Insurers: Keeping class action in Arkansas will force settlement

John O'Brien Apr. 3, 2012, 10:52am


TEXARKANA, Ark. (Legal Newsline) - Insurance companies say lawyers are trying to force a heavy discovery burden on them in an Arkansas state court by skirting federal law regulating class actions.

Pending is the lawyers' motion to remand their case to Miller County, where defendants say they will be unable to defend themselves against a flood of discovery requests designed to force a settlement. The companies removed the case to an Arkansas federal court in January.

The lawsuit, filed in June 2008, alleges a conspiracy among insurance companies to underpay uninsured or underinsured motorists claims through the use of a software tool called Colossus. The plaintiffs have moved to remand the case back to Arkansas, arguing they are not asking for more than the $5 million that would subject the case to federal class action law.

"The Class Action Fairness Act provides that such class actions with national implications be heard in federal court," the companies' removal notice says.

"While plaintiffs attempt to avoid this court through purportedly limiting the damages for the putative plaintiff class they want to represent, the amount at issue in this case as plead in the complaint far exceeds the $5 million threshold for CAFA jurisdiction.

"Even if the purported damage limits were to be accepted in determining the amount in controversy, the value of the requested injunctive relief brings the amount in controversy well over the $5 million jurisdictional minimum."

The attorneys representing the plaintiffs are Keil & Goodson of Texarkana; Nix, Patterson & Roach of Austin and Dangerfield, Texas; Crowley Normal of Houston; and James Pratt of Camden, Ark.

In their remand motion, they say their lawsuit asserts only Arkansas state law claims, seeks a class certification of only Arkansas residents and was filed in an Arkansas state court.

"Despite odd suggestions in the Notice of Removal to the contrary, Plaintiffs' complaint clearly and obviously alleges a proposed class limited to Arkansas residents," the motion says.

Motions to dismiss filed in Miller County have been stayed while U.S. District Judge Susan Hickey decides the jurisdiction issue.

21st Century Insurance filed a response to the remand motion on March 1. The response includes what the company feels will happen if the case is remanded to Miller County.

"(T)he 21st Century defendants will be exposed to extraordinary and unduly burdensome discovery (for which the Arkansas state court system affords no interlocutory appellate relief) designed solely to impale defendants on Morton's Fork - expending money for attorneys and employees to respond to Plaintiffs' egregious discovery or paying attorneys' fees to plaintiffs' counsel to settle the case," it says.

"For while the plaintiffs in this case have said they do not seek more than $5 million in damages, none of the parties - plaintiffs or defendants - believe for one moment that this case can possibly be settled unless that settlement first involves paying attorneys fees to Plaintiffs' counsel in amounts greatly in excess of $5 million."

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