FORT SMITH, Ark. (Legal Newsline) – An Arkansas federal judge recently held a hearing to weigh sanctioning class action attorneys, including John Goodson of Keil & Goodson, and attorneys for the company they sued that he says wasted his court’s time while colluding to push through a controversial settlement in a different court.
On Feb. 18, U.S. District Judge P.K. Holmes III held a hearing to decide whether he will sanction the attorneys who sued insurer USAA, as well as that company, for submitting a settlement in another court the day after it was dismissed from Holmes’ court.
Holmes presided over the case for 17 months and said he was assured the sides were engaged in settlement negotiations. Eventually, on June 22, the plaintiffs voluntarily dismissed the case.
But they refiled it the next day in an Arkansas state court, along with the proposed settlement.
Holmes said it is clear the sides waited to submit the settlement until the case was moved to a state court to avoid having the settlement scrutinized under federal court procedures.
Holmes wrote that the attorneys must have realized he would be diligent in his duty to protect the interests of absent class members and would be unlikely to approve the settlement.
The settlement “advanced the interests of class counsel (a large fee award with a clear sailing provision) and defense counsel (a claims made settlement with onerous claims requirements and a reversionary fund) while largely failing to protect the interests of the class, whose members would otherwise be entitled to collect potentially substantial sums of money from Defendants.”
The lawsuit against USAA, which provides insurance for military members and their families, alleged excessive depreciation costs figured in insurance claims.
Goodson is known for a case that came before the U.S. Supreme Court in 2013. He had attempted to keep another case in state court by stipulating that the plaintiffs he represented wouldn’t seek more than $5 million in damages.
Under the Class Action Fairness Act of 2005, defendants can transfer state court class actions to federal court if the amount in controversy exceeds $5 million.
The unanimous Supreme Court said that stipulation wasn’t good enough and that federal courts could compute potential damages on their own to determine the amount in controversy.
In the USAA case, which ended up in Polk County Circuit Court, a Little Rock attorney named Robert Trammell, representing four veterans, asked the court to dismiss the potential settlement.
He wrote, “Everything about this case has a sham aspect to it.” He says there's no way USAA ends up paying out the $3.4 million attorneys claim the settlement provides
to class members.
The Arkansas Times reported that the Polk County court has already approved $1.85 million in fees for the attorneys.
USAA wrote that it acted in good faith and that all federal rules and statutes allow what it and the plaintiffs attorneys did.
It also claimed it believes the settlement would have held up to federal court scrutiny.
Class attorneys say they achieved a favorable settlement for the class and that sanctions are not warranted.
“Counsel’s actions complied with the applicable rules of civil procedure, were supported by existing case law interpreting the parties’ right to choose their forum, were endorsed by and consistent with treatises discussing this issue, and were in accord with the express and implicit approval of other federal judges in (Arkansas federal courts),” they wrote.