The plaintiffs’ attorneys in a controversial insurance class-action case have asked Chief U.S. District Judge P.K. Holmes III to use his discretion and not sanction them next week for abusing the federal court system.
The lawyers already “have been punished severely by” the dozens of articles reporting on the case, including articles by the ABA Journal, Reuters and various newspapers and legal publications, attorney Gregory Joseph of Joseph Hage Aaronson LLC of New York said in a 29-page pleading filed Wednesday. “There is no need for further punishment.”
More: Read the attorneys filing here (PDF).
Joseph is representing all of the plaintiffs’ attorneys except for Stephen Engstrom of Little Rock. Engstrom, however, filed a notice to adopt Joseph’s filing.
In addition, Joseph wrote, none of the plaintiffs’ attorneys acted with malice or subjective bad faith when they agreed to dismiss the class-action from Holmes’ court and refile it in Polk County Circuit Court to settle the case.
He said that “many federal judges” in Arkansas have allowed other class-action cases that were pending in federal court to be settled in state court.
“In each case, the federal judge was apprised that the federal class action was being dismissed to effect a settlement in state court, subject to state court certification and review,” Joseph wrote. “In each case, the federal judge facilitated the process. There was no reason for any of the [plaintiffs’ attorneys] — all of whom were involved in at least one of these cases — to believe that the same conduct would be deemed sanctionable in this case.”
Joseph also argued that sanctions should be used for serious offenders, which doesn’t apply in this case.
“An injunction would also have potentially devastating professional consequences,” the motion said. “Clients do not need lawyers who have been sanctioned, let alone lawyers who — while acting on the clients’ behalf — must file notices proclaiming the fact they have been sanctioned.”
A reprimand also would hurt the attorneys’ careers.
“Every insurance application, every insurance renewal, … every bar renewal requires disclosure of the reprimand,” Joseph wrote. “A reprimand is an irremovable badge of dishonor that should not be imposed.”
In April, Holmes issued an order announcing that he intended to sanction 16 attorneys involved in the class-action case against the USAA insurance company.
Holmes said that the attorneys — including plaintiffs’ attorney John Goodson of Texarkana, husband of state Supreme Court Justice Courtney Goodson, and defense attorney Lyn Pruitt of the Mitchell Williams law firm in Little Rock — may appear before him on June 24 at a hearing on the nature of the sanctions he will impose. The hearing “will not be conducted for the purpose of reconsidering” his decision that sanctions are warranted, Holmes wrote in his 32-page order. A final order will be issued following the hearing.
The sanctions he is considering center on requiring the attorneys to include a disclosure in future federal court cases that they have been sanctioned for abusing the system, a harsher penalty than non-lawyers may appreciate.
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