessary to protect the interests of absent class members.
“When it comes to class action settlements, the usual criticism of trial judges is that they have done too little—not too much—in protecting absent class members,” he wrote in a Feb. 28 response. He cited a 2018 decision by the First District of the Illinois Appellate Court that found objector counsel Christopher Bandas committed a “fraud on the court” but, in a concurring opinion, chastised the lower court judge for failing to scrutinize plaintiffs firm Edelson PC’s $5.4 million fee request.
Rafey Balabanian, of Edelson PC in San Francisco, represented the plaintiffs in the Logitech case. Mayer Brown partner Donald Falk in Palo Alto, who represents Logitech, filed the petition for writ of mandamus before the Ninth Circuit, which, last month, granted its emergency motion for a stay of the case pending its petition. The Ninth Circuit also ordered Alsup to explain his pretrial orders.
Alsup has long had a requirement that lawyers get class actions certified prior to settlement discussions. Most judges do not impose such a requirement, but many are reviewing class action settlements with increasing scrutiny, particularly in the Northern District of California, which announced new guidelines Nov. 1.
Edelson filed the case less than a year ago, alleging Logitech misled consumers into believing that its Z200 stereo sound system came with speakers that had four functional drivers, not two. Alsup’s initial standing order on June 13 emphasized, among other things, that lawyers should not discuss settlement of the case prior to class certification—although he carved out some exceptions in which doing so would be “acceptable to conserve resources.”
Claiming to fit within that exception, lawyers asked Alsup to halt the litigation for settlement negotiations. He denied that and, in an Aug. 23 case management order, set deadlines for class certification to move forward.
In challenging both orders, Logitech’s petition said that prohibiting settlement discussions violated the First Amendment. Logitech also argued that Alsup had plenty of opportunities under Rule 23 of the Federal Rules of Civil Procedure, which govern class actions, to address his concerns about a potential settlement. Additionally, new amendments to Rule 23 that became effective Dec. 1 envisioned that there would be settlements of class actions prior to certification.
But Alsup, in his response, said Logitech, like other defendants, is in a better position to get a discounted settlement prior to class certification.
“The central point is this—from the viewpoint of protecting absent class members, there is an important difference between a class settlement struck before a ruling under Rule 23 seeking class certification and one negotiated after a class has been certified,” Alsup wrote. “When a lawyer files a putative class action complaint and negotiates a proposed class-wide settlement before certification is decided, 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. In turn, this weakness can prejudice any deal struck before the issue of certification is determined.”
In a March 5 reply, Mayer Brown partner Dale Giali disagreed with Alsup’s argument defending the constitutionality of his orders. Giali wrote that barring settlement talks violated the First Amendment. Also, Alsup’s Rule 23 arguments, he wrote, “miss the mark.”
“However beneficial the district court’s intent to protect absent class members may be, good intentions do not provide authority to stop parties to class actions from discussing, negotiating, and submitting precertification settlements,” he wrote. “Some precertification settlements are no doubt unfair, but many are not.”