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Colossal class action hits Texarkana

By Legal News Line | Jul 11, 2008

Judge Kirk Johnson

TEXARKANA, Ark. (Legal Newsline) - Like the common lore, everything may be bigger in Texas, except, it seems, when it comes to staggering legal action. Nobody tops Texarkana, Ark., these days. Everything about the case known as "Colossus" – often called the largest class-action lawsuit ever filed in America – is super-sized. The case centers on a complaint alleging that hundreds of insurance companies worked with three software companies to undervalue auto claims. A program called "Colossus," the plaintiffs argued, allowed insurers to undervalue claims, which the plaintiff contends is a conspiracy to commit fraud. The lawsuit originally named 581 insurance companies. Settlements have reportedly approached $300 million and plaintiff attorneys have already shared $73 million in fees. "This is your typical sort of class-action shakedown," said Jim Copland, director of The Manhattan Institute for Policy Research. "The discovery costs are massive, that's what this is really about." Indeed, many defendants remain mired in legal motions. Those companies that have settled said they did so in light of the enormous legal costs that could mount in a case this size. Those firms that haven't settled are finding out the hard way – and the expensive way – that those original predictions may have actually underestimated the time and costs involved in sifting through bodily injury files from 1996. To date, Miller County Circuit Judge Kirk Johnson of Texarkana has yet to rule on more than 60 motions in the case of Georgia Hensley et al v. Computer Sciences Corporation et al. – a pile of paper that has clearly kept copiers, not to mention legal staff, lawyers and court employees working overtime. Last month, Johnson did enter two significant orders favorable to plaintiffs, which in effect keep the litigation moving forward. He granted plaintiffs' motion to "sever" defendants USAA, ANPAC, GEICO, Claim IQ, Inc. and Computer Science Corporation, stating the "obvious reason" for doing so is that non-settling defendants whose motions are denied along the way will "appeal any decision not favorable to them." And after waiting nearly three years for Johnson to rule on technical motions to dismiss, for such reasons as improper service and non-settling defendants, the requests were flatly rejected in an order entered last month. "The defendants' convoluted reasoning on the issue defies understanding and it is merely grasping at straws with the argument," Johnson wrote. While Johnson is partially reconsidering his decision for the defendants who argue they were not properly served due to lack of a court seal, many more compelling issues loom before the 59-year-old judge first elected in 2002: Some defendants claim they do not sell auto insurance, nor use the Colossus program at all. Like the case itself, a colossal number of questions of procedure have further knotted the case as it trudges through the court. The remote legal outpost of Texarkana, in a state whose high court used to take a dim view of class actions, remains buried under the work load required by the case. Johnson's so far scant rulings appear to obey the mood of the Arkansas Supreme Court, which since 1991 has almost always sided with plaintiffs on class certification questions. In 1997, a slogan coined by state Supreme Court Justice Annabelle Clinton Imber, "certifying this case as a class action is fair to both sides," in a suit against Mega Life and Health Insurance has resounded until today. In April of this year, the Justices affirmed a class action against Chartone Inc., which pleaded that it would have to search 120,000 files of confidential medical records. Justice Donald Corbin wrote that Chartone's failure to maintain and store sufficient records was not the plaintiff's fault. Allowing defendants to defeat class certification through lack of accurate records would encourage other businesses to maintain poor records, Corbin wrote. "[P]roceeding as a class action is fair to both sides," he wrote. Lead plaintiffs' attorney John Goodson filed Hensley v. Computer Science Corporation over the software program Colossus and every insurance company that uses it on Feb. 7, 2005. The placement of this case was anything but coincidence, Copland of The Manhattan Institute said. "It is important to realize that this suit was filed the day before the Class Action Fairness Act of 2005 was instituted," he said. The Class Action Fairness Act of 2005 – "the most significant federal tort reform clearly in the last decade," Copland said –pushes legislation like Colossus into the federal courts. Plaintiff lawyers typically preferred local courts and local juries who "are traditionally sympathetic to the local plaintiffs over big businesses," Copland said. "They tactically filed it in this state court while they still could. This suit is in state court in Texarkana precisely because of the day it was filed." Problems with logistics, timing and scheduling have reached nearly every level of jurisprudence, including the First Amendment Right of the press to cover the hearings. In May, Judge Johnson kicked a Legal Newsline reporter out of court. "In federal court it would be much harder for these types of maneuvers," Copland told Legal Newsline. Copland said businesses fear not only the staggering legal costs, but also the negative publicity from being associated in the case, which often leads to quick settlements. "It is not unprecedented," Copland said. "It is just something you won't see much of anymore because of the Class Action Fairness Act." Numerous messages seeking comment from Goodson, the lead plaintiffs' attorney, were not returned. "It's a pretty dumb case really," Copland said.

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