The 8th Circuit Court of Appeals ruled Tuesday that attorney John Goodson of Texarkana and four other lawyers didn't engage in "forum shopping" in an Arkansas class-action case and tossed the sanctions against them.
The case involved an assumed class action against the USAA insurance company that had been on the docket of U.S. District Judge P.K. Holmes III for nearly a year and a half before attorneys for both the plaintiffs and defendants agreed to dismiss the case. The day after the dismissal, in June 2015, the case was refiled with a settlement agreement attached in Polk County Circuit Court, where it was later settled.
Holmes concluded that the attorneys made the move to state court to avoid his review of the settlement, which he said he wouldn't have approved.
More: Read the complete ruling.
In August 2016, Holmes issued an order that reprimanded Goodson, who is the husband of an Arkansas Supreme Court justice, and four other attorneys who he found to have abused the court system for manipulating the case. A reprimand is considered a mild form of sanction.
Goodson and the other attorneys appealed Holmes' finding to the 8th Circuit, where oral arguments were heard in February in front of a three-judge panel.
In the ruling released Tuesday, 8th Circuit Judge Lavenski Smith wrote that he understood Holmes' "frustration" with what he "perceived as an abuse of the federal court system."
But the attorneys in the case "had at least a colorable legal argument" that Holmes' approval wasn't needed to dismiss the case from federal court.
The ruling said Holmes abused his "discretion in finding that counsel acted with an improper purpose … and abused the judicial process by stipulating to the dismissal of the federal action for the purpose of seeking a more favorable forum and avoiding (an) adverse decision.
"As a result, it also abused its discretion in imposing sanctions upon the plaintiffs' counsel for the purported violation," Smith wrote.
The sanctions against Goodson and the other attorneys were thrown out.
In the oral argument on Feb. 7, Gregory Joseph of Joseph Hage Aaronson LLC of New York, who represented most of the plaintiffs' attorneys, maintained what the attorneys did was proper under the federal rules. He said federal judges had not objected when a similar strategy was used in other, similar cases in federal court in Arkansas.
"This was the generally accepted view of the law," Joseph said. "No one was evading federal review."