Class-Action Watchdog Says Sanctions Should Stand Against Attorneys

Class-Action Watchdog Says Sanctions Should Stand Against Attorneys
P.K. Holmes III

A Washington nonprofit that represents class members against unfair class-action cases told the 8th U.S. Circuit Court of Appeals last week that sanctions should stand against five plaintiffs' attorneys who were found to have abused the court system in their manipulation of a controversial case.

The Competitive Enterprise Institute's Center for Class Action Fairness filed a 51-page friend of the court brief that said Chief U.S. District Court Judge P.K. Holmes III was correct when he issued the sanctions in August against the attorneys, including John Goodson of Texarkana, who is the husband of a state Supreme Court justice, because Holmes found that they acted in bad faith.

Holmes found seven other plaintiffs' attorneys and three defense attorneys involved in the class-action case had abused the court system. The attorneys said they didn't do anything wrong and have appealed Holmes' finding.

The case at the center of the matter was Adams v. United Services Automobile Association, which concerned the method used to calculate homeowners' insurance claims. It was pending in Holmes' court for 17 months until both sides agreed to dismiss it in June 2015.

The case was refiled the next day, with a class-action settlement agreement attached, in Polk County Circuit Court, where the settlement was approved without any questions by Circuit Judge Jerry Ryan. 

The plaintiffs' attorneys' quickly received $1.85 million for costs and attorneys' fees. Only 4 percent of the class filed a claim, which resulted in payments to the class members of less than $300,000, the Center of Class Action Fairness said.

Holmes, who didn't find out about the refiling of the case until he read about it in a December 2015 edition of Arkansas Business, called the maneuver improper "forum shopping" and said he wouldn't have approved the settlement.

Ted Frank, director of the CEI's Center for Class Action Fairness, said in the brief filed last week that Holmes' order should be affirmed.

The attorneys' "request for carte blanche to engage in secret forum-shopping that prejudices absent class members runs afoul of class counsel's and courts' fiduciary duties to those class members," he said in the 51-page brief. "The fact of the matter is that the parties still unapologetically defend their right to silently forum-shop away from a judge that would scrutinize their settlement and safeguard absent class members' interests."