Defendants mount arguments for keeping Colossus in federal court

Michelle Keahey May 8, 2012, 2:56pm

Plaintiff attorney Brad Seidel

TEXARKANA, Ark. (Legal Newsline) - A group of insurance companies fighting high stakes litigation involving computer software known as "Colossus" say the plaintiffs' choice of venue is "blatant forum shopping."

The companies want U.S. District Judge Susan O. Hickey of the Western District of Arkansas to deny plaintiffs' motion to remand the case to Miller County, Arkansas, where years earlier the same group of attorneys obtained more than $185 million in fees in an identical class action lawsuit. Their suits claim that insurance companies conspired to underpay uninsured or underinsured bodily injury claims by using Colossus software developed by Computer Science Corp.

Citing the Class Action Fairness Act (CAFA), insurers claim that federal jurisdiction is proper because the proposed class would have more than 100 members, who are seeking to recover in excess of $5 million.

In March, Hickey wrote in an order that she would take up the issue of subject matter jurisdiction through the plaintiffs' motion to remand, before the court addresses the issue of personal jurisdiction.

While the defendants are filing motions asking Hickey to reconsider that order, they are mounting arguments against returning the case to Miller County Court.

The new class action, Basham and McClendon v. American National County Mutual Ins. Co. et al, mirrors one filed in Miller County Court on the eve of the enactment of CAFA in 2005, Hensley v. CSC. The case produced individual settlements valued at up to $53 million, though a total settlement value is not available.

Hensley was overseen by Miller County Judge Kirk Johnson.

After years of protracted discovery that was costly and inconvenient, most companies settled saying that it was too expensive to defend.

A group of insurance companies known as ANPAC, the sole remaining defendant, eventually learned that a named plaintiff in em>Hensley had died. ANPAC offered to settle for $20,000 in 2011.

The offer was neither accepted nor declined. The plaintiffs' attorneys apologized to Johnson and the defense lawyers for going months without telling anyone that the last remaining named-plaintiff had died. The case was voluntarily dismissed on Nov. 7, 2011, without the plaintiffs' responding to ANPAC's settlement offer.

However, just a few weeks later on Dec. 7, 2011, the plaintiffs' attorneys, John Goodson and Matt Keil of Keil & Goodson in Texarkana and Brad Seidel of Nix, Patterson & Roach in Daingerfield, filed the new lawsuit in Miller County, the one now pending in the Western District of Arkansas. The lawsuit names Eddie Basham, as the Adminstrator of the Estate of James Bashman and Freda McClendon as class representatives. The insurance company defendants include various subsidiaries of ANPAC, Erie Insurance, Infinity Insurance, Farm Bureau, Royal Insurance, 21st Century, Metlife, and Traveler's Insurance.

With years of unfavorable experience with Johnson in Miller County, the insurance companies quickly filed to remove the case to federal court where it remains under Hickey's jurisdiction.

One of ANPAC's attorneys has accused the plaintiffs of "blatant forum shopping" in reference to the inclusion of plaintiff McClendon and the attempt to get the case first tried in Sebastian County, Arkansas. When that Sebastian County Court ruled unfavorably toward the plaintiffs, they dismissed the McClendon case and named her as a co-plaintiff when the Colossus class action was re-filed in Miller County in December 2011.

ANPAC also has stated that the plaintiffs' attorneys are using "tactics designed to avoid removal and coerce settlements."

In the current action, the plaintiffs repeatedly state that their lawsuit does not fall under the requirements of CAFA as the case will only represent Arkansas class members and will not seek more than $75,000 per plaintiff or more than $5 million in total damages, not including injunctive relief and attorney's fees.

Although the plaintiffs claim that the lawsuit is limited to Arkansas-only class members, the plaintiffs' initial argument claims a nationwide conspiracy, according to the defendants.

"Defendant conspired to use Colossus to reduce the amount paid on bodily injury claims across the nation, including UM/UIM claims made in Arkansas," the original complaint states.

Another argument insurance companies are making to keep the case in federal court is the example of huge settlements paid in Hensley.

"Settlements in related litigation involving identical allegations and the same counsel, as well as settlement demand to a defendant in this action, demonstrate that any recovery by plaintiffs will exceed $5 million," states an answer from the Travelers defendants.

As of the end of April, Metlife defendants have filed a motion to strike parts of the plaintiffs' argument in the motion to remand. The plaintiffs are attempting to re-write their complaint to avoid federal court jurisdiction by stating that they are not asking for unjust enrichment and disgorgement damages, the defendants' motion states.

"Plaintiffs could have limited all of their requested recovery to profits attributable to the Arkansas class alone or to amounts by which defendants were unjustly enriched at the expense of Arkansas class members, but they did not," Metlife's motion states.

Metlife continues, "Plaintiffs' counsel are experienced attorneys who have litigated removal and remand issues at length in Arkansas. If they wanted to limit the amount in controversy here to their stipulated damage limitations, they could have limited this case to one for damages. Nevertheless, they requested injunctive relief of unlimited value."

The parties are currently awaiting Hickey's ruling on the motion to remand.

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