A federal court recently approved a $255 class settlement against Juul for economic losses to consumers who purchased the product but were misled about its addictiveness, causing them to overpay. In re: Juul Labs Inc., Marketing, Sales Practices and Products Liability Litigation, case number 3:19-md-02913, in the U.S. District Court for the Northern District of California.  However, the Court rejected the use of the Artificial Intelligence or AI platform “ClaimClam” to submit class settlement claims and objections en masse. ClaimClam purportedly aggregates and submits claims in exchange for a percentage of each claimant’s recovery.

As is typical for class action cases, a claims administrator established a website to provide information about the case, including how to submit a claim, how to object to the settlement, and how to opt out of the settlement. Potential class members were notified via email, physical mail postcards, and through the internet, including social media platforms. As of July 21, 2023, about 6.35 million individuals submitted claims. As of August 9, 2023, 460 individuals submitted “form” objections to the settlement via ClaimClam. ClaimClam also submitted “tens of thousands” of claims.

Class counsel urged the Court to reject the ClaimClam’s submissions, arguing the AI third-party aggregation process could provide “incorrect or potentially misleading” information to putative class members. In rejecting the use of AI, the Court held “[a]llowing en masse submissions by claims aggregators like ClaimClam raises real risks that Class Members will not receive accurate information regarding the scope of the class and the claims process.”  The Court went on state “[a]llowing a third-party to submit hundreds or thousands of aggregated claims also hinders the ability of the Court-appointed Claims Administrator to communicate directly with claimants and conduct required follow up to identify fraudulent claims or verify thesssss accuracy of claims and to resolve claim disputes (e.g., confirm hours worked in wage and hour suits, or the amount of product purchased in consumer suits).”  The Court further noted it had due process concerns regarding the use of AI.

Instead, the Court ordered ClaimClam to turn over contact information about its “clients” and for class counsel and the claim administrator to notify those individuals about the proper procedure for submitting a claim or objection. The Court’s rejection of the use of AI in this class action sets a high standard for the use of AI in future class actions. As such, we expect the use of AI in class actions and the class administration to be subject to intense scrutiny, particularly given the accuracy concerns raised by the Court in Juul Labs.