Did lawyers use federal court as a 'bargaining chip'? Irked judge schedules sanctions hearing
A federal judge has scheduled a Feb. 19 hearing to consider whether to sanction lawyers who dropped a federal case and refiled it in Arkansas state court with a proposed class settlement, possibly with the intent to find a court more disposed to approve the deal.
U.S. District Judge P.K. Holmes of Fort Smith, Arkansas, scheduled the show cause hearing after blasting the lawyers for alleged “forum shopping” in a Dec. 21 opinion (PDF), report Arkansas Business and Arkansas Online.
Holmes said the lawyers appeared to have used the federal court “as a bargaining chip in the negotiation of an ultimately questionable settlement” and then opted for state court “to evade the federally mandated review of the class and the settlement by this court in particular,”
The defendants had removed the case against the USAA insurance company to federal court where it stayed on the docket for 17 months. Holmes said the lawyers should show cause why their federal filings were not made for “generally inappropriate procedural gamesmanship” with no intent to actually litigate in federal court.
The refiling in state court, Holmes said, led him to conclude that “counsel anticipated the court would be diligent in its duty to protect the interests of absent class members and would be unlikely to approve a settlement that 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).”
The suit had alleged USAA underpaid class members for actual cash value claims made under their property insurance policies. The settlement required the insurer to set aside $3.4 million for class members and to pay plaintiffs lawyers up to $1.85 million in fees and expenses, according to coverage by Arkansas Online. Among the lawyers for the plaintiffs is Texarkana attorney John Goodson, who is married to Arkansas Supreme Court Justice Courtney Goodson.
