FORT SMITH, Ark. – Five lawyers were handed sanctions under a ruling by a judge in the U.S. District Court for the Western District of Arkansas - Fort Smith Division over moving a class-action suit to a more favorable location so that would impose greater payment to the lawyers.
Judge P.K. Holmes III issued the order to five attorneys, including John Goodson, a Texas-Arkansas lawyer. A total of 16 lawyers were named in the case and were up for sanctions, but that number was dropped to five after further review.
The attorneys are accused of violating Rule 11 of the Federal Rules of Civil Procedure by first filing the class-action case against USAA insurance company in federal court. They dismissed the case and later filed in the state court with a stipulated settlement.
The settlement resulted in a 4 percent claims rated against the settlement of $3,445,598 and $1,850,000 in fees and expenses to be awarded to the plaintiffs’ attorneys in a quick pay provision. This was at the expense of the class.
Holmes said moving the case to a state court would avoid the scrutiny that a settlement of this size would have paid to an estimated 15,000 homeowners in the USAA case. Instead only 650 claims were filed as of earlier this year while the attorneys received the $1.8 million payout immediately.
Holmes said the lawyers abused the judicial process by “evading properly-invoked federal judicial scrutiny and gaming the system.” They filed the suit in state court in December 2013 and followed procedures to move the case to a state court in January 2014. They allegedly let the case sit for a year, filing paperwork that suggested they were preparing the case and making progress toward resolving the matter.
Holmes wrote in his opinion that, “an appropriate sanction is necessary to vindicate judicial authority.” He went on to say that the lawyers abused the judicial process, which is punishable by the court. Holmes said the attorneys used the court as a "bargaining chip" to benefit themselves for a payout rather than for the legal process.
While initially 16 lawyers were named to be in violation of Rule 11, Holmes later ruled only five faced sanctions. In the order the attorneys facing reprimand are D. Matt Keil, John C. Goodson, Jason Earnest Roselius, Martin Weber Jr. and Richard E. Norman.
Judge Holmes found that lawyers Wystan Michael Ackerman, Stephen Edward Goldman, Lyn Peeples Pruitt, Stevan Earl Vowell, William B. Putman, W. H. Taylor, Matthew L. Mustokoff, Timothy J. Myers, A. F. “Tom” Thompson III and Kenneth (Casey) Castleberry did violate Rule 11, but didn’t do so in bad faith and do not face sanctions.
The court also named respondent Stephen C. Engstrom in the case as a possible violator of Rule 11. In the end it was found that Engstrom had no responsibility in the violation and did not abuse the judicial process. He will face no sanctions.
Holmes instructed the three lawyers for USAA insurance company to settle the case. They do not face any sanctions.