by Gwen Moritz
Posted 1/14/2013 12:00 am
Updated 4 months ago
Let me start by saying this: I like lawyers fine. I have friends who are lawyers. I spent five years working for the bar association in Nashville, Tenn., and I found the lawyers I met there to be approximately as likeable as the general population and loads smarter. I believe in the rule of law, and I know that lawyers perform irreplaceable services to the citizenry of the United States. I’ll even say that class-action lawsuits have their place.
Having said all that, let me now say this: Some lawyers are ruining whatever was left of the reputation of the legal profession through what looks for all the world to be sheer, blind greed.
I’m embarrassed to confess that I didn’t realize that Miller County was a “magnet jurisdiction” — a place considered very friendly to class-action complaints, especially those that are likely to settle — until the U.S. Supreme Court last week took up the case of Standard Fire Insurance v. Knowles. I honestly thought that kind of cynical, systemic abuse of the legal system was a Mississippi thing, not an Arkansas thing. Silly me. Perhaps I need to get out more.
All I know about the specific case heard by the Supreme Court last week is what I’ve read in various national news reports. Roger Parloff, who wrote the most readable analysis in Fortune, described Standard Fire as “a lurid, tragicomic, outlandish back story” disguised as “a dry procedural question over whether certain interstate class-actions should be heard by state or federal courts.”
The procedural question is this: Does the federal Class Action Fairness Act of 2005 allow lawyers to avoid having class-action suits moved out of state court and into federal court merely by stipulating that they don’t intend to seek more than the threshold amount of $5 million in damages and attorneys’ fees?
The lurid back story, in Parloff’s words, “concerns the goings-on inside the circuit court of Miller County, Ark., where a handful of local law firms have made almost $400 million in fees over the past seven years, all from class-action settlements that have been procured without a judge’s ever having ruled that these cases are even worthy of class treatment, let alone meritorious.”
What’s more, “Precisely how much cash the lawyers’ clients — the class members themselves — have received from the lawyers’ so amply-compensated efforts on their behalf is, on the other hand, a mystery to this day.”
Four hundred million dollars. In just seven years. In settlements, not jury awards. On lawsuits that haven’t even been determined to be worthy of class-action status. With no idea how much of the money actually went to the allegedly damaged plaintiffs.
No wonder certain lawyers are so eager to keep their cases in that jurisdiction that they are willing to limit the total damages even before they determine how many plaintiffs might be in the class and how much they’ve been damaged. The only reasonable conclusion is that these lawsuits are designed to enrich the lawyers, and the plaintiffs — who may actually have been damaged — are merely necessary evils.
(Parloff also made the following parenthetical observation: “Appellate prospects were not, in any case, encouraging. The Arkansas Supreme Court tends to be extraordinarily pro-plaintiff in its interpretation of class-action law. In addition, Keil & Goodson partner John C. Goodson, who is involved in most of the Miller County class actions described in this article, is married to one of the seven justices of the Arkansas Supreme Court. She wrote a unanimous ruling in December 2011 striking down a state tort reform law which had sought to place caps on punitive damages.” He’s referring to Justice Courtney Hudson Goodson.)
Before the oral arguments on Monday last, Parloff predicted a 9-0 ruling against the lawyers who stipulate away the value of a case in order to stay in state court. But Archis A. Parasharami, a Washington, D.C., lawyer who attended the hearing, wrote that Justice Elena Kagan “made clear throughout the argument that in her view plaintiffs’ lawyers may use stipulations to avoid federal jurisdiction.” That’s discouraging, but surely at least five justices will act to stop the abuse.
If not, Congress should.
The best legal news last week was the decision by American International Group Inc. not to join its former CEO, Hank Greenberg, in suing the federal government because the terms of the $182 billion bailout that saved AIG from bankruptcy in 2008 were not generous enough. That old definition of chutzpah — a boy kills his parents and throws himself on the mercy of the court because he is an orphan — seems positively quaint.
Gwen Moritz is editor of Arkansas Business. Email her at GMoritz@ABPG.com.