Insurance companies want judge to adopt fellow court's forum shopping decision
TEXARKANA, Ark. (Legal Newsline) - Defendants fighting a class action lawsuit in U.S. District Court for the Western District of Arkansas are asking a judge to adopt a fellow Court's ruling on forum shopping.
The defendant insurance companies want District Judge Susan O. Hickey to apply to Basham and McClendon v. American National County Mutual Ins. Co. et al, a recent ruling made by District Judge Jimm Hendren in Thatcher v. Hanover Insurance Group.
For nearly four months, Hickey has held under advisement a plaintiffs' motion to remand Basham to the Circuit Court of Miller County, Arkansas.
Basham involves allegations that insurance companies conspired to underpay uninsured or underinsured bodily injury claims by using the claims adjusting software - Colossus.
Defendants are trying to keep Basham and Thatcher in federal court to avoid litigating in what is perceived as plaintiff-friendly Miller County.
On May 29, Hendren admonished plaintiffs for seeking to dismiss and then re-file Thatcher in Miller County.
"They are not to be permitted to shop for a new and hopefully more favorable forum if it turns out that their complaint -as drawn-places them in a court not of their liking," Hendren wrote.
Basham shares a number of commonalities with Thatcher, including the same plaintiffs' attorneys - John C. Goodson of Keil & Goodson of Texarkana and Brad E. Seidel of Nix, Patterson & Roach of Daingerfield, Texas.
Basham and Thatcher also are similar to class actions filed in Miller County in 2004 and 2005, and which were settled after years of costly litigation. Court documents show that the plaintiffs' attorneys made millions in fees from those cases.
Years later, Basham and Thatcher were hatched in Miller County. They were removed on grounds that federal court has proper subject matter jurisdiction per the Class Action Fairness Act because the amount of damages being sought exceeded state court jurisdiction.
The plaintiffs filed motions to remand Basham and Thatcher back to Judge Kirk Johnson of Miller County.
In Thatcher, insurance companies are accused of not disclosing or paying the appropriate general contractor's overhead and profit fee. Throughout its many pleadings, plaintiffs have argued that they were not asking for an amount of money sufficient to place the case in federal court jurisdiction.
In his May opinion, Hendren disagreed and ruled that federal court has proper subject matter jurisdiction.
In support of his ruling, he found that the defendants' affidavits calculating the amount of damages that could be recovered - if the plaintiff proved the claims - were proper evidence in support of the removal to federal court.
Hendren also ruled that the amount of money in controversy was the amount that could be awarded and included a 40 percent statutory attorneys' fee, which is available in lawsuits involving an alleged failure to pay in an insurance contract.
Despite the plaintiff's express disclaimer that it was seeking under $5 million in damages - the threshold for federal jurisdiction - Hendren opined that punitive damages could still be awarded under Arkansas law, which could escalate damages to more than $5 million.
"Ad damnum clauses and disclaimers within a complaint are inadequate to cap the amount in controversy below the minimum for removal jurisdiction," he wrote.
Hendren also stated that a separate affidavit or stipulation must be submitted with a complaint to establish a lower amount in controversy.
Once he ruled on the issue of jurisdiction, Hendren went on to address why the plaintiff wanted Thatcher voluntarily dismissed.
The plaintiff stated that his intent was to dismiss the case, re-file in state court and eliminate three causes of action filed in the amended complaint.
Hendren ruled that the only reason for these actions was to "avoid removal of the class action to federal court" and amounts to "improper forum shopping."
The opinion stated that although the plaintiff has a right to write his complaint as he saw fit and pursue it in a court with proper jurisdiction, they cannot forum shop.
Defendants in Basham argue that the Thatcher ruling decides several of their disputed questions.
The insurance company defendants, which include Travelers Insurance, Metlife and the ANPAC groups, say that the plaintiffs' disclaimers attempt to limit their recovery to avoid federal court jurisdiction and are not sufficient.
They also argue that to limit their recovery the plaintiffs should have filed a separate binding stipulation.
Unsurprisingly, the plaintiffs in Basham disagree with Hendren's ruling in Thatcher, and want the case remanded to Johnson's court in Miller County.
They argue that the extensive stipulations and alternative pleading contained in their complaint are sufficient to limit damages recoverable in the same manner as a separate affidavit/stipulation would be.