Judge Keeps Texarkana Case In Federal Court

by Mark Friedman  on Monday, Sep. 2, 2013 12:00 am  

John Goodson

The potential class-action case that was the subject of a pivotal ruling by the U.S. Supreme Court will be staying in federal court, another blow to the plaintiffs’ attorneys who had hoped to continue the case in the historically friendly confines of Miller County Circuit Court.

U.S. District Court Judge P.K. Holmes III found that plaintiff Greg Knowles’ proposed class-action lawsuit against Standard Fire Insurance Co. has a potential award of $6.1 million, breaking the $5 million threshold needed to keep it in federal court.

Attorney John Goodson of the Texarkana firm of Keil & Goodson is one of the attorneys representing Knowles. He argued that the amount of damages of the lawsuit, including the attorneys’ fees, was just below $5 million and that the case should be sent back to Miller County Circuit Court, where it was originally filed in 2011.

Goodson’s team, which includes the law firms Taylor Law Partners LLP of Fayetteville, Nix Patterson & Roach LLP of Austin, Texas, and Crowley Norman LLP of Houston, had maintained in court filings that the damage amount first accepted by Holmes — which was just more than $5 million — was wrong.

Standard Fire argued that the potential damages were just over $3 million, but adding other penalties and a 40 percent attorneys’ fee based on the $3 million damage amount brought the total to just more than $5 million.

Part of the argument Goodson’s team made was that the 40 percent attorneys’ fees figure was too high and shouldn’t have been used to calculate the damages.

“The proper benchmark for a class action should be set at 25%,” Knowles’ filing said.

But Holmes agreed with Standard Fire’s higher percentage estimate.

“Substantially higher attorneys fees than are estimated here were already awarded in seven class action lawsuits filed” in Miller County Circuit Court involving similar claims that Knowles had against his insurance companies, Holmes wrote.

In one of the lawsuits, the attorneys’ fees were $40 million for a case involving the settlement of a class of customers who claimed insurance coverage for damage to buildings in Arkansas.

“Furthermore, Plaintiff’s attorneys were listed as class counsel in all seven of these state-court actions,” Holmes wrote in the order. “It therefore strikes the Court as disingenuous for Plaintiff to persist in his argument that the amount in controversy in the case at bar could not possibly exceed $5 million total.”

Knowles alleged breach of contract in connection with a homeowners’ policy issued by Standard Fire. Knowles said in the complaint that Standard Fire failed to pay for some charges in connection with hiring a general contractor. Knowles alleged that Standard Fire officials knew about the fees but didn’t pay.

Holmes said the case could stay in U.S. District Court in Texarkana. A proposed trial date is set for Sept. 15, 2014.

Fighting for State Court

Holmes’ ruling was the second major loss for Goodson and his co-counsels in the case.

When the Knowles lawsuit was filed in 2011 in Miller County Circuit Court, the plaintiffs’ attorneys stipulated in the complaint that Knowles and the rest of the class would not seek more than $5 million in damages and fees for the Arkansas policyholders. That point was key; under the Class Action Fairness Act passed by Congress, defendants can unilaterally move cases worth more than $5 million out of state courts and into federal court.

And that’s what Standard Fire wanted to do, because class-action defendants in Miller County Circuit Court have been hammered with demands to produce millions of pages of documents at their own expense.

Standard Fire attempted to move the case to U.S. District Court in 2011, where it thought it would have an impartial court experience. But because of Knowles’ stipulation that he wouldn’t seek more than $5 million in damages, the case was returned to Miller County.

But the U.S. Supreme Court on March 19 issued a unanimous decision in favor of Standard Fire, which had appealed the question of such stipulations. The highest court said plaintiffs can’t stipulate before the lawsuit is certified as a class action that they aren’t seeking more than $5 million in fees and damages.

 

 

Please read our comments policy before commenting.