Insurers note 'forum shopping' issue going before Supreme Court

Michelle Keahey Aug. 31, 2012, 12:10pm

TEXARKANA, Ark. (Legal Newsline) - A group of insurance companies have filed notice with U.S. District Judge Susan O. Hickey that the U.S. Supreme Court is scheduled for conference next month on a "forum shopping" issue related to their defense in a class action lawsuit.

The nation's high court is set to hold conference on Sept. 24 involving Knowles v Standard Fire Ins. Co. At issue is the calculation of amounts in controversy and whether the plaintiffs' complaint details enough information about the required amount of value for the federal court to have jurisdiction under the Class Action Fairness Act (CAFA).

The group of insurance companies known as ANPAC informed Hickey about the U.S. Supreme Court conference because the issue is similar to what the group is raising in Basham and McClendon v. American National County Mutual Insurance Co. et al, which Hickey oversees.

ANPAC claims that plaintiffs are forum shopping by placing damage stipulations and other clauses to limit damage recoveries within their class action complaints, all in an effort to keep the case in Miller County, Ark. state court.

Hickey has held under advisement for months a plaintiffs' motion to remand the case to Miller County Circuit Judge Kirk Johnson's court in Texarkana.

The Basham case involves allegations of conspiracy and fraud over the use of the computer software Colossus, a claims adjusting program which is allegedly used by insurance companies to lower the costs paid to its insureds.

ANPAC argues that plaintiffs are attempting to "evade" federal court jurisdiction under CAFA by claiming the unnamed class members will not recover more than $5 million in total. It also argues that the plaintiffs are making the damage allegations in bad faith and the plaintiffs lack the authority to limit damages available to the unnamed class members.

In the Knowles v. Standard Fire Ins. Co. case, which also originated in Miller County Circuit Court, plaintiffs are attempting to limit the damages available to the unnamed class members to less than $5 million in aggregate. The defendants in the case removed the case to federal court, but were unsuccessful with their arguments to keep the case within federal jurisdiction. The defendants were also unsuccessful in obtaining an appeal with the Eighth Circuit.

After the appeal was denied, the defendants petitioned the U.S. Supreme Court.

The ANPAC defendants state that if the Supreme Court makes a determination in the Knowles issue, it would reflect on the arguments in the ongoing Basham litigation. ANPAC is hoping the U.S. Supreme Court will rule that plaintiffs cannot limit damages available to the unnamed members of the class, and that any reliance on Arkansas law to do so would be unconstitutional.

In its pleadings, the ANPAC group argues that it has been embroiled in more than seven years of litigation based on allegations which do not distinguish its conduct from other insurers and the Colossus software manufacturer.

ANPAC states that the other defendant insurance companies "have been dismissed after buying peace by settling in separate lawsuits which probably netted no appreciable benefits to any insured class member, but have earned opposing counsel attorney's fees of over $185 million in Colossus settlements."

"In short, if this litigation is allowed to continue against the ANPAC Defendants in the Circuit Court of Miller County, Arkansas, it will be tantamount to placing Defendants into an abyss," ANPAC states.

The plaintiffs, according to ANPAC, want to keep nationwide or multi-state class actions in state court "whose judges have reputations for readily certifying classes and approving settlements without regard to class member interest."

The plaintiffs' attorneys in the Basham class action and the Knowles class action include John C. Goodson and Matt Keil of Keil & Goodson P.C. in Texarkana and Brad E. Seidel of Nix, Patterson & Roach LLP in Austin, Texas.

These attorneys are accused by ANPAC of filing dozens of class actions with damage stipulations in an effort to keep the cases in the Miller County Circuit Court of Arkansas.

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