Federal judge reprimands five class-action lawyers for using court as a 'bargaining chip'
A federal judge in Fort Smith, Arkansas, has reprimanded five class-action lawyers for dropping a federal case and refiling it in Arkansas state court with a proposed class a settlement.
U.S. District Judge P.K. Holmes III said in an order (PDF) on Wednesday that the lawyers had used the federal courts “as a mid-litigation bargaining chip,” and the federal case was dropped for the improper purpose of seeking a more favorable forum to approve the settlement. Publications covering his decision include Arkansas Online, the San Antonio Express-News and Arkansas Business.
One of the sanctioned lawyers is Texarkana attorney John Goodson, who is married to Arkansas Supreme Court Justice Courtney Goodson.
Holmes had originally said he intended to sanction 16 lawyers in the case, but his Wednesday opinion said only five lawyers should be sanctioned under Rule 11 of the Federal Rules of Civil Procedure.
Three lawyers for the USAA insurance company had been directed to settle the case and should not be sanctioned, Holmes said. He also found that conduct by seven other lawyers did not rise to the level of bad faith. Another lawyer’s involvement in the case was peripheral and he did not abuse the judicial process, Holmes found.
The case against USAA insurance company had alleged it underpaid class members on homeowners’ insurance claims. The Arkansas settlement awarded $1.85 million in attorney fees and provided for a $3.4 million settlement fund, but only about 4 percent of class members made written claims.
