Inside the Miller County Class-Action Strategy Invalidated by U.S. Supreme Court

by Mark Friedman  on Monday, Mar. 25, 2013 12:00 am  

Attorney John Goodson (inset) and his pursuit of class-action lawsuits led to a U.S. Supreme Court ruling last week that will make it easier for defendants in  to move their cases out of Miller County Circuit Court and into federal court. (Photo by Evan Lewis)

The highest court announced in August that it would take the case and then heard oral arguments on the first Monday in January. The ruling last week sends the Knowles case back to U.S. District Court.

May It Please the Court

The importance of the $5 million question to the Keil & Goodson legal strategy was underscored when partner John Goodson’s wife, Arkansas Supreme Court Justice Courtney Hudson Goodson, attended the oral argument in the Knowles case. Afterward, she met briefly with Justice Antonin Scalia, who had been apprised of her husband’s interest in the case.

Boutrous, the lawyer for Standard Fire, told the high court that, by enacting the Class Action Fairness Act, Congress intended to quash the kind of legal shenanigans being perpetrated by plaintiffs’ attorneys that kept class-action cases in friendly state courts.

He told the justices that plaintiff Knowles shouldn’t be allowed to “affect or jeopardize or undermine the claims of absent individuals” by stipulating that the damages wouldn’t be more than $5 million.

As discovery in state court starts, Boutrous said, he feared that another policyholder might step forward and say the damages are worth more, and the next plaintiff wouldn’t be bound by Knowles’ stipulation.

Justice Sonia Sotomayor asked what was wrong with that scenario, since that would allow the case to be moved to federal court. Boutrous said waiting for another plaintiff wouldn’t solve the problem defendants are having with onerous and expensive discovery requests in the meantime.

He said the stipulation on damages was designed solely “to keep the case in state court, contrary to Congress’ intent.”

In Miller County, “it’s not speedy justice,” Boutrous said. “It takes five or six years to get a hearing on anything and then there’s no hearing, even on class certification.”

David Frederick, a Washington, D.C., attorney, argued the case for homeowner Greg Knowles, but he was, in effect, representing the lawyers who have made the $5 million stipulation a centerpiece of their business plan.

He said any proposed class representative and his attorneys always make a number of strategic judgments on how best to handle a class-action case. “And that entails judgments about whether to assert various legal theories here,” he said.

Frederick said Congress didn’t want every class-action case going to federal court because the courts didn’t have the money to deal with the potential wave of lawsuits.

At one point, Chief Justice John Roberts Jr. asked Frederick why the Knowles case was filed in Miller County Circuit Court.

“Because these are Texarkana lawyers who filed on behalf of all Arkansas residents and Texarkana, Ark., is a jurisdiction in Arkansas,” he said.



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